KE Q2 Earnings Call Highlights

• 100% Upside in This Real Estate Stock, Institutions Buying In

KE (NYSE:BEKE) reported second-quarter 2026 gains in gross margin and profit despite a year-over-year revenue decline, as the housing-services company cited cost controls, operating improvements and changes in business mix.

Total gross transaction value, or GTV, rose 6.3% from a year earlier, while revenue fell 5.7%. Chief Financial Officer Tao Xu said the revenue decline was primarily tied to adjustments in the home renovation and furnishing business and revenue-recognition effects associated with iterative product models in renovation services.

Non-GAAP net income increased 74.9% year over year to RMB3.185 billion, with non-GAAP net margin reaching 13%, up 6 percentage points from a year earlier and the company’s highest level in three years. GAAP net income rose 100.8% to RMB2.624 billion.

Margins Expand as Operating Expenses Fall

KE’s gross margin increased 6.7 percentage points year over year to 28.6%, while GAAP operating expenses fell 14.1% to RMB3.989 billion. GAAP operating profit more than doubled, rising 185.6% to RMB3.026 billion.

Xu attributed the improvement to a healthier cost structure, strict financial discipline, lower fixed labor costs and increased operating efficiency. He said contribution margins improved year over year and sequentially across the company’s core business lines.

Store-related costs declined 25.9% year over year to RMB560 million, reflecting rent-cost optimization and network adjustments at Lianjia. Sales and marketing expense fell 26.1% from a year earlier to RMB1.4 billion, while research and development expense decreased 13.4% to RMB550 million.

On a sequential basis, operating expenses rose 21.3%, reflecting seasonal selling expenses in home renovation and provisions in the new-home business. General and administrative expenses included approximately RMB280 million in bad-debt provisions following what Xu called a prudent assessment of certain receivables and collateral values.

Xu said the company does not intend to extrapolate one quarter’s profit performance, noting that marketing incentives and frontline sales costs can fluctuate with business mix, revenue scale and seasonality. Under a neutral market assumption, however, he said the lower cost baseline should continue to support profitability.

Existing-Home and New-Home Businesses Hold Up

Existing-home transaction-services GTV reached RMB629.89 billion, up 8% year over year, while revenue rose 4.5% to RMB7.02 billion. The segment’s contribution margin increased 6.1 percentage points to 46.1%.

Chief Executive Officer Stanley Peng said the company’s existing-home performance was driven not by network expansion or rising prices, but by higher productivity within its stable connected-store network and better conversion of platform-service value into revenue. Connected-store transaction volume grew nearly 30% year over year, while average transactions per active connected store increased 26%, Peng said.

Non-Lianjia platform-service revenue rose 27.8% year over year. Xu said GTV grew faster than revenue in the existing-home business because non-Lianjia GTV, for which platform-service fees are recognized on a net basis, represented a larger share of activity.

In the new-home business, GTV rose 1.2% to RMB258.39 billion and revenue increased 3.8% to RMB8.95 billion. Contribution margin climbed 4.4 percentage points to 28.8%.

Xu said KE maintained new-home scale through earlier collaboration on high-quality projects, better customer conversion and resource allocation toward projects with stronger potential. He added that the company would continue to manage payment terms and developer credit risk prudently rather than pursue GTV growth at the expense of collections or margins.

Renovation and Rental Revenue Decline During Product Shifts

Home renovation and furnishing revenue fell 30.1% year over year to RMB3.19 billion. The company said it had exited inefficient cities, stores and customer-acquisition channels, while lower new-home deliveries also weighed on demand. Still, contribution margin improved 7.5 percentage points to 39.6%, aided by centralized procurement, supply-chain optimization and lower material costs.

Xu said the broad-based renovation adjustments are now largely complete and that the company does not expect further broad contractions this year. He noted that showroom visits improved sequentially in July, though construction cycles mean that contract activity may take time to translate into reported revenue.

Home-rental-services revenue declined 14.8% to RMB4.83 billion as Carefree Rent shifted toward a lighter, lower-risk model that recognizes revenue on a net basis. Managed rental units exceeded 790,000 at the end of the quarter, up about 34% year over year, with net-basis products accounting for more than half of the portfolio.

The rental segment’s contribution margin rose 6.9 percentage points to 15.3%. Xu cited the product mix shift as well as lower labor, installation and post-lease costs. He said owner renewal reached 74%, up 4 percentage points year over year, while tenant renewal reached 56%, up 1 percentage point.

Management Emphasizes Consumer-Centric and AI-Led Transformation

Peng said KE is moving from broad, citywide operating approaches toward more localized strategies tailored to specific districts, projects, properties and customer needs. He said management is increasingly focused on agent productivity, healthy store profitability and service quality rather than scale alone.

Peng also described a more specialized service model in which roles are separated among client management, property presentation, consulting, contracting, renovation and leasing. From May through July, client managers handled more than 50,000 leads and achieved a 7.4% lead-to-showing conversion rate, compared with 5% for the broader market, he said.

On artificial intelligence, Peng said the company views AI as a “direct variable” in reshaping customer service, internal processes and organizational design rather than simply an efficiency tool. KE is using AI to organize data, support agents’ project comparisons and enable more tailored management of individual properties, clients and agents.

The company reported RMB6.61 billion in operating cash inflow for the quarter and said its broad cash balance, excluding customer deposits, was approximately RMB67.3 billion at quarter-end. KE spent about $250 million on share repurchases in the second quarter and about $460 million in the first half.

About KE (NYSE:BEKE)

KE Holdings Inc (NYSE: BEKE) is a technology-driven real estate services company that operates an integrated online and offline platform for housing transactions and related services in mainland China. The company provides consumer-facing property listing marketplaces alongside a broad network of offline brokerage offices and agents, aiming to facilitate sales, rentals and new-home transactions for individual and institutional clients.

The company’s offerings span property listings for new and resale homes, rental listings, brokerage representation and transaction facilitation.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

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