Q2 2026 JD Health International Inc Earnings Call

August 13, 2026

Speaker #2: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the JD Health International 2026 Interim Results Conference Call. At this time, all participants are in listen-only mode.

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the JD Health International 2026 Interim Results Conference Call. At this time, all participants are in listen only mode. Please note that both management's presentation and the Q&A session will be conducted in Mandarin. Simultaneous English interpretation will be provided by a third-party interpreter throughout the call by the English channel, which will remain in listen-only mode for the duration of the call. I will now turn the call over to today's host. Please go ahead. Thank you, operator. Good day, ladies and gentlemen. Welcome to our 2026 interim conference call. Joining us today are JD Health's Executive Director and CEO, Mr. Cao Dong, and CFO, Ms. Deng Hui. Ms. Deng will first walk us through the financial performance for the period, followed by a Q&A session. Mr. Cao will then deliver closing remarks.

Speaker #2: Please note that both management's presentation and the Q&A session will be conducted in Mandarin. Simultaneous English interpretation will be provided by a third-party interpreter throughout the call via the English channel, which will remain in listen-only mode for the duration of the call.

Speaker #2: I will now turn the call over to today's host. Please go ahead. Thank you, operator. Good day, ladies and gentlemen. Welcome to our 2026 interim conference call.

[Company Representative] (JD Health): Thank you, operator. Good day, ladies and gentlemen. Welcome to our 2026 interim conference call. Joining us today are JD Health's Executive Director and Chief Executive Officer, Mr. Cao Dong, and Chief Financial Officer, Ms. Deng Hui. Ms. Deng will first walk us through the financial performance for the period, followed by a Q&A session. Mr. Cao will then deliver closing remarks.

Speaker #2: Joining us today are JD Health's executive director and CEO, Mr. Cao Dong, and CFO, Ms. Deng Hui. Ms. Deng will first walk us through the financial performance for the period, followed by a Q&A session.

Speaker #2: Mr. Cao will then deliver closing remarks. Before we start, we would like to remind you that today's discussion may contain forward-looking statements, which involve a number of risks and uncertainties.

Deng Hui: Before we start, we would like to remind you that today's discussion may contain forward-looking statements which involve a number of risks and uncertainties. Actual results may differ materially from those mentioned today. The company does not undertake any obligation to update any forward-looking information except as required by law. During today's call, management will also refer to certain Non-IFRS financial measures for comparison purposes only. For the reconciliation between IFRS and Non-IFRS financial results, please refer to the interim results announcement for the six months ended 30 June 2026, issued today. Now I'd like to turn the call over to Ms. Deng Hui. Please go ahead. Hello, everyone. This is Deng Hui, CFO of JD Health. Thank you for joining our earnings call today. In the H1 of 2026, China continued to advance the quality development of the healthcare industry. Our total revenue reached RMB 450.9 billion.

[Company Representative] (JD Health): Before we start, we would like to remind you that today's discussion may contain forward-looking statements which involve a number of risks and uncertainties. Actual results may differ materially from those mentioned today. The company does not undertake any obligation to update any forward-looking information except as required by law. During today's call, management will also refer to certain Non-IFRS financial measures for comparison purposes only. For the reconciliation between IFRS and Non-IFRS financial results, please refer to the interim results announcement for the six months ended 30 June 2026, issued today. Now I'd like to turn the call over to Ms. Deng Hui. Please go ahead.

Speaker #2: Actual results may differ materially from those mentioned today. The Company does not undertake any obligation to update any forward-looking information, except as required by law.

Speaker #2: During today's call, management will also refer to certain non-IFRS financial measures for comparison purposes only. For the reconciliation between IFRS and non-IFRS financial results, please refer to the interim results announcement for the six months ended June 30, 2026, issued today.

Speaker #2: Now, I would like to turn the call over to Ms. Deng Hui. Please go ahead. Hello, everyone. This is Deng Hui, CFO of JD Health.

Deng Hui: Hello, everyone. This is Deng Hui, Chief Financial Officer of JD Health. Thank you for joining our earnings call today. In the H1 of 2026, China continued to advance the quality development of the healthcare industry. Our total revenue reached RMB 450.9 billion.

Speaker #2: Thank you for joining our earnings call today. In the first half of 2026, China continued to advance the quality development of the healthcare industry; our total revenue reached $40.9 billion.

Speaker #2: Our non-IFRS operating profit was—income was $30.5 billion, up 40.3% year-over-year. Notably, non-IFRS operating margin expanded by 1.5 percentage points to 8.5%, making 9 consecutive quarters of year-over-year increase. Product revenue increased 15.6% year-over-year, reaching $33.9 billion in the first half of the year, with the core market categories maintaining industry-leading growth.

Deng Hui: Our Non-IFRS operating income was RMB 30.5 billion, up 40.3% year over year. Notably, Non-IFRS operating margin expanded by 1.5 percentage points to 8.5%, making nine consecutive quarters of year over year. Product revenue increased 15.6% year over year, reaching RMB 33.9 billion in the H1 of the year, with the core medical categories maintaining industry-leading growth. In pharmacy, on top of the faster Q1 growth, we also maintain a faster growth in dermatology, oncology, endocrinology, cardiovascular health, and metabolic health. We have leveraged our omnichannel networks and professional pharmacy operations. We have launched 65 new drugs on our platform over the period. As the first go-to option has deeply been embedded in people's mind share. In supplements, we have been focusing on branding, coupled with our compliant promotional efforts, also competitive advantages, we have created a certain growth runway.

Deng Hui: Our Non-IFRS operating income was RMB 30.5 billion, up 40.3% year-over-year. Notably, Non-IFRS operating margin expanded by 1.5 percentage points to 8.5%, making nine consecutive quarters of year over year. Product revenue increased 15.6% year over year, reaching RMB 33.9 billion in the H1 of the year, with the core medical categories maintaining industry-leading growth. In pharmacy, on top of the faster Q1 growth, we also maintain a faster growth in dermatology, oncology, endocrinology, cardiovascular health, and metabolic health. We have leveraged our omnichannel networks and professional pharmacy operations. We have launched 65 new drugs on our platform over the period. As the first go-to option has deeply been embedded in people's mind share. In supplements, we have been focusing on branding, coupled with our compliant promotional efforts, also competitive advantages, we have created a certain growth runway.

Speaker #2: In pharmacy, on top of the fast Q1 growth, we also maintained faster growth in dermatology, oncology, and cardiovascular health. In medical health, we have leveraged our omnichannel networks and professional pharmaceutical operations.

Speaker #2: We have launched 65 new drugs on our platform over the period. As the first go-to option has deeply been embedded in people's mindshare, in supplements we have been focusing on branding, coupled with our compliant promotional efforts.

Speaker #2: We also have competitive advantages. We have created a certain growth runway. In medical devices, based on user insights and a direct supply chain, we have customized a few new devices and also AI-powered services for at-home health management.

Deng Hui: In medical devices, based on our user insights and also direct supply chain, we have customized a few new customized devices and also AI-powered services in at-home health management. Our service revenue in H1 of the year was RMB 7 billion, with a share of the total revenue continuing to rise. All user needs continue to evolve. We have provided a highly efficient digital marketing tool. The number of advertising merchants grew over 20% year over year. We also deepened partnerships with Novo Nordisk, Innovent Biologics, CR Pharmaceutical, and Argus Pharmaceuticals, advancing innovative collaborations in areas as new drug launches, academic marketing, intelligent patient management services. We also continue to expand new healthcare service offerings and deepen the integration of online and offline operations.

Speaker #2: Our service revenue in the first half of the year was $7 billion, with its share of total revenue continuing to rise. All user needs continue to evolve.

Speaker #2: We have provided highly efficient digital marketing tools. The number of active advertising merchants grew by over 20% every year. We also deepened partnerships with Novo Nordisk, Invinent Biologics, CR, and Argoron.

Speaker #2: Advertising innovative collaborations in areas such as new drug launches, academic marketing, and intelligent patient management services, we also continue to expand new healthcare service offerings and deepen the integration of online and offline operations, as of the end of June.

Deng Hui: As of the end of June, JD Pharmacy had expanded its presence to more than 450 stores across 10 cities nationwide, working in tandem with the JD Instant Delivery services. We also diversify our payment channels. We have extended added medical insurance payment services to 11 additional cities, bringing the total to 40 cities. In offline scenarios, we continue to broaden our healthcare offerings. In Beijing, we actually opened our first integrated healthcare center, integrating physical examination, dental care, and medical services. Also expanded home care and at-home rapid testing services, further strengthening our end-to-end consultation, examination, diagnosis, and pharmaceutical services ecosystem. We also remain focused on enhancing operational efficiency through more refined management practices. Our gross profit was RMB 10.6 billion for the period. Gross margin improved 0.9% year over year to 26.1%, marking nine consecutive quarters of yearly growth. Procurement cost optimization was constantly increasing.

Speaker #2: JD Pharmacy has expanded its presence to more than 450 stores across 10 cities nationwide, working in tandem with JD Instant Delivery Services. We have also diversified our payment channels and have extended medical insurance payment services to 11 additional cities, bringing the total to 40 cities.

Speaker #2: In offline scenarios, we continue to broaden our healthcare offerings. In Beijing, we actually opened our first integrated healthcare center, integrating physical examination, dental care, and medical services. We also expanded home care and at-home rapid testing services.

Speaker #2: We are further strengthening our end-to-end consultation, examination, diagnosis, and pharmaceutical services ecosystem. We also remain focused on enhancing operational efficiency through more refined management practices. Our gross profit was $10.6 billion for the period.

Speaker #2: Gross margin improved 0.9% every year to 26.1%, marking 9 consecutive quarters of a year of growth. Procurement cost optimization was constantly increasing. Non-IFRS, our fulfillment expense ratio was 10%, flat with the same period last year.

Deng Hui: Non-IFRS, our fulfillment expense ratio was 10%, flat with the same period last year. We have been fulfilling, making user experience. So we increased the fulfillment costs. However, the economies of scale has been increasing, which has been largely offset at the associated incremental costs in fulfillments. In H1 2026, the Non-IFRS marketing expense ratio improved by over 0.5 percentage points year over year to 4.6%, mainly attributed to more targeted marketing strategies, enhanced spending efficiency. Non-IFRS R&D expense ratio was up 0.2% to now at 2.3%, was reflecting our efforts investments in AI, where we have been iterating our Jingyi Qianxun functionalities. Also, we are introducing its application across different scenarios, focusing on user experience. The AI agent, Dr. Dawei, continued to gain traction. Its user base has increased by nearly fourfold, driving the higher product purchase conversion.

Speaker #2: We have been improving user experience, so we increased the fulfillment cost. However, economies of scale have been increasing, which has largely offset the associated incremental costs in fulfillment.

Speaker #2: In the first half of 2026, the non-IFRS marketing expense ratio improved by over 0.5 percentage points year over year to 4.6%, mainly attributable to more targeted marketing strategies which enhanced spending efficiency.

Speaker #2: The non-IFRS R&D expense ratio was up 0.2%, now at 2.3%. This reflects our IFRS investments in AI. We have been iterating our changing functionalities, and we are also introducing its application across different scenarios, focusing on user experience.

Speaker #2: The AI agent Dr. Dawei continued to gain traction. Its user base has increased by nearly 4-fold. Driving the higher product purchase conversion. Also, the Jindong Jingyi for doctors has been fully integrated in the JD Health online hospital and embedded in doctors' online clinical workflows, supporting decision-making and improving efficiency.

Deng Hui: Also, the Jingyi Qianxun for doctors has been fully integrated in the JD Health Internet Hospital and embedded in doctors' online clinical workflows, supporting decision making and improving efficiency. Non-IFRS management improved is around 0.7%. Operating efficiency also is leading in the industry. In H1, Non-IFRS operating income grew 40.3% year over year to $3.5 billion in H1 2026. So the interest or finance income was around $814 million. That was mainly due to the fluctuations in the fair value changes in the wealth management products. Non-IFRS net margin was up 8.5% at around $3.9 billion. The net cash generated from operating activities was $4.46 billion. As of 30 June, cash and cash equivalents restricted to cash term deposits with management products totaled to RMB 71.5 billion, an increase of 2 billion from the end of 2025.

Speaker #2: Non-IFRS management improvement is around 0.7%. Operating efficiency is also leading in the industry. In the first half, non-IFRS operating income grew 40.3% year-over-year to $3.5 billion in the first half of 2026.

Speaker #2: So, the interest or finance income was around $814 million. That was mainly due to the fluctuations in fair value changes in the wealth management products.

Speaker #2: Non-IFRS net margin was up 8.5% at around 3.5 3.9 billion. The net cash generated from operating activities was 4.46 billion. As of June 30th, cash and cash equivalents restricted to cash term deposits with management products sold at 71.5 billion RMB, an increase of 2 billion from the end of 2025.

Speaker #2: We have repurchased shares worth HK$840 million and have canceled all of them. Thanks to the continuous rise in profit and our robust cash position, we will continue executing our share repurchase program.

Deng Hui: We have repurchased shares worth 840 million HKD. We have canceled all of them. Thanks to the continuous rise in profit and also robust cash position, we will continue executing our share repurchase program. In summary, JD Health delivered high-quality growth with a steady enhancement in operating efficiency and profitability. Looking ahead to the next H2, we are able to maintain and confident in maintaining better than industry growth, further solidifying our position as the largest online pharmacy retail platform. We will also continue to strengthen our AI-powered supply chain capabilities and maintain disciplined investments in AI, and we will look forward to return the benefits for our shareholders. That concludes my prepared remarks. We are now open for questions. Now, let us move to Q&A session. If you would like to ask a question, please press star 1 on your keypad.

Speaker #2: In summary, JD Health delivered high-quality growth with a steady enhancement in operating efficiency and profitability. Looking ahead to the next second half, we are able to maintain a confident better than industry growth, further solidifying our position as the largest online pharmacy retail platform.

Speaker #2: And also, we'll continue strengthening our AI-powered supply chain capabilities and maintain disciplined investments in AI, and we will look forward to return the benefits for our shareholders.

Speaker #2: And that concludes my prepared remarks. We are now open for questions. Now, let's move to Q&A session. If you would like to ask a question, please press the star one on your keypad.

Operator: Now, let us move to Q&A session. If you would like to ask a question, please press star 1 on your keypad.

Speaker #2: Due to time constraints, please limit your questions to two. If you have any further follow-up questions, please re-enter the queue. Thank you. The first question comes from BOFA's Miranda.

[Analyst] (BofA Securities): For the time constraints, please limit your questions to 2 questions. If you have any further follow-up questions, please re-enter the queue. Thank you. The first question comes from BofA, Miranda. Thank you, management, for taking my question. I was wondering the growth trends for the 3 key categories, some short-term and near-term factors affecting the growth. Also in Q2, we maintain an accelerated growth in pharmaceutical product revenue. I was wondering, what are the key drivers behind the rapid growth, and also what will be the outlook for the H2 of the year. For non-pharmaceutical product revenue, the growth has slowed down slightly in the H1 of the year. What are the reasons behind that, and also what is the outlook for that. Last but not least, on the policy front, the regulation on nutrition and supplements, what kind of trends are we seeing. Thank you, Miranda.

Operator: For the time constraints, please limit your questions to 2 questions. If you have any further follow-up questions, please re-enter the queue. Thank you. The first question comes from BofA, Miranda.

Speaker #2: Thank you, management, for taking my question. I was wondering the growth trends for the thorough key categories some short-term and near-term factors affecting the growth, and also in Q2, we maintain an accelerated growth in pharmaceutical product revenue.

[Analyst] (Bank of America): Thank you, management, for taking my question. I was wondering the growth trends for the 3 key categories, some short-term and near-term factors affecting the growth. Also in Q2, we maintain an accelerated growth in pharmaceutical product revenue. I was wondering, what are the key drivers behind the rapid growth, and also what will be the outlook for the H2 of the year. For non-pharmaceutical product revenue, the growth has slowed down slightly in the H1 of the year. What are the reasons behind that, and also what is the outlook for that. Last but not least, on the policy front, the regulation on nutrition and supplements, what kind of trends are we seeing.

Speaker #2: I was wondering what are the key drivers behind the rapid growth, and also what will be the outlook for the second half of the year.

Speaker #2: For non-pharmaceutical product revenue, the growth has slowed down slightly in the first half of the year. What are the reasons behind that, and also what’s the outlook for that?

Speaker #2: Last but not least, on the policy front—the regulation on nutrition and supplements—what kind of trends are we seeing? Thank you, Miranda. I am Taodong.

Cao Dong: Thank you, Miranda.

Cao Dong: I am Cao Dong. To answer your questions, which are your key concerns, first, let us talk about pharmaceutical product revenue. Indeed, the growth is aligned with our expectations. Let me break you down in terms of the logic behind that. I think there is a prerequisite. Selling pharmaceutical product or medication is not an easy feat. Far more challenging. To do it well, there are a few things that we need to do well. Number 1, we need to have the strong supply chain capabilities. That means your category covering has to be the most up-to-date and comprehensive, and they have to be genuine and with a better prices. To achieve that, it takes years of efforts. So it is reflected in the supply chain capabilities. So you have to be able to offer the most up-to-date product offerings with the most reasonable prices.

Speaker #2: To answer your questions, which are your key concerns, first, let's talk about pharmaceutical product revenue. Indeed, the growth is aligned with our expectations. And let me break you down in terms of the logic behind that.

Speaker #2: So, I think there is a prerequisite: selling pharmaceutical products or medication is not an easy feat. It is far more challenging. I mean, to do it well, there are a few things that we need to do well.

Speaker #2: Number one, we need to have strong supply chain capabilities. That means your category covering has to be the most up-to-date and comprehensive, and they have to be genuine.

Speaker #2: And with better prices—I mean, to achieve that, it takes years of effort, so that's reflected in the supply chain capabilities. You have to be able to offer the most up-to-date product offerings at the most reasonable prices.

Speaker #2: That can only be achieved with robust supply chain capabilities. Secondly, you have to possess strong fulfillment capabilities. So, that means your nationwide network has to be complete.

Cao Dong: That can only be achieved with a robust supply chain capabilities. Secondly, you have to possess a strong fulfillment capability. That means your nationwide network has to be complete. I mean, covering majority of the regions in China, particularly those remote and also less developed regions. So there are still access issues that we need to address, I mean, in terms of this market. Thirdly, the company has to have a great mindshare. I am talking about both on the 2C side and 2B side. We can sell our medications to remote areas. For example, like I said, we are even making our medicine accessible, available to prisoners. I mean, they need medications, and we are able to make it happen. So that is an example that shows you that JD Health’s mindshare, we are having a very good performance in both the 2B and 2C front.

Speaker #2: I mean, covering majority of the regions in China, particularly those remote and also less developed regions. So, we make so there are still access issues that we need to address.

Speaker #2: I mean, in terms of this market. Thirdly, the company has to have great mind share. I mean, I've been talking about both on the C side and the B side.

Speaker #2: We can sell our medications to remote areas, for example, like I said, we are even making our medicine accessible, available to prisoners. I mean, they need medications, and we are able to make it happen.

Speaker #2: So, that is an example that shows you that JD Health’s mind share—we are having a very good performance in both the 2B and 2C front.

Speaker #2: And number four, we have to have well-established medical or healthcare service capabilities. Leveraging AI, we can better educate our patients. I mean, we have to equip that with the medicine retail.

Cao Dong: And number 4, we have to have a well-established medical or healthcare service capabilities. Leveraging AI, we can better educate our patients. We have to equip that with the medicine retail. We need to have a matching service, so as to reduce the barriers to sell the drugs. Number 5, we need to be regulatory compliant. We have to be disciplined looking over the long term. You need to be compliant to the regulations, understanding the logic, making contributions to the regulators, pushing the industry to grow healthily. This takes a lot of efforts. These five factors that I have mentioned are areas where we are trying to do the best. Like I said, traffic alone won't come to deal. It takes decades of efforts to invest, to accumulate. However, once you are able to possess or build those advantages, they can form very competitive mode for a company.

Speaker #2: We need to have a matching service so as to reduce the barriers to sell the drugs. Number five, we need to be regulatory compliance.

Speaker #2: We have to be disciplined. Looking over the long term, you need to be compliant with the regulations, understanding the logic, making contributions to the regulators, and pushing the industry to grow healthily.

Speaker #2: This takes a lot of efforts. So, these five factors that I've mentioned I mean, our areas where we are trying to do the best.

Speaker #2: Like I said, I mean, traffic alone won't cut the deal. I mean, it takes effort—decades of effort—to invest and accumulate. However, once you're able to possess or build those advantages, they can form a very competitive moat for a company.

Speaker #2: So, that's why we are able to lead the market in our pharmaceutical or medication sales, and we have been continuing to solidify our efforts in these regards.

Cao Dong: So that is why we are able to lead in the market in our pharmaceutical or medication sales. We have been continuing to solidify our efforts from these regards. From the regulations perspective, there will be some short-term fluctuations or headwind, but over the long run, we are very bullish. For us, who has a robust supply chain and a strong reputation, it positions us in a very good position to go the long run. If you look at the regulation landscape for JD Health, it has been an industry that has been regulated heavily by the policies or regulators. There have been constant corrections, and we have been a compliant player throughout. Regulation is here to stay for the long run. Medium to long run, it is going to benefit us as a company. That is my answer on the medications sales.

Speaker #2: And from the regulations perspective, there will be some short-term fluctuations or headwinds, but over the long run, we are very bullish. So, for us, who have a robust supply chain and a strong reputation, it positions us in a very good place to go the long run.

Speaker #2: I mean, I mean, if you look at the regulation landscape, I mean, for JD Health, I mean, it has been an industry that has been regulated heavily by the policies or regulators.

Speaker #2: There have been constant corrections, and we have been a compliant player throughout. So, regulation is here to stay for the long run. In the medium to long run, it's going to benefit us as a company.

Speaker #2: So, that's my answer on the medications sales. Now, moving on to nutrition and supplements. Yeah, short-term wise, we are seeing some headwinds. It's performing less than we had expected.

Cao Dong: Now moving on to nutrition and supplements. Yeah, short-term wise, we are seeing some headwinds. It is performing less than we have expected. But again, we have to look at the long run. We are gaining market share in nutrition and supplement market. Some of the impacts that we see, first is fake overseas brands, which has been reported by CCTV and some other programs. Second, the clear defined categories. There has been some regulatory efforts going on, but it favors us. Over the past few decades, looking at how the market grew, we are seeing that the market is getting more increasingly regulated. This is a process where the true genuine competitive companies will stand out. There is going to be increasingly more domestic substitution.

Speaker #2: But again, we have to look at the long run. We are gaining market share in the nutrition and supplement market, so some of the impacts we see—

Speaker #2: First is fake overseas brands, which have been reported by CCTV and some other programs. And second, the clearly defined categories, and there have been some regulatory efforts going on.

Speaker #2: But it favors us. Over the past few decades, I mean, looking at how the market grew, we are seeing that the market is becoming increasingly regulated.

Speaker #2: I mean, this is a process where the truly genuine, competitive companies will stand out. So, there is going to be increasingly more domestic substitution. Some of the domestic players would like to leverage the reputation of an overseas brand, and they are conducting fraudulent sales, I mean, towards the senior citizens.

Cao Dong: Some of the domestic players would like to leverage the reputation of an overseas brand, and they are conducting fraudulent sales towards the senior citizens. This is necessary for the regulators to come in and crack down on such practices. For us, we should have a healthy market where the market favors the healthy and compliant players. We are seeing the same landscape or same situation for nutrition and supplements. We have to build our fulfillment capabilities, supply chain capabilities. For JD Health, we have a strong reputation, and we got the medical and healthcare service capabilities as well as the compliance. With the better user experience, we can gain further market share, and over the long run, we are going to benefit from that regulation. Also, like I said, regulation is here to stay for the long run.

Speaker #2: I mean, it is necessary for regulators to come in and crack down on such practices. And for us, I mean, we should have a healthy market where the market favors the healthy and compliant players.

Speaker #2: So, we are seeing the same landscape or the same situation for nutrition and supplements. We have to build our fulfillment capabilities and supply chain capabilities for JD Health.

Speaker #2: We have a strong reputation, and we have the medical and healthcare service capabilities as well as the compliance. So, with a better user experience, we can gain further market share, and over the long run, we're going to benefit from that regulation.

Speaker #2: And also, like I said, regulation is here to stay for the long run. If you look at the past few decades, there has been consistent regulation pushing the industry toward a healthier trajectory.

Cao Dong: If you look at the past few decades, it has been a consistent regulation pushing the industry towards a more healthier trajectory. This is an opportunity to have all the players to pursue a more compliant growth. We welcome such kind of policies which will lead an industry towards more healthy trajectory. We definitely expected the performance to improve from the H1 of the year. We also expect more visibility into the regulations so that everyone is aware or clear what are those that is going to be put on the blacklist and what are the list of products that can be developed from the domestic substitution perspective. Outlook-wise, we are definitely expecting slower growth in the H2 of the year. I would definitely talk about AI, where we would like to elaborate more. We definitely have a lot of expectations. For now, it is performing relatively weak.

Speaker #2: So, this is an opportunity for all the players to pursue more compliant growth, and we welcome such policies, which would lead the industry toward a healthier trajectory.

Speaker #2: And we definitely expect the performance to improve from the first half of the year. We also expect more visibility into the regulations so that everyone is aware of or clear about what is going to be put on the blacklist and what are the list of products that can be developed from the domestic substitution perspective.

Speaker #2: Outlook-wise, we're definitely expecting slower growth in the second half of the year. I would definitely talk about AI, where we would like to elaborate more; we definitely have a lot of expectations.

Speaker #2: For now, it's performing relatively weak. Medical equipment has contributed the most. I mean, in the past, if you followed us long enough, however, we are seeing that other segments are growing faster, slightly, than medical equipment. But nevertheless, medical equipment is still a very promising sector.

Cao Dong: Medical equipment has contributed the most, in the past, if you followed us long enough. However, we are seeing that other segments are growing faster, slightly, than medical equipment. Nevertheless, medical equipment is still a very promising sector. Given the aging society and also the nursing requirements, this is definitely a segment where we can onboard more merchants and introduce more product offerings. Also they are getting increasingly more home-oriented, smaller size-oriented. Over the long run, we have confidence in the outlook for medical equipment. So that is an overview for these three categories. Also, I touched briefly on regulations. Hopefully, that answers your question. Your next question comes from Henry from UBS. Please go ahead. Thank you. Management, I am Henry from UBS. Got two questions. Number one, in the H1, the adjusted operating profit, we are seeing better growth. What are the key drivers behind that?

Speaker #2: Given the aging society and the increasing nursing requirements, this is definitely a segment where we can onboard more merchants and introduce more product offerings. Also, the products are becoming increasingly home-oriented and smaller in size, but over the long run, we have confidence in the outlook for medical equipment.

Speaker #2: So, that's an overview of these three categories. Also, I touched briefly on regulations. Hopefully, that answers your question. Your next question comes from Henry from UBS.

Operator: Your next question comes from Henry from UBS. Please go ahead.

Speaker #2: Please go ahead. Thank you. Management, I am Henry from UBS. I have two questions. Number one, in the first half, the adjusted operating profit—we're seeing better growth.

[Analyst] (UBS): Thank you. Management, I am Henry from UBS. Got two questions. Number one, in the H1, the adjusted operating profit, we are seeing better growth. What are the key drivers behind that?

Speaker #2: What are the key drivers behind that? And what's the profitability outlook for the second half and over the longer term? Second question is on the repurchase.

Deng Hui: What is the profitability outlook for the H2 and over the longer term? Second question is on the repurchase, and also an update on the company's share repurchase program. Thank you, Henry. We have been maintaining high-quality growth. Our revenue has been leading the industry. Also, our gross profit and also operating expense ratio has been coming down. Overall revenue is growing faster than our profit over the past three years. It is actually maintained a 30% CAGR growth. Looking ahead, we are confident in sustaining the growth momentum. At the moment, there is still growth potential for us to improve the gross margin. For high frequent products, it is a low-margin product. For low frequent purchasers, it is a high margin business. We have to balance that. So logic-wise, it makes sense.

[Analyst] (UBS): What is the profitability outlook for the H2 and over the longer term? Second question is on the repurchase, and also an update on the company's share repurchase program.

Speaker #2: And also, an update on the company's share repurchase program. Thank you, Henry. We have been maintaining high-quality growth. Our revenue has been leading the industry.

Deng Hui: Thank you, Henry. We have been maintaining high-quality growth. Our revenue has been leading the industry. Also, our gross profit and also operating expense ratio has been coming down. Overall revenue is growing faster than our profit over the past three years. It is actually maintained a 30% CAGR growth. Looking ahead, we are confident in sustaining the growth momentum. At the moment, there is still growth potential for us to improve the gross margin. For high frequent products, it is a low-margin product. For low frequent purchasers, it is a high margin business. We have to balance that. So logic-wise, it makes sense.

Speaker #2: Also, our gross profit and operating expense ratio have been coming down. Overall, revenue is growing faster than our profit over the past three years.

Speaker #2: It's actually maintained a 30% kicker growth. And looking ahead, we are confident in sustaining the growth momentum. At the moment, there's a stronger potential for us to improve the gross margin.

Speaker #2: For high-frequency products, it comes with a low margin. And for low-frequency purchases, it's a high-margin business. So, we have to balance that.

Speaker #2: So, logic-wise, I mean, it makes sense. For the healthcare sector, which needs a lot of effort and care, I think there has been significant demand for this sector.

Deng Hui: For the healthcare sector, which needs a lot of efforts and care, I think there has been a significant demand for this sector. We have been exploring how we can scale up the services in medical care, which will increase the gross margin. Also the economies of scale is certain, as you can see that the society is aging. For us, if we were able to provide patients and partners with a certain value, that is going to solidify our leading position and also translate it into our economies. You can see that the gross profit of various segments has been improving. So overall, we are confident in maintaining the momentum and achieving a high single-digit operating margin for the long run. Your next question is on share repurchase. Earlier in May, we announced our first-ever four-year share repurchase program of up to 1 billion USD.

Speaker #2: And we have been exploring how we can scale up the services in medical care, which will increase the gross margin. Also, the economies of scale are certain, as you can see that the society is aging.

Speaker #2: For us, if we are able to provide patients and partners with certain value, that's going to solidify our leading position and also translate into our economies.

Speaker #2: You can see that the gross profit of various segments has been improving. So, overall, we are confident in maintaining the momentum and achieving a high single-digit operating margin for the long run.

Speaker #2: Your next question is on share repurchase. Earlier in May, we announced our first ever four-year share repurchase program of up to $1 billion. Over the past quarter...

Deng Hui: Over the past quarter, we have repurchased over 840 million HKD, or $110 million US. We have canceled all of these shares repurchased. With the continued improvements in profitability and robust cash position, we are well positioned to execute the share repurchase program while continuing to make disciplined investments in our business. We will remain focused on building a healthy and resilient business, actively pursuing new opportunities, and driving steady and sustained growth in both revenue and profitability, creating long-term value and delivering returns to our shareholders. Your next question comes from Lincoln Kong at Goldman Sachs. Please go ahead. Thank you, management, for taking my question. Congratulations on the excellent results in the H1. My question is on AI. Our AI, Jingyi AI Assistant, has been integrated across the full spectrum of your healthcare services. How does management see AI creating value for the company's core business?

Speaker #2: We have repurchased over 840 million, or $110 million, and we have canceled all of these shares repurchased. So, with the continued improvements in profitability and robust cash position, we are well positioned to execute the share repurchase program while continuing to make disciplined investments in our business.

Speaker #2: We will remain focused on building a healthy and resilient business, actively pursuing new opportunities and driving steady, sustained growth in both revenue and profitability.

Speaker #2: Creating long-term value and delivering returns to our shareholders. Your next question comes from Lincoln Com at Goldman Sachs. Please go ahead. Thank you, management, for taking my question.

Operator: Your next question comes from Lincoln Kong at Goldman Sachs. Please go ahead.

Lincoln Kong: Thank you, management, for taking my question. Congratulations on the excellent results in the H1. My question is on AI. Our AI, Jingyi AI Assistant, has been integrated across the full spectrum of your healthcare services. How does management see AI creating value for the company's core business?

Speaker #2: Congratulations on the excellent results in the first half. My question is on AI. Our AI assistant has been integrated across the full spectrum of your healthcare services.

Speaker #2: How does management see AI creating value for the company's core business? Also, as mentioned, AI penetration is accelerating. So, how do we expect AI to primarily drive cost and efficiency improvements, and how could it also become a new source of revenue?

Cao Dong: Also, as mentioned, AI Dr. Da Wei's penetration is accelerating. How do we expect AI to primarily drive cost and efficiency improvements, and how could it also become a new source of revenue? What are some of the differentiated advantages compared with other peers in the market who are also investing in AI? Thank you, Lincoln. I know AI is a key concern for all of you. We also value the investments in AI. Let me first give you the conclusion. In our view, AI can not only reduce costs and improve efficiency, it can also become a standalone business creating business value. That is highly certain conclusion. In our day-to-day practice, reducing costs and improving efficiency is clear. Well, not to be exaggerating, AI is integrated in our day-to-day operations and management. For each week, we have meeting sessions related to AI.

Lincoln Kong: Also, as mentioned, AI Dr. Da Wei's penetration is accelerating. How do we expect AI to primarily drive cost and efficiency improvements, and how could it also become a new source of revenue? What are some of the differentiated advantages compared with other peers in the market who are also investing in AI?

Speaker #2: And also, what are some of the differentiated advantages compared with other peers in the market who are also investing in AI? Thank you, Lincoln.

Cao Dong: Thank you, Lincoln. I know AI is a key concern for all of you. We also value the investments in AI. Let me first give you the conclusion. In our view, AI can not only reduce costs and improve efficiency, it can also become a standalone business creating business value. That is highly certain conclusion. In our day-to-day practice, reducing costs and improving efficiency is clear. Well, not to be exaggerating, AI is integrated in our day-to-day operations and management. For each week, we have meeting sessions related to AI.

Speaker #2: I know AI is a key concern for all of you. We also value the investments in AI. Now, let me first give you the conclusion.

Speaker #2: In our view, AI can not only reduce costs and improve efficiency; it can also become a standalone business, creating business value that is a highly certain conclusion.

Speaker #2: In our day-to-day practice, reducing costs and improving efficiency is clear. Well, not to exaggerate, but AI is integrated into our daily operations and management.

Speaker #2: For each week, we have meeting sessions related to AI. On a weekly basis, we continue taking inventory of the areas or tools and products that, created by UI, could help reduce costs and improve efficiency.

Cao Dong: On a weekly basis, we continue to take an inventory of the areas or tools, products that, created by UI, could help reduce costs and improve efficiency. Then we will quickly replicate that, integrate that, apply that across our day-to-day situations. That is also true with other companies. I am sure that everyone is learning how to use AI, but the key is that it cannot be simply a tool. Particularly in healthcare service sector, it can be a standalone business, and that is how we position AI internally, and this is where we have been working towards. Well, at the moment, can we prove that it has already become a standalone business that yields tangible results? I cannot say that for sure, but I would say we are halfway through. Let me break it down for you. As a standalone business, we have been maintaining a very pragmatic approach towards AI.

Speaker #2: And then we'll quickly replicate that, integrate that, and apply that across our day-to-day situations. That is also true with other companies. I mean, I'm sure that everyone is learning how to use AI.

Speaker #2: But the key is that it cannot simply be a tool, particularly in the healthcare service sector. It can be a standalone business. And that's how we position AI internally.

Cao Dong: Particularly in healthcare service sector, it can be a standalone business, and that is how we position AI internally, and this is where we have been working towards. Well, at the moment, can we prove that it has already become a standalone business that yields tangible results? I cannot say that for sure, but I would say we are halfway through. Let me break it down for you. As a standalone business, we have been maintaining a very pragmatic approach towards AI.

Speaker #2: And this is where we are working towards as well. At the moment, can we prove that it has already become a standalone business that yields tangible results?

Speaker #2: I cannot say that for sure, but I would estimate that we are halfway through. Let me break it down for you. As a standalone business, I mean, we have been maintaining a very pragmatic approach towards AI.

Speaker #2: When it comes to AI technology investments, we are being very prudent. We do not invest blindly. We do not spend a lot of money on PR and marketing trying to build a reputation.

Cao Dong: When it comes to AI technology investments, we are being very prudent. We do not invest blindly. We do not spend a lot of money on PR and marketing, trying to build a reputation. From day one, it has been clear to us that how we need to create synergies between AI and other existing businesses to create further value. If you look at on a higher level, for 2C customer or user-facing AI, we have an AI called Dr. Da Wei, which is a male 50-year physician. That is the persona. It has gradually been replacing the consultations with a human or physician. We are seeing adoptions. Rather than a chit-chat chat robot, we seriously position it as a medical AI assistant who cannot only do chit-chat. Additionally, we have been trying to commercialize Dr. Da Wei.

Speaker #2: From day one, it has been clear to us that what we need to do to create synergies between AI and our other existing businesses is to generate further value.

Speaker #2: And if you look at it from a higher level, for customer- or user-facing AI, we have an AI called Dr. Daway, which is a male, 50-year-old physician.

Speaker #2: That's the persona. It has gradually been replacing consultations with a human or physician. We're seeing adoption rather than just chit-chat. The chat robot is being seriously positioned as a medical AI assistant, who can not only do chit-chat.

Speaker #2: Additionally, we have been trying to commercialize Dr. Daway in the future—the online hospital, which will be powered by an AI agent, an AI physician.

Cao Dong: In the future, the online hospital, which will be powered by AI physician, will gradually grow. AI-powered Dr. Dawei or physician will gradually replace those consultations with physicians. At the moment, it is free of charge, providing foundational, informative information or educating purposes or functionality. In some regards, Dr. Dawei could outperform physicians in terms of the technological know-how. Therefore, we have been proactively transitioning from manual consultation towards AI-powered consultation. But again, we are going to have the physicians do the final check to review the results. But overall, we are seeing very positive user experience and feedback from the adoption of Dr. Dawei. For commercialization of this effort, we have entered some agreements, and we are quickly iterating the functionality. We are seeing some clear runway for commercialization for Dr. Dawei.

Speaker #2: I mean, we'll gradually grow, so AI-powered Dr. Daway or physician will gradually replace those consultations with physicians. At the moment, it's free of charge, providing foundational informative information for educating purposes or functionality.

Speaker #2: I mean, in some regards, Dr. Daway could outperform physicians in terms of technological know-how. Therefore, we have been proactively transitioning from manual consultation toward AI-powered consultation.

Speaker #2: But again, we're going to have the physicians do the final check to review the results. But overall, we are seeing very positive user experience and feedback from the adoption of Dr. Daway.

Speaker #2: And for commercialization of this effort, we have entered some agreements and we are quickly iterating the functionalities. So, we're seeing some clear runway for commercialization for Dr. Daway.

Speaker #2: Number two, for complex consultations that require top-level physicians, this is an area where the consultations cannot be replaced. However, we do see some positive signs in the capabilities of AI assistants in some regards.

Cao Dong: Number two, for complex consultations that require top-level physicians, this is somewhere that the consultations cannot be replaced. However, we do see some positive signs in the capabilities of AI assistant in some regards. Gradually, AI will be able to offer very informative feedback for the physicians to review. We are seeing clear visibility or runway for user-oriented scenarios. Next, to doctors' scenarios, which is our AI product is called Zhiyi. By benchmark scores, we have been performing really well. We hope that more of the remote, less developed markets, doctors from, or physicians from these areas could use this model or assistant because they definitely need more training to help them make a more informed decision. Therefore, this will be an inclusive. Hello. Excuse me, can you spell your name, please? Hello, can you hear me? Our product is called Zhiyi.

Speaker #2: And gradually, AI will be able to offer very informative feedback for physicians to review. So we're seeing clear visibility, or runway, for user-oriented scenarios.

Speaker #2: Next, two doctors scenarios which is our AI product is called JE by benchmark scores we have been performing really well. We hope that more of the remote less developed markets I mean, doctors from or physicians from these areas could use this model or assistant because they definitely need more training to help them make more informed decisions.

Speaker #2: Therefore, this will be an inclusive... Hello, excuse me. Can you spell your name, please? Hello, can you hear me? Our product is called Joy.

Operator: Hello. Excuse me, can you spell your name, please? Hello, can you hear me?

Cao Dong: Our product is called Zhiyi.

Speaker #2: To put it simply, we want to create incremental market opportunities for the in-hospital business, and that is moving in tandem with compliance. We have seen significant potential for this segment.

Cao Dong: To simply put, we want to create the incremental market for the in-hospital business, and that is moving in tandem with a compliance. We have seen significant potential for this segment. Overall, we have been evaluating where are the ceilings. Right now, 60% to 60% of the market happen within the hospital. For example, we are thinking about where we can replace or access outside the hospital. For example, the prescriptions and et cetera. But how long will it take to gradually access these opportunities or scenarios? It is happening, but not at a very fast speed. Other than these I mentioned, we do devise our own plans to develop incremental market or gain more business from those that are happening in the hospital. But it is very intricate situation. Nevertheless, our two hospital or hospital-oriented AI product, Zhiyi, is dedicated to this effort. That is roughly the product that we have.

Speaker #2: Overall, we have been evaluating: where are the ceilings? Right now, 60 to 65 percent of the market happens within the hospital, for example. I mean, we're thinking about where we can replace or access outside the hospital.

Speaker #2: For example, the prescriptions and so on. But how long will it take to gradually access these opportunities or scenarios? I mean, it's happening, but not at a very fast speed.

Speaker #2: Other than these I mentioned, we also devise our own plans to develop incremental markets or gain more business from those that are already happening in the hospital.

Speaker #2: But it's a very intricate situation. Nevertheless, our two hospital or hospital-oriented product, Joy, is dedicated to this effort. So that is roughly the product that we have.

Speaker #2: But nevertheless, I mean, these three products can also be introduced to pharmaceutical companies, which can help better serve their businesses. For now, we don't see significant contribution from AI in terms of the retail of pharmaceuticals, but over the long run, we are seeing that more clearly.

Cao Dong: Nevertheless, these three products can also be introduced to pharmaceutical companies, which can help better serve their businesses. We do not see significant contribution from AI in terms of the retail of pharmaceuticals. But over the long run, we are seeing that more clearly. That is my overview on how AI, on what role it plays in our ecosystem. Hopefully, that answers your question. Thank you. That is very thorough. Next question is from Feng Qipeng at CITIC Securities. Please go ahead. Thank you, Madlyn, for taking my question. In terms of your core businesses, we are seeing very solid competitive advantages. Nevertheless, we do notice that competitors are playing a role of innovative product solutions and AI to help with marketing. As the need, demand, and technology continue to iterate, what are some of the competitive factors or variables that could help JD Health stand out?

Speaker #2: So that's my overview on how AI and what role it plays in our ecosystem. Hopefully, that answers your question. Thank you. That is very thorough.

Lincoln Kong: Thank you. That is very thorough.

Speaker #2: Next question is from Feng Qipeng at Citi. Please go ahead. Thank you, Madeleine, for taking my question. In terms of core businesses, we're seeing very solid competitive advantages.

Operator: Next question is from Feng Qipeng at CITIC Securities. Please go ahead.

Qingpu Yang: Thank you, Madlyn, for taking my question. In terms of your core businesses, we are seeing very solid competitive advantages. Nevertheless, we do notice that competitors are playing a role of innovative product solutions and AI to help with marketing. As the need, demand, and technology continue to iterate, what are some of the competitive factors or variables that could help JD Health stand out?

Speaker #2: Nevertheless, we do notice that competitors are playing a role with innovative product solutions and AI to help with marketing. So as need, demand, and technology continue to iterate, what are some of the competitive factors or variables that could help JD Health stand out?

Speaker #2: Can management share some color on that? Thank you for the question. Like I said, I mean, from what I see, JD Health or JD has a gigantic ecosystem.

Cao Dong: Can management share some color on that? Thank you for the question. Like I said, from what I see, JD Health or JD has a gigantic ecosystem. There is a self-operated platform, and then there is our platform. They have been working seamlessly, allowing technologies to be integrated into it to allow us to maintain control of the market, reducing the costs while improving the operational efficiency, and all of our efforts have been toward that goal. In terms of the competitive landscape, let me answer it with an example. We are now trying to build a JD Health app or application. We did not invest heavily in this application. However, around a month ago, back in that time, we launched a program called Happy Joyful Weight Losing, and it has become blockbuster. We have ranked the leaderboard of new app downloads thanks to the explosive users.

Qingpu Yang: Can management share some color on that?

Cao Dong: Thank you for the question. Like I said, from what I see, JD Health or JD has a gigantic ecosystem. There is a self-operated platform, and then there is our platform. They have been working seamlessly, allowing technologies to be integrated into it to allow us to maintain control of the market, reducing the costs while improving the operational efficiency, and all of our efforts have been toward that goal. In terms of the competitive landscape, let me answer it with an example. We are now trying to build a JD Health app or application. We did not invest heavily in this application. However, around a month ago, back in that time, we launched a program called Happy Joyful Weight Losing, and it has become blockbuster. We have ranked the leaderboard of new app downloads thanks to the explosive users.

Speaker #2: There's a self-operated platform, and then there's our platform. They have been working seamlessly, allowing technologies to be integrated into them to enable us to maintain control of the market, reduce costs, and improve operational efficiency.

Speaker #2: And all of our efforts have been toward that goal. In terms of the competitive landscape, let me answer this with an example.

Speaker #2: We are now trying to build a JD Health app, or application. We didn't invest heavily in this application. However, around a month ago, back in that time, we launched a program called Happy Joyful Lose Weight Losing.

Speaker #2: It has gained, it has become blockbusters. We have ranked the leaderboard of new app downloads, thanks to the explosive users. We want to say that we have many niche applications.

Cao Dong: We want to say that we have many niche applications. We want to tap into healthcare management and medical services. We use AI as the solution to build a platform, attracting more users to our platform to manage their health. So that is one of the examples. There are many apps that focus on losing weight or weight lasting, and we have been exploring functionality other than weighing yourself. We have been tapping into equipment like respiratory machine or scale. We have been exploring various means to offer a better user experience. We are leveraging AI to build a more visible progress for the user's weight loss journey. On that app, we introduced many other equipment as well as related medications. It has created a significant or greater user stickiness for users, and users are constantly staying on the app, browsing within the app. Is it a success already?

Speaker #2: We want to tap into healthcare management and medical services. We use AI as the solution, to build a platform attracting more users to our platform to manage their health.

Speaker #2: So that's one of the examples. There are many apps that focus on losing weight or weight loss. And we have been exploring functionalities other than weighing yourself.

Speaker #2: We have been tapping into equipment like respiratory machines, or scales, so we have been exploring various means to offer a better user experience.

Speaker #2: We are leveraging AI to build a more visible progress for the user's weight loss journey. And on that app, we introduced many other equipment as well as related medications. It has created significant or greater user stickiness, and users are constantly staying on the app, browsing within the app.

Speaker #2: So, is it a success already? I wouldn't say so, but it has proved that we have already provided a platform that integrates all of these functionalities onto one platform.

Cao Dong: I would not say, but it has proved that we have already provided a platform that integrates all of these functionalities onto one platform. So this case alone has showed very promising results for us. Therefore, for us, we are able to leverage the synergies of supply chain fulfillment and AI capabilities. Coupled with our self-operated platform, we are able to make a lot of progress, and this would help us execute our strategic goals, fine-tuning here and there along the way. So I would say we are very confident that we can make innovations in medical services rather than simply selling products. Hopefully this case could help you understand our strategies when it comes to AI investments. That concludes our Q&A session. Now let us move on to the closing remark. Thank you for your questions, everyone.

Speaker #2: So this case alone has shown very promising results for us. Therefore, we are able to leverage the synergies of supply chain fulfillment and AI capabilities.

Speaker #2: And, also, coupled with our self-operated platform, we are able to make a lot of progress. This will help us execute our strategic goals, with fine-tuning here and there along the way.

Speaker #2: So, I would say we are very confident that we can make innovations in medical services rather than simply selling products. Hopefully, this case could help you understand what our strategies are when it comes to AI investments.

Speaker #2: That concludes our Q&A session. Now, let's move on to the closing remarks. Thank you for your questions, everyone. Before we wrap up, I would like to share a few closing remarks.

Operator: That concludes our Q&A session. Now let us move on to the closing remark.

Cao Dong: Thank you for your questions, everyone.

Cao Dong: Before we wrap up, I would like to share a few closing remarks. We delivered solid results in the H1 2026. We continued to see strong momentum across our core pharmaceutical categories, with growth ahead of the industry. Our market position strengthened further and operating margin improved year-over-year for the ninth consecutive quarter. These achievements were driven by economic scale, steady gains in operating efficiency, stronger user mind share. Now, let me walk you through the three key areas that shaped our performance in the H1 and our long-term growth trajectory. First, JD Health's differentiated supply chain capabilities are its single greatest advantage in capturing the industry's long-term opportunities. The out-of-hospital pharmaceutical market is entering a long-term growth stage. Online penetration remains relatively low. Consumers are increasingly seeking more professional healthcare services, which are highly visible long-term industry opportunities.

Speaker #2: We delivered a solid result in the first half of 2026. We continue to see strong momentum across our core pharmaceutical categories, with growth ahead of the industry.

Speaker #2: Our market position strengthened further, and operating margin improved year over year for the ninth consecutive quarter. These achievements were driven by economic scale, steady gains in operating efficiency, and stronger user mind share.

Speaker #2: Now, let me walk you through the three key areas that shaped our performance in the first half and our long-term growth trajectory. First, JD Health's differentiated supply chain capabilities are its single greatest advantage in capturing the industry's long-term opportunities.

Speaker #2: The out-of-hospital pharmaceutical market is entering a long-term growth stage. Online penetration remains relatively low. Consumers are increasingly seeking more professional healthcare services, which are highly visible long-term industry opportunities.

Speaker #2: We have consistently built our capabilities around core pharmaceutical supply chain strengths, and through years of investment in strengthening our digital healthcare ecosystem, we have established clear, differentiated advantages in supply chain reliability, comprehensive and professional services, fulfillment efficiency, and compliance.

Cao Dong: We have consistently built our capabilities around core pharmaceutical supply chain strengths. Through years of investment in strengthening our digital healthcare ecosystem, we have established clear differentiated advantages in supply chain reliability, comprehensive and professional services, fulfillment efficiency, and compliance. This foundation will allow us to further strengthen user mindshare and widen our competitive edge, setting us up to capitalize on the industry's long-term growth opportunities from the strongest possible position. Next, we see significant long-term growth opportunities emerging from healthcare services and AI-powered healthcare. Building on our existing capabilities, we are expanding our healthcare services and offline services offerings while applying AI across healthcare and various other business scenarios to create value for both consumers and business partners. These efforts go beyond extending our supply chain capabilities. They also create new avenues for long-term growth.

Speaker #2: This foundation will allow us to further strengthen user mind share and widen our competitive edge, setting us up to capitalize on the industry's long-term growth opportunities from the strongest possible position.

Speaker #2: Next, we see significant long-term growth opportunities emerging from healthcare services and AI-powered healthcare, building on our existing capabilities. We are expanding our healthcare services and offline service offerings.

Speaker #2: We are applying AI across healthcare and various other business scenarios to create value for both consumers and business owners. These efforts go beyond extending our supply chain capabilities.

Speaker #2: They also create a new avenue for long-term growth. Finally, we have clear pathways for sustained profitability improvement and cost efficiencies from economies of scale and a stronger supply chain.

Cao Dong: Finally, we have clear pathways for sustained profitability improvement, cost efficiencies from economies of scale and a stronger supply chain, a more favorable business profile driven by the growth of AI-powered digital services, and continued improvements in operating efficiency. With these in place, we are confident in achieving a high single-digit operating margin over the long term. Going forward, we will remain focused on our long-term strategy and execute with discipline. We will further strengthen our supply chain capabilities, enhance fulfillment efficiency, refine our service capabilities, and accelerate efficient AI adoption across our business to create greater value. We believe that staying committed to creating long-term value for our users and the industry will automatically translate into sustainable returns for our shareholders. Thank you all for your continued interest and support for JD Health. Thank you for your questions. That concludes today's conference call.

Speaker #2: A more favorable business profile, driven by the growth of AI-powered digital services and continued improvements in operating efficiency. With these in place, we're confident in achieving a high single-digit operating margin over the long term.

Speaker #2: Going forward, we will remain focused on our long-term strategy and execute with discipline. We'll further strengthen our supply chain capabilities, enhance fulfillment efficiency, refine our service capabilities, and accelerate efficient AI adoption across our business to create greater value.

Speaker #2: We believe that staying committed to creating long-term value for our users and industry will ultimately translate into sustainable returns for our shareholders. Thank you all for your continued interest and support of JD Health.

Operator: Thank you for your questions. That concludes today's conference call. If you have further questions, please contact our IR team. Thank you.

Operator: If you have further questions, please contact our IR team. Thank you.

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Q2 2026 JD Health International Inc Earnings Call

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