JD.com Bets on AI Commerce and Food Delivery as Electronics Slump Tests China Consumer

Core retail holds its nerve while the product mix tilts

JD.com entered 2026 in a characteristically paradoxical position: headline growth slowing in its legacy stronghold of electronics, even as its broader retail and service ecosystem quietly became more profitable, diversified and data-rich.

In the fourth quarter of 2025, total net revenues edged up 2 per cent year on year to RMB 352bn, capping a full year in which group revenues rose 13 per cent to RMB 1.3tn. The apparent deceleration masks a sharp divergence beneath the surface. Electronics and home appliances – long the backbone of JD’s identity – fell 12 per cent in the quarter, facing what management repeatedly described as an “exceptionally high base” and the after-effects of last year’s subsidy-fuelled trade‑in boom. Yet general merchandise, from supermarket staples to fashion and healthcare, continued to hum, growing 12.1 per cent in Q4 and 15.3 per cent across the year.

For investors, the more revealing metric is profitability. JD Retail, the core first‑party and marketplace operation, expanded its full-year operating margin by 52 basis points to 4.6 per cent – the sixth consecutive annual improvement since segment reporting began in 2019, when margins stood at 2.7 per cent. That trajectory comes despite what CEO Sandy Xu called a “highly competitive landscape” and a deliberate choice in Q4 to give back some newly won gross margin through price cuts on electronics, ramped-up R&D and higher employee compensation.

The quarter illustrated how far JD has moved from being a single‑engine, hardware‑driven business. Product revenues dipped 3 per cent in Q4 but still rose 10 per cent for 2025 as a whole. Service revenues, by contrast, grew 20 per cent in the quarter and 24 per cent for the year. Marketplace and marketing – increasingly code for advertising – rose 15 per cent in Q4 and 18.9 per cent in 2025. Advertising itself delivered double‑digit growth every quarter, as JD fine‑tuned traffic allocation and conversion rates, and began to deploy AI agents for merchants and suppliers.

Xu was explicit about how management now sees the retail portfolio. General merchandise – particularly supermarket, fashion and healthcare – has emerged as the primary growth engine. Supermarket sales grew in the mid-teens in 2025 with margin expansion, while fashion delivered gains across user numbers, frequency, ARPU and ticket size, which she stressed came from “the team’s execution rather than external tailwinds”. Electronics, for all its current drag, is treated as a category in cyclical pause rather than secular decline, with the resumed national trade‑in programme and a coming wave of AI‑centric devices expected to provide a more constructive backdrop in the second half of 2026.

In the shorter term, management is braced for continued distortion. Government‑backed subsidies under the 2025 trade‑in scheme were front‑loaded into the first half of last year, leaving a particularly tough comparable base for early 2026. Rising memory chip prices, which are pushing up handset and digital device pricing, may further suppress unit volumes even as higher average order values partially cushion top line revenue. Xu promised to lean harder into supply chain efficiencies, offline presence and service quality to protect share and “user mind share” through the cycle.

New growth engines: users, food delivery and overseas forays

If the product mix is shifting, the user metrics paint a more unambiguously expansionary picture. Quarterly active customers rose 30 per cent year on year in Q4, and JD now boasts more than 700m annual active customers. Shopping frequency leapt by more than 40 per cent over 2025, with gains across new and existing users and JD Plus members. The company is not just adding accounts; it is deepening engagement.

Much of that acceleration stems from ventures that, a few years ago, would have seemed far from JD’s electronics‑and‑logistics heartland. Food delivery – once the terrain of rival platforms – is now framed as a core strategic pillar. JD Food Delivery is still loss‑making, but revenues helped drive a 201 per cent jump in the “new businesses” segment in Q4 and 157 per cent for the full year. More tellingly, CFO Ian Shan reported that the segment’s non‑GAAP operating loss narrowed to RMB 14.8bn in Q4, with the food delivery business itself reducing losses by about 20 per cent quarter on quarter. Since launch, he emphasised, it has delivered sequential loss reduction every single quarter.

Here, JD is attempting something subtly different from its peers. Management insists the proposition is “high‑quality food delivery”, anchored in full‑time riders and tight integration with JD’s broader supply chain. Order momentum remains “steady”, while total investment in the business fell nearly 20 per cent sequentially in Q4. Internal synergies are beginning to show: merchants on the platform have climbed more than 270 per cent, user cohorts exhibit rising cross‑selling across categories, and food delivery now contributes a meaningful 2–3 per cent increment to advertising revenue.

Both Xu and Shan struck a careful balance on the 2026 outlook. Investment in food delivery has “peaked in 2025” and should decline this year if market competition turns more rational. At the same time, JD will “drive healthy order volume” and continue to prioritise unit economics, with diversified revenue streams, more targeted subsidies and efficiency gains from scale. The ambition is less about domination of an already congested space than using on‑demand services as a powerful on‑ramp to JD’s wider retail ecosystem, particularly in lower‑tier cities.

Those lower‑tier markets are also the rationale behind Jingxi, JD’s value‑oriented platform. Jingxi has pushed deeper into tier‑six and below cities with non‑branded products, broadening JD’s user catchment beyond its traditional urban middle‑class base. Investment here will rise “a little bit” in 2026, Shan said, but unit economics are expected to improve.

Internationally, JD is laying foundations that will only register economically over a longer horizon. The CECONOMY acquisition remains under regulatory review, but the group has already begun to localise its retail and logistics network in Europe. Joybuy, a full‑category online retail platform, will officially launch this month after what management described as encouraging pilot feedback. Its core differentiator, much like JD in China, will be fulfilment: JD is building its own European delivery network, JoyExpress, offering same‑day and next‑day services in key cities across the UK, Germany, France and the Netherlands.

The strategy is unabashedly dual‑track. On the one hand, Joybuy and JD Logistics will help Chinese brands expand overseas using JD’s infrastructure. On the other, JD aims to pull high‑quality European brands back into China, strengthening its global supply chain on both import and export flows. For now, the financial contribution is modest, but investors are being asked to see this as a necessary, capital‑intensive stage in making JD a genuinely international retailer.

AI as the new supply chain

Threaded through the numbers is an attempt to recast JD less as an e‑commerce platform and more as what Xu repeatedly called a “technology commerce company”. If the first decade of Chinese online retail was about building physical infrastructure – warehouses, delivery fleets, payment rails – the next is, in JD’s telling, about saturating that infrastructure with AI.

JoyAI, the company’s in‑house large language model, now supports more than 1,000 applications across customer service, procurement, merchant tools and internal operations. Token usage jumped nearly 100‑fold in 2025 compared with 2024. Jingyan, an AI “agent” that shapes search and recommendation, surpassed 150m annual active customers last year, with a stated target of doubling that base in 2026. During the 11.11 promotion, JD’s multimodal AI customer service handled 4.2bn user enquiries with higher satisfaction and fewer human interventions.

Perhaps more interesting for investors is how the AI push feeds directly into monetisation. Advertisers are already reallocating budgets towards JD, which is increasingly viewed as “the most consistent daily sales platform” and a premium destination for brand building. AI‑powered algorithms and agents are designed not simply to lower costs, but to improve advertising ROI through more precise targeting and lifecycle management. The early impact is visible in the marketplace and marketing line, which grew faster than product sales in 2025 and carries structurally higher margins.

On the logistics side, JD continues to automate what used to be its most labour‑intensive asset. More than 20 LangzuTech flagship warehouses are now live in China, and the model has been exported to the UK to support premium 211 (same‑day and next‑day) delivery. JoyInside, an AI agent for hardware, has partnered with 40 brands; sales of JoyInside‑integrated products surged twenty‑fold during 11.11 compared with the 18 June promotion, hinting at how AI might itself become a category‑creating force in consumer electronics.

Xu is keen to frame agentic commerce – the idea that AI agents will intermediate consumer intent and traffic flows – not as an existential threat but as an accelerant. Front‑end user interfaces may evolve rapidly, but the underlying determinants of retail success remain, in her formulation, “user experience, cost and efficiency”. In that world, a company that controls supply, fulfilment and data stands to benefit as much as, if not more than, pure traffic aggregators.

Capital returns and the balance sheet question

Behind the strategic rhetoric lies a balance sheet that still affords JD room to manoeuvre. Group gross margin expanded 32 basis points to 15.6 per cent in Q4 and 18 basis points to 16 per cent for the year, largely thanks to JD Retail’s sustained improvement. FY non‑GAAP net income attributable to ordinary shareholders reached RMB 27bn, implying a 2.1 per cent margin, while Q4 non‑GAAP net profit came in at RMB 1.1bn.

Free cash flow, however, told a more volatile story, plunging to RMB 6bn from RMB 44bn in 2024. Management attributed the drop to cash outflows tied to the trade‑in programme and swings in operating income. Trade‑in related receivables have begun to normalise, with accounts receivable declining sequentially for two quarters. Cash, restricted cash and short‑term investments still totalled a hefty RMB 225bn at year‑end.

That liquidity is being steadily recycled back to shareholders. JD’s board approved an annual cash dividend of about US$1.4bn for 2025, equivalent to US$0.05 per ordinary share or US$1 per ADS, unchanged from the prior year. In parallel, the company repurchased US$3bn of stock, roughly 6.3 per cent of outstanding shares at end‑2024, and cancelled them. Shan reiterated the company’s high single‑digit long‑term margin target at the group level, and the same for JD Retail, suggesting that capital returns will remain a recurring feature so long as those trajectories look achievable.

The political environment, for once, was almost an afterthought. Xu framed Beijing’s regulatory posture towards internet platforms as increasingly “normalized”, supportive of compliant players and focused on preventing “vicious competition”. JD, which has long emphasised full tax compliance, labour protections for couriers and conservative accounting, appears comfortable that the rules of the game now favour “good money” over the bad.

For investors weighing whether JD is still primarily a cyclical China consumption proxy or something more structural, this earnings season offered a nuanced answer. Electronics, the most macro‑sensitive part of the portfolio, is in a clear downturn and will likely drag well into 2026 – but sits within an ecosystem where general merchandise, services, advertising and AI‑enabled logistics are accelerating. The group’s new bets in food delivery and Europe are compressing near‑term free cash flow, even as they expand the long‑term total addressable market.

The wager, as JD tells it, is that a supply‑chain‑centric model, saturated with AI and extended into on‑demand and overseas channels, can deliver both growth and rising margins over time. The coming year – with high‑base effects, shifting device economics and the first full year of Joybuy – will test whether that configuration is robust enough to withstand China’s increasingly uneven consumer recovery.