JD.com (JD Quick QuoteJD - Free Report) , the supply chain-based e-commerce giant in China, reported better-than-expected first-quarter 2025 results. Its revenues in the quarter increased 15.8% year over year to RMB 301.1 billion ($41.5 billion), which beat the Zacks Consensus Estimate by 3.2%. The company reported non-GAAP diluted net income per share of RMB 8.41 ($1.16), which rose 48.8% year over year. The figure beat the consensus estimate by 10.48%. 

The solid performance can be attributed to improving consumer sentiment and continued enhancements in JD’s supply chain capabilities and user experience. The company’s strategic involvement in AI and robotics positions it for long-term growth. 

However, despite the long-term growth prospects, JD is facing several near-term headwinds, which should caution investors. 

Let’s take a closer look at the factors affecting the company to understand why investors should consider avoiding the stock till clearer recovery indicators emerge.

JD Faces Pressures in the New Business Segment

JD’s new business segment posted a non-GAAP operating loss of RMB 1.3 billion in the first quarter of 2025, despite an 18% year-over-year revenue increase. The loss was mainly driven by the aggressive expansion of its food delivery business, which is still in its early stages and failed to make a meaningful contribution to financial performance during the quarter.

The food delivery initiative, although showing user traction, remains a drag on profitability. With operations only beginning to scale at the end of the first quarter, JD incurred significant costs without a corresponding revenue impact. The company remains in the early phase of developing its food delivery operations, with continued system improvements required to enhance both user experience and operational efficiency.

JD’s Earnings Estimate Revisions Show Downward Trend

The Zacks Consensus Estimate for 2025 earnings is pegged at $4.59 per share, which has been revised downward by 3.16% over the past 30 days, indicating 7.75% year-over-year growth. 

The consensus mark for 2025 revenues is pegged at $172.07 billion, suggesting 7.04% year-over-year growth.

JD.com’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 25.23%.

JD Operates in an Intensely Competitive Market

The online retail industry in China is intensely competitive. JD.com’s current competitors in China include Alibaba (BABA Quick QuoteBABA - Free Report) and PDD Holdings Inc. Sponsored ADR (PDD Quick QuotePDD - Free Report) . Globally, JD.com faces intense competition from the e-commerce behemoth Amazon (AMZN Quick QuoteAMZN - Free Report) . 

Alibaba commands roughly 80% of China’s e-commerce market, while PDD Holdings Inc. attracts consumers with aggressive discounts and group-buying offers. Amazon remains highly competitive in retail through its unbeatable pricing, wide selection, and convenience.

Tough competition can hurt JD by reducing its profit margins, shrinking its market share, weakening its brand, or even causing big losses. When setting prices, the company has to look at what competitors are charging for similar products. If rivals lower their prices or offer extra perks, the company may have to do the same to stay competitive. Otherwise, it risks losing customers, which could hurt its business and financial performance.

Some of JD’s current competitors have longer operating histories, greater brand recognition, better supplier relationships, larger customer bases and higher penetration in the market, which poses a major threat to the company.

JD Stock Price Performance and Valuation

JD shares have returned 7.5% in the year-to-date period, outperforming the Zacks Retail-Wholesale sector and the Zacks Internet - Commerce industry’s growth of 3.2% and 4.9%, respectively. The stock has also outperformed the S&P 500 index’s decline of 0.5% in the same time frame.

However, JD has underperformed its industry peers, BABA and PDD. Shares of BABA and PDD have gained 55.3% and 23.2%, respectively, in the year-to-date period. Shares of AMZN have lost 3.6% in the same time frame. 

JD.com’s YTD Price Return Performance

Image Source: Zacks Investment Research

From a valuation perspective, JD currently trades at a forward 12-month P/E ratio of 7.94X, which is well below the Zacks Internet - Commerce industry’s 22.94X. This suggests that investors may be paying a lower price relative to the company's expected earnings growth.

JD’s P/E F12M Ratio Depicts Discounted Valuation

Image Source: Zacks Investment Research

Conclusion

JD.com delivered a strong first-quarter performance, but near-term prospects seem murky. Losses in its new business segment, particularly food delivery, and aggressive investments in AI, automation, and logistics are weighing on near-term profitability. The company’s latest move, launching an international all-cargo air route between Wuhu, China and Hanoi, Vietnam, adds to JD’s capital expenditure without offering near-term contribution. With earnings estimates trending downward and intensifying market competition, investors should consider exiting positions. Until clearer signs of recovery emerge, JD.com is best avoided.

JD currently carries a Zacks Rank #4 (Sell). 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.