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A Look at JD’s Capital Spending in Q2 2018

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Aug. 18 2020, Updated 6:34 a.m. ET

Heavy spending led to losses

JD.com (JD) is investing in technology, marketing, and capital assets. This is hurting its short-term profitability, as the company’s latest quarterly results show. JD swung back to a loss in the second quarter, which was nearly double what analysts expected.

JD reported a loss of $334.4 million for the second quarter, reversing a profit of $243.1 million in the first quarter. Analysts were expecting a loss of $177.0 million in the second quarter. JD’s loss in the latest quarter ballooned from a year ago when it posted a loss of $42.3 million.

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Technology spending soared nearly 80%

JD’s spending on technology and content jumped 79.8% YoY (year-over-year) to $420.2 million in the second quarter. Amazon’s (AMZN) technology and content costs rose 30.9% YoY in that period.

Online retailers such as JD and Amazon are spending significantly on technology to improve product recommendations for shoppers, deliver better ad targeting for marketers, and generally improve the user experience. eBay’s (EBAY) technology spending jumped 12.5% YoY in the second quarter.

JD’s marketing costs were up 29.1% YoY to $795.1 million in the second quarter, driven by promotions for its 618 shopping festival and efforts to confront competition from Alibaba (BABA).

Capex more than doubled

JD’s capex more than doubled to over $710.0 million in the second quarter. JD and Alibaba have been investing in physical stores as a way of speeding up deliveries and generally blurring the line between online and offline buying as they expand into selling groceries.

In addition to Google (GOOGL), JD is backed by Tencent (TCEHY) and Walmart (WMT). Tencent’s revenues jumped 30.2% YoY in the second quarter, while Walmart’s sales grew 3.8% YoY in its comparable period.

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