JD.com's 1Q26 performance was strong, but 2Q26 faces a higher base and pressure from new-business losses

Overview

This report is Morgan Stanley's commentary on JD.com, Inc.'s 2026 first-quarter results. The report notes that the company delivered a strong 1Q26 on JDR margin and narrowing new-business losses, but in 2Q26 the electronics and home appliances business will face a more difficult year-over-year base, while new businesses such as food delivery, Jingxi, and Joybuy may still generate substantial losses.

Core views

The core view is that, although near-term earnings have been revised up, JD.com's risk/reward over the next 12 months is still unattractive. Morgan Stanley expects 2Q26 JDR revenue to decline 2.2% year over year and group revenue to be roughly flat; new-business losses are expected to remain stable sequentially at about Rmb10bn. For the full year, 2H26 electronics and home appliances and JDR revenue growth may benefit from a lower base and a recovery in the real estate market, but new-business investment will continue to weigh on long-term margins and ROE.

Analysis framework

The report evaluates JD.com's risk/reward by combining the magnitude of the earnings beat, management guidance, segment revenue and margin assumptions, non-GAAP earnings forecasts, DCF valuation, and peer P/E comparison. On valuation, the report raises the target price to US$27.00, implying about 9x 2026e non-GAAP P/E, and considers this valuation roughly comparable to PDD's 8-9x, or about 9x, 2026e P/E.

Methodology notes

• Valuation MethodDCF

  Discounted cash flow valuation

  The report continues to use DCF as its valuation method and lists WACC and terminal growth assumptions in the relevant tables; the main target price is US$27.00.

• Financial ForecastingMorgan Stanley ModelWare

  Morgan Stanley internal forecasting framework

  Unless otherwise noted, all metrics are based on the Morgan Stanley ModelWare framework and Morgan Stanley Research estimates.

• Relative Valuationnon-GAAP P/E comparison

  Comparison based on 2026e non-GAAP P/E versus peers

  The target price implies about 9x 2026e non-GAAP P/E, which the report says is broadly comparable to PDD's valuation level, but a discount is considered appropriate because JD.com has a more difficult revenue base and greater earnings uncertainty.

• Risk/RewardRisk Reward scenarios

  Bull, base, and bear scenarios

  The risk/reward section shows BULL CASE US$36.00, BASE CASE US$27.00, and BEAR CASE US$14.00 to illustrate the potential valuation range under different operating and competitive scenarios.

Asset mapping & comparison

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

• JD.com, Inc. (JD.US / JD.O)

  research target

  Strengths

  1Q26 JDR margins beat expectations, and food-delivery losses are narrowing as planned; 2H26 electronics and home appliances/JDR revenue growth may be supported by a lower base and a recovery in the real estate market.

  Weaknesses

  2Q26 faces a higher revenue and profit base, and electronics and home appliances are affected by price increases and insufficient subsidy quotas; new-business investment may weigh on long-term margins and ROE.

  Comparison

  The target price implies about 9x 2026e non-GAAP P/E, which the report says is roughly comparable to PDD's 8-9x, or about 9x, valuation; however, a discount is considered reasonable because JD.com's revenue base is more difficult and earnings uncertainty is higher.

  Risks

  Higher-than-expected sales and marketing spending, a slower-than-expected consumer recovery, the return of irrational competition in e-commerce, and new-business losses narrowing less than expected.

• PDD Holdings Inc (PDD.O)

  peer valuation reference

  Strengths

  The report uses PDD's 2026e P/E as one of the valuation references for JD.com's target price.

  Weaknesses

  The report does not discuss PDD's fundamentals in detail within the JD.com body and uses it only for peer valuation comparison.

  Comparison

  JD.com's US$27.00 target price implies about 9x 2026e non-GAAP P/E, which is close to PDD's trading level of about 8-9x, or about 9x.

  Risks

  Changes in peer competition intensity may affect JD.com's relative valuation and margin assessment.

• Alibaba Group Holding (BABA.N)

  industry peer and company covered in the disclosure section

  Strengths

  An important peer within China internet coverage, used for industry valuation and disclosure context.

  Weaknesses

  This report does not focus on Alibaba's operating details.

  Comparison

  The valuation section notes that JD.com trades at a discount to Alibaba and PDD because its revenue comparison base is more difficult and earnings uncertainty is higher.

  Risks

  Changes in industry competition and regulation may affect the valuation of the broader China internet sector.

Key data

• RatingUnderweightThe report maintains an Underweight stock rating on JD.com, Inc.
• Target PriceUS$27.00The target price is raised from US$25.00 to US$27.00.
• Current Share PriceUS$30.53The closing price is as of May 11, 2026.
• Implied Upside/Downside to Target Price-12%The table shows upside/downside to price target of (12).
• 2026e non-GAAP Net ProfitRmb31.7bnThe report model expects 2026 non-GAAP net profit to grow 17% year over year.
• 2026e EPSRmb22.27Previous forecast was Rmb21.40.
• 2026e RevenueRmb1,391bnThe financial summary table shows 2026e net revenue.
• 2Q26 JDR Revenue Forecast-2.2% yoyThe report expects JDR 2Q26 revenue to decline 2.2% year over year.
• 2Q26 New-Business Loss ForecastAbout Rmb10bnFood-delivery losses are cut in half year over year, but combined losses at Jingxi and Joybuy are expected to increase sequentially.
• Target Price Implied ValuationAbout 9x 2026e non-GAAP P/EThe report considers this valuation roughly comparable to PDD's 8-9x or about 9x level.

Impact & implications

For investment implications, the report acknowledges that 1Q26 earnings quality was good and earnings forecasts were raised, but it places greater emphasis on the 2Q26 high base, new-business losses, and long-term margin pressure. The higher target price does not change the Underweight conclusion, indicating that near-term profit improvement is not enough to offset valuation and fundamental uncertainty.

Risks

• 2Q26 electronics and home appliances face a higher base, which may slow JDR revenue growth.
• A significant price increase driven by rising memory prices may suppress demand or affect GMV and revenue conversion.
• Insufficient online subsidy quotas for the trade-in program may weigh on the performance of electronics and home appliances.
• Losses in food delivery, Jingxi, and Joybuy may continue to drag on margins and ROE.
• Higher-than-expected sales and marketing spending will pressure earnings improvement.
• A slower-than-expected recovery in consumer sentiment may affect group revenue and JDR growth.
• If irrational competition returns to e-commerce, margin expansion could be weakened.

What to watch

• Whether 2Q26 JDR revenue comes in below or above the report's forecast of -2.2% yoy.
• Whether food-delivery losses in 2Q26 and 2H26 can be cut in half year over year as guided by management.
• Whether combined losses at Jingxi and Joybuy continue to widen sequentially.
• Whether 2H26 electronics and home appliances/JDR revenue accelerates meaningfully as the report expects.
• Whether a recovery in the real estate market can translate into support for home appliance demand after about a six-month transition period.
• Whether group non-GAAP net profit can reach the report's expected Rmb31.7bn in 2026 and 17% year-over-year growth.
• Whether the competitive landscape, subsidy policy, and consumer sentiment change the core assumptions behind the Underweight rating.