ZKH

Overall Business Performance

• The company extended its growth trajectory that began in Q4 2025, with both GMV and revenue growing year-over-year for three consecutive quarters, achieving the fastest growth rate in recent quarters in Q2 2026.
• The company achieved quarterly operating profitability for the first time, with adjusted net income turning from a year-ago loss to a positive RMB 39 million, as net profit growth outpaced GMV growth and profitability improved alongside scale expansion.
• Strategic initiatives and prior capability-building investments are now converting to operating results more quickly, reinforcing the company's improving fundamental trajectory.

Customer & Industry Expansion

• Growth is balanced across multiple customer segments: Regional SMEs have maintained strong momentum since Q4 2025, with improved SME market coverage and service capabilities; the high-margin SME segment's outperformance supports overall margin improvement, and management expects its GMV share to rise further.
• Long-term investments in specialized products and industry-specific services are delivering results, with rapid growth across multiple high-potential core industries, and early positioning in high-automation-intensity sectors (new energy, semiconductors, communications electronics) to capture demand from capacity expansion and production line automation upgrades.

Overseas Business Development

• Overseas expansion accelerated from Q1 2026, moving beyond early market exploration to a new stage of parallel capability building and business expansion.
• The company operates two international business lines: supporting Chinese manufacturers expanding overseas with one-stop MRO solutions (cross-border sourcing coordination, compliance, local fulfillment), and building localized operations in key overseas markets (focused on the U.S. currently).
• North Sky private label products gained traction on Amazon for categories including material handling equipment and industrial fans, and a dual China-overseas sourcing system was established for key categories to improve supply chain resilience.

Core Capability Building

• Product Capability: The company continues to deepen its presence in high-barrier specialized MRO categories and strengthen collaborations with leading manufacturers. It formed a comprehensive electrical automation product portfolio, expanded collaboration with Intel on edge control solutions, and added over 700 new private label SKUs while building in-house testing capabilities to improve development efficiency and quality consistency.
• Fulfillment Capability: A new dedicated hazardous materials warehouse was completed in Cangzhou, Hebei, expanding the company's compliant storage capacity for hazardous chemicals. As of quarter end, the national fulfillment network includes over 30 distribution centers, 109 transit warehouses, over 200 company-operated delivery vehicles, and over 6,000 on-site smart vending machines. Fulfillment expenses as a share of net revenue declined to 3.7% from 4.2% year-over-year, reflecting improved operating leverage.
• AI & Digitalization: The company launched the Domino industrial supplies big data engine in June 2026, which is powered by over 1 billion product parameters and provides high-quality structured data for customer MRO data governance and AI applications. Multiple AI solutions (AI Materials Manager, Linglong Huishou, etc.) are now deployed across multiple industries, with AI Materials Manager serving over 8,600 customers and processing more than 24 million rows of materials data to help customers reduce inventory costs. Internally, AI saved over 12,000 employee hours in Q2, and AI-assisted coding accounted for over 70% of total coding activity.

• Management expects GMV growth to accelerate further in the second half of 2026, with Q3 2026 GMV growth projected to exceed Q2 2026's 18.9% year-over-year rate, and the full-year 2026 GMV growth target of 15% to 20% remains on track to be achieved.
• Profitability is expected to improve more meaningfully in the second half, as operating expense ratios are projected to continue declining and operating leverage will further strengthen.
• The international business is expected to turn profitable in the second half of 2026, as management maintains disciplined expense management and a focus on return on investment.
• The company will continue to expand private label penetration, with a long-term target of reaching 30% of total GMV.

Domestic MRO Business: Total Q2 2026 GMV was RMB 2.9 billion, growing 18.9% year-over-year; net revenue reached RMB 2.4 billion, growing 12.8% year-over-year. Gross profit totaled RMB 430 million, growing 20.3% year-over-year, with gross margin as a percentage of GMV at 14.9%. Regional SME customers contribute 30% of total GMV, with 30% year-over-year GMV growth. Central SOEs and large key accounts contribute 60% of total GMV, delivering double-digit year-over-year GMV growth, with state-owned enterprise GMV growing over 20% year-over-year. By industry, steel and non-ferrous metals GMV doubled year-over-year; communications and electronics, fine chemicals and pharmaceuticals, utilities all posted over 30% year-over-year GMV growth; electrical automation GMV grew 160% year-over-year; semiconductor customer GMV grew over 100-fold year-over-year. Private Label Business: Private label GMV grew over 25% year-over-year, accounting for approximately 10% of total GMV. International Business: First half 2026 GMV exceeded RMB 95 million, growing more than tenfold year-over-year.

No explicit risks or operational failures were discussed by management during the call.

Q: What are the key drivers behind the Q2 2026 GMV growth acceleration, which segments are seeing the strongest momentum, and what is management's full-year 2026 GMV growth outlook? / A: Management attributes the acceleration to ongoing market share gains in China's fragmented MRO market, with three core drivers: 1) strong growth across multiple high-potential industries, including 103% growth for steel and non-ferrous metals, 57% growth for utilities, 37% growth for fine chemicals/pharmaceuticals and food/agriculture, and 35% growth for communications and electronics; 2) outperforming 30% GMV growth for SME customers, which have higher margins and drive overall margin improvement, with SME share expected to continue rising; 3) 25%+ year-over-year private label growth, which outpaces overall growth and carries a 10% margin premium over third-party products. Management confirmed Q3 growth will exceed Q2's 18.9% rate, and the full-year 15-20% GMV growth target remains achievable based on current July-August order trends.

Q: What changes in customer purchasing behavior have you seen with the rise of AI, what progress has been made on existing AI applications like AI Materials Manager, and what is the latest update on the planned AI subsidiary? / A: Management observed three key shifts in customer behavior: customers now increasingly use natural language to describe procurement needs instead of relying on keyword searches and manual quotations; demand for high-quality, accurate structured MRO product data is rising as AI becomes part of procurement decision-making; and SMEs are more receptive to self-service intelligent procurement, which can lower service costs and improve experience. AI Materials Manager now serves over 8,600 customers (93% year-over-year customer growth) and already generates commercial revenue; the company plans to launch the Linglong Huiyan industrial vision solution with Intel in October 2026. The AI subsidiary is progressing per plan, will have an independent flexible organization and talent structure to support future capital activities, will maintain deep synergy with ZKH's data, customer and supply chain resources, and aims to become an industrial smart infrastructure provider.

Q: What is the latest progress and outlook for the company's international business, and what is the update on the company's shareholder return plan? / A: International business delivered tenfold year-over-year first half GMV growth to RMB 95 million, with growth expected to continue in the second half. The business has two core pillars: supporting Chinese manufacturers expanding overseas with local fulfillment capabilities, and building localized operations focused on the U.S. market, with strong online sales growth for private label products on Amazon. Management remains disciplined on investment, targeting profitability for the international business in the second half of 2026. For shareholder returns, the $50 million 2025-2027 share repurchase program remains active, with approximately $7.67 million repurchased as of Q2 end; the company plans to step up repurchase pace, and will consider initiating dividends once profitability scales more meaningfully.