ZKH Group (ZKH) Q1 2026 earnings review
Growth Accelerates, Earnings Turn Positive
ZKH Group has definitively broken its losing streak. After returning to growth late last year, Q1 26 saw GMV growth accelerate to 12.9% YoY—the highest in recent quarters. More importantly, this top-line recovery translated straight to the bottom line. Despite Q1 being a seasonally soft quarter, ZKH achieved non-GAAP Adjusted Net Profitability (1.7M RMB) for the first time in a first quarter, reversing a 50.2M RMB loss from a year ago. The turnaround is driven by aggressive cost discipline—specifically a 17% YoY drop in fulfillment expenses—and the return of double-digit spending from central SOEs. While a slight compression in gross margin and 3P take rates warrants monitoring, the sheer force of ZKH's operating leverage makes this a fundamentally sound quarter.
🐂 Bull Case
The company's heavy infrastructure investments are finally paying off. Fulfillment expenses plummeted 16.8% YoY despite a 12.9% jump in GMV, driving Opex as a percentage of revenue down to 17.8% from 21.3% a year ago.
The macro headwinds are subsiding. State-Owned Enterprises (SOEs) have returned to double-digit GMV growth, while the higher-margin SME segment grew over 20% YoY, proving demand is durable across customer tiers.
🐻 Bear Case
Consolidated gross margin slipped to 16.7% from 17.2% YoY. If volume gains are coming at the expense of pricing power, the path to sustained, high-margin profitability could be longer than anticipated.
The marketplace take rate compressed significantly to 12.9% from 14.0% a year ago, raising questions about ZKH's pricing power with third-party vendors.
⚖️ Verdict: 🟢
Bullish. ZKH successfully navigated a brutal strategic optimization phase and has emerged leaner. Crossing the threshold into non-GAAP profitability during the weakest quarter of the year proves their AI and fulfillment efficiency initiatives are working.
Key Themes
Fulfillment Efficiency Driving the Bottom Line
ZKH's fulfillment network is officially a profit engine. Fulfillment expenses collapsed 16.8% YoY to 77.6M RMB, accelerating a multi-quarter trend of cost reduction. This was achieved through a 36% YoY improvement in warehouse utilization and the expansion of a self-operated delivery fleet. Fulfillment costs now represent just 3.7% of net revenues, down from 4.8% a year ago.
SME and GBB Platform Accelerating
ZKH's dual-platform strategy is working. The GBB platform, which caters to smaller businesses, saw GMV surge 30.6% YoY to 268.8M RMB. Furthermore, total GMV from SME customers grew over 20%. This mix shift is crucial as SME cohorts historically provide better margin profiles than massive, heavily-negotiated SOE contracts.
AI Directly Generating Sales
ZKH is moving beyond back-office AI. The company upgraded its proprietary large language model, 'Hangjia Linglong', and launched 'Hangjia Huiyan', the industry's first intelligent visual search engine for industrial products. More tangibly, AI now handles 30% of product matching and search tasks, and the 'ProductRecom Agent'—which generated 200M RMB in sales in FY25—is scaling rapidly, directly lifting conversion rates.
Marketplace Take Rate Compression
A clear contradiction to the positive margin story: The take rate for the Marketplace (3P) model decelerated sharply, falling 111.6 basis points to 12.9% from 14.0% a year ago. While 3P GMV grew 18.3%, Net Service Revenues only grew 8.9%. If ZKH is lowering take rates to attract or retain vendors, the marketplace model's profit contribution will lag its volume growth.
Cash Burn Persists in Q1
Despite achieving non-GAAP net profit, ZKH's Operating Cash Flow remains negative at -34.0M RMB. While this is a massive improvement from the -97.1M RMB recorded in 25Q1, accelerating GMV growth will demand increased working capital. Inventories and accounts receivable need careful management to prevent a liquidity squeeze.
Other Revenues Continuing to Decline
Other Revenues (warehousing, logistics, and equipment lease services) fell 13.2% YoY to 10.9M RMB. This continues a multi-quarter trend of deceleration in this segment. While a small piece of the pie (under 1% of total revenue), it indicates a failure to successfully monetize ancillary supply chain services to third parties.
Other KPIs
Accelerating. Private-label GMV grew over 20% YoY, increasing its share of total GMV to 9.7% from 8.3% in FY25. The launch of 400 new products in Q1 highlights management's commitment to reaching their long-term target of 30% GMV share, which is essential for structural gross margin expansion.
Accelerating. Customer count grew 11.0% YoY, adding over 6,600 new clients compared to the prior year. This proves the strategic optimization phase—where low-quality customers were intentionally churned—is firmly in the rearview mirror.
Guidance
Accelerating. ZKH printed a -3.3% decline in GMV for the full year 2025. Guiding for double digits signifies that the 12.9% momentum seen in Q1 is expected to hold throughout the year, driven by SOE recovery and SME expansion.
Reversing. Following a non-GAAP adjusted net loss of 85.9M RMB in FY25, management confirmed confidence in achieving full-year profitability. Landing a 1.7M RMB profit in the seasonally weak Q1 de-risks this target significantly.
Key Questions
Marketplace Take Rate Decline
The 3P marketplace take rate dropped over 110 basis points YoY to 12.9%. Was this due to promotional incentives, a shift in vendor mix, or competitive pressure? What is the normalized take rate we should model for FY26?
Gross Margin Contraction
Consolidated gross margin compressed by 41.2 basis points YoY. Given that high-margin private-label GMV grew 20% and SME business was strong, what specific product categories dragged the overall margin down?
U.S. Expansion Cash Burn
You noted further optimization of product and fulfillment in the U.S. market. Is the international segment expected to be a drag on the goal of full-year 2026 profitability, or is it tracking toward breakeven?