JD.com achieves 15% year-on-year revenue growth in Q3 2025, driven by rising user base and expanding core retail margins.

OPERATOR - (00:00:00)

Hello and thank you for standing by for JD.com's third quarter 2025 earnings conference call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Head of Investor Relations. Please go ahead.

Sean Zhang - Head of Investor Relations - (00:01:49)

Thank you. Good day everyone. Welcome to JD.com third quarter 2025 earnings conference call. With us today are CEO of JD.com, Ms. Sandy Hsu and CFO Mr. Yan Shan. Sandy will kick up the call with her opening remarks and Yan will discuss the financial results. Then we'll open the call to questions from analysts. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only and will include forward looking statements. Please refer to our latest Safe harbor statement in earnings press release on our IR website which applies to this call. We will discuss certain non GAAP financial measures. Please refer to the reconciliation of non GAAP measures to the comparable GAAP measures in the earnings press release. Please also note all figures mentioned in this call today are in RMB unless otherwise stated. Now let me turn the call over to our CEO Sandy, please.

Sandy Hsu - Chief Executive Officer - (00:02:54)

Thank you Sean. Hello everyone. Thank you for joining our third quarter 2025 earnings conference call. We achieved a set of solid results across our strategic priorities during the third quarter and further enhanced our capabilities to drive better user experience, lower cost and higher efficiency. Our total revenues were up 15% year on year sustaining our double digit growth momentum. We are delighted to see growth of our general merchandise categories and marketplace and marketing revenues continue to accelerate sequentially. Both are becoming our important growth drivers. Non GAAP net profit came in at 5.8 billion RMB in the quarter with the core retail business margin continue to expand year on year. Our food delivery business also sustained healthy expansion while its loss narrowed in Q3 from the prior quarter. As we continue to optimize operating efficiency and improve unit economics overall, our business are making good progress along our long term strategic roadmap. We are confident that our core retail business will steadily expand market share with healthy margin improvement and new initiatives will create deeper synergies and drive healthier financial models, further strengthening our entire business ecosystem. Among all the encouraging developments that underpinned these results, I would like to point 3 most notable highlights for this quarter, which I believe should be the key takeaways from today's call. First, strong momentum in our user base and engagement. Our quarterly active customer number was up over 40% year on year in Q3, sustaining the momentum built in the previous quarters thanks to both organic growth of JD Retail as well as contributions from our new businesses such as JD Food Delivery and Jinsey. The consistent growth has led to our annual active customers exceeding 700 million in October, making a new milestone in our user expansion. In particular, the number of JD members, our highest quality user group, also recorded healthy growth in the quarter. In addition to user scale, user shopping frequency on our platform also increased by over 40% year on year in Q3, a pace we've sustained for two consecutive quarters. Notably, we saw meaningful shopping frequency increase across all user groups, including new users, existing users and JD plus members. This user momentum is clear proof that we have stayed very focused on providing a better user experience amid evolving user demand. In return, our expanding and more active user pool further improves our engagement with users, deepens our user insights and enables us to better address their demand. This virtual cycle ultimately supports our sustainable growth in the long run. Second, our core retail business remained strong in Q3. Retail revenues increased by 11% year on year in the quarter to 251 billion RMB. There were a mix of contributors to this. While the high base effect for electronics and home appliances category started to kick in, sales of general merchandise as well as marketplace and marketing revenues continued to accelerate growth this quarter profit wise, both JD Retail's gross margin and operating margin further expanded at a solid pace, demonstrating the continued scale benefits and operating efficiency gains of the business. Looking at the main categories, the electronics and home appliances category has been faced with a high base since the second half of Q3, which has been weighing on its growth momentum. This is an industry wide challenge and we are working closely with brands and manufacturers to navigate through it. For example, we've been leveraging our market and user insights to support brands and manufacturers in developing new and customized product models. Meanwhile, we continue to lower the costs for brands and strive to secure the best prices for our customers thanks to our supply chain capabilities. Although the high basic effect is expected to linger the near term, it's clear that the advantages of our business model and market position in these categories remain intact and we are confident in building on these strengths to unlock new growth potential in this market. General merchandise category recorded 19% year on year revenue growth in Q3, an impressive acceleration from a quarter ago. Within this category, revenues from supermarket, fashion and health categories maintained double digit year on year growth in the quarter. The strong tailwind is expected to sustain into Q4. This is a result of our efforts in enhancing our product portfolio, price competitiveness and service quality which eventually translates to better user experience and stronger user man share. As we continue to tap into the huge market potential, we believe general merchandise will play a bigger role in supporting JD Retail's long term growth. In addition to healthier category mix, another bright spot in our Q3 performance was Marketplace and marketing revenues which at the group level grew 24% year on year in the quarter. It has remained on a double digit growth trajectory for four consecutive quarters. In particular, growth of our advertising revenues has accelerated sequentially in every quarter this year and exceeded 20% year on year in Q3. This strong momentum mainly stems from the accelerated ad revenues generated by Core JD Retail Business. Our improved ecosystem for both 1P business and 3Pmerchants, better AI powered ad tools and improved traffic allocation efficiency all have contributed to the strong trend. As we move into Q4, we expect Marketplace and marketing revenues to continue the healthy growth. Our platform ecosystem is taking good shape and gaining positive traction with suppliers and merchants large and small. The third highlight I want to share is our new businesses within the segment. JD Food Delivery continued to make healthy progress in Q3. Its GMV achieved double digit quarter on quarter growth in the quarter driven by both order volume growth and a healthier order mix with high value orders contributing a vast majority of total orders. While scaling up. The food delivery business also narrowed operating loss sequentially in Q3 thanks to the improving UE performance. This encouraging progress is achieved through our enriched supplies, increased operating efficiency, disciplined investment and amid a competitive market and our efforts to expand food delivery's revenue streams. More importantly, Food Delivery continued to generate strong synergies with our retail business. In addition to user growth and engagement, the cohort cumulative cross selling rate has been on an upward trend. Products from our supermarket, electronic accessories and Jinxi categories remained the biggest beneficiaries of this trend. Going forward we will focus on further growing the food delivery business scale, UE optimization and unlocking stronger synergies with retail logistics and other businesses across our ecosystem. Other new businesses including both JINGSE and International business are progressing well as planned. JINGSE further penetrated into the lower tier markets and grew its merchant and user base. Our international retail business is gradually establishing capabilities in the uk, France, Germany and Benelux regions paving the way for our global expansion. Both are making solid steps in executing on their long term strategies. One more thing before I Wrap up we unveiled our AI roadmap during the 2025 JD Discovery Conference in September. I want to share a few exciting updates here. First, we launched a number of new AI products at the event including Tata, an all purpose digital human assistant app and join inside an AI agent for robots, toys, devices among others satisfaction. Second, we introduced industry specific AI applications across four sectors of retail, healthcare, logistics and industrial. Third, we also made upgrades to a few of our retail technology infrastructure such as JD Streamer, our new digital human technology that provides E commerce, live streaming and short video production solutions. JD Streamer has served over 40,000 brands so far with significantly lower cost and better sales performance compared to real human life streaming costs. In addition, we provide 24.7nonstop AI customer service which handled over 4.2 billion inquiries during our Double 11 grant promotion. We are excited about the potential of these AI applications as we foster a comprehensive AI ecosystem spanning across various industries. To conclude, Q3 was a productive quarter with all our business lines moving ahead steadily on our strategic roadmap. The user momentum on our platform was strong. Our core retail business is in solid shape with multiple complementary long term growth drivers and great potential for long term margin improvement. Beyond core retail, new businesses including food delivery, GINSEA and our international retail business are on track for healthy development both financially and operationally. Taken together, our businesses are operating in synergy, blustering our conviction in the path ahead. We see great opportunities to further unlock the collaborative value of our business ecosystem and to position us well for sustainable high quality growth. With that, now let me turn the call over to Ian.

Yan Shan - Chief Financial Officer - (00:16:26)

Thank you Sandy hello everyone and thank you for joining the call today. In the third quarter we recorded a set of healthy performance across our business lines. Our total revenues were up 15% year on year outpacing the growth of JD's total retail sales. This was supported by double digit revenue growth in our core retail business. Despite the high base for electronics and home appliances, general merchandise and service revenues both delivered stronger growth in Q3 and recorded their fastest pace since the second quarter 2023. In terms of profits, JD Retail achieved strong year on year expansion in both gross and operating margins in the quarter and our food delivery business also saw a sequential reduction in investment scale. Overall, our business are moving in the right direction and we are at a stronger position to drive sustainable growth for the long term. Now let's go through our financial Results. In the third quarter, total net revenues increased by a solid 15% year on year to RMB 299 billion in Q3. Breaking down the mix product revenues were up 10% year on year in Q3. Revenues of electronics and home appliances were up 5%, decelerating from last quarter due to the high base effect created by the trading program. This is in line with our expectations and we are confident that we are positioned to further solidify our leading market position as we leverage our supply chain advantages and stay focused on enhancing user experience, reducing cost and improving efficiency. Revenues of General merchandise were up 19% year on year in the quarter, a notable highlight of our Q3 performance. Growth in general merchandise has sustained double digit growth for four consecutive quarters and further accelerated from the previous quarter. Within General merchandise, both supermarket and fashion categories saw growth rates surpassing meetings in Q3. The results were mainly driven by our continuous efforts to enhance our operational capacity capabilities, build up better user experience and mind share alongside our growing market share. This gives us the confidence that the strong momentum in our general merchandise categories will continue going forward as we capture the huge potential in this market. Service revenues were up 31% year on year in Q3, a solid acceleration compared to previous quarters. Notably, marketplace and Marketing revenues increased 24% year on year, accelerating sequentially every quarter for seven quarters in a row. Within this line, advertising revenues continue to see robust growth, mainly driven by the notable improvement of user engagement and and better advertising tools that we provide for both suppliers and merchants at our core retail business. This demonstrates our more robust ecosystem and the strong growth in the number of merchants and users on our platform. We expect marketplace and marketing revenues to continue solid growth in Q4, contributing to both our top line growth and margin performance. Logistics and other Service revenues grow 35% year on year in Q3, mainly driven by the incremental delivery revenues from food delivery business. Now let's turn to our segment performance. JD retail revenues were up 11% year on year in Q3. Our core retail business has built multiple growth drivers and we believe growth of the general merchandise category and value added services including advertising will be important pillars in retail's long term growth. JD Retail also saw healthy progress in margin expansion in the quarter. Its gross margin has sustained year on year expansion for 14 quarters in a row and was up 1.3 percentage points to 19.3% in Q3. This was driven by a favorable mix shift towards higher margin business along with optimized procurement cost by leveraging our scale H VAC and supply chain advantages. In addition, in Q3JD Retail's non GAAP operating income was up 28% year on year to RMB 14.8 billion and operating margin was up 76bps to 5.9% both continuing strong momentum Moving to JD Logistics the logistics revenues were up 24% year on year in Q3. Both internal and external revenues grew at a steady pace and JD Logistics also saw incremental delivery service revenues generated by for delivery payment. In terms of profits, JD Logistics non GAAP operating income was compressed 39% year on year to RMB 1.3 billion in the quarter as it continued to invest in customer experience, service capabilities and technology to enhance efficiency of the entire logistics process. These efforts aim to boost JDLogistics competitiveness in products and services and strengthen its market position which over time will translate into sustainable margin expansion. Our net new business generated RMB 15.6 billion in revenues, a steady growth compared to last quarter. This was driven by the continued expansion of our food delivery Jinshi and International business. Non GAAP operating loss of new business slightly widened sequentially to RMB 15.7 billion. To break this down, Food Delivery saw a sequential reduction in its investment in Q3. Our food delivery business continued to scale with a healthier financial model with expanded revenue streams, disciplined spending in users and increased operating efficiency. As to other new business, both Jingxi and International Business increased investments compared to a quarter ago. They are in a rapid development stage and are important pillars in JD's long term strategies. Going forward, we will continue to scale up the new business and further unlock synergies to set the stage for our future growth. At the same time, we are committed to improving UE performance and aim to drive healthy and sustainable bottom line growth in the long run. For our consolidated profit performance in Q3 our gross profit was up 12% year on year to RMB 50 billion and gross margin was 17%, slightly reduced by 0.4 percentage point. This was primarily due to margin dilution from the food delivery business and JD Logistics which offset JD Retail's solid gross margin expansion in the quarter. Consolidated non GAAP net income attributable to ordinary shareholders was RMB 5.8 billion in Q3 and non GAAP net margin was 1.9%, both down year on year. This near term headwind in profits mainly reflect our investments in food Delivery. Our last 12 months free to cash flow as of the end of Q3 was RMB13 billion compared to RMB34 billion in the same period last year. This was primarily due to cash outflows associated with the trading program and the decline in operating income. By the end of the third quarter our cash and cash equivalent, restricted cash and short term investments totaled RMB211 billion. In summary, we're encouraged by the solid progress in both core retail and new business. Retail has built a group metric with multiple drivers and a clear path to our long term margin target. Food delivery is growing with a healthier financial model and other new business, including lower tier market and international business are also making solid steps for the next chapter. All our businesses are on the right track, starting to generate notable synergies with one another and collectively contributing to our high quality development in the long term. With that, I will turn it back to Sean thank you thank you Sandy.

Sean Zhang - Head of Investor Relations - (00:27:58)

And Yin for the Q and A session. You're welcome to ask questions in English or Chinese and our management will answer.

UNKNOWN - (00:28:05)

The question in Chinese.

OPERATOR - (00:28:06)

We'll provide English translation for convenience purpose only. In case of any discrepancy, please refer to our management in the original language. Operator we are open the call for Q and A Session Now. The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take two questions at a time from each caller. If you have more than two questions, please request to join the queue again after your first two questions have been addressed. Your first question comes from Kenneth Fong at ubs. Hey.

Kenneth Fong - Equity Analyst - (00:29:14)

Now Thank you thank you management for taking my question. My first question is on the government trading subsidies. As the year on year comparison base is getting higher into the second into the fourth quarter, can management share the growth outlook for the electronics and home appliances growth for JD retail and financially as the trading subsidies fade and volume kind of slower in terms of growth year on year, how should we think about margin impact on JD retail? My second question is on the overseas development. Post a recent acquisition on. Company overseas. And JD joined by commence operations. Can management share about its overseas strategy including the scale and the pace of investment? Thank you.

Yan Shan - Chief Financial Officer - (00:31:04)

Thanks for your question. Kenny, yes, since last year the treating program has stimulated consumer demand and contributed to the sales of home appliance and PCs. So this created an inevitable high base for the industry which is within the market's petition. Although the treating program has caused short term fluctuation in the consumer demand, its more substantial impact is driving industry upgrade and promoting products that are innovative, intelligent and green and ultimately leading to high quality growth of the industry. Since the treaty program, JD has actively supported implementation of the policy. As such, we have further enhanced our market share and supply chain capability in the related categories and especially on our 1Pmodel. The continuous enhancement of our core advantage differentiate JD and builds our Long term growth foundation will continue to leverage our strength in product price and service with the goal to further strengthen user mindshare and consolidate and expand our market share. Will focus on a few areas.

UNKNOWN - (00:34:04)

So.

Yan Shan - Chief Financial Officer - (00:34:04)

This area includes first on the product innovation. We'll collaborate with brands to launch more customized products driving product upgrades and and innovation on price optimization, we will also leverage our scale advantage and supply chain capability to further optimize cost offering user more competitive price and on the service. So we offering omnichannel consumer service will build a seamless online and offline shopping. Experience for our customer. For example, we have been strengthening our offline presence in home appliance and 3C categories focus focusing on large stores like JD Mall, JD Home Appliance City flagship stores in the high tier cities and smaller ones such as JD Home appliance stores in the lowchairs market. In addition, we also provide differentiated service including integrated delivery and installation offering better user experience and more efficient service to our user. With these efforts, we'll further consolidate our market share. As of Q3 we have over 20 JD malls nationwide and the number of appliance city flagship stores exceeded 100.

UNKNOWN - (00:35:58)

In.

Yan Shan - Chief Financial Officer - (00:35:58)

Terms of profit margin, we'll continue to offer users the best value for money product to ensure better. User experience and mindshare. Additionally, whether during the training program or in a normalized phase going forward, our team will leverage supply chain capabilities and enhance collaboration with brands. So overall we are confident in our user mindshare and market share in the home appliance and three C categories. JD will continue to strengthen our capabilities and strategic positioning, working very closely with brands to address short term challenges and support the long term healthy development of the industry. Additionally, our growth drivers are now more diversified. We have seen sustained sales growth acceleration in categories such as supermarket, health, fashion and service revenue from advertising which are emerging as new growth engines for jd. Furthermore, as I just have shared, both our user base and shopping frequency have been on a stronger growth trend. During JD 11.11 grand promotion, the number of our shopping customer increased by 40% year on year. This set of momentum will support our healthy growth next year and give us more confidence in the long term. Regarding your second question on JD's international business, so first, from the strategic perspective, international expansion has only always been a key long term strategy for jd. As the largest retailer in China, we aim to gradually establish a highly efficient global retail network so that we can deliver JD's premium shopping experience to consumers worldwide. We recognize the international market is very big. For example, Europe is is the second largest consumer Electronics market in the world only second to China and there are still many great areas to improve user experience. We also aim to seize the opportunity of Chinese supply chain going global, leveraging our supply chain advantage to better support Chinese brands in their international expansion. In terms of business model, unlike other cross border e commerce platforms, we leverage our supply chain capabilities, commit to a local e commerce approach and localization strategy. We collaborate with high quality brands and suppliers around the world to create mutually beneficial partnership in terms of progress. Currently, Joy Buy, our European online retail business is in the test phase in countries including the uk, France, Germany and the Netherlands. This marks an important step in JD's international strategy. We'll continue to enhance user experience and build our key capabilities in in areas including first, expanding product offerings and collaboration with premium global brands. Second, enhancing logistic capability to improve the efficiency and stability of warehousing and delivery. Third, investing in R and D to optimize the product functionality and enhancing shopping experience. We welcome investor analysts based in Europe to experience our Joy Buy app and provide us your experience regarding Seqonomy, the transaction is still subject to the regulatory approval. We'll provide you guys further updates when appropriate. So from the investment standpoint this is a gradual process. We will continue to advance our international expansion strategy steadily while maintaining a gradual and prudent financial discipline. We will prioritize investment efficiency and make dynamic adjustments to adhere healthy and sustainable to achieve healthy and sustainable growth. Overall, the scale of the investment in our international business will not be substantial for JD.com and will carefully manage the investment pace and scale. Alfred, we can take the next question.

OPERATOR - (00:44:22)

Your next question comes from Ronald Kung with Goldman Sachs.

UNKNOWN - (00:44:34)

Now.

Ronald Kung - Equity Analyst - (00:44:51)

Business Models. Thank you Management. Two questions. The first is on food delivery. What is the duration that JD will be committed to invest at this loss making period as part of customer acquisition? And what's the progress in improving unit economics in commissions and business models like the Seven Fresh and even coffee across the Seven Fresh brands? Second question is on general merchandise. Seeing very healthy growth there and in 3P. So how do we plan to further strengthen the competitive edge in the three key categories supermarket, health and apparel in terms of speed, selection, quality and price? Thank you.

UNKNOWN - (00:46:17)

Now.

Mutian - (00:46:23)

Mutian.

Sandy Hsu - Chief Executive Officer - (00:47:02)

Thank you Ronald for your question. Both food delivery and on demand retail is a long term strategy for jd. We aim to drive healthy and sustainable sustainable growth of the business. We have been optimizing operational efficiency and improving UE. So in Q3 we remain very rational amid the intensified competition in the industry. Our food delivery business is currently in its first stage of development. Our goal for this stage is to establish better user mindshare and market share in the quality food delivery sector. We will be committed to providing high quality food delivery service to our existing premium user while attracting new users. Additionally, as you guys know, what we are good at is supply chain. So we'll continue to deepen our supply chain effort such as through our innovative seven Fresh Kitchen model to offer differentiated experience and service to our users.

Yan Shan - Chief Financial Officer - (00:48:33)

Kodanjia number 5 Ying Salisha.

UNKNOWN - (00:49:33)

Woman. Nazisong twitch.

Sandy Hsu - Chief Executive Officer - (00:50:12)

So in the third quarter JD Food Delivery maintained healthy growth trend. JD Food Delivery GNV achieved double digit growth quarter on quarter alongside order volume growth, it also delivered healthier order mix with a proportion of meal orders steadily rising and contributing to a vast majority of our total order. At the same time, average price per order also increased quarter on quarter compared to Q2amid intensified competition. So this is remarkable while scaling up overall investment in food delivery. In JD food delivery business in Q3 narrowed sequentially thanks to the UE improvement. The revenue contribution of food delivery is still limited as we are implementing a commission free policy for merchants and only started to generate limited advertising revenues. That said, our team has made solid progress in improving operational efficiency including enriching supplies. The number of high quality restaurant merchants continue to grow in the quarter. We also further improved our subsidy efficiency with refined operations and tailored subsidy strategy to different regions, user groups and order types. In addition, as we continue to upgrade our underlying system capability, we have seen better operating efficiency. We also launched our new Business 7 fresh kitchen model in July which address food safety concerns through supply chain innovation. Our goal is to ensure that consumer can enjoy their meals with peace of mind and at the same time help quality restaurant improve profitability. Since its launch, seven Fresh Kitchen has been welcomed by our customers with a rapid increase in order in its order volume. It has also boosted sales and order growth of other quality restaurants within the 3 kilometer range. By the end of this year, people will see more 7 fresh kitchen in the region of Beijing.

UNKNOWN - (00:53:23)

Don, Taiwan.

Sandy Hsu - Chief Executive Officer - (00:53:49)

Looking ahead, we'll drive our strategic progress with a long term perspective and focus on long term roi. Our goal is to create a sustainable business that drives healthy order growth and at the same time gradually unlock scale effect enhance operations with better ue. Ultimately, JD food delivery should be a self sustaining business. Moreover, food delivery is deeply integrated into JD overall ecosystem. We believe there is significant potential for synergies in user momentum, supplies and fulfillment within our ecosystem. The way of our business working together is not simply adding one and cutting another JD user acquisition costs in the long term JD user acquisition costs will decrease and at the group level we are committed to driving sustainable growth while maintaining profitable and cash flow sufficient.

UNKNOWN - (00:55:59)

Ah. Selling the Ego Pin Le Pimpai.

Sandy Hsu - Chief Executive Officer - (00:56:31)

Regarding your question about our general merchandise category, as I mentioned before it has sustained a four quarter consecutive double digit growth. Key categories especially supermarket, health, fashion and home goods all deliver very strong growth. We see significant growth potential in general merchandise including supermarket and fashion as our user have substantial unmet demand. We have clear growth strategy for each of these key categories. First on supermarket categories we focus on improving user mindshare and user penetration through promotions such as through our promotions such as Black Friday and Super 8 will build stronger user mindshare of our supermarket offering. Supermarket category will also take the opportunity of our rapid user growth on the platform to drive healthy higher penetration and conversion. We have been optimizing cost and improving operational efficiency through our supply chain capability providing more competitive price to our user which validates the economic scale of our 1P model. Our supermarket category has made solid progress in this area and builds strong competitiveness compared to other model online and offline. At the same time we will collaborate with brands, further refine our operation and build categories with strong JD mindshare and growth potential such as liquor, baby and mom products and household cleaning categories. All have already established strong user mindshare. We expect to make breakthroughs in other categories as well. Overall, our strategy for the general merchandise category is very clear. We are confident in the growth potential and market opportunity in the general merchandise sector as we enhance operation and user mindshare. General merchandise is an important pillar of JD growth matrix and will support our long term sustainable growth. We can take the next question Operator.

OPERATOR - (00:59:27)

Once again, if you wish to ask a question, please press Star one on your telephone and wait for your name to be announced. Your next question comes from Alicia Yap with Citigroup.

Alicia Yap - Equity Analyst - (00:59:43)

Hi. Thank you. So can management share with us the synergies on general merchandise category that benefit from the food delivery traffic? Most of your food delivery user come from loyal JD user and what is the retention rate of the newly acquired user through the food delivery? Would you able to quantify and share the cohort of new food delivery user who become active user of JD Core retail user and second question is can management update us on your latest AI strategy and investment? Can you elaborate how AI has helped on JD's core business and how do we think about the financial impact? Thank you.

Sandy Hsu - Chief Executive Officer - (01:03:02)

Thank you Alicia for your question. I'll take the first one. So as JD food delivery drives Healthy development. We also see it's generating deeper synergies with JD Retail. First, on the user growth and user engagement side in Q3, DAU of JD app maintained rapid growth with growth rates leading the industry. Our quarterly active customers and user shopping frequency Both recorded over 40% year on year growth in the quarter as we continue to provide quality food delivery. We have seen JD Food Delivery's user retention rate maintained at a relatively high level and at the same time boost our overall user engagement and user shopping frequency while serving our high quality existing users. Our food delivery business also attracts new users to our platform. Our annual active customer number surpassed the milestone of 700 million in October reflecting our expanding user base and increasing user stickiness. At the same time, we will be accelerating the deployment and further optimizing our user conversion strategies and tools based on the preferences of food delivery users. We will be providing retail product selection and recommendation and in a more precise way thus driving better user conversion. We've seen that the conversion rate of the new users acquired by JD Food delivery has been trending up month by month and for the earliest group of such users, their cohort conversion has reached close to 50% in Q3. Second on the cross sell side, we've seen a stronger trend of cross category purchases of food delivery users, particularly of our general merchandise categories including supermarket products and live services. We believe food delivery will create new growth momentum to our general merchandise category as it attracts new users and drives up shopping frequency of our existing users. In addition, JD Food Delivery has has also accelerated the development of our on demand retail business. We will build a dedicated team that pays close attention to this area. Going forward, we will continue to accelerate the synergies between food delivery and core retail business in terms of user momentum, cross category purchases and marketing. In addition, we will tap into more synergies of our broader business ecosystem driving healthy progress in our user base expansion, revenue growth and efficiency improvement.

Yan Shan - Chief Financial Officer - (01:07:59)

I'll answer the second question so we are in the new era where we see a lot of new opportunities in AI and significant value of business model model reform. JD has built a solid comprehensive AI capability framework that covers infrastructure models, platforms, application scenarios and products. Over the next three years we'll make a sustained investment to foster a trillion RMB scale AI ecosystem across various industries. So at our JDD conference in September, we have unveiled JD AI Strategy Roadmap and launched flagship AI product including our jdai, Tata and All Purpose Digital, Human Assistant and Joy Insight and AI agents for robot toys, devices and among.

UNKNOWN - (01:10:00)

Dong et Hua, Da Vinchi.

Yan Shan - Chief Financial Officer - (01:10:21)

In terms of AI application, JD's differentiation is that we have extensive application scenarios including retail, logistics, health care and other industry sectors. So, taking both retail and logistics as example, in retail use case, we are providing merchants with over 50 AI tools such as AI Assistant, AI Agent for Advertising Allocation and Jingxin DM to help merchants enhance efficiency and lower cost in content generation, marketing, supply chain management and customer service. We also redefined E commerce experience in the AI era. We launched a smart search and recommendation function. Through natural language interaction, it can precisely understand user needs and delivering a huge breakthrough in shopping efficiency and truly personalized shopping experience. In the logistics use case, our logistic robots have been deployed across more than 20 provinces in China and over 10 countries globally, covering the entire logistics chain from warehousing, sorting to transportation and distribution. Looking ahead, the expanding deployment of logistic robots, autonomous vehicles and drones will further reduce logistic costs in the society, increase our business partner efficiency and keep optimizing shopping experience for our consumers. Okay operator, we can take the last question.

OPERATOR - (01:12:14)

Your last question comes from Thomas Chong at Jefferies.

Thomas Chong - Equity Analyst - (01:12:42)

Thanks management for taking my question. My first question is about our ecosystem development including the number of 3pmerchants contribution. As well as the expectation over the next few quarters. My second question is about the outlook in terms of our profitability and margin in next few years. Thank you. All right, thank you.

Yan Shan - Chief Financial Officer - (01:14:15)

Thank you Thomas. We've actually made a solid progress in developing our platform ecosystem with a set of indicators growing at a very rapid pace. So in Q3 our active merchant number grew by over 200% year on year. We've onboarded more top tier merchants as well as merchants from industrial belts, providing users further enriched product offerings. Meanwhile, our food delivery business has also brought in a large number of quality restaurant merchants. We've also seen positive feedback from users. In Q3. The number of users who shopped our 3P offerings grew at a fast pace of over 50% year on year, outpacing the growth of our total users reflected in the financial results. Our commission and advertising revenues have been on a very rapid growth trajectory with growth rate accelerating to 24% year on year in Q3, which is the highest pace since Q2 2022. We believe our platform ecosystem has a lot of potential. In particular, we will further explore industrial belts to onboard more merchants. We will also continue to expand our food delivery merchant base to enrich local supplies for our 3P ecosystem. In addition, we will continue to strengthen our platform infrastructure and provide more tech tools to merchants with the goal to help them enhance operating efficiency on our platform, we will also optimize merchant operation rules and traffic allocation efficiency to create a clear growth path and a fair ecosystem for our 3P merchants. In addition to that, we will continue to strengthen user mindshare of our 3P offerings. We were seeing that for our 3P driven categories such as fashion category users have built growing mindshare of shopping for clothing on JD.com we are committed to developing our platform ecosystem, achieving win win outcomes with our 3Pmerchants and better serving our users platform ecosystem business will also be our long term driver for both revenue growth and profitability expansion. For your second question in Q3, JD Retail continued to see steady profit growth. This further validates our confidence in retail's long term margin trajectories. The main drivers for this include first, the healthy development of our platform ecosystem will drive growth momentum in our commission advertising revenues which will be a contributor to our margin expansion. Second, as we continue to build up our supply chain advantages and the scale effect of our core retail business, we are confident to further lower costs and improve our operating efficiency which will lead to better margin performance. To note, JD Retail's gross margin has been expanding year on year for 14 consecutive quarters. Third, our category mix shift will also impact our margin performance. Currently, the operating efficiency and margin performance of most of our categories and brands have been improving. In particular, our supermarket category has built stronger procurement capabilities and differentiated product offerings. We see meaningful potential to further increase supermarket margins going forward. Meanwhile, as we continue to optimize the product mix for electronics and home appliances, we also see room to increase these categories margins in the long term. In terms of investment in our new businesses, we will be centered around supply chain capabilities to make investments such as in Food Delivery, International and jingxi businesses. As we further enhance our supply fulfillment and services and broaden coverage in categories, customers and regions, we see more growth potential of our businesses. As the new initiatives generate deeper synergies with our existing businesses, we expect to see improvements in operating efficiency and profitability of our broader business ecosystem. Finally, our high single digit margin target for the long term remains unchanged.

OPERATOR - (01:22:49)

That's a WRAP operator.

Zong - (01:22:51)

We are now approaching the end of the conference call. I will turn the call over to JD.com's Zong for closing remarks. Thank you for joining us on the call today and thanks for your question. If you have further questions, please do not hesitate to contact me and the IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you. Have a good day.

OPERATOR - (01:23:15)

Thank you for your participation in today's conference call. This concludes the presentation. You may now disconnect. Good day.