JD.com's first-quarter revenue exceeded 203.1 billion yuan—how much room for further growth is there?

On the eve of the 618 shopping festival, JD.com released a hot quarterly financial report.

On the evening of May 19, JD.com released its financial report for the first quarter of 2021. Continuing the trend from the previous quarter, this report also shows a rebound in the growth rates of the three core indicators: revenue, net profit, and number of users.

In the first quarter of 2021, JD.com Group's net revenue reached 203.2 billion yuan, up 39% year on year; net profit was 3.6 billion yuan, a 227% increase from last year's 1.1 billion yuan; in terms of users, as of the end of March, JD.com had 499.8 million annual active users, up 29% year on year.

Let's take a closer look at these three data points,

The first net income increased by 39% year on year, which is the best performance of JD.com in the past three years. Since the revenue growth rate fell below 30% in Q4 2018, amid widespread pessimism, JD.com's revenue growth rate has not climbed back above 30% for six consecutive quarters, only returning to over 30% for the first time in Q3 2020.

Second, net profit increased year on year. JD.com posted profits under both GAAP and Non-GAAP in the first quarter, with net profit attributable to ordinary shareholders reaching 3.6 billion yuan, compared with 1.1 billion yuan in the same period last year, a year-on-year increase of 227%; non-GAAP net profit attributable to ordinary shareholders was 4 billion yuan, versus 3 billion yuan in the same period last year.

Third, in terms of the number of users, JD.com added 112 million net new users in a single quarter, marking the largest year-on-year increase in its history. As of March 31, 2021, JD.com had nearly 500 million active buyers in the past 12 months, up 29% from 387.4 million in the same period last year. Although the increase was substantial, the growth rate has slowed compared with the previous two quarters, both of which saw user growth exceeding 30%.

According to the financial report, as of March 31, 2021, JD.com's retail revenue reached 185.796 billion yuan, up 35.27% year on year; logistics revenue was 22.411 billion yuan, up 64.1% year on year; and new business revenue was 5.154 billion yuan, up 55.76% year on year.

It is also worth mentioning that service revenue is becoming a new driving force for JD.com's overall revenue. Shifting from a 'products' revenue model to a diversified 'products + services' revenue model has been JD.com's main strategy for finding new growth points over the past two years. In Q1, JD.com's product revenue reached 175.3 billion yuan, up 34.7% year on year, while service revenue stood at 27.9 billion yuan, up 73.1% year on year, accounting for an even larger share of total net revenue—13.7%.

This net service revenue mainly includes platform and advertising service revenue, as well as logistics and other revenue. Among them, logistics revenue was 13.8 billion yuan, up 109% year on year; advertising service revenue was 14.1 billion yuan, up 48% year on year. In other words, the logistics business is the main driver of JD.com's revenue growth.

However, as is well known, JD.com Logistics is about to go public, and its subsequent operating performance will be separated from the group's financial statements, which is expected to have a considerable impact on the group's performance. Therefore, spinning off JD.com Logistics for an IPO has both advantages and disadvantages. Going forward, the main responsibility for boosting JD.com's performance may shift to new businesses such as Jingxi and JD Industrial Development. At present, these segments still contribute a relatively small share of revenue, accounting for less than 3% of total revenue.

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