Earnings Call Transcript - JD Q3 2025

Sean Shibiao Zhang, Head of Investor Relations

Thank you. Good day, everyone. Welcome to JD.com's Third Quarter 2025 Earnings Conference Call. With us today are CEO of JD.com, Ms. Sandy Xu; and CFO, Mr. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian 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 the 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. Sandy, please?

Xu Ran, CEO

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 revenue continue to accelerate sequentially. Both are becoming our important growth drivers. Non-GAAP net profit came in at RMB 5.8 billion in the quarter with the core retail business margin continued 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 efficiencies and improve unit economics. Overall, our business is 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 underpin these results, I would like to point out three most notable highlights for this quarter, which I believe are 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 Jingxi. 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 Plus 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 RMB 251 billion. 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 the marketing revenues continue 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 cost for brands and strive to secure the best prices for our customers, thanks to our supply chain capabilities. Although the high base effect is expected to linger in 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 ultimately translates to better user experience and stronger user market 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 a 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 3P merchants, along with AI-powered ad tools and improved traffic allocation efficiency, all have contributed to this 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 user experience. This encouraging progress is achieved through our enriched supplies, increased operating efficiency, disciplined investment in a competitive market, and our efforts to expand food delivery 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 Jingxi categories remained the biggest beneficiaries of this trend. Going forward, we will focus on further growing the food delivery business scale, user experience optimization, and unlocking stronger synergies with retail, logistics, and other businesses across our ecosystem. Other new businesses, including both Jingxi and international business, are progressing well as planned. Jingxi further penetrated into the lower-tier markets and grew its merchant and user base. Our international retail business is gradually establishing capabilities in the U.K. and from 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 TaTaTa, an all-purpose digital human assistant app, and JoyInside, an AI agent for robots, toys, and devices, among others. Second, we introduced industry-specific AI applications across four sectors of retail, health care, 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. JoyStreamer has served over 40,000 brands so far, with significantly lower cost and better sales performance compared to real human live streaming costs. In addition, we provide 24/7 nonstop AI customer service which handled over 4.2 billion inquiries during our 11.11 Grand 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 road map. 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, Jingxi, and our international retail business are on track for healthy development, both financially and operationally. Taken together, our businesses are operating in synergy, bolstering 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.

Ian Su Shan, CFO

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 MBS 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 of 2023. In terms of profit, 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 investments scale. Overall, our business is moving in the right direction, and we are in 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 costs, 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 merchandising, both supermarkets and fashion categories saw growth rates surpassing mid-teens in Q3. The results were mainly driven by our continuous efforts to enhance our operational capabilities, build 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 in user engagement 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 grew 35% year-on-year in Q3, mainly driven by the incremental delivery revenues from the 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. This 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 costs by leveraging our scale effect and supply chain advantages. In addition, in Q3, JD Retail's non-GAAP operating income was up 28% year-on-year to RMB 14.8 billion, and operating margin was up 76 basis points 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 the food delivery business. In terms of profit, 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 the efficiency of the entire logistics process. These efforts aim to boost JD Logistics' 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, Jingxi, 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 continues 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're 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 user experience 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 points. 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 the non-GAAP net margin was 1.9%, both down year-on-year. This near-term headwind in profit mainly reflects our investments in food delivery. Our last 12 months free cash flow as of the end of Q3 was RMB 13 billion compared to RMB 34 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 equivalents, restricted cash, and short-term investments totaled RMB 211 billion. In summary, we're encouraged by the solid progress in both core retail and new business. Retail has built a growth mix 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 businesses, including lower-tier market and international business are also making solid steps towards 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.

Sean Shibiao Zhang, Head of Investor Relations

Thank you, Sandy and Ian. For the Q&A session, you're welcome to ask questions in English or Chinese, and our management will answer the questions in Chinese, providing English translation for convenience purposes only. In case of any discrepancy, please refer to our management statement in the original language. Operator, we'll open the call for a Q&A session now.

Operator, Operator

Your first question comes from Kenneth Fong.

Kenneth Fong, Analyst

My first question is about government trading subsidies. As we move into the fourth quarter and the year-on-year comparison base increases, can management provide an outlook for growth in electronics and home appliances at JD Retail? Also, with trading subsidies diminishing and a slowdown in year-on-year growth, how should we assess the impact on margins for JD Retail? My second question is regarding overseas development. Following the recent acquisition of a company abroad and the start of operations for JD Joy, can management elaborate on this overseas strategy, including the scale and pace of investments?

Unknown Executive, Unknown Title

Thanks for your question, Kenny. Yes, since last year, the trading program has stimulated consumer demand and contributed to the sales of home appliances and PCs, creating a higher base for the industry that aligns with market expectations. While the trading program has led to some short-term fluctuations in consumer demand, its more significant effect is on driving industry upgrades and promoting innovative, intelligent, and eco-friendly products, ultimately resulting in high-quality growth for the industry.

Xu Ran, CEO

Since the trading program, JD has actively supported the implementation of the policy. We have further enhanced our market share and supply chain capability in the related categories, especially in our 1P model. The continuous enhancement of our core advantage differentiates JD and builds our long-term growth foundation. We will continue to leverage our strength in product price and service with the goal of further strengthening user mind share and consolidating and expanding our market share. We will focus on a few areas.

Sean Shibiao Zhang, Head of Investor Relations

This area includes product innovation, where we will collaborate with brands to launch more customized products, driving product upgrades and innovation. For price optimization, we will leverage our scale advantage and supply chain capabilities to further reduce costs, offering users more competitive prices. In terms of service, we are providing omnichannel consumer service to create a seamless online and offline shopping experience for our customers. For example, we have been strengthening our offline presence in home appliance and 3C categories, focusing on large stores such as JD Mall, JD Home Appliance, and city flagship stores in high-tier cities, as well as smaller stores in lower-tier markets. Additionally, we offer differentiated services like integrated delivery and installation to enhance user experience and provide more efficient service. Through these efforts, we will further consolidate our market share. As of Q3, we have established over 20 JD Malls nationwide, and the number of JD Appliance City flagship stores has surpassed 100.

Xu Ran, CEO

In terms of profit margin, we will continue to offer users the best value for their money to enhance their experience and brand loyalty. Additionally, whether during the trading program or in a normalized phase moving forward, our team will utilize our supply chain capabilities and improve collaboration with brands.

Sean Shibiao Zhang, Head of Investor Relations

So overall, we are confident in our user mind share and market share in the home appliance and 3C categories. JD will continue to strengthen our capabilities and strategic positioning, working 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, both our user base and shopping frequency have been on a stronger growth trend during JD's 11.11 Grand Promotion. The number of our shopping customers increased by 40% year-on-year. This momentum will support our healthy growth next year and give us more confidence in the long term.

Xu Ran, CEO

Regarding your second question on JD's international business. From a strategic perspective, international expansion has always been a key long-term goal for JD. As the largest retailer in China, we strive to gradually establish a highly efficient global retail network to deliver JD's premium shopping experience to consumers around the world. We understand that the international market is vast; for instance, Europe is the second-largest consumer electronics market globally, following China, and there are still many areas to enhance user experience. We also plan to capitalize on the opportunity of the Chinese supply chain expanding globally, utilizing our supply chain advantages to better assist Chinese brands with their international growth. In terms of progress, Joybuy, our European online retail business, is currently in the test phase in countries including the U.K., France, Germany, and the Netherlands. This is a significant step in JD's international strategy. We will continue to enhance user experience and build our key capabilities by expanding product offerings and collaborating with premium global brands, improving logistics to enhance efficiency and stability in warehousing and delivery, and investing in R&D to optimize product functionality and improve the shopping experience. We invite investor analysts in Europe to try our Joybuy app and share their feedback. Regarding CECONOMY, the transaction is still pending regulatory approval, and we will provide further updates when appropriate. From an investment perspective, this is a gradual process. We will continue to advance our international expansion strategy steadily while maintaining careful financial discipline. We will focus on investment efficiency and make adjustments as necessary to achieve healthy and sustainable growth. Overall, the scale of the investment in our international business will not be significant for JD.com, and we will manage the pace and scale of investment cautiously.

Operator, Operator

Your next question comes from Ronald Keung with Goldman Sachs.

Ronald Keung, Analyst

The first question is about food delivery. How long will JD commit to investing during this loss-making phase for customer acquisition? Additionally, what advancements have been made in improving economics, commissions, and business models like 7Fresh and coffee across the 7Fresh brands? The second question pertains to general merchandise, where we are observing strong growth in third-party sales. How do we plan to enhance our competitive advantage in third-party categories such as supermarkets, health, and apparel in terms of speed, selection, quality, and price?

Xu Ran, CEO

Thank you, Ronald, for your question. Both food delivery and on-demand retail are long-term strategies for JD. We aim to drive healthy and sustainable growth in the business. We have been optimizing operational efficiency and improving user experience. In Q3, we are staying rational despite the intensified competition in the industry. Our food delivery business is currently in its first stage of development, with the goal of establishing better user mind share and market share in the quality food delivery sector. We are committed to providing a high-quality food delivery service to our existing premium users while also attracting new users. As you know, we excel in supply chain management, and we will continue to enhance our supply chain efforts, including through our innovative 7Fresh teaching model to offer differentiated experiences and services to our users. In the third quarter, JD Food Delivery achieved a strong growth trend, with its GMV experiencing double-digit growth compared to the previous quarter along with an increase in order volume. We also saw a healthier mix of orders, with meal orders steadily rising and making up a large portion of our total orders. Concurrently, the average price per order increased from Q2 due to increased competition, which is noteworthy. Even as we expanded our overall investment in food delivery during Q3, our JD Food Delivery business reduced its operating losses sequentially, aided by enhancements in user experience. The revenue contribution from food delivery remains limited as we are currently operating a commission-free policy for merchants and have only recently begun to generate minor advertising revenues. Nevertheless, our team has made significant strides in boosting operational efficiency, including enhancing our supply offerings, as the number of quality restaurant merchants grew throughout the quarter. We also improved our subsidy efficiency by refining operations and tailoring subsidy strategies to various regions, user groups, and order types. Moreover, as we continue to upgrade our system capabilities, we've observed improved operating efficiency. We launched our new 7Fresh Kitchen business model in July, which addresses safety concerns through supply chain innovation. Our goal is to ensure consumers can enjoy their meals with peace of mind while helping quality restaurants improve profitability. Since its launch, 7Fresh Kitchen has been well received by our customers, leading to a rapid increase in order volume. It has also contributed to sales and order growth for other quality restaurants within a 3-kilometer radius. By the end of this year, more semi-fresh kitchens will be visible in the Beijing region. Looking ahead, we will drive our strategic progress with a long-term perspective and focus on long-term return on investment. Our goal is to create a sustainable business that promotes healthy order growth while gradually increasing scale and improving operations with a better user experience. Ultimately, JD Food Delivery should become a self-sustaining business. Additionally, food delivery is closely integrated into JD's overall ecosystem. We see significant potential for synergies in user engagement, supply, and fulfillment within our ecosystem. Our business functions collaboratively rather than simply adding to or replacing elements. We expect JD user acquisition costs to decrease in the long term. At the group level, we are dedicated to achieving sustainable growth while ensuring profitability and sufficient cash flow. Regarding your question about our general merchandise category, it has sustained double-digit growth for four consecutive quarters. Key categories, particularly supermarket, health, fashion, and home goods, have all experienced very strong growth. We see significant growth potential in general merchandise, especially in supermarket and fashion, as our users have considerable unmet demand. We have a clear growth strategy for each of these key categories. First, on supermarket categories, we will concentrate on enhancing user awareness and penetration through promotions like Black Friday and Super 18. Our aim is to strengthen user recognition of our supermarket offerings. This category will leverage our rapid user growth on the platform to achieve greater penetration and conversions. We are optimizing costs and enhancing operational efficiencies via our supply chain capabilities, allowing us to offer more competitive prices, which reinforces the economic advantages of our first-party model. The supermarket category has made significant progress in this area and is developing solid competitiveness both online and offline. Additionally, we will partner with brands to further refine our operations and establish categories with strong recognition and growth potential, such as liquor, baby and mom products, and household cleaning items, all of which have already garnered strong user awareness. We anticipate making advancements in additional 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 this sector as we enhance operations and user awareness. General merchandise is an important pillar of JD's growth metrics and will support our long-term sustainable growth. We can take the next question.

Operator, Operator

Your next question comes from Alicia Yap with Citigroup.

Alicia Yap, Analyst

Can management share the synergies in the general merchandise category that benefit from the food delivery traffic? Most of your food delivery users come from loyal JD users. What is the retention rate of newly acquired users through food delivery? Can you quantify and provide details on the cohort of new food delivery users who become active JD Core retail users? Additionally, can management update us on your latest AI strategy and investment? Can you elaborate on how AI has assisted JD's core business and the anticipated financial impact?

Ian Su Shan, CFO

Thank you, Alicia, for your questions. I will address the first one. As JD Food Delivery continues to grow, it is also creating stronger connections with JD Retail. First, regarding user growth and engagement. In the third quarter, the daily active users of the JD app showed significant growth, outpacing the industry. Our quarterly active customers and the frequency of their shopping both exceeded 40% year-on-year growth during the quarter. By consistently offering quality food delivery, we have maintained a high user retention rate for JD Food Delivery, which in turn has increased overall user engagement and shopping frequency. While we cater to our loyal existing users, our food delivery service is also attracting new users to our platform. In October, our annual active customer count surpassed 700 million, indicating our expanding user base and enhanced user loyalty. We will also be speeding up the implementation and optimizing our user conversion strategies and tools tailored to food delivery users' preferences. We have been providing more targeted retail product selections and recommendations, which enhances user conversion. The conversion rate for new users gained through JD Food Delivery has been steadily improving each month, and for the earliest group of these users, their cohort conversion reached nearly 50% in the third quarter.

Alicia Yap, Analyst

On the cross-sell side, we anticipate a stronger trend of cross-category purchases among food delivery users, especially in our general merchandise category, which includes supermarket products and live services. We believe that food delivery will generate new growth momentum for our general merchandise category by attracting new users and increasing shopping frequency among existing ones. Furthermore, 3D food delivery has also accelerated the development of our on-demand retail business. We plan to establish a dedicated team focused on this area. Moving forward, we will work to enhance the synergies between food delivery and our core retail business regarding user momentum, cross-category purchases, and marketing. Additionally, we will explore more synergies within our wider business ecosystem, promoting healthy growth in user base expansion, revenue, and operational efficiency.

Xu Ran, CEO

I'll answer the second question. We are in a new era with many opportunities in AI and significant value in business model reform. JD has established a strong AI capability framework that includes infrastructure models, platforms, application scenarios, and products. In the next three years, we will invest continuously to develop a comprehensive AI ecosystem across various industries. At our JD Discovery Conference in September, we presented our AI strategy roadmap and launched key AI products, including our JD AI TaTaTa, a versatile digital human assistant, and JoyInside, an AI agent for robots, toys, and devices, among others. In terms of application, JD differentiates itself with a wide range of application scenarios, including retail, logistics, healthcare, and other industry sectors. For retail, we provide merchants with over 50 AI tools, such as systems and agents for advertising allocation, which enhance efficiency and lower costs in areas like content generation, marketing, supply chain management, and customer service. We have also transformed the e-commerce experience in the AI era by launching a smart search and recommendation feature that utilizes natural language interaction, allowing for a better understanding of user needs and significantly improving shopping efficiency and personalization. In logistics, our robots are deployed in more than 20 provinces in China and over 10 countries worldwide, managing the entire logistics chain from warehousing to distribution. Looking forward, the continued deployment of logistics robots, autonomous vehicles, and drones will further decrease logistics costs, increase efficiency for our business partners, and continually enhance the shopping experience for consumers. Now, operator, we can take the last question.

Operator, Operator

Your last question comes from Thomas Chong at Jefferies.

Thomas Chong, Analyst

My first question is about our ecosystem development, specifically regarding the contribution of third-party merchants and the expectations for the upcoming quarters. My second question pertains to the outlook for our profitability and margins over the next few years.

Ian Su Shan, CFO

My first question is about our ecosystem development, including the number of third-party merchants' 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 the next few years.

Xu Ran, CEO

Thank you, Thomas. We've made solid progress in developing our platform ecosystem with a set of indicators growing rapidly. In Q3, our active merchant number increased by over 200% year-on-year. We've onboarded more top-tier merchants as well as those from industrial sectors, enhancing our product offerings for users. Additionally, our food delivery business has attracted many quality restaurants to our merchant base, and we've received positive feedback from users. In Q3, the number of users shopping our 3P offerings grew by over 50% year-on-year, outpacing the overall user growth, as reflected in our financial results. Our commission and advertising revenues have been on a strong growth trajectory, with growth rates accelerating to 24% year-on-year in Q3, marking the highest increase since Q2 2022. We believe our platform ecosystem holds significant potential. We will specifically explore industrial belts to onboard more merchants, and continue to expand our food delivery merchant base to enhance local supplies for our third-party ecosystem. Additionally, we aim to strengthen our platform infrastructure and offer more technological tools to merchants, helping them improve operational efficiency. We will also optimize merchant operation rules and traffic allocation to create a clear growth path and a fair ecosystem for our third-party merchants. Furthermore, we will work on increasing user awareness of our third-party offerings. For categories driven by our third-party platform, such as fashion, we have observed that users are increasingly associating shopping for clothing with JD.com. We are dedicated to developing our platform ecosystem, achieving mutually beneficial outcomes with our third-party merchants, and better serving our users. The platform ecosystem business will be a key driver of both revenue growth and profitability in the long term. For your second question, in Q3, JD Retail continued to experience steady profit growth. This reinforces our confidence in the long-term margin trajectory of retail. The main factors contributing to this include the healthy development of our platform ecosystem, which will drive growth in our commission and advertising revenues, aiding margin expansion. Additionally, as we enhance our supply chain advantages and the scale of our core retail business, we are optimistic about further lowering costs and improving operating efficiency, which will enhance margin performance. Notably, JD Retail's gross margin has been expanding year-on-year for 14 consecutive quarters. The shift in our category mix will also affect margin performance. Currently, most of our categories and brands are showing improved operating efficiency and margin performance. Particularly, our supermarket category has developed stronger procurement capabilities and unique product offerings. We see significant potential to further increase supermarket margins in the future. Furthermore, as we continue to optimize the product mix for electronics and home appliances, we see opportunities to boost margins in these categories over the long term. Regarding investments in our new businesses, we will focus on supply chain capabilities, making investments in areas such as food delivery, international, and Jingxi businesses. As we enhance our supply, performance, and services while expanding our coverage in categories, customers, and regions, we anticipate more growth potential in our businesses. As these new initiatives create deeper synergies with our existing operations, we expect improvements in operating efficiency and profitability across our broader ecosystem. Lastly, our long-term target for a high single-digit margin remains unchanged.

Operator, Operator

We are now approaching the end of the conference call. I will turn the call over to JD.com's Sean Zhang for closing remarks.

Sean Shibiao Zhang, Head of Investor Relations

Thank you for joining us on the call today, and thanks for your questions. 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, Operator

Thank you for joining today's conference call. This concludes the presentation. You may now disconnect. Have a good day.