JD.com (JD) Stock: Revenue Beats Estimates Despite Profit Drop in Third Quarter

TLDR

• JD.com reported third-quarter revenue of 299.1 billion yuan, beating analyst estimates of 294.05 billion yuan with a 14.9% year-over-year increase.
• Net income fell to 5.3 billion yuan from 11.7 billion yuan in the same quarter last year as the company invested in global expansion and promotional offers.
• The company reached 700 million annual active customers in October, showing growth in both user base and shopping frequency.
• JD.com’s food delivery unit showed improved performance with reduced sequential investment due to better unit economics.
• U.S.-listed shares rose nearly 5% in premarket trading following the earnings report.

JD.com posted third-quarter revenue that exceeded Wall Street expectations. The Chinese e-commerce company reported 299.1 billion yuan in total revenue.

This marked a 14.9% increase from the prior year. Analysts had expected 294.05 billion yuan.

The company’s U.S.-listed shares jumped nearly 5% in premarket trading. This happened despite a sharp decline in profits.

JD.com, Inc., JD

Net income attributable to ordinary shareholders dropped to 5.3 billion yuan. That’s down from 11.7 billion yuan in the same quarter last year.

The adjusted profit came in at 5.8 billion yuan. This represented a decline from 13.17 billion yuan year-over-year.

Analysts had forecast an adjusted net profit of 4.23 billion yuan. JD.com beat that estimate even with the steep profit decline.

Customer Base Expansion

The company hit a major milestone in October. JD.com reached 700 million annual active customers.

CEO Sandy Xu said the company saw strong growth in both user base and shopping frequency. This happened during the July-September quarter.

The growth came as Chinese consumers remained cautious with spending. Worries over job and income security kept shoppers looking for deals.

Food Delivery Progress

JD.com launched its food delivery business earlier this year. The division showed steady growth in order volume during the quarter.

The company competes with market leaders Meituan and Alibaba’s Ele.me in this space. Alibaba recently rebranded Ele.me to Taobao Shangou earlier this month.

JD.com narrowed its investment in food delivery sequentially. This happened due to improved unit economics performance.

The business generated deeper synergies with JD Retail. As the division scaled up, it required less investment than previous quarters.

China’s top market regulator has called for companies to engage in “rational” competition in food delivery. The sector has been marked by intense price wars.

JD.com and rivals like Alibaba have been using heavy discounts to attract customers. These price cuts have weighed on margins across the sector.

The company benefited from government-backed trade-in policies. These programs allow consumers to exchange older appliances for newer ones.

JD.com is China’s top retailer of home appliances. The government subsidies helped drive demand on the platform.

The company’s shares had fallen around 10% year-to-date through Wednesday’s close. The premarket jump followed the better-than-expected earnings and revenue results.

JD.com continues to pour money into global expansion. The company is also maintaining promotional offers for Chinese consumers.

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