JD (JD) Q2 2025: Food Delivery Losses Expand to RMB 14.8B as User Growth Surges 40%
JD’s Q2 marked a pivotal quarter as food delivery investments widened losses but delivered a step-change in user growth and engagement. The company’s core retail business continued to expand margins, while new business lines, particularly food delivery, fueled a sharp rise in active users and cross-category sales. Management signaled a sustained commitment to platform integration and global expansion, even as near-term profitability absorbs the cost of scaling new initiatives.
Summary
- User Base Inflection: Quarterly active customers jumped over 40% YoY, led by food delivery and broader retail engagement.
- Margin Divergence: Core retail profitability improved, but group net margin compressed due to aggressive new business investment.
- Long-Term Bet: Leadership is prioritizing ecosystem synergies and international expansion, accepting near-term losses to build durable growth.
Performance Analysis
JD delivered 22% revenue growth in Q2, outpacing China’s broader retail sector and sustaining double-digit expansion across electronics, home appliances, and general merchandise. Notably, electronics and home appliances revenue rose 23% YoY, benefiting from government stimulus and product innovation, while general merchandise grew 16%. Service revenues accelerated 29%, with logistics and other services up 34%—an eight-quarter high—driven by food delivery scale-up.
Profitability diverged sharply by segment. JD Retail’s non-GAAP operating profit rose 38% YoY, with margin climbing to 4.5%. However, group non-GAAP net margin fell to 2.1%, as food delivery and new business investments led to a RMB 14.8B operating loss in new business. Free cash flow dropped to RMB 10B from RMB 56B last year, reflecting heavy outlays for growth initiatives and government trading programs. Despite this, core retail gross margin expanded for the thirteenth consecutive quarter, underscoring operational efficiency gains.
- Food Delivery Investment: New business revenues tripled, but losses widened, with food delivery recognized as a key user and traffic driver.
- General Merchandise Momentum: Supermarket and fashion categories kept double-digit revenue growth streaks alive, demonstrating category strength outside electronics.
- User Engagement Spike: Shopping frequency and Plus member activity increased over 40% and 50% respectively, highlighting improved platform stickiness.
JD’s business model—anchored in supply chain integration and direct sales (1P model, where the retailer owns inventory)—continues to deliver cost and service advantages, but the company is now balancing these strengths with ambitious, margin-dilutive bets on platform breadth and ecosystem reach.
Executive Commentary
"User growth and engagement stand out as a key achievement for us in Q2, as we continue to center on users and spare no effort in delivering the best possible user experience. Growth of our quarterly active customers accelerated notably to over 40% year-on-year in Q2, and total QAC base reached a new milestone."
Sandy Xu, Chief Executive Officer
"Our non-GAAP net profit margin was down to 2.1%, mainly due to our investments in food delivery. Although near-term profitability is impacted by strategic investments, we remain confident that those efforts will position the company for sustained growth and long-term value creation."
Ian Shen, Chief Financial Officer
Strategic Positioning
1. Food Delivery as Ecosystem Catalyst
JD Food Delivery is now central to JD’s long-term platform vision, not as a standalone business but as a traffic and engagement engine for the entire ecosystem. Management highlighted exponential order growth, rapid merchant onboarding (over 1.5 million high-quality restaurants), and a full-time delivery workforce exceeding 150,000. Cross-selling from food delivery to core retail, especially supermarkets and lifestyle categories, is already visible, boosting user frequency and Plus member engagement.
2. Supply Chain-Driven Retail Model
JD’s core retail segment continues to leverage its integrated supply chain and 1P model to drive margin expansion and category leadership. Electronics and home appliances benefited from government trading programs and product innovation, while supermarkets maintained six quarters of double-digit growth. Supply chain efficiency remains a key source of cost advantage and user experience differentiation, enabling lower prices and superior fulfillment.
3. Technology and New Business Innovation
JD is investing in AI, automation, and new business models (including on-demand retail and international expansion) to drive future growth. Technology adoption is focused on logistics automation, supply chain optimization, and user experience improvement, with an emphasis on building a scalable, efficient, and innovative platform. These investments are expected to unlock new revenue pools and reinforce JD’s competitive moat.
4. International Expansion and M&A
Going global is a stated long-term priority. JD is building out retail and logistics infrastructure in Europe and the Middle East, with the acquisition of Seconomy in Europe expected to deliver local supply chain and brand synergies. Management emphasized a localization strategy—establishing local teams, sourcing, and fulfillment—to differentiate from traditional cross-border models.
Key Considerations
JD’s Q2 results reflect a company in strategic transition, aggressively investing in new engines of growth while defending its core retail margin and supply chain advantage. The near-term financial trade-off is clear, but management is betting on scale and ecosystem integration to drive future profitability.
Key Considerations:
- Food Delivery Losses vs. User Growth: Investments are expanding losses in the short term, but delivering a step-change in user acquisition and engagement.
- Margin Expansion in Core Retail: Supply chain and 1P model advantages are supporting steady profit improvement, even as group margin compresses.
- Cross-Sell and Ecosystem Synergy: Food delivery is driving incremental traffic and cross-category sales, particularly in supermarkets and lifestyle services.
- Internationalization Risks and Rewards: Overseas expansion offers long-term potential, but integration and regulatory hurdles remain.
- Capital Allocation Discipline: Despite heavy investment, JD continues to return capital through buybacks (over $1.5B repurchased YTD) and dividends, signaling confidence in underlying cash generation.
Risks
Competitive intensity in food delivery and on-demand retail is escalating, with management acknowledging “over-competition” and unsustainable pricing in the sector. Near-term profitability will remain under pressure as JD invests in scaling new businesses. Regulatory uncertainty around government stimulus programs and international M&A integration also pose material execution risks. Free cash flow compression and margin dilution may persist until new business lines reach scale and efficiency gains materialize.
Forward Outlook
For Q3 2025, JD guided to:
- Continued double-digit revenue growth across core categories
- Maintained margin expansion targets for JD Retail, even as group margin remains pressured by new business investment
For full-year 2025, management maintained its focus on:
- Healthy top-line growth outpacing industry averages
- Disciplined investment in food delivery, on-demand, and international business
Management highlighted several factors that will shape results:
- Food delivery order volume growth remains robust into Q3
- Synergies between new and core business lines are expected to deepen, driving higher user value and engagement
Takeaways
JD’s Q2 performance signals a willingness to sacrifice near-term margin for long-term ecosystem dominance. The company is leveraging its supply chain DNA to expand both domestically and globally, betting that user growth and engagement gains will ultimately translate into sustainable profitability.
- Food Delivery Drives Platform Flywheel: The strategic integration of food delivery is already boosting user frequency and cross-category sales, but at a material cost to group profitability.
- Core Retail Remains Margin Anchor: Supply chain-led efficiency continues to support margin expansion in JD Retail, providing a financial buffer for new business bets.
- Watch for Profitability Inflection: Investors should monitor the pace at which food delivery losses narrow and ecosystem synergies convert to bottom-line improvement, as well as the execution of international expansion.
Conclusion
JD’s Q2 2025 underscores a high-conviction pivot toward platform breadth and user engagement, even at the expense of near-term profitability. The company’s success will hinge on its ability to translate user momentum and ecosystem synergies into durable margin recovery as new businesses mature.
Industry Read-Through
JD’s results highlight the rising importance of ecosystem integration and user engagement in China’s retail landscape. The aggressive push into food delivery and on-demand retail signals a broader industry trend toward platform convergence and cross-category synergy. Competitors in e-commerce and logistics will likely face intensifying pressure to scale new service lines and deepen user stickiness, even as profitability comes under strain. International expansion strategies that emphasize supply chain localization and brand partnerships may become more prevalent, particularly as Chinese platforms seek growth beyond domestic markets.