Hello and thank you for standing by for JD.com's second quarter 2026 earnings conference call. At this time all participants are in listen only mode. After management's prepared remarks there will be a question and answer session. Today's conference is being recorded. If you have any objections you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations. Please go ahead.

Thank you, operator. Good day, everyone. Welcome to JD.com's second quarter 2026 earnings conference call. With us today are CEO of JD.com, Ms. Sandy Xu, and CFO, Mr. Yan Shan. Sandy will kick off the call with her opening remarks, and Yan will discuss the financial results. Then we'll open the call to questions from analysts. Please note, unless otherwise stated, all comparison in this call will be against our results from the comparable period of 2025. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only. We'll include forward-looking statements. Please refer to our latest safe harbor statement in earnings press release on the IR website, which applies to this call. We'll discuss certain non-GAAP financial measures. Please refer to the reconciliation of non-GAAP measures to the comparable GAAP measures also in the earnings price release. Please also note that all figures mentioned in this call are in R&D, unless otherwise stated. With that, let me turn the call over to our CEO, Sandy. Sandy, please.

Thank you, Sean. Hello, everyone. Thank you for joining our second quarter 2026 earnings conference call. We close the second quarter with steady performance in line with our expectations, maintaining strong operational resilience amid macro and industry headwinds. We are navigating a high trade-in comparison base, upstream price pressure in consumer electronics, and evolved macro dynamics. Our commitment to high-quality development translated to robust profitability. Most notably, Q2 marked a definitive turning point for our profitability trajectory. Our non-GAAP net income attributable to ordinary shareholders surged by 21% year-on-year to 8.9 billion RMB, driven by both JD ratios Healthy Margin Expansion, and JD Food Delivery's loss reduction. In particular, both JD Retail Growth Margin and Operating Margin hit historic highs for peak promotional seasons, and JD Food Delivery narrowed its losses by over 50% year-on-year in the quarter. This performance underscores the unique strength of our business model Even in a complex external environment, it continuously enables us to deepen our supply chain capabilities, unlock operational efficiencies across our business ecosystem, and drive sustained profit expansion. Moving to our operational highlights, I would like to share three key developments for the quarter. We maintained healthy user momentum while dramatically improving marketing efficiency in the quarter. Across key metrics, including MAU, quarterly active customers, and plus members, we sustained double-digit year-on-year growth. Our June 18th grant promotion also set a new record for purchasing users. Crucially, we achieved this user expansion well streamlining group level marketing expenses supported by enhanced operational efficiency and marketing optimization across JD Food Delivery and JD Retail. We maintained high quality user momentum in Q2, primarily driven by deeper engagement among existing users. Notably, Our efforts to provide diversified services catering to our users' life needs, such as healthcare, home services, and auto or aftermarket services, resonated strongly with our users, contributing to deeper user engagement and stickiness. In healthcare, we provide users with a full set of online and offline services, from consultation to pharmacy, and on-site pair. In home services, revenues increased exponentially year-on-year in Q2. And in auto aftermarket services, our JD Auto Service offline stores have covered over 1,000 districts and counties across China as of Q2. Overall, this reflects our strategic shift from rapid user acquisition toward elevating user quality and lifetime value. Through disciplined lifecycle management, we are successfully converting new users into highly sticky, loyal customers. Second, CoreJD Retail delivered a resilient top-line performance in Q2. while continuing to unlock profitability upside. Heading into Q3, we expect JD Retail to hit a turning point, re-accelerating into positive top line expansion while sustaining healthy bottom line. Looking at category performance, while revenues from electronics and home appliances were moderated by a high comparison base and upstream price increase in Q2, As momentum picked up in June, our market position and user man-share remained firmly intact amid these market dynamics. Looking into the second half of the year, we expect top-line growth for this category to accelerate from the first half, as the high comparison base from the trading program states. and our strong supply chain strengths allow us to navigate consumer electronics price cycles more effectively. General merchandise maintained healthy growth in the second quarter. In particular, our supermarket category remained a key standout, delivering near double-digit year-on-year revenue growth with a proven multi-year track record. JD Supermarket has established itself as the most attractive platform for both users and suppliers. This success is a powerful example demonstrating how our core philosophy, the relentless pursuit of superior user experience, cost optimization, and operational efficiency translates into sustainable market leadership. Other general merchandise categories such as healthcare and industrial products also delivered solid double-digit growth in the quarter. As we further tap into massive time, supported by our supply chain efficiency and strong user man-share, we remain confident in our execution for the remainder of the year and beyond. In addition to delivering resilient top-line performance, JD Retail achieved further profitability improvement in the second quarter. Its growth margin expanded by 1.3 percentage points year-on-year to 18.5%, mainly attributable to two drivers, deepening supply chain scale benefits and a favorable revenue mix supported by high-margin marketplace and marketing revenues. particularly the rapid growth in advertising revenues. City retail's operating margin increased by seven basis points to 4.6%, setting a new record for a peak promotional quarter. Beyond the gross margin expansion, this performance also reflects our eye-driven marketing spend. This allowed us to direct more resources toward R&D capabilities, which is fully aligned with our long-term business strategies. Moving on to new businesses. Through our focus on operational efficiency, we substantially reduced losses in new businesses, particularly in JD food delivery, We are maintaining disciplined execution against our strategic roadmap. During the second quarter, JD Food Delivery maintained healthy order volume momentum while narrowing total losses by over 50% year-on-year. Within just one year of execution, JD Food Delivery has achieved a dramatic, fast-paced improvement in unit economics. driven by our relentless focus to drive operational efficiency and revenue diversification. Moving forward, we see substantial runway for further UE optimization in our food delivery business while we continue to unlock its cross-segment synergies with our core retail business. Operations at our JoyBuy and Zunzi businesses advanced steadily along their strategic paths with strict ROI discipline. During the quarter, JoyBuy sharpened its competitive edge in Europe through its fast, reliable fulfillment and premium localized services, such as integrated delivery and installation service for home appliances, By directly addressing local consumers' pain points, Joybuy is building increasing user retention and has doubled its revenues within two quarters. Inc. continued to deepen its penetration in lower-tier markets, with QAC increasing over 40% year-on-year and contributing 40% of new active customers in Q2. Unlocking valuable incremental user pools for our ecosystem. While both businesses saw a sequential step-up in strategic investment, all spend was executed with rigorous discipline and strictly within our expectations. Beyond operational execution, we accelerated the integration of AI and physical automation Deeper into our core value chain in the second quarter, spending demand forecasting, product sourcing, intelligent customer services, and full stack logistics automation. Next generation shopping and conversion, we are proactively upgrading our search, recommendation, ad targeting engine, along with our proprietary AI Shopping Agents by leveraging AI to sharpen precision in user intent, matching, and traffic allocation. We have driven tangible improvements in user engagement, conversion, and ROI for our brand partners. On enterprise productivity and efficiency, internally, we are seamlessly integrating generative AI Thank you. Thank you. Thank you. Thank you. to further optimize our cost structure and operating efficiency. In warehousing and sorting, JD through JD Logistics expanded deployment of our proprietary Langzhu tech, goods-to-person solution across more warehouses and product categories. In autonomous delivery, JDL scaled thousands of airmaned ground vehicles Across more than 20 provinces, as of Q2, we are launching our first 24-7 overnight autonomous delivery routes in Shenzhen. Powering this automation is our Jingdong Logistics MetaBrain LLM, which drives real-time intelligent decision-making within our exclusive automated operating framework. In summary, Our teams executed with strategic consistency and resilience throughout the second quarter. Looking ahead to the second half of 2026, we remain fully committed to our strategic priorities while responding with agility to evolving micro trends. Our core digital business will continue to drive efficiency gains across every link along the supply chain and new businesses will unlock strategic potential while maintaining strict financial discipline. Combined with our integrated AI capabilities, we are confident in building a resilient business that delivers high-quality, sustainable development through all market cycles. With that, let me turn the call over to Ian.

Thank you, Sandy. Hello, everyone. Thanks for joining the call today. In the second quarter, we delivered a high-quality financial performance, anchored by robust bottom-line expansion, while electronics and home appliances performance was temporarily tempered by high competition base, leading total revenues to decrease slightly by 2.9% year-on-year. Our core secular growth drivers including general merchandise categories and marketplace and marketing revenues maintained healthy momentum. Meanwhile, facing external challenges, we sharpened our focus on supply chain capabilities and operational efficiency, and this move paid off clearly on our bottom line. Our non-GAAP net income rose 20.8% year-on-year to RMB 8.9 billion in Q2, with net margin expanding by 0.5 percentage point to 2.6%, backed by robust profitability of JD Retail and the ongoing financial optimization of JD Food Delivery. As we headed into the second half of the year, were confident to return to positive growth on the top line while unlocking further profitability through our supply chain strength and robust execution. Alongside our resilient financial performance, we remained committed to shareholder return. During the first half of the year, we repurchased a total of approximately 69.9 million Class A ordinary shares equivalent to 34.9 million ADS for a total of US $1 billion. This represents around 2.5% of our ordinary shares outstanding as of December 31st, 2025. Now, let's go through our Q2 financial performance. Total revenues were RMB $346 billion in Q2. reflecting a 2.9% year-on-year decline as we navigated near-term category dynamics. Breaking down the mix, our product revenues reflected divergent performance across categories. Electronics and home appliances managed through the combined headwinds of a high trading base and upstream component price increase. General Merchandise remained a resilient growth anchor, led by supermarket category, which sustained rapid near double-digit revenue growth for the quarter. This performance highlights the strength of our multi-engine growth model across different market cycles. Looking into Q2, second half, we expect growth momentum to accelerate across categories, as we continue to elevate user experience through our superior product selection, price competitiveness, and service quality. Service revenues grew by 6.8% year-on-year in Q2. Within this line, marketplace and marketing revenues were up 8.3%, primarily driven by higher growth in advertising revenues. Although growth moderated relatively to previous quarters against a high user traffic base, marketplace and marketing revenues consistently outpaced the product sales. We expect this structural diversion to continue, serving as an important driver for our margin expansion over time. Logistics and other service revenues increased by 5.9% year-on-year in the quarter The pace normalized as our food delivery business left its initial launch and entered a full comparable year-on-year period starting this quarter. Now, let's turn to our segment performance. JD Retail Revenues came in at RMB 295 billion in Q2, down 4.7% year-on-year in the second quarter, in line with expectations. as we navigated category-specific space effects and market dynamics. Notably, as our continuous efforts in supply chain and user experience gained traction, momentum picked up in June. We expect this recovery trajectory to build further into Q3, making a pivot back to positive revenue growth for JD Retail. In terms of profitability, JD Retail delivered exceptional results in the second quarter. Gross margin expanded by 1.3 percentage points year-on-year to 18.5%. This marked JD Retail's 17th consecutive quarter of year-on-year gross margin expansion, a strong testament to our ability to consistently unlock profit potential across market cycles. In addition, JD Retail's non-GAAP operating profits reached RMB 13.5 billion in Q2, with operating margins up 7 basis points to 4.6%, a record high for promotional seasons. We achieved this milestone amid increased investment in research and development capabilities. Thanks to gross margin expansion, and improved marketing efficiency, which provided us great financial flexibility to steadily reinvest for long-term growth. In particular, JD Retail's marketing expense ratio dropped year on year for the fourth consecutive quarter. Overall, this set of results is a clear proof of our business model resilience, our deepening supply chain capabilities, and favorable revenue mix can effectively cushion short-term top-line fluctuations, driving better profitability through operational quality rather than single-scale expansion. Moving on to JD Logistics, its revenues grow by 24.3% year-on-year to RMB 68.1 billion in Q2. primarily driven by incremental contribution from on-demand delivery service. JD Logistics' non-GAAP operating income reached RMB 2.3 billion, up 15.6% year-on-year, representing an operating margin of 3.5%. JD Logistics' near-term margin fluctuations were mainly attributable to DAPOM, while the rest of JD Logistics' business maintained a healthy profitability trajectory. Turning to our new business, revenues came in at RMB 7.3 billion in Q2. The year-on-year decline was driven by the shifting of recognition of on-demand delivery revenues from new business to JD Logistics, which took effect in Q1, 2026. Profitability in this segment improved notably, with operating loss narrowing significantly year on year to RMB 9.9 billion. This was primarily driven by a more than 50% loss reduction in JD full delivery, highlighting our strong execution in optimizing its unique economics through streamlined operations, revenue diversification, and strict ROI discipline as market competition normalized. We are confident that our food delivery business will continue to see meaningful year-on-year loss reduction throughout the rest of the year. Meanwhile, investments in JoyBuy and Jingxi progressed in line with our strategic roadmap. Notably, JoyBuy delivered encouraging sequential revenue growth in Q2. as our overseas supply chain strength, and the differentiated service offerings continue to gain traction among European consumers. While absolute operating loss expanded as Joybuy entered a rapid scaling phase, its loss margin narrowed sequentially, demonstrating our disciplined approach to business expansion and continuous operational refinement. Turning to our consolidated profit performance, host level gross margin expanded meaningfully by 1.2 percentage points year on year to 17.1% in Q2, reaching a near all-time high. This expansion was primarily driven by JD Retail's remarkable margin performance. On operating expense, Total operating expense decreased by 4.4% year-on-year in the quarter, with the expense ratio decreasing by 0.3%. This operating leverage was largely driven by optimized marketing spend, which was partially offset by stepped-up R&D investments, particularly scalable AI applications. This linear OPAC structure reflects our strategic focus on operational efficiency and bottom line quality over low ROI volume expansion. As a result, our consolidated non-GAAP net income attributable to ordinary shareholders expanded by 20.8% year-on-year to RMB 8.9 billion in Q2. lifting non-GAAP net margin by 0.5 percentage point to 2.6%. Q2 marks a definitive turning point for our consolidated profitability, and we are confident in sustaining this expanding profit trajectory as we move forward. Turning to our liquidity, last 12 months free cash flow as of the end of Q2 reached RMB 31 billion, representing a significant improvement compared to RMB 10 billion in the prior year period. This was primarily driven by disciplined working capital management, specifically a healthy acceleration in account receivable collections and the normalized cash outflows associated with the trading program. By the end of Q2, Our cash and cash equivalents, restricted cash, and short-term investment totaled R&D $235 billion. In summary, the second quarter once again demonstrated the fundamental resilience of our business and the discipline of our strategic execution. Despite top-line headwinds, We unlock further margin upside in JD Retail while maintaining disciplined ROI-driven investments in new business. Looking ahead to the second half of 2026, we believe we have reached a clear inflection point. Top line growth is re-accelerating, profitability continues on an upward trajectory, and deep AI integration is actively redefining both user experience and enterprise efficiency. With solid operational momentum and a strong balance sheet, we remain fully committed to delivering sustainable long-term value to our shareholders through high-quality growth, expanding profitability, a disciplined approach to capital allocation, and consistent shareholder returns. With that, I will turn it back to Sean. Thank you.

Thank you, Sandy and Ian. For the Q&A session, you are welcome to ask questions in Chinese or English, and our management will answer your question in Chinese and will provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management statement in original language. Operator, we are opening the call for Q&A session now.

Thank you. The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take two questions at a time from each caller. If you have more than two questions, please request to join the question queue again after your first two questions have been addressed. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Kenneth Fong with UBS. Please go ahead.

谢谢管理层介绍我的提问。 我有两个问题。 第一个是在二季度高技术的压力以下, 其实我们看到GD Retail 营业时间非常超预期的表现。 In Hongguan, we are not sure about the demand for large-scale products, and the environment in which they are submitted. Can you help us look at the growth trend of large-scale products in the second half of the year? The second question is about Japan. We see that Japan is also slowing down in the second quarter. I would like to ask what is the core reason behind this? Can you help us look at the growth trend of Japan in the next few quarters? I will put it here. Thanks, management, for taking my questions. Despite the high base in the second quarter, JD Retail still achieved an outperforming performance given the macro uncertainties, the front-loaded demand for 3C electronics and home appliances categories, and continued price hike. Could management share the outlook for this category for the growth trend in the second half of the year? And my second question is about general merchandise growth rate. which have experienced slowdown in the second quarter. What were the core factors driving this? And can management share your view for the growth trend for these general merchandise categories over the upcoming quarter, please? Thank you.

Thank you for your question. As you said, in the second quarter, we, indeed, Jingdong Sales, have once again shown our business's strong performance. The sales of power generation products is also in line with our previous prediction. Despite the increase in the cost of high-tech and raw materials last year, the increase in the price of electronic products caused by the increase in the price of electronic products caused by the increase in the price of electronic products caused by the increase in the price of electronic products caused by the increase in the price of electronic products caused by the increase in the price of electronic products caused by the increase in the price of electronic products caused by the increase in the price of electronic products caused by the increase in the price of electronic products caused by the increase in the price of electronic products caused by the increase in the price of electronic products caused by the increase in the price of electronic products and many more. But thanks to Qiangdong's deep supply chain capability and our solid user mentality in this category, we can see that Qiangdong's power supply category continues to consolidate our market position. In particular, the market share of home appliances is steadily increasing. At the same time, We also see the effect of our full channel layout. The current business is also growing faster, so the overall performance is relatively more stable in the industry. You can also see that we are actually in Hong Kong and Shanghai. We have also opened our JDMOD. It is also welcome to the investor analysis room. You can have a look. And then in the second half of the year, although the price of electronic products has increased, Thank you. Thank you. The second is that the supply chain capacity will also relieve the pressure of rising prices to a certain extent. This is also what Jingdong is good at. We are also constantly strengthening our supply chain capacity to be able to effectively deal with and slow down the price rise of electronic products by preemptively setting up and relatively flexible backup adjustments. At the same time, we continue to provide users with products with price competitiveness The third point is product innovation. The rapid development of AI technology has actually brought about the opportunity for product and product-based innovation. We are also working with many brands to quickly respond to and develop new products, and to quickly apply new technologies to meet the needs of users who are constantly changing and even creating new needs. At the moment, our Joe Insight has reached a collaboration with nearly 200 brands, providing smart interaction capabilities for home appliances, robots, and other hardware, and using Jingdong's AI capabilities to create a more intelligent and convenient experience for users. In the long term, we are very confident in the market position of the power supply category. Although there have been fluctuations in short-term sales, Let me translate the answer to the first question. Thank you. Hi, Kenny. Thank you for your question.

As you said, in the second quarter, JD Retail once again showed strong operating resilience. The performance of our electronic home appliance revenue was in line with our previous expectation. Despite the category phase, some short-term pressure in the quarter, mainly due to last year's high base and the price hike in electronics driven by the higher raw material cost. Even so, backed by our strong supply chain capabilities and solid user mindshare, We continue to strengthen our market position. Notably, our market share across all major home appliance categories grew steadily in the second quarter. Especially our omnichannel effort also paid off with our offline business growing at a much faster pace As a result, our overall performance remains more resilient in home appliance and electronics category than the industry. As you already know, we opened JD Mall in Shanghai and Hong Kong, and we welcome analysts and investors to pay a visit. Looking into the second half, While the ongoing rising consumer electronic price may continue to weigh on consumer demand, we remain confident that this category growth will improve meaningfully in the second half for three reasons. Number one, the base effects start to gradually normalize. Starting from Q3, the drag from last year's high trading base will gradually ease. Growth in electronics and home appliances is expected to reaccelerate as comparison base normalizes. Second, we are using our supply chain capabilities to mitigate the price pressures. We continue to strengthen our supply chain. Thank you very much. Rapid AI growth is unlocking opportunities for our product and category innovation. We work closely with brands to co-develop new products using these new technologies. Our Joy Insight has partnered with nearly 200 brands, leveraging JD's AI capability to enable smarter interaction across home appliances and robots. delivering a smarter and more convenient user experience. So over the long term, we remain highly confident in our leadership in the electronics and home appliance category. While sales may fluctuate in the short term, JD's unique value to brands become even clearer at certain times. We will continue to leverage our 1P supply chain efficiency to deliver more competitive prices and services to our customers while providing brands with a highly predictable and efficient sales channel.

Let me answer the second question. Regarding the Japanese white products, they were also affected to a certain extent by the high-end technology of the second quarter last year. On the one hand, the national stock market directly triggered the sales of home appliances and home appliances. On the other hand, the national stock market also triggered the flow of platforms and some cross-purchase purchases with the take-out business. Although the second quarter of the Japanese dollar fell this year, the market share of the Japanese dollar is steadily increasing. In fact, the market share of the Japanese dollar, which has the largest volume, is more stable and is close to the double-digit growth.

To your second question, yes, our general merchandise category was also impacted by the high base in last Q3. At the same time, not only did the trading program directly boosted sales of home goods, It also joined force with our food delivery business to drive notable traffic to our platform and drive cross-sell to a certain extent. So while general merchandise growth moderated somewhat in Q2 this year, in fact, we continue to steadily gain market share across all general merchandise subcategories. Notably, supermarkets, our largest category within general merchandise, deliver a near double-digit resilience performance, while healthcare and industrial products maintain solid double-digit growth.

Next, we have CINCIN's Japanese products that continue to maintain a healthy growth. Its core driving force includes one is the continuous improvement of product management capability that will bring user experience. The delivery of these new products has also brought an increase in traffic and new users. Next, we will strengthen the user's ability to operate, improve transfer and cross-purchase. This part of the user has room to release in the Japanese white product category. The third is the continuous enhancement of the brand ecosystem. We continue to introduce high-quality business and train small and medium-sized brands. In this section, we help business owners to do a good job of precision operation. In the past three months, the sales increase of 3P sales has exceeded the quality of the product. In the second quarter, the ratio will also increase. This is also an improvement of our platform's ecosystem. In general, we expect that the sales increase will increase rapidly in the second half of the year. Looking ahead, we are confident that general merchandise category will maintain healthy growth backed by several key drivers. Number one,

Category operational excellence is enhancing user experience. We are seeing further upside in our 1T supply chain capability for general merchandise category, especially in supermarket. By extending product selection, building price competitiveness, and elevating service quality, we will enhance user experience and solidify JD's user mindshare in general merchandise category. Second, we see sustained user growth momentum. As user mindshare for our general merchant category deepens, our user base continues to grow healthily. New business including food delivery and Jingxi are bringing notable incremental traffic and new users. Moving forward, we will enhance our user operation to boost conversion and drive process. and we see meaningful upside in general merchandise category sales. Third is our improving platform ecosystem. We continue to onboard high quality merchants and incubate emerging brands while helping them optimize end-to-end operations. This allows merchants and brands to achieve more certain growth on JD while also bringing incremental sales to our platform at the same time. JD Retail's 3P GND growth has outpaced 1P for the past three consecutive quarters with its contribution to total GND extending Q on Q in Q2. So overall, we expect JD Retail's growth to accelerate quarter by quarter in the second half of the year. Our electronics and home appliance should steadily recover while general merchandise category maintain healthy growth. We also see as conversion efficiency improves, our advertising revenue has meaningful room to pick up speed. Thank you for your question, Kenny. We can go to the next analyst.

Thank you. Your next question comes from Ronald Keung with Goldman Sachs. Please go ahead.

Thank you, Sandy, Sean. Two questions. First, I want to ask, because other Internet giants, we see that capital expenses have exceeded the current cash flow. Under this background, Jingdong has entered a healthier cycle of free cash flow.

As for this advantage, we also see that the company may have some new investments.

How will the management board consider setting a more clear annual profit ratio for shareholding? The second question is, with the rapid growth of drive-by and the introduction of German retail shopping, how does Jingdong plan to experience the price and user experience or logistics experience? Thank you, management. So two questions. One is on your free cash flow. We're seeing you entering into a much healthier free cash flow cycle in contrast to other mega caps in Internet, which are seeing CapEx exceeding operating cash flow for 2020. So with this unique positioning of JD, yet I see some incremental investments including some real estate. So will management consider setting a more official percentage of annual profits for shareholder returns? Second is on Joybuy, seeing very fast growth there and a still pending acquisition of the German retailer. So how do you differentiate or plan to differentiate your price, users, experience, or logistic experience further? And what is your investment budget for the second half and next year? Thank you.

Ronald, thank you. This year, in the first half of the year, The company has repurchased a total of about 69.9 million ordinary shares. The amount of repurchase reached US$1 billion, which is equivalent to 2.5% of the share flow on December 31, 2025. The repurchase plan of US$3.5 billion announced previously still has an amount of US$1 billion left. We are currently following the plan. Regarding the setting of the share return ratio, We will continue to create value for shareholders, continue to invest in the operation and supply of business, improve the long-term competitiveness and value of the company, and continue to return to shareholders through the sustainable development of business health, as well as diversification such as division of red, repurchase, and so on. We will pursue the maximization of the comprehensive return of long-term shareholders. Thirdly, we can also look at the track record of shareholder returns. I believe you can see that in the past, we have paid back the shareholder's interest and determination. For the past two or three years, we have paid back about $1.3 billion in dividends and returns. As for the dividends, we have done continuous annual payments since the beginning of 2022. Even when the profits fluctuate in 2025, we have maintained the stability of each shareholder and ensured the shareholder's cash revenue. In the first half of this year, we purchased around 69.9 million ordinary shares for a total amount of $1 billion. This represented 2.5% of our ordinary shares outstanding.

as of December 31st, 2025. Under the previously announced three-year 5 billion USD share repurchase program, the remaining amount is around 1 billion USD. We are expecting the program as planned. Our shareholder return ratio will remain firmly committed to creating value for our shareholders. We will continue to invest in business operations and supply chain capabilities to enhance JD's long-term competitiveness and value. We will return value to shareholders through multiple forms, including healthy and sustainable business development, dividends, and share repurchases. Our goal is to maximize long-term total shareholder returns. Third, our track record also shows our strong commitment to shareholder returns. Since 2023, We have returned around $13 billion USD to shareholders through dividends and share repurchases. On dividends, we have maintained annual dividend payments since 2022 and kept dividend per share stable even when profits fluctuated in 2025, providing shareholders with steady cash returns. On buybacks, we have repurchased around 17% of our outstanding shares since 2023. So going forward, we will remain committed to shareholder returns.

Let me answer the second question.

The core competitiveness of Zhaoyi Bai is that it reproduces the deep-rooted supply chain capabilities of Xinzhong for many years to reach Europe. Especially with regard to our advantageous product range, we have created an extremely differentiated user experience through our efficient self-sales, retail, and logistics contracts. including ZnPySong and On-Door Installation services. This also helps us, JoyBuy, to more or less win the reputation of users in Europe. It not only drives the stability of the user flow rate, but also encourages the business to achieve revenue growth within two seasons.

Hi, Ronald, let me answer your second question. So JoyBuy's core strength lies in taking JD's long-standing supply chain capabilities overseas and localizing them in Europe, particularly in home appliance electronics, where we have a clear edge. Driven by our efficient 1P retail and logistic fulfillment capabilities, we offer a highly differentiated user experience, including integrated delivery and installation services. This has helped JoyBuy gradually win Stronger user recognition and mindshare across Europe, increasing user retention and doubling JoyBuy's revenue within two quarters.

First, JoyBuy is starting to establish a clear edge in user experience and retention.

Powered by our own warehouse network in Europe, JoyBuy now offers same-day and next-day delivery across major European cities, bring in place orders in the morning, receive in the afternoon hyper-fast delivery services to over 40 million customers in Europe.

Unlike other e-commerce platforms, we insist on the local e-commerce mode with our leading supply chain capabilities. We also see that in June, the time of the Summer Black Friday event, the service of the 211 City of Danyu, Songzhuang, led to You can see unlike other so-called traditional cross-border e-commerce platforms, JD leverages our supply chain to build a localized e-commerce model.

We are strengthening our product offering, proactively partnering up with top-tier brands and suppliers, and delivering high-quality products to our local customers in Europe. During JoyBuy's recent Summer Black Friday sale in June, our 2-1-1 same-day delivery and one-stop delivery installation service drove strong electronics and home appliance sales. Notably, during the heat wave in Europe, We saw strong sales of air conditions where our one-stop delivery and installation service truly deliver a differentiated experience, further boosting JoyBuy's brand reputation and customer satisfaction in Europe.

Of course, JoyBuy is still in the early stages of its ability to build. The investment of JoyBuy in the second quarter has increased significantly. The loss-loss ratio has improved significantly. In the next few seasons, with the rapid growth of the unit, the improvement of logistics and travel, and the expansion of the service scope, the investment in Zhaoyi Bai will gradually increase. But our investment is also regular, and the scale is controllable. Moreover, the business model of Zhaoyi Bai is consistent with Jindong, which is the core of the supply chain. As our business expands, it will naturally drive the gradual manifestation of the scale effect. or the financial model will continue to improve.

Of course, Joybuy is still in a very early stage of capability building. So as we fortify our core supply chain strength across product selection and logistic fulfillment, in Q2, our investment in Joybuy grew modestly Q on Q, but its loss margin improved sequentially. Over the coming quarters, We expect as the order volume of JoyBuy continues to grow quickly and logistic fulfillment efficiency improves and service coverage expands, investment in JoyBuy is expected to increase accordingly. However, our investment will remain very disciplined and manageable. In addition, JoyBuy's business model is consistent with JD's core model with supply chain at the center. So as JoyBuy scale expands, Thank you. We can take the next question. Thank you.

Your next question comes from Alicia Yap with Citigroup. Please go ahead.

Hello. Good evening. Thank you. 管理層,晚上好。 謝謝接受我的提問。 兩個問題。 The first question is about the competition pattern of take-out. The status is stable. What are the plans and goals for the growth of the market, the growth of users, and the cross-sales association in the take-out business? The second question is about the commission and advertising revenue. So for questions, first is related to food delivery. So with the landscape stabilizing, What is JD's latest plan for your market share user growth and also the cross-sell synergy target? Second question is for marketplace and also marketing revenues. How can JD sustain faster growth rates amid the competitions and also the slower consumption? What is your view on the growth expectation for this line item into the second half? Thank you.

Thank you, Alicia. Let me answer the first question. First of all, Jindong's delivery business has made good progress. In the second quarter, the unit size of the delivery business has maintained a healthy and rising status. At the same time, total investment has also achieved a significant improvement of more than 50% of the total loss. Since the first quarter of the delivery business, the unit loss and its advantages have clearly been optimized. This is mainly due to the improvement of the operation and supply efficiency of Jindong's business. Thank you, Alicia. Let me answer the first question regarding GTFood Delivery.

GD Food Delivery has made solid progress. In the second quarter, order volume maintained healthy growth while narrowing total loss by over 50% year-on-year. So within just one year of execution, the unit economics improved meaningfully for this business, driven by refined operations and higher subsidy efficiency. We saw subsidy per order notably decreased In terms of business coordination, take-out is a business that is deeply rooted in Jingdong's overall ecosystem.

The value of coordination is also gradually released and reflected. This includes the coordination of core retail business with users and cross-border shopping. In terms of synergy with our core business,

As a deeply embedded business within JD ecosystem, JD Food Delivery is delivering clear synergies. First, it creates strong synergy with our core retail business across user acquisition and cross-sell. Our quarterly active customer maintains solid double-digit year-on-year growth in the quarter. Second, it enriches our location-based supplies and merchant ecosystem. And third, we are integrating the underlying fulfillment capabilities between food delivery and logistics, which we believe will boost our on-demand delivery capabilities and efficiency.

From a long-term goal, while maintaining the growth of our food delivery business, we will continue to improve our operating efficiency, gradually improving the advantages of food delivery. More importantly, we will accelerate the deep coordination of food delivery and core business,

In terms of the long-term goal, we aim to maintain healthy scale growth in food delivery and continue to boost operating efficiency and unit economics. More importantly, we'll deepen integration between food delivery and our core business, to further unlock ecosystem synergy to drive sustainable user and revenue growth while lifting overall efficiency and profitability.

For your second question, Alisha,

JD remains committed to enhancing user experience. Without compromising this focus, we will gradually drive monetization through improved efficiency. In the second quarter, our marketplace and marketing revenues sustained growth that outpaced our total revenues, while advertising revenue showing faster momentum.

In the second half of the year, with the gradual return of large-scale sales, we are confident to see the rapid growth of advertising revenue. At the same time, the increase in technical efficiency, the optimization of product structure, and the expansion of flow rate are all providing motivation for the continuous growth of advertising. In terms of technology, we are fully improving the distribution efficiency of advertising by integrating the algorithm of advertising into the big model. and many more.

Looking ahead to the second half of the year, as our overall sales recover, we are confident in accelerating our advertising revenue growth. Meanwhile, we expect tech-driven efficiency gains category mix optimization and traffic pool expansion to help fuel sustained momentum in our advertising business. On tax-driven efficiency, we've been driving ad distribution efficiency by integrating AI into our algorithms. This optimizes recommendation accuracy, boosting conversion rates, and accelerating ad revenue growth. On category mix optimization, General merchandise categories, which have higher ad monetization rates, are growing faster and taking a larger share of our total sales. This makeshift structurally supports our advertising growth. On traffic pool expansion, new businesses, such as food delivery, have brought incremental traffic to our platform, expanding our overall traffic pool for advertising. In addition to that, Food Delivery's own advertising capabilities continue to mature, contributing incremental ad revenue.

Over the long term,

As our platform ecosystem continues to improve and grow, and as technology drives further efficiency gains, we expect our advertising revenue to maintain steady growth, serving as one of the core drivers of our revenue and profit growth. Officer, we can go to the next question.

Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.

Good evening. Thank you for accepting my question. I have two questions. The first one is, Guan Licheng, can you explain the trend of JD's profit and loss in the third half of the year? In addition, how should we look at the investment of the new business? And how do we look at this year's profit and loss from the group level? Thank you. Let me translate it for you. Good evening. Thanks, management, for taking my questions. My first question is, can management comment about second half JD retail margin outlook? And my second question is about how we should think about the investment in new business. And on that front, how should we think about the group level profitability and net margin? Thank you.

Thomas, thank you for your question. Let me answer it. In the second quarter, the steady increase in the net profit rate of Jindong's retail business is mainly due to the continuous improvement of the net profit rate, including the increase in operating and supply chain efficiency, which led to an increase in the net profit rate of the products, as well as the continuous increase in the commission and advertising income of high net profit. Thank you, Thomas. I'll take your questions. In Q2, JD Retail's operating margin improved steadily. This was mainly attributable to first,

Growth margin saw sustained improvement. This is supported by product sales growth margin expansion as a result of enhanced operational and supply chain efficiency, alongside an increasing contribution from high margin commission and advertising revenue. Second, JD Retail's marketing expense and expense ratio have been improving year on year, a trend we have seen for four consecutive quarters. At the same time, we continued to place strong emphasis on R&D capabilities, especially related to AI applications. JD Retail's R&D expenses increased notably in Q2.

In the next half of the year, we expect the efficiency of Jindong's retail supply chain to continue to improve, and to boost the retail turnover rate. At the same time, we also believe that in order to invest in the long term, Looking into the second half of the year, we expect to improve the supply chain efficiency to continue to drive higher growth margin for daily retail.

At the same time, we remain committed to long-term investments, particularly in R&D for AI applications. We expect R&D expenses to maintain a growth trajectory for the near term, but we believe these investments are gradually translating into operational benefits, lifting long-term efficiency, and optimizing the overall expense structure for JD Retail.

In the long term, we maintain confidence in achieving high profit margin goals. The core driving force still includes self-sufficiency. With the strengthening of self-sufficiency supply chain capabilities and scale advantages, the product profitability will continue to improve steadily. The change in product types, such as supermarkets, still has a greater room for improvement. At the same time, with the growth of the product structure, Over the long term, we remain confident in achieving our high single-digit margin target. The key drivers include our first 1P capabilities,

With stronger 1P supply chain capabilities and skill benefits, we expect product sales gross margin to improve steadily. Second, category upside. Categories such as supermarket still have meaningful potential to improve its profitability. In addition, as we further refine product mix, electronics and home appliances categories also have room for margin expansion over time. Lastly, platform ecosystem. As high margin service revenues, such as commissions and advertising, grow at a rapid pace, we expect our revenue mix to further optimize, serving as a structural driver for margin expansion.

Regarding the investment of new business and the profit of the group, first of all, we are exploring and investing in new business, which is always around the ability of the Jindong supply chain to do long-term layout and ability improvement, including internationalization, down-to-earth market, timely sales, etc. At the same time, as the new business is gradually matured, the co-operative effect of Jindong's overall business ecosystem will continue to be released,

In terms of investments in new businesses and JD Group's consolidated profitability, first, our efforts and investments in new businesses are long-term initiatives with a focus on leveraging and enhancing our supply chain strength. These areas include international business, lower-tier markets, and on-demand retail and so on. As these new businesses gradually mature, synergies across our business ecosystem will continue to unfold, supporting long-term healthy growth and profit contribution.

目前各项新业务的发展阶段和投入周期各不相同, 我们会遵守财务纪律,关注投入产出的效率。 Thank you for your attention. The international market is now in the early stages of business development. The current development is very fast and healthy. The advantage is also gradually improving. However, the business scale is expanding rapidly, so investment is gradually increasing. In the future, we will invest according to the rhythm, keeping the overall investment scale stable and controllable. Surprise, through differentiated supply and efficiency, penetrated the downstream market, bringing us a large number of new users, improving user activity,

At present, our new businesses are at different stages of development and investment cycles. We remain committed to strict financial discipline, focusing on ROI efficiency and will dynamically balance resource allocation across the new initiatives. Overall, we will ensure our profitability trend at the group level remains healthy. Specifically, in Q2, JD Food Delivery narrowed its losses by 50% year-on-year. Looking ahead, we remain focused on optimizing its unit economics, and we expect further efficiency gains and a substantial narrowing of year-on-year losses in the second half of the year. For international business, while in its early stage, it's showing fast-paced and healthy momentum, with unit economics gradually improving. Given its rapid development, our investment has scaled up accordingly. Going forward, we will invest at a measured pace and keep total investment for the business steady and within our control. As for Jingxi, As it effectively penetrates lower-tier markets with differentiated supply, it has brought in a large amount of new users and enhanced user engagement for our platform. Moving forward, we expect Jingxi to drive rapid order growth while continuously improving its unit economics.

Regarding the overall profit of the Group, the net profit of the Group in the second quarter enters a certain profit growth turning point, and it begins to recover the same healthy growth. Looking forward to the next half of the year, with the healthy development of core business and regular investment, we are confident in promoting the rapid growth of Group profits. In the future, it is expected that with the long-term profit capacity of core sales, there will be room for improvement and improvement. On JD Group's profitability, Q2 marked a clear inflection in its trajectory, returning to healthy year-on-year expansion. Looking ahead to the second half of the year, supported by core business health and investment discipline, we are confident

in driving accelerated profit growth at the group level. Over the long term, as our core retail business has further room to enhance profitability and new businesses continue to optimize ROI efficiency, unlock synergies, and gradually become new growth engines, we are well positioned to drive steady long-term profit expansion for the group.

Oh, I think that's all the time we have for Q&A. Back to operator.

Thank you. We are now approaching the end of the conference call. I will now turn the call over to JD.com's Sean Zhang for closing remarks.

Okay, thank you. Thank you for joining us today on the call, and thank you for your questions. As always, if you have further questions, please feel free to contact me and our team. We appreciate your interest and support in JD.com and really looking forward to talking with you again next quarter. Thank you very much. Have a good day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.