ZKH Group (NYSE: ZKH) posts first operating profit as GMV jumps 19%

ZKH Group Limited (NYSE: ZKH) moved into quarterly operating profitability for the first time in the second quarter of 2026 as gross merchandise value increased 18.9% to RMB2.88 billion and net revenue rose 12.8% to RMB2.44 billion. Operating income reached RMB4 million compared with a RMB72 million loss a year earlier, while net profit swung to RMB26.7 million from a RMB53.5 million loss.

The improvement was not simply a function of higher sales. Gross profit increased 20.3% to RMB429.6 million, faster than revenue, lifting gross margin to 17.6% from 16.5%. Operating expenses declined 0.8% to RMB425.6 million and fell to 17.4% of revenue from 19.8%, creating enough operating leverage to cross into a small quarterly profit.

Yet the stock’s reaction was unusually volatile. ZKH was indicated more than 20% higher in premarket trading after the results, but regular-session shares later traded around US$2.87, down about 1% from the previous close. That reversal suggests investors were encouraged by the profitability milestone but remained cautious about cash flow, customer growth and the durability of the margin improvement.

What drove ZKH Group’s first quarterly operating profit?

The key change was that gross profit expanded while the operating-cost base remained almost flat. Revenue rose by RMB277 million year on year, yet operating expenses declined slightly, allowing a greater share of incremental gross profit to reach operating earnings.

Non-GAAP EBITDA improved to positive RMB41.9 million from negative RMB38.7 million, while adjusted net profit reached RMB38.5 million compared with an adjusted net loss of RMB36.5 million. Basic and diluted net profit per American depositary share were RMB0.17, compared with a RMB0.33 loss a year earlier.

Gross-margin improvement provided another important contribution. A rise from 16.5% to 17.6% equals approximately 110 basis points, while operating expenses as a percentage of revenue declined by roughly 240 basis points. Those two movements together explain why modest double-digit revenue growth could translate into a much larger change at the bottom of the income statement.

Why is ZKH’s 50.7% marketplace growth strategically important?

Marketplace, or third-party, GMV increased 50.7% to RMB431.5 million, far ahead of the 14.6% growth in first-party product-sales GMV. The core ZKH Platform increased GMV 22.9% to RMB2.64 billion, while the GBB Platform declined 12.1% to RMB242.5 million.

A faster-growing marketplace can improve capital efficiency because the platform facilitates transactions without necessarily taking the same inventory ownership associated with first-party sales. The economic benefit depends on take rates, service economics and the mix of transactions, however, and ZKH’s marketplace take rate declined to 11.8% from 14.2%.

That creates an important trade-off. Marketplace volume is scaling rapidly, which can improve platform breadth and customer engagement, but monetisation per unit of GMV has weakened. Investors therefore need to watch both volume and take rate rather than treating 50.7% GMV growth as equivalent to 50.7% profit growth.

Why did ZKH’s customer count fall even as GMV grew nearly 19%?

The number of customers declined 1.7% to 73,547 even though total GMV increased 18.9%. This implies that growth was driven by higher activity among retained customers, a shift toward larger accounts or changes in customer mix rather than simple expansion of the customer count.

Management said GMV from small and medium-sized enterprises on the ZKH Platform increased by approximately 30%, while key industrial accounts and central state-owned enterprises maintained double-digit growth.

That can be positive if deeper spending by higher-quality customers improves economics, but a shrinking customer count is still worth monitoring. A procurement marketplace ultimately benefits from breadth as well as wallet share, and sustained growth will be stronger if ZKH can combine increasing spend per customer with renewed expansion of the active customer base.

Why is cash flow still a concern despite the move into profit?

ZKH used RMB122.4 million of cash in operating activities during the quarter, compared with RMB110.7 million used a year earlier. Cash, restricted cash and short-term investments declined to RMB1.67 billion, or approximately US$246.5 million, from RMB1.92 billion at the end of December.

The company is therefore profitable on the quarterly income statement but has not yet demonstrated positive operating cash conversion. That gap can result from working capital, payment terms, inventory and other operational factors, but it matters because sustainable profitability ultimately needs to translate into cash rather than simply accounting earnings.

The cash position remains substantial relative to ZKH’s current equity value, providing financial flexibility. The company also had repurchased approximately 2.49 million American depositary shares for US$7.67 million under its US$50 million buyback authorisation through June 30.

Why did ZKH shares give back a 20% premarket surge?

Initial trading indications reflected the symbolic importance of the first quarterly operating profit and the sharp improvement in adjusted profitability. By the regular session, however, ZKH was around US$2.87, below the prior US$2.90 close and within a 52-week range of US$1.92-US$3.90. Trading volume was unusually heavy at several million shares compared with a much smaller recent average.

The reversal suggests the market examined the quality of the result more critically after the initial headline response. Operating profit was only RMB4 million, operating cash flow remained negative and the customer count declined, even though GMV, revenue and margins improved materially.

Management expects growth to accelerate during the second half and said international GMV increased tenfold during the first six months of 2026, supported by localisation efforts in the United States and services for Chinese manufacturers expanding overseas. That offers another potential growth engine, but the next earnings report will need to show that the Q2 profit milestone can become repeatable.

ZKH has crossed an important threshold from growth accompanied by operating losses to a quarter in which revenue expansion produced positive operating earnings. The market’s refusal to sustain the initial rally indicates that investors want the next threshold as well: consistent profits accompanied by positive cash generation.