JPMorgan initiates JD.com at Overweight as margin recovery and lower new-business losses offset revenue concerns

Overview

This initiation report argues that JD.com's earnings recovery is advancing despite temporarily weak revenue. JPMorgan attributes the slowdown largely to difficult comparisons with China’s 2025 trade-in subsidies, while highlighting improving retail profitability, lower food-delivery losses and JD’s service-led retail model.

Core views

JPMorgan initiates coverage of JD.com at Overweight, arguing that the investment case rests less on an immediate return to rapid revenue growth than on sustained customer retention, service advantages and lower competitive spending. In 2Q26, group revenue declined 2.9% year on year to Rmb346.4bn, but gross profit rose 5% and gross margin expanded 1.2 percentage points to 17.1%. JD Retail delivered a 4.6% operating margin during a major promotional quarter, while non-GAAP net income increased 21% year on year to Rmb8.9bn. Marketing expense fell by about 25%, supporting the report’s view that earnings can improve even while reported revenue remains under pressure. A second pillar is the reduction in losses from newer businesses. New-business operating losses narrowed to Rmb9.9bn in 2Q26 from Rmb14.8bn a year earlier and Rmb10.4bn in 1Q26; food-delivery losses more than halved year on year, while its commission and advertising revenue nearly doubled quarter on quarter. Management indicated that total 2026 food-delivery investment should decline from 2025 if competition remains stable. JPMorgan’s Rmb37.0bn 2026 adjusted-net-income forecast assumes only Rmb9bn of year-on-year loss reduction, leaving potential upside if the 2Q26 run rate persists. The estimate is 17% above Bloomberg consensus, and the institution raised its 2026 adjusted-net-income forecast by 5% despite cutting its revenue forecast by 1%. The report frames the main revenue debate as temporary comparison pressure versus structural market-share loss. China’s state trade-in subsidy program lifted demand for appliances and electronics in 2025, two important JD categories, but the program fell to Rmb250bn in 2026 from Rmb300bn in 2025 and covered fewer categories. JPMorgan believes this creates unusually difficult year-on-year comparisons rather than proving that JD is losing share. Supporting evidence includes 2Q26 revenue that exceeded consensus, quarterly and annual active-customer growth of more than 20% year on year, continued strength in general merchandise, and marketplace and marketing revenue growth. Supermarket and general-merchandise revenue rose 5.6% year on year in 2Q26, while marketplace and marketing revenue grew 8.3%, reducing reliance on subsidy-sensitive electronics. The report expects JD Retail to return to positive revenue growth in 3Q26 and forecasts 2H26 group revenue growth of 7% year on year, compared with 1% in 1H26. JD’s first-party model is central to the reasoning. It owns inventory and controls much of fulfillment, an approach that was disadvantaged when subsidies and automated price matching made price the main purchase criterion. China’s platform Price Conduct Rules restrict forced merchant markdowns, cross-channel price parity and automated price tracking; draft delivery-subsidy rules would also limit long-running, large-scale subsidies and require campaign disclosure. JPMorgan argues that these changes could restore the importance of JD’s more than 1,500 warehouses, direct procurement, delivery, installation, product authenticity, after-sales service and trade-in collection. Its quick-commerce rider network across 350 cities is viewed mainly as an enabler of instant delivery for appliances, electronics and supermarkets rather than food-delivery market share itself. The valuation case uses a Jun-27 target price of HK$148 for 9618 HK and US$38 for JD US, based on 9x 2027E P/E, described as JD’s three-year average; this translates into 10x 2026E P/E. As of Sep. 8, the shares traded at 7-8x JPMorgan’s 2026 earnings estimate and 4-5x its core-earnings estimate excluding all new-business losses. The report sees this difference as showing that the market remains focused on weak revenue and uncertainty around loss reduction, while JPMorgan sees upside risk to consensus earnings estimates. The report’s thesis depends on the revenue decline reversing as comparisons ease and on competitive discipline continuing. Persistent weak JD revenue despite healthy national category sales would point to market-share loss. Renewed subsidies, weak enforcement of delivery-subsidy rules, a reacceleration of food-delivery investment, or aggressive overseas spending by JoyBuy could delay loss reduction and challenge the margin-recovery case.

Analysis framework

JPMorgan reviews 2Q26 revenue, margins, earnings and new-business losses against year-ago results and consensus, then tests whether weak revenue reflects subsidy-driven comparison effects or market-share loss. It links regulation and JD’s fulfillment model to future competitive spending and service differentiation, forecasts 2026-27 earnings, and applies forward P/E multiples to derive its price targets.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Separating reported revenue weakness caused by subsidy-related comparisons from underlying category demand and JD's market-share performance.

  The report compares category sales, subsidy releases, active-customer growth and JD Retail growth to judge whether the revenue decline is arithmetic or signals share loss.

• Competition & strategyValue chain analysis

  Assessment of JD's inventory ownership, warehousing, fulfillment, delivery, installation and after-sales capabilities.

  JPMorgan argues that restrictions on price-driven practices may allow these service and logistics capabilities to matter more in customer choice.

• Valuation methodsP/E and PEG Valuation

  Forward P/E valuation using a 9x 2027E multiple, described as JD's three-year average.

  The selected multiple produces the Jun-27 targets and is compared with the company’s 2026 earnings multiple and China e-commerce peers trading below 10x.

Asset mapping & comparison

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

• JD.com, Inc. (9618 HK / JD US)

  Primary covered company; JPMorgan assumes coverage at Overweight.

  Strengths

  Recovering margins, narrowing new-business losses, more than 1,500 warehouses, direct procurement, fulfillment and after-sales capabilities.

  Weaknesses

  Revenue remains exposed to difficult subsidy-related comparisons in electronics and appliances.

  Comparison

  The report notes that most China e-commerce peers trade below 10x P/E, while JD's target valuation uses 9x 2027E P/E.

  Risks

  Market-share loss, failed margin recovery, renewed subsidy competition, weak regulatory enforcement and aggressive overseas spending.

Key data

• 2Q26 group revenueRmb346.4bnDown 2.9% year on year; better than consensus.
• 2Q26 gross margin17.1%Up 1.2 percentage points year on year.
• JD Retail operating margin4.6%Achieved during a major promotional quarter.
• 2Q26 non-GAAP net incomeRmb8.9bnUp 21% year on year.
• New-business operating lossRmb9.9bnDown from Rmb14.8bn a year earlier and Rmb10.4bn in 1Q26.
• 2026E adjusted net incomeRmb37.0bnRaised 5%; 17% above Bloomberg consensus.
• 2026E revenueRmb1,356.6bnJPMorgan forecast, up 4% year on year.
• 2027E adjusted net incomeRmb42.1bnJPMorgan forecast.

Impact & implications

JPMorgan believes that a positive JD Retail growth result in 3Q26, continued lower new-business losses and disciplined sector spending would validate its view that earnings recovery can continue without rapid near-term revenue growth. Conversely, weak JD growth after comparison effects ease would shift the interpretation toward share loss.

Risks

• JD revenue remaining weak while national category demand stays healthy would indicate worse-than-expected market-share loss.
• Margins and profits may fail to improve because of strategy changes or renewed competition.
• Further deterioration in China’s macro environment could weaken consumption.
• A renewed subsidy campaign, weak delivery-subsidy enforcement or aggressive JoyBuy overseas spending could delay new-business loss reduction.

What to watch

• Monthly National Bureau of Statistics appliance and communications-equipment retail sales, subsidy-fund releases and JD’s reported category growth.
• Whether JD Retail returns to positive growth in 3Q26 as subsidy comparisons ease.
• New-business losses, food-delivery investment and sales-and-marketing expense at each result.
• Final delivery-subsidy rules, enforcement, penalties and competitor promotional campaigns in 2H26.
• JoyBuy Europe user-acquisition intensity and aggregate sector sales-and-marketing spending in the December quarter.