JD.com faces profitability concerns ahead of earnings report

Investors are closely watching JD.com as it prepares to release its earnings report on May 13. The company’s low profitability, especially after expanding into the food delivery sector, has raised concerns.

JD.com’s Hong Kong-listed stock is expected to fluctuate by 6.9%, up from the 4.2% average observed after the last eight quarterly reports.

The company’s shares have dropped 22% since March, making it one of the worst performers in the Hang Seng Tech Index.

In February, JD.com launched its food delivery service to compete with Meituan. To attract users, it heavily invested in discounts and waived commissions for some merchants.

However, analysts question the sustainability of these tactics, given JD.com’s low operating margin of 3.9% last year.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ China’s massive food delivery market justifies costly entry despite margin concerns

The enormous scale of China’s online food delivery market explains JD.com’s willingness to absorb short-term losses for potential long-term gains.

The Chinese food delivery sector is projected to reach $197.9 billion by 2033, growing at nearly 10% annually from $81.9 billion in 2024 1.

JD.com’s aggressive customer subsidies and commission waivers for merchants joining before May 1, 2025, reflect a classic market entry strategy seen previously in Chinese e-commerce wars 2.

This growth-over-profitability approach mirrors patterns seen across global food delivery markets, where the online food delivery industry worldwide is projected to grow at 13% annually, reaching $1.65 trillion by 2027 3.

2️⃣ JD’s logistics infrastructure provides competitive advantage amid thin margins

JD.com’s extensive fulfillment network gives it a significant advantage in the food delivery space despite the margin challenges.

The company’s nationwide logistics system already manages over 10 million SKUs daily and serves more than 580 million active customers, providing a robust foundation for rapid food delivery expansion 4.

JD has demonstrated its delivery capabilities through partnerships like the one with Dada Group, which enabled one-hour delivery for over three million products and included approximately 100,000 stores 5.