Ronald Keung • Goldman Sachs

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Sean Zhang, Head of IR, explained that JD.com will leverage its supply chain capabilities, product optimization, and service enhancements to sustain market share growth in electronics, independent of trading programs. Regarding food delivery, he positioned it as a long-term (5-20 year) strategic initiative deeply integrated with the core retail business. The focus is on quality, system capabilities, and rider welfare to generate synergies and gradually improve unit economics, despite near-term competitive intensity.

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CEO Sandy Xu explained that food delivery is a natural, strategic extension of the core retail business, not a standalone venture. The current focus is on user experience, business scale, and ROI, with the goal of creating long-term synergies across the JD ecosystem. CFO Ian Shan added that the strength in general merchandise comes from relentless operational enhancements over the past two years, and the strategy for sustaining momentum involves further expanding brand selection, leveraging supply chain advantages, and driving user growth across the platform.

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CEO Sandy Xu explained that future growth will be propelled by the general merchandise category, particularly supermarkets and fashion, alongside continued user growth and platform ecosystem enhancements. For supermarkets, the focus is on improving procurement, sales capabilities, and fulfillment efficiency with JD Logistics. Regarding electronics, Ms. Xu noted a rebound in mobile and PC sales and a month-over-month recovery in home appliances in Q1. To solidify leadership, JD will enhance its trade-in services and leverage its supply chain to penetrate lower-tier markets.

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CFO Ian Shan stated that JD will maintain a dynamic balance, aiming for full-year revenue growth to outpace China's total retail sales while also achieving year-over-year profit growth. He attributed Q2's record profit to supply chain efficiencies. CEO Xu Ran added that JD's unique 1P and logistics capabilities create a strong competitive moat, and the company is confident in the long-term growth of China's e-commerce market.

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Chief Financing and Investment Officer Chong Cai attributed the strong order growth to an expanding high-quality user base, effective operational strategies improving user conversion, and growth in new businesses like Less-than-Truckload (LTL). He stated that no significant impact from tariffs has been observed due to the platform's focus on domestic freight and expressed optimism for the 2025 volume outlook.

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CFO Chong Cai attributed the robust growth to three key factors: successful new user acquisition strategies targeting direct shippers, effective operational enhancements like the premium cargo bidding function, and the expansion of new business lines such as less-than-truckload (LTL) services. He expressed confidence in maintaining healthy growth momentum into 2025, regardless of macroeconomic challenges.

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CFO Huiping Yan, translating for Chairman Meisong Lai, affirmed ZTO's commitment to narrowing the volume growth gap with the industry while maintaining service quality and reasonable profits. Yan highlighted significant progress in retail and reverse logistics, with Q1 daily retail parcel volume up 45% to 6 million and reverse logistics volume surging over 150% to 3.5 million daily. She noted that while pricing is competitive, ZTO's early-mover advantage and deep relationships with e-commerce platforms create a high barrier to entry, and that growing this segment is key to improving courier earnings and network stability.

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Chairman Meisong Lai, translated by CFO Huiping Yan, confirmed a 2025 volume growth target of 20-24%, exceeding the industry's expected 15%, to expand market share while maintaining a focus on service quality and reasonable profit. CFO Huiping Yan added that the CapEx cycle has largely matured, with the 2025 plan targeting RMB 5.0 to 5.5 billion, a decrease from 2024's RMB 5.9 billion, primarily for facility upgrades and securing remaining land.

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Chairman and CEO Meisong Lai, translated by Sophie Li, explained that the slower growth was a deliberate strategy to avoid unprofitable, low-priced parcels and focus on service quality. He affirmed confidence in meeting the full-year 15-18% growth guidance, implying an acceleration in the second half. Regarding costs, Mr. Lai stated that while industry-wide productivity gains are slowing, ZTO has significant reserve capacity in its super sorting centers and expects to consistently release meaningful cost efficiencies going forward.

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CEO Yongming (Eddie) Wu clarified that while the first quarter's results were impacted by the Spring Festival, the surge in demand seen in April and May, particularly for inference workloads, is more representative of the regular growth pace going forward. He explained that smaller edge models are complementary to the cloud business, fostering ecosystem reliance, while larger models directly drive cloud usage due to their need for scalable and cost-effective compute power.

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CEO Yongming Wu stated that while the first quarter's results were impacted by the Spring Festival, demand surged afterward, particularly for inference workloads, setting a pace more representative of future growth. He explained that smaller, edge-based models are complementary to the cloud business; customers using the Qwen model family often require cloud-based compute for larger models and more complex tasks, which drives business to Alibaba Cloud and creates higher customer reliance on its products.

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Executive Toby Xu confirmed the take rate has stabilized due to a balance of factors. Positive drivers include the new 0.6% software service fee and increased adoption of the Shenzhen T marketing tool. These are offset by the growth of new business models with lower initial monetization. Xu noted that while there is significant potential to increase the take rate, the company will maintain a balanced approach to ensure merchant health.

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CEO Eddie Wu explained that the initial focus on user experience to drive GMV is now shifting towards monetization as market share stabilizes. He noted new ad tool 'Quanzhantui' will take 6-12 months to optimize. CFO Toby Xu added that a new 0.6% technology service fee on Taobao and Idle Fish, starting in September, will contribute to revenue, though smaller merchants will receive support.

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CEO Yongming Wu confirmed triple-digit AI revenue growth and noted an explosion in demand for inference. He expects this to contribute to higher margins but cautioned that significant CapEx investments over the next three years will have an amortized impact. Wu also stated that due to fierce competition, margins in China will likely differ from international markets and emphasized that scale effects from acquiring more customers will help optimize costs.

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CEO Eric Shen stated that the Q4 gross margin is expected to be marginally lower than Q3 but within the 23% range, as the company invests for growth. CFO Mark Wang added that Q3's margin expansion was driven by a higher contribution from apparel, cost-saving initiatives, and higher-margin other revenues like Shan Shan Outlets. Wang explained the higher tax expense was due to a RMB 175 million withholding tax on a RMB 3.5 billion dividend distribution from mainland China to Hong Kong to fund share buybacks. He noted the long-term effective tax rate should normalize around 17-18%.

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