JD.com's comprehensive first-quarter 2026 results exceeded market expectations, confirming a substantial improvement in its profit structure. JPMorgan Chase maintained its "Overweight" rating on the stock, stating these results validate its previous non-consensus view—that the market consensus has not fully reflected JD.com's profit upside potential. JD.com's adjusted net profit for Q1 reached 7.4 billion yuan, surpassing JPMorgan's forecast by 24% and the market consensus by 38%. According to the Wind trading desk, Yao Cheng, Head of China Equity Research at JPMorgan, noted in a May 12th earnings flash review that these results established three key conditions: the sustainability of retail profit margins, the reliability of the path to narrowing losses in new businesses, and the accelerated growth in the take rate for high-margin services. From a market impact perspective, JPMorgan expects these results to drive double-digit upgrades to the market consensus for JD.com's revenue and profit over the coming quarters. The stock's current price implies a forward 2027 price-to-earnings (P/E) ratio of only 8x. JPMorgan believes this valuation does not yet reflect the aforementioned structural improvement trend and has factored valuation upgrades into its outlook. **Profit Significantly Exceeds Expectations; Retail Margin Hits Record High** JD.com's total Q1 revenue was 315.7 billion yuan, a 5% year-over-year increase, exceeding JPMorgan's and the market consensus forecasts by 2% and 1%, respectively. Adjusted operating profit was 5.6 billion yuan, 177% higher than JPMorgan's forecast. The adjusted operating margin was 1.8%, far exceeding the 0.7% and 0.8% consensus estimates from JPMorgan and Bloomberg. Regarding profit structure, JD Retail's revenue grew only 1.8% year-over-year, but its operating margin expanded to 5.6%. This represents a 0.7 percentage point increase from the same period last year and is 0.4 percentage points higher than JPMorgan's forecast, marking a historical high. JPMorgan noted that the margin outperformance stemmed from two main factors: improved profitability in the retail business and a cooling of competition in China's food delivery market, leading to reduced subsidy spending. Adjusted diluted earnings per ADS were 5.12 yuan, exceeding JPMorgan's and Bloomberg's consensus estimates by 26% and 44%, respectively. GAAP net profit was 5.8 billion yuan, a 52% year-over-year increase. **Service Revenue Accelerates; Food Delivery Losses Narrow Significantly Sequentially** The improvement in revenue structure was another key highlight of the quarter's performance. Service revenue growth accelerated to 20.6% year-over-year, benefiting from a structural shift toward higher-margin platform and commission-based businesses. This structural change helps drive continuous expansion of overall profit margins against a backdrop of relatively moderate revenue growth. Regarding new businesses, management explicitly confirmed that food delivery losses narrowed significantly quarter-over-quarter. JPMorgan views this trend as evidence that the most aggressive investment phase for the food delivery business has passed. The report indicates that, compared to loss reduction in instant grocery, the advancement of international business in 2026 is expected to be more cautious. This combination is seen as conducive to the continuous improvement of the group's overall profitability. **Cash Flow Continues to Improve; Valuation Still Has Significant Upside** Cash flow also showed marked improvement. Free cash outflow narrowed significantly to 6.5 billion yuan this quarter from 21.6 billion yuan in Q1 2025. On valuation, JPMorgan maintains its target price for JD.com's US-listed shares at $38, corresponding to a 9x forward 2027 P/E ratio (three-year average) or an 11x forward 2026 P/E ratio. In comparison, most Chinese e-commerce peers currently trade below 10x. JPMorgan points out that JD.com's current 8x forward 2027 P/E ratio implies the market is underpricing the profit improvement trend. It believes there is upside risk to both the market consensus and its own profit forecasts, indicating room for share price appreciation.