KE Holdings Inc. Q1 FY2026 earnings call

Overall Financial Performance

• Total group GTV was 711.2 billion RMB, down 15.6% YoY due to a high base from the prior-year period. Total revenue was 18.9 billion RMB, down 19% YoY.
• GAAP net income was 1.26 billion RMB, up 46.7% YoY. Non-GAAP net income was 1.61 billion RMB, up 15.7% YoY. Non-GAAP operating profit was 1.67 billion RMB, up 45.1% YoY and 416.2% QoQ, with non-GAAP operating margin at 8.8% (a seven-quarter high).
• The company spent ~$195 million on share repurchases in Q1, up 40% YoY. Cumulative spending on share repurchases since September 2022 reached ~$2.7 billion, representing ~13.5% of total outstanding shares pre-program.
• Excluding customer deposits, cash balance remained at 65.6 billion RMB after repurchases, maintaining a strong liquidity position.

Market Observations

• The existing home market saw a resilient post-Chinese New Year recovery, with improving transaction momentum, buyer decisiveness, and seller sentiment, though market divergence across cities and segments remains, and the industry is still in a structural adjustment and confidence rebuilding phase.
• Consumer demand is shifting toward authentic living needs, asset quality, and long-term lifestyle fit, pushing the industry toward a more stable, healthy, and sustainable growth path.

Strategic Transformation Overview

• The company launched a new round of strategic and organizational restructuring, based on the insight that the industry's scarce value has shifted from listing information to high-quality housing decision support. KEA Holdings is evolving from a transaction-organizing platform to a platform that supports better residential purchasing decisions.

Core Transformation Initiatives

• Organizational adjustment: Send managers back to front lines: Reorient management away from internal meetings and reporting to direct consumer and service provider engagement, to identify and solve specific on-the-ground problems, and build tiered knowledge bases for services.
• Agent professionalization: Shift agent training from knowledge testing to hands-on case-based drills, use AI to codify frontline best practices, and evaluate agent professionalism via long-term client feedback rather than static certifications, to build capabilities in understanding client pain points, delivering decision support, and upholding accountability for high-stakes decisions.
• Productization of non-standard services: Rebuild end-to-end services for buyers and sellers tailored to specific needs: for sellers, roll out segmented tools like Commit to Sell and community open days to improve price discovery and closing certainty; for buyers, add a neutral pre-agent decision support layer combining AI and expert guidance to clarify needs and match to appropriate agents.
• AI as an organizational capability: AI amplifies frontline expertise by generating custom tools from natural language requests; as of end of April, the internal AI application platform covered over 7,100 employees, with 4,400 active applications and over 4.12 million total visits. New cross-functional three-person squad models enable rapid scenario iteration, turning individual expertise into institutional capability.

Non-core Transaction Business Progress

• Home Renovation and Furnishing: Revenue decline is a result of proactive exit from low-UE channels and underperforming cities; Q1 contribution margin improved 3.6 pp YoY to 36.2% with significantly narrowed losses, driven by centralized procurement, modular product design, and operational standardization.
• Home Rental: Managed units grew 47% YoY, with a rising share of higher-margin net-basis rental products; contribution margin improved to 14.8% from 6.7% YoY, driven by product structure optimization, AI productivity gains, and organizational restructuring, demonstrating that fragmented operationally heavy businesses can achieve scale efficiencies.

1. Existing Home Transaction Services: Q1 GTV was 534.4 billion RMB, down 7.9% year-over-year (YoY) and up 10.9% quarter-over-quarter (QoQ). Revenue reached 6.1 billion RMB, down 10.7% YoY and up 12.7% QoQ. Contribution margin hit 41.3%, up 3.2 percentage points (pp) YoY and 0.9 pp QoQ, accounting for 32.3% of total company revenue.
2. New Home Business: Q1 GTV was 145.9 billion RMB, down 37.2% YoY and 29.5% QoQ. Revenue was 5.1 billion RMB, down 37% YoY and 30% QoQ. Contribution margin reached 25.7%, up 2.3 pp YoY and down 2.6 pp QoQ, accounting for 27.0% of total company revenue.
3. Home Renovation and Furnishing Services: Q1 revenue was 2.3 billion RMB, down 20.6% YoY and 35.3% QoQ. Contribution margin was 36.2%, up 3.6 pp YoY and 7.4 pp QoQ, accounting for 12.2% of total company revenue.
4. Home Rental Services: Q1 revenue was 5 billion RMB, down 1.5% YoY and 7.4% QoQ. Contribution margin reached 14.8%, up 8.1 pp YoY, marking the sixth consecutive quarter of sequential improvement. As of Q1 end, managed rental units exceeded 740,000, up 47% YoY, accounting for 26.5% of total company revenue.
5. Emerging and Other Businesses: Q1 net revenue was 321 million RMB, down 8.1% YoY and 30% QoQ, accounting for 1.7% of total company revenue.

• Management expects full-year 2026 margins to improve year-over-year, even as quarterly margins may see seasonal fluctuations. Margin expansion is supported by earnings flexibility in the core home transaction business, improving unit economics in home renovation and rental, and sustained cost discipline.
• Existing home transaction volumes are expected to continue growing year-over-year in Q2 2026. While core areas in Tier 1 cities have solid price support, broader nationwide price stabilization still requires more data to confirm.
• The ongoing strategic transformation is planned as a multi-year cycle, with a pilot-first approach, no blind expansion, and a focus on maintaining stable core business operation quality and cash flow while continuous iteration of products, processes, and resource allocation.
• Revenue for the home renovation and furnishing business is expected to stabilize and return to quality growth after near-term adjustments to business structure and model.
• Long-term upside for margin expansion remains across all core business segments, driven by ongoing productivity gains and structural improvements, rather than one-off factors.

• The real estate market remains in a phase of structural adjustment and confidence rebuilding, with continued inherent cyclical volatility and persistent divergence across cities and market segments.
• The new Commit to Sell product is still in early pilot stage with a small sample size, and its ability to scale and deliver sustained efficiency gains has not yet been fully validated.
• Near-term weak new home market volatility has negatively impacted demand for home renovation and furnishing services, contributing to near-term revenue declines.
• The strategic transformation relies on successful adoption of AI across the organization and fundamental changes to organizational structure and agent capabilities, which may face implementation risks and take multiple years to deliver full results.

Q: What drove the Q1 existing home spring rally, how is it different from prior recoveries, and is the trend sustainable?

A: This recovery is more resilient than prior cycles: it is driven by genuine pent-up demand after price corrections, not just short-term policy stimulus, with stabilizing prices and improving seller expectations alongside returning buyers. Key drivers include clear policy signals to stabilize the market, substantially lower entry barriers for buyers after price corrections, and narrowing spreads between rental yields and mortgage rates that restored housing appeal. Going forward, existing home transaction volumes are expected to keep growing YoY in Q2, with solid price support in core Tier 1 city areas, but broader nationwide price stabilization needs more data to confirm. April transactions on KEA's platform grew over 30% YoY, hitting the second-highest absolute volume on record, showing ongoing resilience.

Q: Can you share an update on the Commit to Sell pilot, and does it improve transaction efficiency?

A: Commit to Sell is an early-stage pilot product for seller-side transformation, designed to reduce back-and-forth negotiation by having sellers set a reserve price and buyers bid with a deposit, closing matches that meet the reserve price. Early results are encouraging, with shorter transaction cycles and high homeowner satisfaction, improving price discovery and efficiency, but the sample size remains small so results are still preliminary. It is part of a broader end-to-end transformation of seller services that segments sellers by need and property type, rather than a one-size-fits-all product. The model amplifies rather than diminishes agent value, elevating their role to decision support rather than just information relay. The company will continue small-scale piloting and iteration before broader expansion.

Q: What is driving the revenue decline in home renovation and furnishing, what KPIs is management focused on, and what is the outlook?

A: The Q1 revenue decline stems from three factors: proactive exit from low-quality lines of business, intentional scaling back in underperforming cities with poor unit economics, and broader market demand weakness driven by new home volatility. Management is not focused on near-term scale, instead prioritizing building a healthy, profitable, sustainable model with standardized fulfillment and personalized offerings. Key focus areas include a two-dimensional modular product matrix to balance standardization and personalization, professionalization of construction workers to improve delivery consistency, and digitalization of design tools to boost productivity. Underlying capabilities and profitability have already improved, with contribution margin up 3.6 pp YoY, and management expects revenue to stabilize and return to quality growth over time.

Q: Is the Q1 margin improvement sustainable, and is there further room for margin upside?

A: The Q1 margin improvement is structural, driven by proactive cross-business optimizations rather than one-off factors, with all core segments seeing YoY contribution margin gains. For existing home, margin expansion came from lower fixed labor costs and higher agent productivity from 2025's organizational and network optimization, with further upside from ongoing transformation productivity gains. For new home, refined operations lowered variable costs, with future upside from new diversified revenue models for developers. For home renovation, centralized procurement cut material costs over 20% and optimized order dispatch boosted productivity, with further unit economics upside from scale. For rental, the shift to higher-margin net-basis products and productivity improvements drove gains, with room for further improvement. Management is confident in full-year YoY margin improvement, even with potential seasonal quarterly fluctuations.