JD Retail Growth Inflection Approaching; Maintain Buy Rating

Overview

Following post-results discussions with JD's CFO and investor relations team, Goldman Sachs reiterated its Buy view on JD. The core view is that JD Retail revenue growth will improve in 2H 2026, profits will recover year-on-year, and narrowing food delivery losses, overseas retail expansion, and stable shareholder returns will improve the market narrative and support a valuation rerating.

Core views

JD Retail's second-quarter revenue outperformed expectations, as the 618 shopping festival and June rebound offset weak retail performance in April-May; following the fading impact of high-base subsidies, positive growth is expected to resume in the third quarter. On profits, supply-chain efficiency, category-mix optimization, and growth in high-margin services such as advertising should support broadly stable operating margins. While maintaining critical order density, the food delivery business should further narrow losses through lower subsidies and improved fulfillment efficiency. Joybuy and Jingxi are growing strongly, but overseas expansion will require upfront investment.

Analysis framework

The report draws on management discussions, quarterly operating trends, and earnings outlook, combining segment growth, unit economics, investment pace, free cash flow, and shareholder returns to assess valuation-rerating potential, and uses a sum-of-the-parts valuation approach to set 12-month target prices.

Methodology notes

• Valuation methodsSum-of-the-Parts Valuation

  SOTP

  Adds together the value of JD's different businesses to derive 12-month target prices of US$43 for JD.US and HK$169 for 9618.HK.

• Operating AnalysisUnit Economics Model

  UE

  Measures food delivery business economics per order and its loss-reduction trajectory through subsidies, fulfillment efficiency, and order density.

• Investment AnalysisGS Factor Profile

  Growth, financial returns, and valuation multiples

  Provides an investment context versus the market and industry peers through standardized rankings of forward growth, ROE/ROCE/CROCI, and valuation multiples.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• JD.com Inc.(ADR) (JD.US)

  Core covered stock

  Strengths

  Recovery in JD Retail growth, improved supply-chain efficiency, growth in high-margin service revenue, narrowing food delivery losses, and support from free cash flow and buybacks/dividends.

  Weaknesses

  General merchandise growth slowed in the second quarter, the food delivery business remains smaller than leading competitors, and overseas operations require upfront investment.

  Comparison

  Relative to Chinese internet peers, JD has outperformed year-to-date; its self-operated retail-led business and supply-chain capabilities are differentiators.

  Risks

  Intensifying e-commerce and food delivery competition, slower online GMV growth, demand and base pressures in electronics and home appliances, retail-margin volatility, and above-expected new-business investment.

• JD.com Inc. (H) (9618.HK)

  Hong Kong-listed security of the same company

  Strengths

  Shares JD.com Inc.'s retail recovery, supply-chain capabilities, and shareholder-return thesis.

  Weaknesses

  Also faces the upfront investment requirements and near-term earnings pressure associated with new-business expansion.

  Comparison

  Corresponds to the same fundamentals as JD.US; the report assigns a 12-month target price of HK$169.

  Risks

  The same as for JD.US, including competition, slower growth, margin volatility, and overseas expansion execution risk.

Key data

• JD.US 12-month target priceUS$43.00Buy rating maintained.
• JD.US current price and upsideUS$29.06；48.0%Price stated in the report.
• 9618.HK 12-month target priceHK$169.00Buy rating maintained.
• 9618.HK current price and upsideHK$110.20；53.4%Price stated in the report.
• Buyback programUS$5bnApproximately US$1bn remaining is expected to be completed by end-August 2027.
• Joybuy growthRevenue and GMV doubled within two quartersQuarterly investment is set to increase in 2H with city expansion and overseas expansion.
• Estimated quarterly Joybuy investmentApproximately Rmb2bnGoldman Sachs believes this upfront investment remains manageable.

Impact & implications

If JD Retail continues to recover growth from the third through fourth quarters while food delivery losses narrow as expected, market concerns over normalized growth and new-business investment may ease. Goldman Sachs believes that upfront investment in local fulfillment, installation, and procurement capabilities will pressure near-term profits, but Joybuy's supply-chain model could build competitive barriers if it achieves scale.

Risks

• Competition in China's e-commerce and food delivery markets is stronger than expected.
• Online GMV growth slows, while electronics and home-appliance businesses face higher comparison bases and demand volatility.
• Execution in general merchandise and JD Super falls short of expectations, leading to downward revenue forecast revisions.
• Continued investment in price competitiveness, user experience, and the third-party ecosystem could cause JD Retail margin volatility.
• Food delivery loss reduction is slower as the business maintains order density.
• Joybuy's expansion into more countries could raise investment levels from 2H 2026 through 2027.
• Inflation in average selling prices of electronic products may affect demand.

What to watch

• Whether JD Retail revenue growth in July and the third quarter continues to exceed the second-quarter pace.
• The contribution of advertising and other high-margin service revenue growth to gross margin.
• Quarter-on-quarter changes in food delivery order density, subsidy rates, fulfillment efficiency, and unit-economic losses.
• Joybuy's pace of city and country expansion, GMV growth, and quarterly investment intensity.
• The impact of artificial intelligence, logistics automation-related R&D, and computing-power investment on expense ratios.
• Progress in executing the US$5bn buyback program and the stability of annual dividends.