JD.com - Earnings Call - Q3 2025
November 13, 2025
Transcript
Operator (participant)
Hello, and thank you for standing by for JD.com's third quarter 2025 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.
Sean Zhang (Head of Investor Relations)
Thank you. Good day, everyone. Welcome to JD.com third quarter 2025 earnings conference call. With us today are CEO of JD.com, Ms. Sandy Xu, and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results. We will open the call to questions from analysts. 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 and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on our IR website, which applies to this call. We will discuss certain non-GAAP financial measures. Please refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release.
Please also note all figures mentioned in this call today are in RMB, unless otherwise stated. Now, let me turn the call over to our CEO, Sandy. Sandy, please.
Sandy Xu (CEO)
Thank you, Sean. Hello, everyone. Thank you for joining our third quarter 2025 earnings conference call. We achieved a set of solid results across our strategic priorities during the third quarter and further enhanced our capabilities to drive better user experience, lower cost, and higher efficiency. Our total revenues were up 15% year-on-year, sustaining our double-digit growth momentum. We are delighted to see growth of our general merchandise categories and marketplace and marketing revenues continue to accelerate sequentially. Both are becoming our important growth drivers. Non-GAAP net profit came in at RMB 5.8 billion in the quarter, with the core retail business margin continuing to expand year-on-year. Our food delivery business also sustained healthy expansion while its loss narrowed in Q3 from the prior quarter as we continue to optimize operating efficiency and improve unit economics. Overall, our business is making good progress along our long-term strategic roadmap.
We are confident that our core retail business will steadily expand market share with healthy margin improvement, and new initiatives will create deeper synergies and drive healthier financial models, further strengthening our entire business ecosystem. Among all the encouraging developments that underpinned these results, I would like to point to three most notable highlights for this quarter, which I believe should be the key takeaways from today's call. First, strong momentum in our user base and engagement. Our quarterly active customer number was up over 40% year-on-year in Q3, sustaining the momentum built in the previous quarters, thanks to both organic growth of JD Retail as well as contributions from our new businesses such as JD Food Delivery and Jingxi. The consistent growth has led to our annual active customers exceeding 700 million in October, making a new milestone in our user expansion.
In particular, the number of JD Plus members, our highest quality user group, also recorded healthy growth in the quarter. In addition to user scale, user shopping frequency on our platform also increased by over 40% year-on-year in Q3, a pace we've sustained for two consecutive quarters. Notably, we saw meaningful shopping frequency increase across all user groups, including new users, existing users, and JD Plus members. This user momentum is clear proof that we have stayed very focused on providing a better user experience amid evolving user demand. In return, our expanding and more active user pool further improves our engagement with users, deepens our user insights, and enables us to better address their demand. This virtuous cycle ultimately supports our sustainable growth in the long run. Second, our core retail business remained strong in Q3. Retail revenues increased by 11% year-on-year in the quarter to RMB 251 billion.
There were a mix of contributors to this. While the high base effect for electronics and home appliances category started to kick in, sales of general merchandise, as well as marketplace and marketing revenues, continued to accelerate growth this quarter. Profit-wise, both JD Retail's gross margin and operating margin further expanded at a solid pace, demonstrating the continued scale benefits and operating efficiency gains of the business. Looking at the main categories, the electronics and home appliances category has been faced with a high base since the second half of Q3, which has been weighing on its growth momentum. This is an industry-wide challenge, and we are working closely with brands and manufacturers to navigate through it. For example, we've been leveraging our market and user insights to support brands and manufacturers in developing new and customized product models.
Meanwhile, we continue to lower the costs for brands and strive to secure the best prices for our customers, thanks to our supply chain capabilities. Although the high base effect is expected to linger in the near term, it's clear that the advantages of our business model and market position in these categories remain intact, and we are confident in building on these strengths to unlock new growth potential in this market. General merchandise category recorded 19% year-on-year revenue growth in Q3, an impressive acceleration from a quarter ago. Within this category, revenues from supermarket, fashion, and health categories maintained double-digit year-on-year growth in the quarter. The strong tailwind is expected to sustain into Q4. This is a result of our efforts in enhancing our product portfolio, price competitiveness, and service quality, which eventually translates to better user experience and stronger user mind-share.
As we continue to tap into the huge market potential, we believe general merchandise will play a bigger role in supporting JD Retail's long-term growth. In addition to healthier category mix, another bright spot in our Q3 performance was marketplace and marketing revenues, which at the group level grew 24% year-on-year in the quarter. It has remained on a double-digit growth trajectory for four consecutive quarters. In particular, growth of our advertising revenues has accelerated sequentially in every quarter this year and exceeded 20% year-on-year in Q3. This strong momentum mainly stems from the accelerated ad revenues generated by core JD Retail business. Our improved ecosystem for both 1P business and 3P merchants, better AI-powered ad tools, and improved traffic allocation efficiency all have contributed to the strong trend. As we move into Q4, we expect marketplace and marketing revenues to continue the healthy growth.
Our platform ecosystem is taking good shape and gaining positive traction with suppliers and merchants, large and small. The third highlight I want to share is our new businesses. Within the segment, JD Food Delivery continued to make healthy progress in Q3. Its DNV achieved double-digit quarter-on-quarter growth in the quarter, driven by both order volume growth and a healthier order mix with high-value orders contributing a vast majority of total orders. While scaling up, the food delivery business also narrowed operating loss sequentially in Q3, thanks to the improving UE performance. This encouraging progress is achieved through our enriched supplies, increased operating efficiency, disciplined investment amid a competitive market, and our efforts to expand food delivery's revenue streams. More importantly, food delivery continued to generate strong synergies with our retail business. In addition to user growth and engagement, the cohort cumulative cross-selling rate has been on an upward trend.
Products from our supermarket, electronics accessories, and Jingxi categories remained the biggest beneficiaries of this trend. Going forward, we will focus on further growing the food delivery business scale, UE optimization, and unlocking stronger synergies with retail, logistics, and other businesses across our ecosystem. Other new businesses, including both Jingxi and international business, are progressing well as planned. Jingxi further penetrated into the lower-tier markets and grew its merchant and user base. Our international retail business is gradually establishing capabilities in the U.K., France, Germany, and Benelux regions, paving the way for our global expansion. Both are making solid steps in executing on their long-term strategies. One more thing before I wrap up. We unveiled our AI roadmap during the 2025 JD Discovery Conference in September. I want to share a few exciting updates here.
First, we launched a number of new AI products at the event, including TaTaTa, an all-purpose digital human assistant app, and JoyInsight, an AI agent for robots, toys, devices, among others. Second, we introduced industry-specific AI applications across four sectors of retail, healthcare, logistics, and industrial. Third, we also made upgrades to a few of our retail technology infrastructure, such as JD Streamer, our new digital human technology that provides e-commerce live streaming and short video production solutions. Joy Streamer has served over 40,000 brands so far, with significantly lower cost and better sales performance compared to real human live streaming costs. In addition, we provide 24/7 nonstop AI customer service, which handled over 4.2 billion inquiries during our Double 11 grand promotion. We are excited about the potential of these AI applications as we foster a comprehensive AI ecosystem spanning across various industries.
To conclude, Q3 was a productive quarter, with all our business lines moving ahead steadily on our strategic roadmap. The user momentum on our platform was strong. Our core retail business is in solid shape, with multiple complementary long-term growth drivers and great potential for long-term margin improvement. Beyond core retail, new businesses, including food delivery, Jingxi, and our international retail business, are on track for healthy development, both financially and operationally. Taken together, our businesses are operating in synergy. Bolstering our conviction in the path ahead, we see great opportunities to further unlock the collaborative value of our business ecosystem and to position us well for sustainable, high-quality growth. With that, now let me turn the call over to Ian.
Ian Shan (CFO)
Thank you, Sandy. Hello everyone, and thank you for joining the call today. In the third quarter, we recorded a set of healthy performance across our business lines.
Our total revenues were up 15% year-on-year, outpacing the group of MBS total retail sales. This was supported by double-digit revenue growth in our core retail business. Despite the high base for electronics and home appliances, general merchandise and service revenues both delivered stronger growth in Q3 and recorded their fastest pace since the second quarter 2023. In terms of profits, JD Retail achieved strong year-on-year expansion in both gross and operating margins in the quarter, and our food delivery business also saw a sequential reduction in investment scale. Overall, our business is moving in the right direction, and we are at a stronger position to drive sustainable growth for the long term. Now, let's go through our financial results in the third quarter. Total net revenues increased by a solid 15% year-on-year to RMB 299 billion in Q3.
Breaking down the mix, product revenues were up 10% year-on-year in Q3. Revenues of electronics and home appliances were up 5%, decelerating from last quarter due to the high base effect created by the trading program. This is in line with our expectations, and we are confident that we are positioned to further solidify our leading market position as we leverage our supply chain advantages and stay focused on enhancing user experience, reducing cost, and improving efficiency. Revenues of general merchandise were up 19% year-on-year in the quarter, a notable highlight of our Q3 performance. Growth in general merchandise has sustained double-digit growth for four consecutive quarters and further accelerated from the previous quarter. Within general merchandise, both supermarket and fashion categories saw growth rates surpassing meetings in Q3.
The results were mainly driven by our continuous efforts to enhance our operational capabilities, build up better user experience and mind share alongside our growing market share. This gives us the confidence that the strong momentum in our general merchandise categories will continue going forward as we capture the huge potential in this market. Service revenues were up 31% year-on-year in Q3, a solid acceleration compared to previous quarters. Notably, marketplace and marketing revenues increased 24% year-on-year, accelerating sequentially every quarter for seven quarters in a row. Within this line, advertising revenues continue to see robust growth, mainly driven by the notable improvement of user engagement and better advertising tools that we provide for both suppliers and merchants at our core retail business. This demonstrates our more robust ecosystem and the strong growth in the number of merchants and users on our platform.
We expect marketplace and marketing revenues to continue solid growth in Q4, contributing to both our top-line growth and margin performance. Logistics and other service revenues grew 35% year-on-year in Q3, mainly driven by the incremental delivery revenues from food delivery business. Now, let's turn to our segment performance. JD Retail revenues were up 11% year-on-year in Q3. Our core retail business has built multiple growth drivers, and we believe growth of the general merchandise category and value-added services, including advertising, will be important pillars in retail's long-term growth. JD Retail also saw healthy progress in margin expansion in the quarter. Its gross margin has sustained year-on-year expansion for 14 quarters in a row and was up 1.3 percentage points to 19.3% in Q3. This was driven by a favorable mix shift towards higher margin business, along with optimized procurement costs by leveraging our scale effect and supply chain advantages.
In addition, in Q3, JD Retail's non-GAAP operating income was up 28% year-on-year to RMB 14.8 billion, and operating margin was up 76 basis points to 5.9%, both continuing strong momentum. Moving to JD Logistics, the logistics revenues were up 24% year-on-year in Q3. Both internal and external revenues grew at a steady pace, and JD Logistics also saw incremental delivery service revenues generated by food delivery business. In terms of profits, JD Logistics' non-GAAP operating income was compressed 39% year-on-year to RMB 1.3 billion in the quarter, as it continued to invest in customer experience, service capabilities, and technology to enhance the efficiency of the entire logistics process. These efforts aim to boost JD Logistics' competitiveness in products and services and strengthen its market position, which over time will translate into sustainable margin expansion.
Our net new business generated RMB 15.6 billion in revenues, a steady growth compared to last quarter. This was driven by the continued expansion of our food delivery, Jingxi, and international business. Non-GAAP operating loss of new business slightly widened sequentially to RMB 15.7 billion. To break this down, food delivery saw a sequential reduction in its investment in Q3. Our food delivery business continued to scale with a healthier financial model, with expanded revenue streams, disciplined spending in users, and increased operating efficiency. As to other new business, both Jingxi and international business increased investments compared to a quarter ago. They are in a rapid development stage and are important pillars in JD's long-term strategies. Going forward, we will continue to scale up the new business and further unlock synergies to set the stage for our future growth.
At the same time, we are committed to improving UE performance and aim to drive healthy and sustainable bottom-line growth in the long run. For our consolidated profit performance in Q3, our gross profit was up 12% year-on-year to RMB 50 billion, and the gross margin was 17%, slightly reduced by 0.4 percentage points. This was primarily due to margin dilution from the food delivery business and JD Logistics, which offset JD Retail's solid gross margin expansion in the quarter. Consolidated non-GAAP net income attributable to ordinary shareholders was RMB 5.8 billion in Q3, and non-GAAP net margin was 1.9%. Both down year-on-year, this near-term headwind in profits mainly reflects our investments in food delivery. Our last 12-month free cash flow as of the end of Q3 was RMB 13 billion compared to RMB 34 billion in the same period last year.
This was primarily due to cash outflows associated with the trading program and the decline in operating income. By the end of the third quarter, our cash and cash equivalents, restricted cash, and short-term investments totaled RMB 211 billion. In summary, we're encouraged by the solid progress in both core retail and new business. Retail has built a growth matrix with multiple drivers and a clear path to our long-term margin target. Food Delivery is growing with a healthier financial model, and other new business, including lower-tier market and international business, are also making solid steps for the next chapter. All our businesses are on the right track, starting to generate notable synergies with one another and collectively contributing to our high-quality development in the long-term. With that, I will turn it back to Sean.
Sean Zhang (Head of Investor Relations)
Thank you. Thank you, Sandy and Ian, for the Q&A session. You're welcome to ask questions in English or Chinese, and our management will answer the question in Chinese. We'll provide English translation for convenience purposes only. In case of any discrepancy, please refer to our management statement in the original language. Operator, we are opening the call for a Q&A session now.
Operator (participant)
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 queue again after your first two questions have been addressed. Your first question comes from Kenneth Fong at UBS.
Kenneth Fong (Head of China Internet Research)
Hey, Sandy and Yan, Sean [Foreign language].
Thank you, management, for taking my question. My first question is on the government training subsidies.
As the year-on-year comparison base is getting higher into the second into the fourth quarter, can management share the growth outlook for the electronics and home appliances growth for JD Retail? Financially, as the training subsidies fade and volume kind of slower in terms of growth year-on-year, how should we think about the margin impact on JD Retail? My second question is on the overseas development. Post the recent acquisition on some of the company overseas and JD Joybuy commenced operations, can management share about its overseas strategy, including the scale and the pace of investment? Thank you.
Sandy Xu (CEO)
[Foreign language] Kenny
Thanks for your question, Kenny. Yes, since last year, the training program has stimulated consumer demand and contributed to the sales of home appliances and PCs. This created an inevitable high base for the industry, which is within the market expectation.
Although the training program has caused short-term fluctuation in the consumer demand, its more substantial impact is driving industry upgrades and promoting products that are innovative, intelligent, and green, and ultimately leading to high-quality growth of the industry.
[Foreign language]
Since the training program, JD has actively supported implementation of the policy. As such, we have further enhanced our market share and supply chain capability in the related categories. Especially on our 1P model, the continuous enhancement of our core advantage differentiates JD and builds our long-term growth foundation. We'll continue to leverage our strengths in product, price, and service with the goal to further strengthen user mind share and consolidate and expand our market share. We'll focus on a few areas.
[Foreign language]
This area includes first on the product innovation. We'll collaborate with brands to launch more customized products, driving product upgrades and innovation.
On price optimization, we'll also leverage our scale advantage and supply chain capability to further optimize cost, offering users more competitive price. On the service, we're offering omnichannel consumer service. We'll build a seamless online and offline shopping experience for our customers. For example, we have been strengthening our offline presence in home appliances and 3C categories, focusing on large stores like JD Mall, JD Home Appliance, city flagship stores in the high-tier cities, and smaller ones such as JD Home Appliance stores in the low-tier market. In addition, we also provide differentiated services, including integrated delivery and installation, offering better user experience and more efficient service to our users. With these efforts, we'll further consolidate our market share. As of Q3, we have built over 20 JD Malls nationwide, and the number of JD Appliance city flagship stores exceeded 100.
[Foreign language]
In terms of profit margin, we'll continue to offer users the best value for money product to ensure better user experience and mind share. Additionally, whether during the training program or in the normalized phase going forward, our team will leverage supply chain capabilities and enhance collaboration with brands.
[Foreign language]
So overall, we are confident in our user mind share and market share in the home appliance and 3C categories. JD will continue to strengthen our capabilities and strategic positioning, working very closely with brands to address short-term challenges and support the long-term healthy development of the industry. Additionally, our growth drivers are now more diversified. We have seen sustained sales growth acceleration in categories such as supermarket, health, fashion, and service revenue from advertising, which are emerging as new growth engines for JD.
Furthermore, as I just have shared, both our user base and shopping frequency have been on a stronger growth trend. During JD Double 11 grant promotion, the number of our shopping customers increased by 40% year-on-year. This set of momentum will support our healthy growth next year and give us more confidence in the long-term.
[Foreign language]
Regarding your second question on JD's international business, so first from the strategic perspective, international expansion has always been a key long-term strategy for JD. As the largest retailer in China, we aim to gradually establish a highly efficient global retail network so that we can deliver JD's premium shopping experience to consumers worldwide. We recognize the international market is very big. For example, Europe is the second largest consumer electronics market in the world, only second to China, and there are still many great areas to improve user experience.
We also aim to seize the opportunity of Chinese supply chain going global, leveraging our supply chain advantage to better support Chinese brands in their international expansion. In terms of business model, unlike other cross-border e-commerce platforms, we leverage our supply chain capabilities, commit to a local e-commerce approach, and localization strategy. We collaborate with high-quality brands and suppliers around the world to create mutually beneficial partnerships.
[Foreign language]
In terms of progress, currently Joybuy, our European online retail business, is in the test phase in countries including the U.K., France, Germany, and the Netherlands. This marks an important step in JD's international strategy.
We'll continue to enhance user experience and build our key capabilities in areas including, first, expanding product offerings and collaboration with premium global brands. Second, enhancing logistic capability to improve the efficiency and stability of warehousing and delivery. Third, investing in R&D to optimize the product functionality and enhancing shopping experience. We welcome investors and analysts based in Europe to experience our Joybuy app and provide us your experience. Regarding Seqonomy, the transaction is still subject to the regulatory approval. We'll provide you guys further updates when appropriate.
[Foreign language]
From the investment standpoint, this is a gradual process. We will continue to advance our international expansion strategy steadily while maintaining a gradual and prudent financial discipline. We will prioritize investment efficiency and make dynamic adjustments to achieve healthy and sustainable growth.
Overall, the scale of the investment in our international business will not be substantial for JD.com, and we'll carefully manage the investment pace and scale. Over here, we can take the next question.
Operator (participant)
Your next question comes from Ronald Keung with Goldman Sachs.
Ronald Keung (Managing Director)
[Foreign language]
Thank you, management. Two questions. The first is on food delivery. What is the duration that JD will be committed to invest at this loss-making period as part of customer acquisition? And what's the progress in improving economics in commissions and business models like the Seven Fresh and even coffee across the Seven Fresh brands? Second question is on general merchandise, seeing very healthy growth there and in 3P. So how do we plan to further strengthen the competitive edge in the 3P category, supermarket, health, and apparel in terms of speed, selection, quality, and price?
Sandy Xu (CEO)
[Foreign language]
Thank you, Ronald, for your question. Both food delivery and on-demand retail is a long-term strategy for JD. We aim to drive healthy and sustainable growth of the business. We have been optimizing operational efficiency and improving UE. In Q3, we remained very rational amid the intensified competition in the industry. Our food delivery business is currently in its first stage of development. Our goal for this stage is to establish better user mind share and market share in the quality food delivery sector. We will be committed to providing high-quality food delivery service to our existing premium user while attracting new users. Additionally, as you guys know, what we are good at is supply chain.
We will continue to deepen our supply chain effort, such as through our innovative 7Fresh Kitchen model to offer differentiated experience and service to our users.
[Foreign language]
In the third quarter, JD Food Delivery maintained healthy growth trend. JD Food Delivery GMV achieved double-digit growth quarter on quarter alongside order volume growth. It also delivered healthier order mix with a proportion of meal orders steadily rising and contributing to a vast majority of our total order. At the same time, average price per order also increased quarter on quarter compared to Q2 amid intensified competition. This is remarkable. While scaling up, overall investment in JD Food Delivery business in Q3 narrowed sequentially thanks to the UE improvement.
The revenue contribution of food delivery is still limited as we are implementing a commission-free policy for merchants and only started to generate limited advertising revenues. That said, our team has made solid progress in improving operational efficiency, including enriching supplies. The number of high-quality restaurant merchants continued to grow in the quarter. We also further improved our subsidy efficiency with refined operations and tailored subsidy strategy to different regions, user groups, and order types. In addition, as we continue to upgrade our underlying system capability, we have seen better operating efficiency. We also launched our new business, 7Fresh Kitchen model, in July, which addressed food safety concerns through supply chain innovation. Our goal is to ensure that consumers can enjoy their meals with peace of mind and, at the same time, help quality restaurants improve profitability.
Since its launch, 7Fresh Kitchen has been welcomed by our customers with a rapid increase in its order volume. It has also boosted sales and order growth of other quality restaurants within the 3 km range. By the end of this year, people will see more 7Fresh Kitchen in the region of Beijing.
[Foreign language]
Looking ahead, we'll drive our strategic progress with a long-term perspective and focus on long-term ROI. Our goal is to create a sustainable business that drives healthy order growth and, at the same time, gradually unlocks scale effect and enhance operations with better UE. Ultimately, JD Food Delivery should be a self-sustaining business. Moreover, Food Delivery is deeply integrated into JD's overall ecosystem. We believe there is significant potential for synergies in user momentum, supplies, and fulfillment within our ecosystem.
The way of our business working together is not simply adding one and cutting another. In the long term, JD's user acquisition costs will decrease, and at the group level, we are committed to driving sustainable growth while maintaining profitable and cash flow sufficient.
[Foreign language]
Regarding your question about our general merchandise category, as I mentioned before, it has sustained a four-quarter consecutive double-digit growth. Key categories, especially supermarket, health, fashion, and home goods, all deliver very strong growth. We see significant growth potential in general merchandise, including supermarket and fashion. As our users have substantial unmet demands, we have clear growth strategy for each of these key categories. First, on supermarket categories, we focus on improving user mind share and user penetration through our promotions such as Black Friday and Super 18s. We'll build stronger user mind share of our supermarket offering.
Supermarket category will also take the opportunity of our rapid user growth on the platform to drive healthy, higher penetration and conversion. We have been optimizing costs and improving operational efficiency through our supply chain capability, providing more competitive price to our users, which validates the economic scale of our 1P model. Our supermarket category has made solid progress in this area and built strong competitiveness compared to other models, online and offline. At the same time, we'll collaborate with brands, further refine our operation, and build categories with strong JD mind share and growth potential, such as liquor, baby and mom products, and household cleaning categories. All have already established strong user mind share. We expect to make breakthroughs in other categories as well.
[Foreign language]
Overall, our strategy for the general merchandise category is very clear.
We are confident in the growth potential and market opportunity in the general merchandise sector as we enhance operation and user mind share. General merchandise is an important pillar of JD growth metrics and will support our long-term sustainable growth. We can take the next question, operator.
Operator (participant)
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Your next question comes from Alicia Yap with Citigroup.
Alicia Yap (Equity Research Analyst)
Hi, thank you. [Foreign language]
So can management share with us the synergies on general merchandise category that benefit from the food delivery traffic? Most of your food delivery users come from loyal JD users. And what is the retention rate of the newly acquired users through the food delivery?
Would you be able to quantify and share the quota of new food delivery users who become active users of JD core retail users? Second question is, can management update us on your latest AI strategy and investment? Can you elaborate how AI has helped on JD's core business and how do we think about the financial impact? Thank you.
Ian Shan (CFO)
[Foreign language]
Thank you, Alicia, for your question. I will take the first one. As JD food delivery drives healthy development, we also see it's generating deeper synergies with JD Retail. First, on the user growth and user engagement side. In Q3, DAU of JD APP maintained rapid growth, with growth rates leading the industry. Our quarterly active customers and user shopping frequency both recorded over 40% year-on-year growth in the quarter.
As we continue to provide quality food delivery, we've seen JD Food Delivery's user retention rate maintained at a relatively high level, and at the same time, boost our overall user engagement and user shopping frequency. While serving our high-quality existing users, our food delivery business also attracts new users to our platform. Our annual active customer number surpassed the milestone of 700 million in October, reflecting our expanding user base and increasing user stickiness. At the same time, we've been accelerating the deployment and further optimizing our user conversion strategies and tools. Based on the preferences of food delivery users, we've been providing retail product selection and recommendation in a more precise way, thus driving better user conversion. We've seen that the conversion rate of the new users acquired by JD Food Delivery has been trending up month by month. For the earliest group of such users, their cohort conversion has reached close to 50% in Q3.
[Foreign language]
Second, on the cross-sell side, we've seen a stronger trend of cross-category purchases of food delivery users, particularly of our general merchandise categories, including supermarket products and live services. We believe food delivery will create new growth momentum to our general merchandise category as it attracts new users and drives up shopping frequency of our existing users. In addition, JD Food Delivery has also accelerated the development of our on-demand retail business. We've built a dedicated team that pays close attention to this area. Going forward, we will continue to accelerate the synergies between Food Delivery and core Retail business in terms of user momentum, cross-category purchases, and marketing.
In addition, we will tap into more synergies of our broader business ecosystem, driving healthy progress in our user base expansion, revenue growth, and efficiency improvements.
Sandy Xu (CEO)
[Foreign language]
I'll answer the second question. So we are in the new era where we see a lot of new opportunities in AI and significant value of business model reform. JD.com has built a solid comprehensive AI capability framework that covers infrastructure, models, platforms, application scenarios, and products. Over the next three years, we'll make a sustained investment to foster a trillion RMB scale AI ecosystem across various industries. At our JDD conference in September, we have unveiled JD AI strategy roadmap and launched flagship AI products, including our JD AI, TaTaTa, and all-purpose digital human assistant, and JoyInsight, and AI agents for robot toys, devices, and among others.
[Foreign language]
In terms of AI application, JD's differentiation is that we have extensive application scenarios, including retail, logistics, healthcare, and other industry sectors. Taking both retail and logistics as example, in retail use case, we are providing merchants with over 50 AI tools such as AI assistant, AI agent for advertising allocation, and [Foreign language]to help merchants enhance efficiency and lower costs in content generation, marketing, supply chain management, and customer service. We also redefined e-commerce experience in the AI era. We launched a smart search and recommendation function. Through natural language interaction, it can precisely understand user needs and deliver a huge breakthrough in shopping efficiency and truly personalized shopping experience. In the logistics use case, our logistics robots have been deployed across more than 20 provinces in China and over 10 countries globally, covering the entire logistics chain from warehousing, sorting, to transportation and distribution.
Looking ahead, the expanding deployment of logistic robots, autonomous vehicles, and drones will further reduce logistics costs in the society, increase our business partner efficiency, and keep optimizing shopping experience for our consumers. Okay, operator, we can take the last question.
Operator (participant)
Your last question comes from Thomas Chong at Jefferies.
Thomas Chong (Regional Head of Internet and Media)
[Foreign language]
Thanks, Management, for taking my question. My first question is about ecosystem development, including the number of 3P merchants' contribution as well as the expectation over the next few quarters. And my second question is about the outlook in terms of our profitability and margin in the next few years. Thank you.
Ian Shan (CFO)
All right, thank you. [Foreign language]
Thank you, Thomas. We've actually made solid progress in developing our platform ecosystem with a set of indicators growing at a very rapid pace. So in Q3, our active merchant number grew by over 200% year-on-year.
We've onboarded more top-tier merchants as well as merchants from industrial belts, providing users further enriched product offerings. Meanwhile, our food delivery business has also brought in a large number of quality restaurant merchants. We've also seen positive feedback from users. In Q3, the number of users who shopped our 3P offerings grew at a fast pace of over 50% year-on-year, outpacing the growth of our total users. Reflected in the financial results, our commission and advertising revenues have been on a very rapid growth trajectory, with growth rate accelerating to 24% year-on-year in Q3, which is the highest pace since Q2 2022.
[Foreign language]
We believe our platform ecosystem has a lot of potential. In particular, we will further explore industrial belts to onboard more merchants. We will also continue to expand our food delivery merchant base to enrich local supplies for our 3P ecosystem.
In addition, we will continue to strengthen our platform infrastructure and provide more tech tools to merchants, with the goal to help them enhance operating efficiency on our platform. We will also optimize merchant operation rules and traffic allocation efficiency to create a clear growth path and a fair ecosystem for our 3P merchants. In addition to that, we will continue to strengthen user mind share of our 3P offerings. We will see that for our 3P-driven categories, such as fashion category, users have built a growing mind share of shopping for clothing on JD.com. We are committed to developing our platform ecosystem, achieving win-win outcomes with our 3P merchants and better serving our users. Platform ecosystem business will also be our long-term driver for both revenue growth and profitability expansion.
[Foreign language]
For your second question, in Q3, JD Retail continued to see steady profit growth.
This further validates our confidence in retail's long-term margin trajectory. The main drivers for this include: first, the healthy development of our platform ecosystem will drive growth momentum in our commission and advertising revenues, which will be a contributor to our margin expansion. Second, as we continue to build up our supply chain advantages and the scale effect of our core retail business, we are confident to further lower costs and improve our operating efficiency, which will lead to better margin performance. To note, JD Retail's gross margin has been expanding year-on-year for 14 consecutive quarters. Third, our category mix shift will also impact our margin performance. Currently, the operating efficiency and margin performance of most of our categories and brands have been improving. In particular, our supermarket category has built stronger procurement capabilities and differentiated product offerings. We see meaningful potential to further increase supermarket margins going forward.
Meanwhile, as we continue to optimize the product mix for electronics and home appliances, we also see room to increase these categories' margins in the long term. In terms of investment in our new businesses, we will be centered around supply chain capabilities to make investments, such as in food delivery, international, and Jingxi businesses. As we further enhance our supply, fulfillment, and services, and broaden coverage in categories, customers, and regions, we see more growth potential of our businesses. As the new initiatives generate deeper synergies with our existing businesses, we expect to see improvements in operating efficiency and profitability of our broader business ecosystem. Finally, our high single-digit margin target for the long term remains unchanged.
Sean Zhang (Head of Investor Relations)
That's a wrap. Operator.
Operator (participant)
We are now approaching the end of the conference call. I'll turn the call over to JD.com's Sean Zhang for closing remarks.
Sean Zhang (Head of Investor Relations)
Thank you for joining us on the call today, and thanks for your question. If you have further questions, please do not hesitate to contact me and our team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you. Have a good day.
Operator (participant)
Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect. Good day.