ZKH Group Q1 Earnings Call Highlights

ZKH Group (NYSE:ZKH) said its first-quarter 2026 results showed accelerating growth and improved profitability, with management pointing to stronger customer activity, efficiency gains and continued investment in artificial intelligence and fulfillment capabilities.

On the company’s earnings call, Founder, Chairman and CEO Eric Chen said ZKH “entered 2026 with strong momentum,” building on a recovery that began in the second half of last year. He said both gross merchandise value, or GMV, and revenue growth accelerated year over year for the second consecutive quarter, while adjusted net profit rose 103% from a year earlier.

Chen said the company achieved adjusted profitability in the first quarter for the first time, despite the period being a seasonal off-season for the maintenance, repair and operations, or MRO, industry. He said the performance reinforced management’s confidence in achieving double-digit GMV growth and full-year profitability in 2026.

GMV and revenue accelerate

CFO Max Lai said first-quarter GMV rose 12.9% year over year to RMB 2.45 billion, while total revenue increased 9.2% to RMB 2.11 billion. Lai described both metrics as ZKH’s strongest quarterly growth in recent periods.

Chen said the number of transacting customers increased 11% year over year to 66,000, reflecting “accelerating adoption of online procurement among Chinese manufacturers.” He added that ZKH expects GMV growth to accelerate further in the second quarter based on current order activity and shipment trends.

Growth was broad-based across customer segments, according to management. Chen said GMV from small and medium-sized enterprise customers on the ZKH platform increased more than 20% year over year. Central state-owned enterprise customers also returned to double-digit GMV growth, improving both sequentially and year over year.

Among industry key accounts, Chen said GMV grew more than 20% year over year across major verticals including electrical manufacturing, communications, electronics, new energy, and steel and ferrous metals. ZKH also expanded its presence in emerging sectors including semiconductors, energy storage, optical modules, robotics and optical communications.

The company’s GBB platform, which serves distributors, resellers and micro and small businesses, also continued to grow. Chen said GBB GMV increased more than 30% year over year and provides synergies with the ZKH platform by extending customer coverage.

Profitability improves as expenses decline

Lai said gross profit increased 6.6% year over year to RMB 354 million. Gross margin declined slightly to 16.7% from 17.2% a year earlier, though management said margin trends improved sequentially, with GMV-based gross margin increasing by 90 basis points.

Total operating expenses fell 8.8% year over year to RMB 376.5 million, representing 17.8% of net revenue compared with 21.3% a year earlier. Lai said fulfillment expenses decreased 16.8% to RMB 77.6 million, research and development expenses fell 25.9% to RMB 29.3 million, and general and administrative expenses declined 7.9% to RMB 131.9 million. Sales and marketing expenses were relatively stable at RMB 137.6 million.

The company’s operating loss narrowed 72.2% to RMB 22.5 million, while operating loss margin improved to negative 1.1% from negative 4.2%. Non-GAAP EBITDA turned positive at RMB 4.2 million, compared with a loss of RMB 52 million in the prior-year period. ZKH reported non-GAAP adjusted net profit of RMB 1.7 million, compared with an adjusted net loss of RMB 50.2 million a year earlier.

Lai said GMV per effective employee increased by more than 20% year over year, reflecting improved workforce productivity. He also cited lower overseas-related spending as ZKH focuses on operating quality and investment efficiency.

Management addresses margin drivers

In response to a question from Deutsche Bank analyst Liu Chang, Chen said ZKH’s gross margin outlook depends on category mix, customer mix and private-label products.

Chen said some categories with lower gross margins, including diesel, transformer oil and silicon photonics wafers, contributed to the year-over-year margin decline in the first quarter. However, he said categories such as personal protective equipment, cleaning, OEM fasteners, handling and storage, and security products are showing better profit conversion efficiency.

Chen also noted that SME customers generally carry higher gross margins than large accounts. SME customers currently account for more than 30% of GMV, while key accounts represent about 60%, he said. Private-label products, which also carry higher margins, accounted for 9.7% of total GMV in the first quarter. Chen said ZKH’s long-term goal is for private-label products to exceed 30% of GMV.

“We will not pursue the maximization of a single product or a single quarter for the gross margin,” Chen said through a translator, adding that the company is focused on improving supply capabilities, deepening customer reach and growing absolute gross profit.

International business and fulfillment

ZKH’s international business delivered revenue growth of more than sixfold year over year, according to Chen. He said the company is supporting Chinese manufacturers expanding overseas while also advancing local U.S. operations through product development, multi-channel sales and fulfillment.

In response to a question from CITIC’s Brook Wang, Chen said ZKH will focus on serving Chinese companies going abroad by leveraging existing customer relationships and strengthening last-mile fulfillment in overseas geographies. He said localized U.S. operations are important, with the company initially focusing on categories needed for warehousing operations before expanding into additional product areas.

Chen said the goal is for the international business to reach breakeven this year, while avoiding spending ahead of demand.

On fulfillment, Chen said ZKH continued to expand its self-operated fleet and improve warehouse operations. Warehouse utilization efficiency improved 36% year over year, and comprehensive fulfillment expenses declined 17%, he said.

ZKH expands AI and product capabilities

Chen said ZKH identified 10 priority product lines in the quarter, including factory automation, electrical automation, pumps, pipes and valves, and cutting tools. The company also launched FA Mall, a one-stop digital procurement and technical services platform for the automation value chain.

By the end of the first quarter, ZKH had 27 million sellable SKUs on its platform, up from 23 million at the end of the prior quarter. The company introduced more than 400 new private-label SKUs during the quarter, and private-label GMV grew more than 20% year over year.

ZKH is also expanding its use of AI across data, models, workflow orchestration and business applications. Chen said about 30% of material matching and product identification tasks in quotation workflows are currently handled by AI, with a target of 70% by the end of 2026. The company also launched Hangjia Huiyan, which Chen described as the industry’s first intelligent visual search engine for MROs.

Lai said ZKH ended the quarter with RMB 1.84 billion in cash and cash equivalents, restricted cash and short-term investments. Net cash used in operating activities narrowed to RMB 34 million from RMB 97.1 million in the same period of 2025.

About ZKH Group (NYSE:ZKH)

ZKH Group Limited develops and operates a maintenance, repair, and operating (MRO) products trading and service platform that offers spare parts, chemicals, manufacturing parts, general consumables, and office supplies in the People's Republic of China. The company provides MRO procurement and management services; digitalized MRO procurement solutions; and logistics and warehousing services. It also engages in the production and sale of intelligent warehousing equipment. ZKH Group Limited was founded in 1998 and is based in Shanghai, the People's Republic of China.

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