KE Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 26, 2025

Key Takeaways

  • Positive Sentiment: Revenue in Q2 rose 11.3% year‐over‐year to RMB26.0 billion, outpacing market growth and reflecting the company’s strong top‐line momentum.
  • Negative Sentiment: Gross margin fell six percentage points to 21.9%, while GAAP net income declined 31.2% year‐over‐year, highlighting margin pressures and profit headwinds.
  • Positive Sentiment: Home rental service revenue surged 78% year‐over‐year to a record RMB5.7 billion, driven by rapid growth in managed units to over 590,000.
  • Positive Sentiment: Non‐housing transaction services accounted for 41% of total revenue in Q2, underscoring the company’s diversified growth drivers beyond brokerage.
  • Positive Sentiment: The board approved an increase and extension of the share repurchase program to $2 billion through August 2028, supported by cash liquidity of ~RMB70 billion.
AI Generated. May Contain Errors.
Earnings Conference Call
KE Q2 2025
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Hello, ladies and gentlemen. Thank you for standing by for KE Holdings Inc. Second Quarter twenty twenty five Earnings Conference Call. Please note that today's call, including the management's prepared remarks and question and answer session will all be in English. Simultaneous interpretation in Chinese is available on a separate line for the duration of the call.

Operator

To access the call in Chinese, you will need to dial into the Chinese language line. At this time, all participants are in listen only mode. Today's conference call is being recorded. I will now turn the call over to your host, Ms. Sitting Li, IR Director of the company. Please go ahead, sir.

Siting Li
Siting Li
IR - Director at KE

Thank you, operator. Good evening and good morning, everyone. Welcome to Ke Holdings Inc. Baker's second quarter twenty twenty five earnings conference call. The company's financial and operating results were published in the press release earlier today and are posted on the company's IR website, investors.ke.com.

Siting Li
Siting Li
IR - Director at KE

On today's call, we have Mr. Stanley Peng, our Co Founder, Chairman and Chief Executive Officer and Mr. Tao Xu, our Executive Director and Chief Financial Officer. Mr. Xu will provide an overview of our business updates and financial performance.

Siting Li
Siting Li
IR - Director at KE

Then Mr. Peng will share more strategic thinking on our current and future developments. Before I continue, I refer you to our Safe Harbor statements in our earnings press release, which applies to this call as we will make forward looking statements. Please also note that Beike's earnings press release and this conference call include discussions of unaudited GAAP financial information as well as unaudited non GAAP financial measures. Please refer to the company's press release, which contains a reconciliation of the unaudited non GAAP measures to comparable GAAP measures.

Siting Li
Siting Li
IR - Director at KE

Lastly, unless otherwise stated, all figures mentioned during this conference call are in RMB. Certain statistical and other information relating to industry in which the company is engaged to be mentioned in this call has been obtained from various publicly available official or unofficial sources. Neither the company nor any of its representatives has independently verified such data, which may involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information and estimates. For today's call, management will use English as the main language. Please note that the Chinese translation is for convenience purpose only.

Siting Li
Siting Li
IR - Director at KE

In the case of any discrepancy, management's statements in their original language will prevail. With that, I will now turn the call over to our CFO, Mr. Tao Xu. Please go ahead, Tao.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Thank you, Mr. King, and thank you, everyone, for joining our twenty twenty five half year results conference call. In Q1, the rest the market continues a recovery moment we saw at the end of last year. However, as we entered Q2, the momentum softened and the slowdown was largely due to international trade friction and the feeding impact of the early policy measures. Because of the high base created by intensive earning policy in the middle of last year, the real estate market recorded as a year over year decline in Q2.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Turning to our business performance. Our platform, agent and store network continued to scale, along with refined operations and ecosystem improvements. Our existing home and new home business significantly outperformed the market in the 2025. The proportion of the number of housing transactions from existing home sales reached a record high. At the same time, our home renovation and furniture business and the home rental service business both achieved high quality growth.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Revenue from non housing transaction services accounted for 41% of total revenue in Q2, highlighting our diversified growth drivers. Regarding our overall financial performance in Q2, our total GTV was RMB 8 and 78,700,000,000.0, representing a year over year increase of 4.7%. The revenue reached RMB 26,000,000,000, up 11.3% year over year. Gross margin declined by six percentage points year over year to 21.9%. GAAP net income was RMB 1,310,000,000.00, falling 31.2% year over year.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Non GAAP net revenue reached RMB1.82 billion, down 32.4% year over year. Next, I'd like to elaborate on the operational update and the financial performance of our business segments. Looking at our housing transaction services. The momentum from our proactive growth efforts has been clearly evident. During the first half of the year, the number of in home sales on our platform rose by 26%, outpacing the market growth rate of 19% estimated by Baker Research Institute, both year over year.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

New home orders on our platform increased by 19%, outperforming the market, which, according to Baker Research Institute, declined by 6% post year over year. The share of our existing home sales continued to rise, with a proportion of total home transaction orders on platform increasing from 51% in the 2021 to 76% in the same period of this year. Our competitive edge in the single home market led to more stable and solid overall business performance. Our agent and store network further expanded. In the first half of the year, various high quality industry brands joined our platform, including Guangzhou Hope Real Properties, Tianjin Bao Yuan Properties, Wuxi Dongshan Real Estate Services and Shenyang Yumei Properties.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

The number of active stores on our platform increased by 30% in the first half of the year, of which active nonlinjia store soared by 36.8% both year over year. The number of active agents on our platform lifted by 19.5% in the first half of the year, including a nearly 24% increase in the number of non linear agents both year over year. For our existing home transaction services, we continue to deepen and refine our operations leveraging our scientific management system, platform based operations and AI driven technology application to boost store and agent productivity throughout home listing, customer acquisition and the conversion process. On home listing side, we have tools like home maintenance score and exceptional home product to help agents better marketing home listings while focused on top listing to increase transaction conversion. On conversion side, we also implemented measures to strengthen store level operation and network operation to enhance matching and transaction efficiency.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

These measures included the mechanisms like incorporating competition into our store scientific matching system, deepening the operation of core governance consoles, store point based incentive program and designating Cardian Efficiency Business Districts. In terms of financial performance, revenue from its in home transactions reached RMB6.7 billion in Q2, down 8.4% year over year and remaining relatively flat quarter over quarter. GTV was RMB583.5 billion, remaining relatively stable year over year. And quarter over quarter, the GTV growth outpaced revenue on a year over year basis, mainly due to a higher GTV contribution from the same home transaction services facilitated by connected agent, for which revenues are recorded on a net basis. The contribution margin for the single home transaction services was 39.9% in Q2, a decline of 7.5 percentage points year over year, primarily due to higher fixed labor cost resulting from an increase in the number of Lianzia agents and the lasting impact of the agent welfare improvement strategy we implemented since last year.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Sequentially, the contribution margin grew by 1.8 percentage points due to stronger leverage as our series of cost reduction and efficiency enhancement initiatives conducted this year led to a quarter over quarter decrease in fixed labor costs, while revenue remained generally flat. For our new home transaction services, the scale of our collaborative projects remained steady. Through our AI driven agent, Qianji, we refined the management of new home projects, revitalizing more existing projects. On customer front, we reinforced business synergies between existing new home and rental services and fine tune operations while launching our AI assistant, Qianxu, to help service providers stimulate customer demand and improve the matching efficiency. In terms of the financial performance, our new home GTV reached RMB255.4 billion Q2, up 8.5% year over year and 10% quarter over quarter.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Revenue from new home transaction was RMB8.6 billion in Q2, rising by 8.6% year over year and 6.7% quarter over quarter. Revenue growth was in line with GTV growth year over year, demonstrating our steady monetization capabilities in new home transactions. While GTV growth outpaced the revenue growth sequentially due to the seasonal fluctuation of the take rate. The contribution margin from the new home content services fell by 0.6 percentage points year over year to 24.4% due to an increased variable cost resulting from our agent welfare improvements last year. Sequentially, the new home contribution margin rose by one percentage point, largely attributed to the cost of cost decline in variable cost, thanks to our refined operations and the focusing sales strategy to maximize unit sales for property projects this year.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

For our home renovation and furniture business, we're focused on enhancing the operations to build up our underlying capability to support our sustainable growth. On product capabilities, we analyze the customer data and insights to understand our core needs, leveraging market designs and R and D. We introduced home renovation modules that can be flexibly configured and quickly iterated. By combining these modules with design adjustments, we provide customers with a one stop home renovation solution. On supply chain side, our digital infrastructure enables us to significantly streamline partner, brand selection and SKU count based on customer needs.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

The proportion of centralized procurement rose markedly, while the overall unit purchase price declined significantly. To further improve our delivery quality, we identified over 2,600 high quality project managers on our platform, improving their efficiency and income while elevating the end user experience. Operationally, we implemented cutting and efficiency business district strategy. We scored business district based on the multiple indicators such as building age and housing transaction volume. This allows designers, project managers and other service providers to focus on high school district, enabling them to gain better to gain deeper insight to the customer and the property conditions.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

By introducing the upfront site measurements and other process, we reshaped workflow to improve operational efficiency. We also accumulated and refined design solutions on the construction guidelines, ultimately enhancing the customer experience. In terms of the financial performance, revenue from our home renovation and the furniture business reached RMB4.6 billion, increasing by 13% year over year. This was mainly driven by the increase in home renovation orders alongside with the high average revenue per order stemming from an increase in the average price of furniture and home furniture retail. Contribution margin for the home renovation and furniture business reached 32.1%, up 0.8 percentage points year over year, primarily driven by a larger proportion of centralized procurement and enhanced order dispatching efficiency.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Sequentially, the contribution margin fell by 0.4 percentage points, mainly attributable to a structural shift with an increased revenue contribution of furniture and home furniture retail, which had relatively low contribution margin. In our home rental service business, we continue to iterate our products and apply AI to recontrast our business process and operational funnel. On product front, we expanded our differentiated product portfolio, launching Product nine in the first half of the year to meet homeowners' various needs around the vacancy period and retail income while balancing risk and returns for our business. For unit sales and occupancy, we implemented quality driven leads allocation rules so that the better listing and the better service provider gets more leads. Customers will also benefit.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

We also leveraged AI capability for the impact on collection and identification of the rental housing conditions as well as impact on the pricing to explore a UNICEAR module led by the platform AI. In terms of the operational management, we leveraged AI's massive computing power to optimize resource dispatching, inventory, UNICEF and occupancy, which enhanced both personal productivity and rental occupancy rates in our pilot regions. In overall, productivity improved remarkably in the first half of the year. The average number of the rental unit manager per property manager rose significantly, reached the number of unit starts growing by over 50% in June compared with the same period last year. Regarding the financial performance, revenue from our home rental services business reached a record high of RMB5.7 billion in Q2, up 78% year over year, mainly benefiting from the rapid growth in the number of the rental units under management.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

By the end of Q2, we have over 590,000 rental units under our management compared with over 310,000 in the same period of 2024. The contribution margin for home rental service was 8.4%, up 2.5 percentage points year over year and 1.6 percentage points quarter over quarter, largely due to the improved gross profit of our carefully run business. As we continue to refine the carefully run business model based on the expense of the service contract, the revenues from the some newly managed rental units were recorded as net revenues derived from the service fee. For Beihoujia business, our strategic direction is very clear and full. We will never be a developer.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Our commitment to an asset like business model is absolute. At the Chengdu, Beiten and Shanghai, Fengxin, Xincheng project, we will now independently operate any other projects. Our role is to deliver C2M product solution as a marketing service for developers and other partners in industry, and we categorically do not provide any form of fund solutions. In Q2, our revenue from emerging and other services decreased by 50.6% year over year and grew by 23.5% quarter over quarter to RMB432 million. Now moving to other costs and expenses, profitability, cash flow and other financial metrics in Q2.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Our store costs reached RMB762 million, increasing by 11.9% year over year and remaining relatively stable quarter over quarter. The year over year growth was mainly from higher store repair and maintenance costs. Other costs were RMB588 million, up 15.2% year over year and 7.5% sequentially, primarily due to a higher basic maintenance cost of our home rental service business. Gross profit dropped by 12.5% year over year to RMB5.7 billion. Gross margin was 21.9%, down six percentage points year over year, primarily due to the decrease in contribution margin from the in home concession services.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Gross margin increased by 1.2 percentage points sequentially in Q2, mainly due to the greater revenue contribution from the home renovation and furniture business, which has a relatively high contribution margin. In Q2, our GAAP operating expenses totaled 4,600,000,000.0, up 31% year over year and 9.7% sequentially. Notably, G and A expenses were RMB 2,100,000,000.0, remaining flat year over year and increasing by 11% quarter over quarter, primarily attributed to an increase in bad debt provision. Sales and marketing expenses amounted to RMB1.9 billion, remaining relatively stable year over year and growing by 7.1% quarter over quarter, primarily resulting from the increased sales and marketing expenses for home renovation and furniture business. Our R and D expenses were RMB633 million, up 25.6% year over year and 8.5% sequentially, largely driven by a higher personnel cost and the taxing service fee.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

In terms of the profitability, net income from operations totaled RMB 1,060,000,000.00 in Q2, down 47.4% from the same period of last year and up 79.4% sequentially. GAAP operating margin was 4.9%, dropping by 4.5 percentage points from Q2 twenty twenty four and rising by 1.5 percentage points quarter over quarter. Non GAAP income from operations totaled RMB 1,610,000,000.00, falling by 42.9% from the same period last year and increasing by 40% sequentially. Non GAAP operating margin reached 6.2%, down 5.9 percentage points from Q2 twenty twenty four, mainly due to a year over year gross margin decline. Non GAAP operating margin rose by 1.3 percentage points from the previous quarter, mainly attributed to a sequential gross margin improvement.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

GAAP net income totaled RMB1.31 billion in Q2, down 31.2% year over year and up 52.8% quarter over quarter. Non GAAP net income was RMB1.82 billion, falling 32.4 year over year and increasing 30.7% quarter over quarter. Moving to our cash flow and the balance sheet. We generated a net operating cash inflow of RMB826 million in Q2. New home DSO reached fifty one days in Q2, remaining a healthy level.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

On top of spending approximately million dollars for share repurchase and distributing US400 million dollars for twenty twenty four final cash dividend during Q2, Our total cash liquidity, excluding customer deposits payable, remaining at a high level of around RMB70 billion. With our robust cash reserves, we will continue to augment shareholder return throughout active share buyback to further enhance capital allocation and capital operation efficiency. At the end of Q2, we repurchased around $394,000,000 worth of shares this year, which accounted for around 1.7% of the company's total share outstanding at the 2023. We have consistently delivered on our promise to reward shareholders. Since launch of our share repurchase program in September 2022, we have repurchased around $2,000,000,000 in shares as of the June 2025, accounting for about 10.3% of our total share outstanding before the program began.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Today, we are pleased to announce that our Board has approved a function of its King's share repurchase program. The authorization has been increased to billion and the program has been extended to 08/31/2028. Going forward, we will continue to reward our shareholders who have grown with us and share the value we create. Despite fluctuations in macro environment, we have delivered a top line performance to the significantly outperform the market, underpinned by our solid business fundamentals and the diversified portfolio. We are actively driving operational improvement to maximize the company's long term value.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

AI driven refined operations and ecosystem optimization are continuously unleashing the platform's long term potential. Our healthy cash flow and the proactive shareholder return policy demonstrate our firm commitment to long term value provision. Looking ahead, we will join force with our partners and shareholders to seize opportunities and create great value together. Thank you. Next, I would like to turn the call over to our Chairman and CEO, Mr. Stanley Peng. Go ahead, sir.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

Thank you, Paul. For the overview of our updates for the first half of the year, now I'd like to share the reasoning behind our initiatives and address some key interests and concerns. First, I'd like to talk about scale and efficiency. For our housing transaction services business, we have expanded our agent and store network very rapidly over the past few years. In the first half of the year, a large number of new brands, stores and agents joined our network.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

However, we saw some softness in our efficiency indicators in housing transaction services in the second quarter. Our ACN and authentic listing were originally built to solve the key consumer pain points of that time. But as China's real estate market evolved, consumer needs changed dramatically, and our response didn't fully meet those emerging needs. This created an urgent need for us to shift our growth engine from scale to efficiency. The main challenge we clear was clear how would we raise productivity per store and per agent and increase platform efficiency while maintaining the scale of our agent and store network.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

Resolving this will define the next stage of our development. To begin with, I want to stress that scale and efficiency are not a zero sum trade off. Gain efficiency doesn't mean sacrificing scale. Reaching the current scale of our aging store network was no small fit. You would be hard pressed to find a comparable example anywhere in the world of a company that has reached such a large presence in a single city through its own operations.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

So how did we accomplish it? In the past, the resources in the market were high quality assets and transaction security guarantees. That is why we built our ACN and introduced authentic listings and service commitments, integrating online platform innovation, offline business execution and disciplined scientific management to support them by providing what was scarce. We achieved a breakthrough in scale and built a deep competitive moat. So how do we move from scale to efficiency?

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

First, by looking at our history, we need to find out the existing strengths that we can leverage while anchoring new capabilities for today's context second, by responding to consumers' evolving needs in China's changing real estate market. The new scarce resources are accurate market insights to help buyers make the right decisions operational capabilities to help sellers market properties effectively and emotional value that comes from emphasizing with customers. Buyers want professional advice, homeowners need skilled marketing support and in the edge of AI, consumers crave emotional connection. Our task is to create clear pathways to deliver these values. As we seek a new growth paradigm, we start by challenging a paradox.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

Large organizations often sacrifice efficiency to pursue scale. We already have the drives for efficiency improvements. First, the transformation of customer demands acts as a natural form of selection. Second, AI led innovation is delivering real productivity gains as a new means of production. AI is becoming increasingly powerful, capable of replacing traditional means of production.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

These two factors two forces enable us to raise efficiency while maintaining the scale of our agent and store network. Our endgame is clear, but how we can get there is still being defined. Going forward, we will commit our energy and resources to those areas to reshape our growth path. Now I'd like to dive into the logic behind some of the business initiatives we are working on. I will start with the home renovation business.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

As Tom mentioned, our strategy center on community centric operations and our full services premium store model. Our rationale reflects a major emerging trend. It's a shift from a traffic driven man size to a local community centric approach. We have begun piloting this model throughout our first full services home renovation premium store in Beijing. In the premium store, we put in showrooms with our modular renovation products, so potential customers can see real replicable home renovations based on typical local floor plans in a community.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

Our organizational structure has adapt accordingly. Designers, project managers and workers are now dedicated to specific communities, gain knowledge and experience of both properties and customer there. The key here is to deepen our engagement, locking in high value areas and strengthening our presence to to become customers' first choice in the region, ultimately occupying their mindshare. Our goal is to bridge the distance between our services and the users. We want to bring them closer physically, psychologically and in decision making, so we can evolve from a city level renovation service provider to a community level partner whose interests are deeply aligned with the customers specifically.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

By opening our home renovation premium store adjacent to our existing home transaction contract signing centers, we have reduced the physical distance to our customers. This tells our customers we are the nibble right down the street, not a large distant company they have to drive an hour to reach. This builds trust and convenience at the same time. Our community based premium store and community specific service providers are well versed in the floor plans and customer needs, so they can offer tailored home renovation design plans even before customers purchase homes. This shortened the decision making distance for customers.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

Why is it? Because the biggest pain points in traditional home renovation is uncertainty. Customers often don't know the final costs, what their homes will look like or whether the service will be reliable. We solve this with two innovative services, community showroom designs and pre signing measurements and drawing. Community showrooms design say to potential customers, your neighbor's home with the same floor plan as yours has already been renovated.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

With visible results, clear process and proven satisfaction, no guesswork is needed. Our pre signing, measurement and the drawing flips the traditional payments first service letter model. We demonstrate value upfront by providing professional measure, measuring and design renderings before customers commit. This gives people great security and confidence right from the start. Our strategy also reduced the psychological distance for users.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

With our physical store, proven cases and a professional consulting team in the community, our brand is no longer a code impersonal advertisement. It becomes a real tangible presence customers can interact with anytime. The assets we gain from this kind of deepened operational are more powerful than marketing, turning one time transactional customers into long term interactive community users. These are just some of the way we think about our initiatives in the home renovation business. Next, I'd like to talk about how we view the home rental business.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

Tou has already covered much of our progress in this segment, including product interaction and a broader user of AI to boost property management efficiency and streamline other operations. Why do we pursue maximum efficiency in this business? Because under the traditional management model, our carefree rental business inevitably faces this in economics of scale. Once the numbers of units reach a certain level, complexity may rise sharply due to the nonstandard nature of our products, the service provider abilities and scale and sales negotiations. At the same time, the rental business operates on the service fee profit margin, which cannot absorb losses from nonstandard operations These three major challenges from iron triangle that compels us to break through the traditional model and pursue maximum operational efficiency.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

So how do we achieve maximum efficiency? In Phase one, we restructured our organization, moving away from the all in one manager model to six specialized roles fully aligned with the logical of our ACM. This division improved professional skills, reduced service variance and embedded its capabilities into our platform. In Phase two, we optimized our product model, shifting from the high risk nonstandard vacancy prune lease out model to our steady rent pass through model with un unified service fees. This stabilized revenue per property, aligned team goals and removed the obstacles for scaling goals.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

We also digitalized process through our SaaS system, accumulating structural data to fuel AI applications. In Phase three, we began to build intelligence into operations, deploying our AI human model, where AI handles standardization, pricing, auditing and 20 fourseven virtual services. We hope that AI could cover 80% of standardized work, while people can focus on trust, irregular cases and high quality services. The logic tying all of this together is about transforming a non standardized offline industry full of uncertainty into a data and intelligence driven business with more uncertainties. At its core, our system reduced reliance on individual experience, smoothing our fluctuations in service quality and customer experience, efficient operations and consistent service quality creates a gross flywheel reinforcing synergies across the home rental business, home renovation and housing transactions.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

Our vision is to build an AI driven rental platform by combined AI, IoT hardware and operating processes. We hope this platform will give the rental industry a proven and scalable profit model. Meanwhile, the pursuit of operational excellence will inevitably compel our whole organization to develop more efficient operational mechanisms. We also hope it can be an example for the traditional service industry showing how structure, model design and technology can solve issues like non standardized nature and economics of scale. Now moving to our Beihaujia business.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

Why are we pursuing this business? We will not be developers. To be clear, we will not be adopting an asset heavy model. The traditional real estate developer business used to depend on land and money. In today's market, there is a new variable, a customer oriented mindset.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

Because we are so close to our customers, we can collect more customer insights and data to add value to this sort of variable. In the early stage of this business, we ran two self operated projects to test our understanding and to see what value we could create for this third factor. Genuine customer needs are at the very core of our product design and construction. We leverage our robust data and AI powered capabilities, including pricing prediction, unit mix optimization and potential customer insights to deeply understand our targeted customer needs. Our project positioning, product design and construction adheres to this authentic customer needs, including many small details traditional developers might overlook, but that consider critical to long term living experience.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

In our Chengdu Beichen project, we have dedicated meticulous design and construction efforts to over 108 quality driven details that many things minor yet meaningful. This spans from urban integration of architectural design, landscape planning, homecoming journey experiences, interior special planning to AI or IoT enabled sensory system covering sight, sound, smell, touch, consciousness as well as lifestyle scenarios and property services. This product this productization capability is something that's becoming crucial as the market shift to buyers. This means the supply side must offer differentiated, not homogeneous products. And this is how we add value to the industry through the third variable of production beyond land and money.

Yongdong Peng
Yongdong Peng
CEO, Co-Founder, Chairman & Executive Director at KE

Finally, we now stand at a crucial turning point, balancing scale and efficiency, adapting to evolve customer demands and keeping paths with rapid technology development are all issues we must address. We have already started exploring and testing new approaches across our business. While maintaining the scale advantage of our platform, we aim to revamp our service interface through community centric operations, unlock organizational efficiencies with AI, rebuild our product logic with a customer centric mindset and continuously shape new paradigms in the residential service industry. This concludes my prepared remarks for today. Operator, we are now ready to take questions.

Operator

Thank you. Your first question comes from Timothy Zhao from Goldman Sachs. Please go ahead.

Timothy Zhao
Timothy Zhao
Equity Research Analyst at Goldman Sachs

Great. Thank you, management, for taking my question and congrats on the solid results and very excited to hear about your new approach in growing the business in future. I think my question is on the secondary home. I was just wondering if management can provide us any overview on the second quarter secondary home market And how should we expect the trajectory into the second half of this year? What kind of policy tools that we can expect for the rest of this year?

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Thank you, Tim C. Let me first take a brief look on the market in the first half. The total value of the housing transaction nationwide was stable overall.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

The market was off to a good start in Q1, sustaining the recurring momentum from the Q4 of last year. But both number and the price of transaction weakened significantly in this Q2. Divergence also intensified. Based on MBS data, new home sales nationwide dropped by 5.2% year over year in the first half. CRSC research indicates the 1,200 developers saw steeper declines, posting 10.9% in the first half sales, flat that intensified to 14.5% year over year in this Q2.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Market holds up relatively well according to Baker Research Institute in the first half. The total value of online registered transaction for existing homes rose 8.3% year over year. This was driven by a 19% increase in the number of transactions, even though average price fell by 9% both year over year, satisfied momentum slowed in this Q2. The transaction volume growth rate dipped to just 2%, and the number of transactions also slipped to a 12% gain. In June, the number of transactions decreased by 8% year over year, and the home prices dropped further month over month by 1.7%.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Rent has been more stable than home prices. Nationwide, rental yield has been steadily rebounding since the year of 2021. In June, it reached a higher of 2.5%, about 40% higher than its lowest point, creating value support for the home prices. Structurally, the sitting home continued to perform better than new homes. The new home transaction tended to have a large average GFA, lower total price and a higher share of the nearly new existing homes.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Population movement from lower to higher tier cities remained steady, and we continue to see wild differences across cities in terms of the housing price, inventory sell through and the land auction premiums. Our key indicators, like homeowner price adjustment, Prosperity Index and Agent Competence Index, shows a weak market sentiment. The feeding efforts of the new policies, China U. S. Trade tensions, shortened the policy vacuums and the system market correction subject to market momentum, reinforced the expectations for price declines, constrained market recovery.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

All of this adds to a strong downward pressure for the market. Since the July, the market downturn has picked up speed. The number of existing home transactions fell by over five percent month over month, while the prices dropped by 1.5%. New home subscriptions fell by 25% month over month, signaling a period of sharp correction. Looking ahead, the market path will still depend on the pace of the future policies and the supplydemand balance improvements.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Both are key to restore the confidence, which in turn influence buying behavior and the price trends. On June 30, the State Council Executive Meeting once again emphasized the need to double down on stabilizing the market, signaling the potential for stronger policy support. On top of current policies that remain in place, there is still room for new stronger policies aimed at boosting demand and improved supply. On demand side, leading cities have further relaxed the purchase restrictions. Urban renewal, relocation vouchers and purchase subsidy can also unlock potential home buying demand.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

On supply side, high quality housing from the fourth generation houses and nearly new existing home supply enabled the easing of sales restrictions could elevate supply side quality and potentially market sentiment and transaction volume. Proactive policy can help counteract the market downward trend and support a shift towards recovery. Thank you.

Operator

Thank you. Your next question comes from John Lam from UBS. Please go ahead.

John Lam
John Lam
Managing Director at UBS Group

Thank you. So let me translate my question to English. So could management share about under the backdrop of the sector downturn regarding the property sector, is there anything that the management team has done to deliver the offer to the investors? For example, would be like the market share, agents productivity or store productivity? And also how does the management think about the growth strategy for both the agents and as well as the number of store?

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

John, thank you for your question. We hope to outperform the market for a long time to come and have taken steps to achieve that. I will answer your question from two angles: scale and efficiency. First, the continuous expansion of our platform, agent and store network over the past few years has fueled the fast business growth. Going forward, we will slow the pace of our store and agent growth and focus more on efficiency or sustainable development.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

This strategy will vary by city. In places where store network coverage is already high, we will impose higher quality and ROI requirements to onboard new stores. In few cities where store network coverage is still relatively low, we'll continue to make strategic investments. By the end of the year, we expect to keep our store and agent number stable outside of Beijing and Shanghai. In those two cities where agent growth has been strong over the past few years, we are consolidating lower performing stores and phasing out lower performing agents.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

I believe it's time to shift our growth focus from scale to efficiency, starting with deeper operational efforts in the short term. In the long term, we expect the technology to drive the industry wide gains in total factor productivity. In details, we will implement in-depth systematic scientific management operations, particularly by enhancing operations that add competitive dimensions. This involves manager process that influence competitive outcomes, such as focusing on properties, customers and improving collaboration and matching to enhance the competitiveness of individual stores on our platform. And we will also continue to strengthen our key operation initiative, such as our points based store incentive system, regional co governance councils, management of high quality business districts and the secretion of agent role for homeowners and buyers, which were partnered in Shanghai.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

These projects are helping us improve our ecosystem and guide service provider behavior. For example, stores in high quality business district had 1.44 times the average productivity of other stores compared with less than 1.4 times in the 2024. Over the long term, technology will be key to enhancing our efficiency and consistently delivering alpha. We see the advance in large AI module technology, combined with our unique scenarios and the data in residential service sector, have strong potential in reshaping user experience, boosting efficiency, supporting transformation both in the real estate industry. We have established the AI project metrics that develop different AI applications simultaneously for different roles of our C and B on both strategic and operational levels.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Some of these applications have demonstrated good results. One example is our AIGC, marketing and AI driven CRM products that drives customer acquisition and the conversion of agents. We have built an intelligent AIGC marketing agent for real estate agents to support customer acquisition through self media, private domain traffic operations and lead conversion. It offers a full site of tools, help agents create a multimodal content for multichannel customer acquisition, perform better data analysis and lead identification, analyze leads and create icebreaker scripts and generate price trend automatically. Our intelligent AI powered CRM agent strengthened customer acquisition and conversion for all customer facing roles.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Here, I refer to the brokerage agent as brokers to avoid any confusion. For its in home brokers, our ARCM improves customer management through a constantly evolving multi agent system powered by our user data. It gives the brokers personalized guidance ranging from market insight and customer strategy to recommended actions. This input helps brokers understand users' needs, gauge their intentions and support new opportunities. It also automate personalized follow-up tasks to drive transactions.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

By the June 2025, Likeu, one of our AI driven CRM product applications, was in use across 59 cities with over 335,000 brokers. The product penetration rate exceeded 75% across Beijing and Shanghai. In Xi'an, for example, brokers who use Leica's expensive bill achieved a 30% higher conversion rate for final customer mandates and about 20% higher conversion rate for showroom compared with brokers that use the product less frequently. For new homes, we have AI driven CRM agents, Qianji and Qianju, that help new home sales managers improve listing management efficiency and strengthen both marketing and marketing for new home products. On our consumer side, for example, our PuTTING AI online services system now provides real estate market analysis, citywide home search, regional analysis, public listing comparisons, preliminary matching for home listing and agents.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

We began group of testing in May, making Puxin available to select users in 11 cities. In July, its MAU reached 780,000, up 10% from June. Commercial volume grew by 59% and average time spent per user was up 14%. Now supports marketing language, marketing model services. We are also transforming Pugin to allow it to proactively explore customer needs and handle tasks while providing more precise, high quality, instructive answers.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

These enhancements will help users make a decision and move transaction forward. 13 is our first to see trial in offering AI powered services, and we are making extensive efforts to offer more important services to the industry. We believe AI is the most crucial driver for our next generation productivity improvements. We will keep you posted on our internal progress. Thank you.

Operator

Thank you. Your next question comes from Griffin Chan from Citi.

Griffin Chan
Griffin Chan
Analyst at Citi

Please So my question is about how will the property new development model such as companies, property sales or promote of the quality house create new opportunity for Baker, for example, in demand forecast or even for the quality side?

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Thank you, Griffin. This year, supply side policy in real estate have accelerated in push better living quality, especially through high quality homes and moving ready new homes. These measures are being implemented at a fast pace. Residential products that meet new national standards have performed well, and the pilot sales of the moving ready new homes in Xinyang have set a good example.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Surveys show that among the factors holding back buyers' price expectation accounted for nearly 50%, while home suitability accounts for around 20%. As new home products, better meet home upgrades, suitability demands and the system for selling, moving ready new home gradually responds, we expect to see reduced quantity and improved quality supply. This new model set much higher requirements on developers from securing funding and to ensure project returns to understanding upgrade needs, project positioning and pricing and the sell through marketing. This will further highlight the value of Baker being to developers. In terms of the impact of the current mortgage model.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

In the short term, in fourth tier cities, new home products that met the new standard will have a lower brokerage sell through proportion and the commission rate than the products under the old standard. Nevertheless, in most cities, new snare products currently only accounted for around 10% of units, and their presence will push old snare products to reach their brokerage service penetration ratio. As a consequence of this, the overall impact on the brokerage channel sales market is gradually small. When new standard products make up over 30% of the product launch in the city, for example, as I do in Xi'an, the brokerage penetration and commission rate will match those of old standard products. The fast sell through of the new regulation products can boost agents' confidence in new home products, forming a virtuous cycle.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Opportunities for cooperation module upgrades. The industry new model will also drive upgrades in how we work with developer beyond the broker channel sales model. Our goal is to offer the tailored service for managers of full project life cycle based on each developer's needs and project type. This will further highlight the value of Beihau Jia business from its C2M product solution to its integrated onlineoffline marketing services. Pricing forecast capability.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

We leveraged systematic modeling approach, including a subjective factory eliminated pricing model with a rolling review and the calibration mechanism and the comparable price trend analysis based on authenticity in home market data. Our algorithm sets out structural factors so that the prices are comparable both across market and over time. This pricing capability helps developers objectively assess price trends and set accurate prices, avoiding profit loss from the mispricing. When competition in selling moving ready new homes intensifies, it can also improve the product value for money positioning. For example, in Nanjing and Wuhan, new standard products are noticeably more competitive, exhibiting independent price trends.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Bakers' price forecasting capability enable granular segmentation analysis to better characterize some market dynamics. Today, our pricing model already have a fairly high level of accuracy. Regarding the unit mix forecasting capability, we plan machine learning algorithms to model and forecast customers' housing unit needs, drawing on both potential customer behavior and historical transaction data. In June 2025, the compliance rate of our sample simulations continue to rise. Our goal for the year of 2026 is to have a full plot and market coverage to help developers plan unit mixes more accurately, avoid inventory buildup and speed up sales of moving ready new homes.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Regarding the customer insights, we can clearly define and pinpoint potential customers for building projects in specific district along with their needs and profiles. This includes identifying their purchasing power, preferred housing unit type, location, age, purchase purpose, filing size and so on. Using our potential customer model, we can forecast the high priced in chain buyers in the next ninety days for only giving districts and their specific needs. This gives developers the information they need to enhance competitiveness by targeting the right demographic and the design, optimizing products that meet the new standard requirements. At the current stage, we hope to help developers position their products accurately at early stage, reducing the cost of the late stage adjustments and improving product alignment with the market demand.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Looking ahead, we will focus on building customization and community operation capabilities to help developers stand out in the moving ready new home market. By complementing developers with our strength in moving ready new home sell through, regulatory adoption and the bottom line protection, our value to developer will extend from brokerage to product source. Thank you.

Operator

Thank you. Your next question comes from Daniel Chen from JPMorgan. Please go

Daniel Chen
Executive Director - Equity Research at JP Morgan Chase & Co

So my question is on the home renovation and furnishing business. We have seen that the margin improvement has been strong on a year over year basis and revenue growth is healthy. So what's the key growth driver behind? Is there further room for cost optimization? Meanwhile, are we going to expand the city coverage?

Daniel Chen
Executive Director - Equity Research at JP Morgan Chase & Co

Or are we going to further optimize our store network?

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

You, Daniel. The home renovation furniture business maintained a relatively high growth rate in the first half of this year. SKU wise, the revenue reached RMB7.51 billion, up 16.5% year over year. On the profitability front, the segment profit margin was 32.3% in the first half of the year, rising by 1.3 percentage points from the same period of last year.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Operational efficiency also improved significantly at the city level in Q2. Operational efficiency enhancement is the focus of our home renovation business this year. We have implemented a series of initiatives aimed at enhancing fundamentals like our product and delivery capability, streamlining our organizational structure and unconfined management and operational efficiency. These efforts have led to continuous improvement in our performance. Here, I'd like to elaborate.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

In terms of cost, the home renovation business expense mainly include material and labor costs. For materials, we cut procurement costs by consolidating brands and SKUs and moving to centralized procurement. By leveraging customer insight to streamline brand selection and SKU count, we have consolidated procurement to three or four brands for most category and achieved significant SKU reduction. Centralized procurement rate for primary and auxiliary materials reached more than 60% in Q2 twenty twenty five compared with over 20% in the same period of last year. This increased procurement value volume per SKU in each category has led to a significant decrease in the unit price of some products that were awarded contracts.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

On the labor side, we have improved service providers' work efficiency by optimizing our order dispatching rules, enhancing the system order distribution capability and focusing project manager service area on specific business histories. Also, we are allocating more resources to high quality service providers. In Q2 twenty twenty five, average monthly order intake per professional project manager was more than double last year's average, driving significant improvement in both their efficiency and income. In terms of the sales and marketing expenses, this mainly covers the sales personnel cost for designers and customer managers and store and brokerage channel costs. As a percentage of revenue, sales personnel cost for designers and other roles significantly decreased year over year, primarily due to our agile transformation of the home renovation business organization structure.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

We streamlined the design team, optimized the overall home renovation business workflow, eliminated certain roles in sales process and shifted the function towards agents. Our digital tools, such as AI proposal and lightweight beam, have significantly improved operational efficiency in the sales process. The average monthly order volume per designers has increased from around 0.8 orders last year to over 1.2 orders in the second quarter of this year. To optimize store cost, we closed some underperforming large stores and the pallor's small sized premium home renovation store near our home transaction country standing center, where we integrated master design prototype showrooms. We hope to strengthen the synergy between our housing transaction business and the new initiatives, reducing store costs and improving sales per unit area while exploring a new one stop full service home renovation model.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Supporting expenses, we also made some structural enhancements, responding service scope of the middle and the back office personnel. The average number of orders supported by each middle and back office personnel increased by 70% year over year in this Q2. This initiative enable us to achieve better operational results while continuously improving the service quality. In Q2 this year, the customer compliance rate of our home renovation and furniture business dropped to below 10% from over 25% in the same period last year. We have seen a significant improvement the unit economies at the city level.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

In Beijing area, revenue increased from over 700,000,000 yuan in the 2023 to 1,150,000,000.00 yuan in the 2024 and exceeded 1,500,000,000.0 yuan in the first half of this year, representing a year over year growth rate of 30%. The gross profit margin in the 2023, 2024 and 2025 was 35%, 36.136.3%, respectively. So operational margin at the city level rose from around 5% in the 2023 to over 11% in the same period of 2025. The remarkable improvement in the model cities UE has boosted our confidence in the business' continuous operation and the future success. There are still plenty of room for the operational efficiency improvements.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Moving forward, our focus will shift from organizational structure optimization this year to implementing ongoing innovation in business models, products and technology. Thank you.

Operator

Thank you. Your next question comes from Jia Dan Zhang from CICC. Please

Xiaodan Zhang
Equity Research Analyst at China International Capital Corporation (CICC)

So thanks management for taking my questions. And we know that since its launch in the 2023, Beihao Zai has brought a number of projects to the market. And drawing on operational experience accumulated over the past year or so, could management share the future plans for Beihaojia? And specifically, what business model will it adopt? And will there be an upper limit on the investment budget for individual projects? Thank you.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Thank you, Sophie. We have been very clear about our Beihaujia strategic direction. We are adamant about not being developers. In terms of business models, we are dedicated to asset light business model. Except for our Chengdu Financial City project and the Shanghai Fengxin Xinjiang project, we will not independently operate other projects.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

The C2M model do not provide funding solutions. We will continue to explore platform model that offers full front to back end service for developers, construction contractors, property owners and asset partners, including product solutions and marketing services. Our product solutions cover C2M product positioning and the design plans baked by AI and big data. Our marketing services are integrated onlineoffline promotional service for more efficient customer acquisition. Regarding the setup capital, which I know is concerned from all of you, we will set a strict limit on the peak total investment from our own funds.

Tao Xu
Tao Xu
Executive Director and Chief Financial Officer at KE

Based on the amount already deployed by group as of June 30, we will invest more than RMB1 billion in additional self owned funds. After the exit of two proprietary development projects in Chengdu and Shanghai, The limit of our capital occupation for this business will be reduced by the investment amount of these two projects, further lowering our aggregate self owned funding cap. Thank you.

Operator

Thank you. We are now approaching the end of the conference call. I will now turn the call over to your speaker host today, Ms. Seating Li, for closing

Siting Li
Siting Li
IR - Director at KE

Thank you once again for joining us today. If you have any further questions, please feel free to contact Beike's Investor Relations team through the contact information provided on our website. This concludes today's call, and we look forward to speaking with you again next quarter. Thank you, and goodbye.

Executives
    • Siting Li
      Siting Li
      IR - Director
    • Tao Xu
      Tao Xu
      Executive Director and Chief Financial Officer
    • Yongdong Peng
      Yongdong Peng
      CEO, Co-Founder, Chairman & Executive Director
Analysts
    • Timothy Zhao
      Equity Research Analyst at Goldman Sachs
    • John Lam
      Managing Director at UBS Group
    • Griffin Chan
      Analyst at Citi
    • Daniel Chen
      Executive Director - Equity Research at JP Morgan Chase & Co
    • Xiaodan Zhang
      Equity Research Analyst at China International Capital Corporation (CICC)
Powered by Quartr