Improved margins and a rebound in sales lifted JD.com’s Q3 profits, but market skepticism lingered over future growth.

JD.com’s Q3 2024 earnings report, released November 14 after the Hong Kong stock market closed, painted a picture of steady financial growth and operational resilience. The e-commerce giant reported operating revenue of RMB 260.4 billion (USD 36.5 billion), a 5.1% year-on-year (YoY) increase, edging past market expectations. Operating profit surged by 29.5% YoY to RMB 12 billion (USD 1.7 billion), lifting the margin from 3.8% to 4.6%. Net profit attributable to shareholders climbed 47.8% YoY to RMB 11.7 billion (USD 1.6 billion). Under non-GAAP measures, profits also impressed, with net earnings rising 23.9% YoY to RMB 13.2 billion (USD 1.8 billion).

Despite these results, JD.com’s US stock price slid more than 6% by the close of trading, suggesting a disconnect between financial performance and investor sentiment. The numbers beg two key questions: What fueled JD.com’s strong quarter? And, with market volatility looming, does the company remain a compelling investment?

What drove JD.com’s Q3 performance?

A closer look at the segments reveals three pillars underpinning JD.com’s better-than-expected results: recovering electronics sales, robust general merchandise growth, and increased activity from third-party merchants.

1. Electronics rebound: Revenue from electronic products rose 2.7% YoY to RMB 122.6 billion (USD 17.2 billion), reversing declines from earlier quarters. A government-backed trade-in policy launched in September boosted demand for consumer electronics and home appliances, especially during China’s late summer heatwave. The policy, which supports sustainable consumption, appears poised to fuel further growth in Q4.
2. General merchandise momentum: Revenue from daily-use general merchandise grew 8% YoY to RMB 82.1 billion (USD 11.5 billion), driven by strong performances in supermarket, fashion, and sports categories. JD.com’s supply chain investments and improvements in user experience led to a 20% increase in purchase frequency among supermarket shoppers.
3. Third-party business growth: Commissions and advertising revenue rose 6.3% YoY. The end of merchant discount fees spurred a 30% rise in orders and a 20% increase in users, while enhanced traffic allocation bolstered advertising revenue. These gains reflect the health of JD.com’s ecosystem and its evolving role as a platform for external merchants.

In Q3 2024, JD.com reported an operating profit of RMB 12 billion, a 29.5% YoY increase, with the operating profit margin improving from 3.8% to 4.6%. Non-GAAP operating profit reached RMB 13.1 billion (USD 1.8 billion), a 17.9% YoY increase, with the margin at 5.0%. These figures underscore the company’s strong profit growth this quarter.

Breaking it down by segment, retail operations contributed RMB 11.6 billion (USD 1.6 billion) in operating profit, a 5.5% YoY increase, with a profit margin of 5.2%. JD Logistics stood out with an operating profit of RMB 2.1 billion (USD 294 million), representing a 624% YoY surge, while the profit margin for this segment rose to 4.7%, up 400 basis points from the same period last year. Meanwhile, other businesses recorded an operating loss of RMB 600 million (USD 84 million), slightly higher than the loss in the same period a year ago.

The profitability improvement this quarter can be attributed to three key factors:

1. First, gross margin gains were driven by enhanced supply chain efficiency. Operating costs increased by only 3.1% YoY, well below the 5.1% revenue growth, resulting in a 16% increase in gross profit and a gross margin of 17.3%, up 165 basis points.
2. Second, JD Logistics delivered cost reductions and efficiency improvements, limiting cost growth to 2.2%, which contributed significantly to the segment’s stronger-than-expected profit growth.
3. Third, the restructuring of platform categories played a critical role. A larger proportion of high-margin categories, such as supermarkets, alongside the growth of third-party businesses, enhanced the overall profitability profile.

JD.com’s Q3 results showcased strong revenue and profit growth, driven by high demand in daily-use goods, supermarket products, and apparel. The recovery in electronic product sales, bolstered by the government’s trade-in policy, also played a key role. Despite a sharp rise in marketing expenses, the company maintained solid profitability by cutting logistics costs and streamlining its supply chain operations.

Looking ahead, Q4 performance is expected to remain robust. The trade-in policy, initiated in late August, now spans 16 provinces online, with JD.com positioned as the designated e-commerce platform. The policy’s ongoing implementation, combined with a recovering macroeconomic environment and a real estate resurgence, is likely to sustain revenue growth. Moreover, an extended Singles’ Day sales season is poised to bolster revenue further.

Throughout 2024, JD.com has sharpened its focus on enhancing user experience, optimizing costs, and increasing efficiency, leading to improvements in product variety, third-party merchant participation, and the platform ecosystem. These efforts, alongside its scaled supply chain and infrastructure, provide a strong foundation for sustainable mid- to long-term profit growth.

From a valuation standpoint, JD.com’s performance has returned to 2020 levels. However, its current price-earnings (PE) ratio (TTM) of approximately 11 times is only a third of its 2020 valuation, highlighting a significant undervaluation. With a strong safety margin and a return rate of approximately 6% through dividends and buybacks, JD.com presents an attractive investment opportunity, provided it maintains high single-digit revenue growth and robust profit expansion.

The views expressed are the author’s own and do not constitute investment advice. Consult a professional before making financial decisions.

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