ZKH Group Earnings Call Signals Turning Point

ZKH Group Limited Sponsored ADR ((ZKH)) has held its Q4 earnings call. Read on for the main highlights of the call.

ZKH Group Limited’s latest earnings call delivered a cautiously upbeat tone, with management framing Q4 2025 as a clear inflection point. Executives highlighted a return to quarterly profitability, accelerating growth metrics, and strong cash generation, while acknowledging full‑year GMV decline, margin pressure, and a still‑negative bottom line that leaves work to do in 2026.

Q4 Profitability Marks a Turning Point

ZKH swung to an adjusted net profit of about RMB 14.8–14.9 million in Q4 2025, reversing a non‑GAAP loss of RMB 15 million a year earlier. Non‑GAAP EBITDA turned positive at RMB 19.7 million, and the company achieved half‑year breakeven for the first time as Q4 operating loss narrowed 13.4% year over year.

Top-Line Growth Reaccelerates in Q4

Growth re‑emerged in the second half, with Q4 GMV up 8.5% year over year and 11.3% sequentially to RMB 2.92 billion. Total revenues climbed 7.9% year over year and 9.8% quarter on quarter to RMB 2.56 billion, signaling a tangible demand recovery after a weaker first half of 2025.

Rapid Customer Expansion and Stronger Mix

The transacting customer base surged to around 74,000, up roughly 60% year over year, representing the fastest quarterly increase in recent years. Coverage now includes over 680 of China’s top 1,000 manufacturers, while SME GMV grew more than 20% in Q4 and both SME and key accounts posted year‑over‑year GMV gains.

Broader Product Assortment and Private-Label Momentum

Platform assortment expanded to 23 million SKUs, a 33% year‑over‑year increase that deepens ZKH’s catalog breadth. Private‑label GMV rose 21% versus last year, lifting its share of total GMV to 8.3% from 6.7%, with 349 new private‑label SKUs launched in Q4 and management emphasizing this as a key long‑term growth and margin lever.

Scaling Supply-Side and Fulfillment Network

On the supply side, ZKH ended the year with nearly 20,000 supplier partnerships and a nationwide logistics footprint of 30 distribution centers and over 100 transit warehouses. Its self‑operated fleet now exceeds 200 delivery vehicles, while international operations span 17 countries with roughly 50% sequential GMV growth and a 20% rise in international customers.

Efficiency Gains and Leaner Cost Structure

Operational efficiency improved sharply as through‑warehouse fulfillment cost fell about 13% year over year in Q4, marking the eighth straight quarter of double‑digit declines. Warehouse labor productivity and space utilization each rose around 20% year over year, while Q4 operating expenses fell 3% and dropped to 16.6% of net revenues, with full‑year opex down 8.7%.

AI-Led Digital Transformation Drives Productivity

Management underscored that AI is now a core operating engine, with data assets at petabyte scale and monthly token consumption exceeding 80 billion, double last year. Over 5,000 RPA digital employees have saved nearly 1 million man hours, while AI agents like ProductRecom and Material Management have boosted sales, automated data handling, and meaningfully lifted customer service and procurement productivity.

Stronger Cash Position and Positive Operating Cash Flow

ZKH exited 2025 with RMB 1.92 billion in cash, restricted cash, and short‑term investments, giving the company ample liquidity. Net cash from operating activities reached RMB 116.1 million in Q4, and operating cash flow was positive for both the quarter and the full year, underpinning flexibility to invest in growth and technology.

Full-Year GMV Decline Reflects Strategic Reset

Despite the Q4 rebound, full‑year 2025 GMV slipped 3.3% to RMB 10.1 billion, as strategic optimization initiatives weighed especially in the first half. Management framed the GMV contraction as a byproduct of pruning less attractive business and repositioning for higher‑quality, more profitable growth in coming years.

Margin Compression from Mix and Commodities

Gross margin in Q4 fell to 15.5% from 17.1% a year earlier, while full‑year gross margin declined to 16.4% from 17.2% in 2024. The company attributed the pressure mainly to a temporary shift toward lower‑margin commodity categories and higher copper and oil prices, even as GMV‑basis gross profit margin edged up about 15 basis points to 14.6%.

Profitability Still Negative on a Full-Year Basis

At the bottom line, ZKH remains in the red for the year even after notable progress, with adjusted net loss narrowing 46.1% to RMB 85.9 million and the margin improving to negative 1.0%. Full‑year non‑GAAP EBITDA was still negative at RMB 79.3 million and operating loss stood at RMB 213.3 million, though both improved by more than a third year over year.

Headwinds from Commodity Prices and Customer Mix

Management warned that volatility in commodity prices, particularly copper and oil, continues to cloud near‑term margin visibility. A slightly higher share of state‑owned enterprise‑related business is also pressuring pricing and profitability in the short run, adding uncertainty to the pace of gross margin recovery.

Business Mix Shift Weighs on Reported Margins

Another drag on headline margins has been a lower contribution from ZKH’s marketplace model, which typically carries higher recognized gross margins due to net revenue accounting. Changes in business mix during the strategic optimization period have therefore mechanically reduced reported gross margin, even as underlying efficiency and mix improvements take hold.

Guidance: Path to 2026 Profitability and AI-Led Growth

Looking ahead, management aims to achieve full‑year profitability in 2026 and expects GMV growth to accelerate into double digits from Q1 onward. The company is targeting about 30% private‑label GMV growth in 2026 to reach roughly 10% of GMV, plans to expand AI usage at least tenfold over two to three years, deepen international reach, and drive further margin and cost improvements from an already solid cash and cash‑flow base.

ZKH’s earnings call painted a picture of a platform emerging from a reset with improving fundamentals but unfinished work on margins and full‑year profits. For investors, the story now hinges on whether Q4’s momentum, private‑label scaling, and AI‑driven efficiencies can offset commodity and mix headwinds and carry the company to its ambitious 2026 profitability goal.