ZTO Express (Cayman) Q2 2026 Earnings Call Transcript

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Provided by Quartr
August 18, 2026

Key Takeaways

  • Positive Sentiment: Strong second-quarter performance: Parcel volume increased 6.5% year over year to approximately 10.9 billion, market share rose 0.4 percentage points, and adjusted net income grew 50.3% to CNY 3.1 billion. Results benefited partly from a CNY 344.3 million tax refund.
  • Positive Sentiment: Cost efficiency and margins improved despite higher fuel prices. Combined transportation and sorting costs declined CNY 0.02 per parcel, while operating margin expanded 1.3 percentage points to 22.2%; management expects core transit costs to fall about CNY 0.03 for the full year.
  • Positive Sentiment: Higher-value businesses are strengthening profitability. Retail parcel volume grew 47%, including reverse-logistics volume of roughly 9.8 million parcels per day, and management said reverse parcels still generate higher per-parcel profit than standard e-commerce shipments.
  • Positive Sentiment: AI and digitization are becoming major efficiency drivers. ZTO said AI-based routing, machine vision, data analysis and customer service reduced transportation costs, improved unloading efficiency, cut management analysis time by more than 90%, and raised consumer satisfaction to nearly 90%.
  • Negative Sentiment: Management lowered or set full-year parcel-volume growth guidance at 6%–10%, equivalent to 40.83–42.37 billion parcels, while warning that elevated oil prices could add CNY 0.01–0.02 per parcel to transportation costs in the second half. Gradual implementation of broader social-insurance requirements for couriers is also expected to increase end-to-end costs in the near term.
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Earnings Conference Call
ZTO Express (Cayman) Q2 2026
00:00 / 00:00

Transcript Sections

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Operator

Please note that this event is being recorded. I would now like to turn the conference over to Ms. Sophie Li, Company Secretary. Please go ahead.

Sophie Li
Sophie Li
Company Secretary and Director of Capital Markets at ZTO Express

Thank you, Chuck. Hello everyone, and thank you for joining us today. The company's results and investor relations presentation were released earlier today and are available on the company's IR website at ir.zto.com. On the call today from ZTO are Mr. Meisong Lai, Chairman and Chief Executive Officer, and Ms. Huiping Yan, Chief Financial Officer. Mr. Lai will give a brief overview of the company's business operations and highlights, followed by Ms. Yan, who will go through the financials and guidance. They will both be available to answer your questions during the Q&A session that follows.

Sophie Li
Sophie Li
Company Secretary and Director of Capital Markets at ZTO Express

I remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions, and they relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements.

Sophie Li
Sophie Li
Company Secretary and Director of Capital Markets at ZTO Express

Further information regarding this and other risks, uncertainties and factors is included in the company's filings with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise, except as required under law. It is now my pleasure to introduce Mr. Meisong Lai. Mr. Lai will read through his prepared remarks in their entirety in Chinese before I translate for him in English. Mason, please.

Meisong Lai
Meisong Lai
Chairman and CEO at ZTO Express

[Non-English content]

Translator

Thank you, Chairman Lai. Now let me do the translation first. Hello everyone. Thank you for joining today's conference call. In the second quarter of 2026, the express delivery industry grew 4.2% in volume year over year. As anti-monopoly policies continue to gain traction, competition became increasingly rational and the overall industry pricing and profitability experienced a steady recovery.

Translator

The industry is fundamentally shifting from its previous singular focus on scale and price wars towards greater emphasis on value creation, network stability, and tangible benefits for frontline partners. ZTO made solid progress across key operating metrics in the second quarter. Parcel volume reached 10.49 billion, up 6.5% year over year, with market share expanding by 0.4 percentage points, entrenching our industry leadership position. Adjusted net income was CNY 3.09 billion, up 50.3% year over year, reaffirming the resilience of our profitability.

Translator

Retail parcel volume grew 47% year over year, as our higher value and diversifying value-added services continued to scale up, increasing revenue diversity for our network outlets. While facing temporary cost pressures caused by oil price fluctuations during the quarter, our end-to-end digitization that intelligence transformation, combined with refined operational execution, enabled us to lower the combined unit cost of transportation and sorting by CNY 0.02 over last year, preserving cost competitiveness that were forged over the years.

Translator

ZTO's second quarter performance is the outcome of synergies across five core aspects, which are productive policy guidance, unwavering long-term strategic focus, solidarity, and the concerted efforts by network-wide partners, continuous increases in operational efficiency, and improving product structure. It also owes much to the hard-won contributions by thousands of outlets, operators, and frontline delivery workers network-wide. First, regulatory direction remains clear, and anti-involution policies were being consistently implemented.

Translator

ZTO stands firm to safeguard a healthy competitive order, balances the interests of headquarters, franchisees, and frontline practitioners, and commits to fostering a sustainable eco-network with equitable shares of benefits for all stakeholders. Second, the company maintains a long-term mindset that discourages impermanent short-term scale gains, and continuously consolidates foundational strengths for its mid- and long-term development.

Translator

We regard steady profit increases for network outlets, sustained earnings growth for frontline careers, and healthy corporate development as our core operating objective, and we continue to deepen our initiatives surrounding three key priorities: market share expansion, service quality upgrading, and end-to-end cost reduction. Third, the entire network will be unified with strategic alignment and increasingly advocate fairness and transparency in network policy-making and implementation.

Translator

We have an objective view on regional economic disparities and have further streamlined grassroots feedback by tailoring incentive schemes and support resources to match all its actual operating conditions. We have further optimized the profit distribution mechanisms at the ground level through performance-based remuneration. Hence, steadily elevated the overall profitability and operational stability of the entire network. Fourth, we are extending our know-how for efficiency gains to outlets.

Translator

We have built a standardized and ongoing operational data analytical system to enable performance visibility and traceability. We continue to enhance last-mile ops efficiencies through direct linkages, reducing organizational layers and expand profit margins. Fifth, we continue to enhance our tiered high-value business portfolio by penetrating deeper into retail parcels and reverse logistics, which optimize the mix between standard e-commerce parcels and value-added services. This also hedges against the potential single-source fluctuations and strengthens the resilience of network profitability. China's express delivery industry is progressing from high-quantity competition to high-quality and sustainable development. Focusing on the strategic principle of achieving high-quality service, high-quality market share, and low end-to-end cost. ZTO will further our tasks in the following five key areas. First, continue to safeguard an environment of fair competition.

Translator

We will adhere to regulatory guidance and take on a leadership role in maintaining the industry's overall competitive order. Second, improve integrated competitiveness in service, market share, and cost. On service, we will focus on door-to-door capabilities to build a clearly differentiated brand awareness. On market share, we will refine customer segmentation, increasing the proportion of small to medium-sized customers and value-added services.

Translator

On cost, we will establish benchmarks for comparable outlets and pass through the what and how of efficiency gains to the end nodes. Third, improve consistency of managerial capabilities across the network. We will standardize policies and customize improvement plans for loss-making outlets. By pushing down digitalization efforts, we will empower franchisee partners to reduce costs and grow revenue. We will encourage top-performing outlets to scale up and support struggling outlets in overcoming adversity to foster an eco-network of mutual benefit and shared prosperity.

Translator

Fourth, deepen digitization design and implementation. We will roll out hands-on training across the network, guide outlets in effectively utilizing tools to narrow gaps in volume, cost, and service. We will also proactively align demand and capacity through careful planning. Fifth, ensure comprehensive safety management and protect grassroots rights. Regular safety inspections will be conducted to identify and eliminate hazards. Enforce accountability at all levels, and establish strict compliance boundaries such as safety, labor practice, and taxation. We will continue to refine courier incentive and compensation schemes, safeguarding their legitimate rights and interests.

Translator

Over the past two decades, we have overcome adversity and weathered intense competition. We have always been clear-minded that scale is merely an outcome, and quality is what truly matters. We are committed to our development principle that integrates service quality, market share, and reasonable profitability.

Translator

We practice our philosophy of shared success, and we firmly believe that the headquarters, outlets, and couriers are interdependent parts of that unity. Only when all parties collectively improve operational efficiency and increase shares of benefits, the entire network can then achieve lasting stability and long-term success. Guided by our mission of bringing happiness to more people through our services, supported by a solid infrastructure foundation and sound financial strength, we will continue to harness digitization efficiency, maintain and strengthen cohesiveness and stability of our partner network.

Translator

We are confident and capable of achieving steady, sustainable growth across the entire network, navigating through industry or economic cycles, and creating lasting value for industry participants and our investors. Now, let's invite Ms. Yan to present the financial results and guidance.

Huiping Yan
Huiping Yan
CFO at ZTO Express

Thank you, Chairman Lai and Sophie. Hello to everyone on the call. As I go through our financials, please note that unless specifically mentioned, all numbers quoted are in CNY and percentage changes refer to year-over-year comparisons. Detailed information on our financial performance, unit economics, and cash flow are posted on our website, and I'll go through some of the highlights here. In the second quarter, our long-term profitable growth strategy delivered solid results. Anti-involution regulatory efforts and our resilient franchise network continue to drive steady market share expansion with industry-leading efficiency. Our parcel volume grew 6.5% to 10.49 billion, with a 0.4-point Increase in the market share. Total revenue increased 23% to CNY 14.5 billion, while operating income rose 30.4% to CNY 3.23 billion.

Huiping Yan
Huiping Yan
CFO at ZTO Express

Adjusted net income grew 50.3% to CNY 3.1 billion, benefiting from a CNY 344.3 million tax refund as our wholly owned subsidiary qualified for a 10% preferential tax rate for tax year 2025. ASP for our core express delivery rose CNY 0.19 or increased 15.5%, driven by a CNY 0.17 positive impact derived mainly from increased KA volume mix, which included higher value reverse logistics and a CNY 0.02 increase from higher average weight per parcel. Total cost of revenue was CNY 10.8 billion, which increased 21.7%. Overall unit costs for the core express delivery business increased 14.6% or CNY 0.12, which includes KA cost increase of CNY 0.14 that was consistent with the strategic increase in KA volume. Despite cost pressures stemming from the rise of oil prices, our combined unit sorting and transportation costs decreased by 3.2% or CNY 0.02, thanks to digitization and lean operations.

Huiping Yan
Huiping Yan
CFO at ZTO Express

Specifically, unit cost of line haul transportation decreased by 3.7% to CNY 0.32, reflecting optimized route planning and enhanced load rate efficiency. Unit sorting costs decreased 2.6% to CNY 0.24, benefiting from continued improvements in labor and automation productivity. Gross profit increased 26.8% to CNY 3.7 billion, and gross profit margin rate increased by 0.8 points to 25.7%. SG&A expenses excluding SBC decreased 10.5% to CNY 555.5 million. SG&A excluding SBC as a percentage of revenue declined to 3.8%, reflecting strong corporate cost efficiency.

Huiping Yan
Huiping Yan
CFO at ZTO Express

Income from operations increased 30.4% to CNY 3.2 billion, and associated margin increased 1.3 points to 22.2%. Operating cash flow totaled CNY 4.6 billion for the quarter, primarily attributable to higher operating profits, lower financing receivables, and interest income realized upon maturities of long-term financial products and favorable terms on sizable few payables due for payment in the next quarter. Adjusted EBITDA increased 20% to CNY 4.2 billion.

Huiping Yan
Huiping Yan
CFO at ZTO Express

Capital expenditure for second quarter totaled CNY 952 million, and we anticipate the annual CapEx in 2026 to be around CNY 6 billion. Moving on to our guidance. Considering the current economic conditions and anticipated industry parcel volume growth, we have updated our full-year parcel volume growth guidance to 6%-10% year-over-year, representing a parcel volume range of 40.83 billion to 42.37 billion. These estimates reflect management's current preliminary view and are subject to change. This concludes our prepared remarks. Operator, please open the line for questions. Thank you.

Operator

Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. We ask that you please limit yourself to two questions. At this time, we'll pause momentarily to assemble our roster. The first question will come from Qianlei Fan with Morgan Stanley. Please go ahead. Pardon me. We have Mr. Steve Qiu with Goldman Sachs as our first questioner. Please go ahead.

Steve Qiu
Steve Qiu
Analyst at Goldman Sachs

[Non-English content]

Steve Qiu
Steve Qiu
Analyst at Goldman Sachs

I'd like to ask a question about AI-driven efficiency gains. I've noticed that a company has deployed 3D digital twin and machine vision technology at its loading hubs, an upgrade with customer service and network outlets, as well as accelerated regional management and decision-making. Could you share ZTO's high-level strategic thinking on digitalization as well as AI, as well as your thoughts on the specific use cases in the operational workflows and where it's been implemented? Thank you.

Meisong Lai
Meisong Lai
Chairman and CEO at ZTO Express

[Non-English content]

Translator

Thank you, chairman. Now let me translate for ZTO. The core value of the AI lies in leveraging data from over 100 million daily parcels and our matured network operations to continuously optimize network-wide costs. It creates a self-reinforcing loop of lower cost and higher efficiency, building digital technological mode that is not easily replicated. Today, AI runs through the entire chain from pickup to delivery and has translated into tangible gains. Specifically, as following: on the hub side or the super sorting center side. In transportation, our proprietary intelligent routing and dispatch system now covers six most common scenarios. By optimizing routes, it unlocks idle capacity and drives improvements in load rates and shortens transit time. Route-coordinated parcel volume grew 120% year-over-year and stranded parcels fell 15%.

Translator

In the first half of 2026, the cost saving achieved by AI in transportation accounted for about 10% of the total reduction in transportation cost. In transit, our smart park system now covers all transit centers nationwide. Machine vision monitors operations in real time and flags 28 types of anomalies from congestion to missorting. Working with on-site alerts and 3D visualization dashboards, it closes the loop from detection to resolution. Unloading efficiency rose 4% and anomaly traceability coverage reached 88.4%. In management, our proprietary data agent now serves more than 2,000 managers at headquarters and provincial offices, fixing the problem of static reports and after-the-fact manual data pulls, thus cutting the time for routing analysis by more than 90%. On the outlet side, in picking up and delivery, our precision address system now covers more than 250,000 frontline couriers with building-level location accuracy of 99.98%.

Translator

It supports dispatch applications from order grouping to route optimization, and its accuracy keeps improving as business volumes continue to grow. On the AI customer service front, more than 90% of merchant inquiries and ticketing are now resolved through AI self-service, effectively lowering labor costs. On the consumer side, with AI stepping in earlier, customer satisfaction has risen from 80% to nearly 90%. On a management front, building on the data agent, we now push standardized best practice playbooks to more than 6,000 outlets across our network with a response rate of 88%, narrowing the capability gap across outlets and enabling proven management practice to be replicated in scale. AI has become a core strategic driver for ZTO.

Translator

Looking ahead, we will continue to deepen the integration of AI across our operations, covering technological breakthroughs, in converting technical breakthroughs into gains in both efficiency and service quality to further solidify our market leadership.

Operator

The next question will come from Qianlei Fan with Morgan Stanley. Please go ahead.

Qianlei Fan
Qianlei Fan
Analyst at Morgan Stanley

Thank you, operator.

Qianlei Fan
Qianlei Fan
Analyst at Morgan Stanley

[Non-English content]

Qianlei Fan
Qianlei Fan
Analyst at Morgan Stanley

Thank you, management, for taking my questions, and congratulations on a very strong profit growth in the quarter. I have two questions. The first question is about the reverse logistics parcels. It is encouraging to see that the retail parcels have contributed a solid foundation for our profit growth. Just wondering in terms of daily volume, where are we now? What is the year implied year-on-year growth? Do we have any targets towards the peak season of this year and in next year? The second question is about the social insurance. In this year, we start to hear more discussion about the full social insurance contribution implementation gradually pushed by regulators. Wondering what is the potential impacts on our costs and operations. Specifically, historically, we have seen that industry-wide cost inflation could be passed through by industry-wide price hikes.

Qianlei Fan
Qianlei Fan
Analyst at Morgan Stanley

Do you think if there are any cost inflation related with this full social insurance contribution, the industry has opportunities to pass that cost inflation through? Thank you.

Meisong Lai
Meisong Lai
Chairman and CEO at ZTO Express

[Non-English content]

Translator

Thank you very much for your question. Let me translate for our chairman. The rapid growth of our retail parcel business, particularly reverse logistic parcels, is a key component of ZTO's high-quality strategy and product diversification. It demonstrates our leadership in customer service and quality as well as the stability of our network. In the second quarter, average daily retail parcel volume exceeded 11.87 million, of which return parcels averaged approximately 9.8 million each day, increased approximately 80% year over year. Although the price of reverse logistic parcels has declined from the past as market competition continues, we expect per-parcel profitability in this business to continue to improve, supported by economies of scale and refined cost control. At present, reverse logistic parcels still generates higher per-parcel profit than standardized e-commerce parcels, effectively lifting the company's overall per-parcel profitability. Next year, again, our strategy is very clear.

Translator

We are seeking high-quality services, high-quality market share, and we aim to improve our capability for door-to-door services. We are focusing closely on the quality of our network earnings as well as our couriers income increases. The reverse parcel volume will continue to be a main driver for our product diversification as well as the profitability gain across the whole network.

Meisong Lai
Meisong Lai
Chairman and CEO at ZTO Express

[Non-English content]

Sophie Li
Sophie Li
Company Secretary and Director of Capital Markets at ZTO Express

Let me translate and supplement where needed. With the critical data sharing system being implemented, regulators plan to advance a multi-tiered social security system for flex work arrangements, including express delivery personnel. Together with anti-monopoly policies, these efforts aim to standardize employment practice, protect frontline workers rights and interests, and drive high quality industry development, which are consistent with ZTO's core beliefs. The policy adopts an approach of a stepped rollout. Social insurance contributions are being enforced for personnel with formal employment relationships, whereas occupational injury protection is being expanded for flexible workers. From the beginning, the company have consistently upheld the core philosophy of shared success, placing great importance on protecting the interests of our network partners and frontline workers.

Sophie Li
Sophie Li
Company Secretary and Director of Capital Markets at ZTO Express

In our own workforce management, we have always adhered to industry practice boundaries, steadily improving our employment system, and encourage our network partners to provide legitimate rights of the frontline workers. We welcome the regulators guidance on Social Security contributions for couriers addressing, and also are actively encouraging and helping our network partners to address challenges for unique flex work arrangements. While the rollout of standardized Social Security initiatives will inevitably bring about end-to-end cost increases in the foreseeable future. Over the long run, complete coverage will strengthen network stability, reduce courier turnover, and further reinforce last-mile service quality. ZTO will continue to stay at the forefront of the industry as it moves toward higher quality development for the long term. That answers your questions. Thank you.

Operator

The next question will come from Aaron Luo with UBS. Please go ahead.

Aaron Luo
Aaron Luo
Analyst at UBS

[Non-English content]

Aaron Luo
Aaron Luo
Analyst at UBS

Let me translate for myself. Thanks Mr. Lai, Ms. Yan, and Sophie for taking my questions. The first one is regarding our new full-year volume guidance. I would like to seek a bit more of your insights on the industry's second-half growth outlook and our company's strategic plan for the second half. On the cost side, do we have any cost guidance for the future? What is the sensitivity of our costs to oil prices? Thank you so much.

Meisong Lai
Meisong Lai
Chairman and CEO at ZTO Express

[Non-English content]

Translator

Now let me translate for the first part of the question. As the anti-monopoly policy continued to take effect in the first half of the year, the express delivery industry has undergone a period of adjustment and has gradually shifted away from price-led scale expansion to quality-driven development, leveraging operating efficiency. Looking ahead, the industry's transformation will continue to deepen, focusing more on improvements in service quality and operational efficiency. We anticipate the parcel volume growth for the entire industry to be at stable or steady level.

Translator

As industry shifts towards high-quality development, the company remains committed to a sustainable long-term mindset rather than seeking short-term scale expansion. For us, the core of high-quality development comes down to increasing profitability of outlets, rising income by couriers and healthy increasing profit for the company. Strategically, we will continue to focus on these priorities, growing effective market share, building differentiated service capabilities, and advancing end-to-end lean operations. While solidifying our leadership in parcel volume, we will place greater emphasis on winning high-quality market share and maintain sound profitability, continually showing up our foundation for competitive growth for medium to long-term. If I may supplement, when you ask about the volume and price, again, we will be watched closely to what the industry's development is as our goal continues to be growing and expanding our market share leadership.

Meisong Lai
Meisong Lai
Chairman and CEO at ZTO Express

[Non-English content]

Translator

The cost performance in the second quarter, due to rising fuel prices, which put pressure on transportation cost and impacted per parcel transportation cost by approximately CNY 0.02. Thanks to continued implementation of efficiency gain initiatives, which includes smart tool, combined unit transportation cost and sorting cost declined by CNY 0.02. Specifically on the transportation cost, in the second quarter, transportation cost per parcel was CNY 0.32, down CNY 0.01 year-over-year. The rising fuel cost added roughly about CNY 0.02 to cost per parcel. On the cost reduction front, first, we further implemented digitized smart tools using our proprietary intelligent dispatch system to forecast shipment flows in advance, optimize shift scheduling. We find low-capacity structures in route planning in real time, while making prudent use of assisted driving system to shorten transit times duration and effectively lower cost.

Translator

Second, we refined our load rate metrics and assessment mechanism, rolled out tiered loading rate incentives. Third, we continue to strengthen fleet management, consistently refining standardized cost model as we use it as a benchmark to incentivize our drivers. Fuel cost impact on the transportation cost. Diesel cost, everybody knows that it rose around 24% in the second quarter, which put pressure on line haul transportation costs. Looking into the second half, the global environment remains highly uncertain. Unit oil price pull back meaningfully. We expect the oil price are not necessarily going to pull back meaningfully. So we expect fuel price continue to weigh on per-parcel transportation cost by about CNY 0.01-CNY 0.02.

Translator

To counter the fuel price volatility, we are leveraging our opportunist reserve of oil at a lower cost and to offset and then also continue to expand our fleet of natural gas trucks, as well as actively exploring the deployment of electrical vehicles that is suitable for express delivery operations. To be exact, because the first half and particularly second quarter, weight per parcel has increased, so therefore really the total cost has increased for transportation. In that sense, we actually achieved more than 10% cost efficiency on transportation. Sorting cost in the second quarter was CNY 0.24, down CNY 0.01 year-over-year. On the equipment front, we steadily increased level of automation with smart solutions for sorting equipment and also upgrading old equipment. Through real-time monitoring and early warning, we improved equipment utilization.

Translator

On the labor cost front, we optimized shift scheduling through station-based staffing forecast and recapped procedures, so therefore enforced accountability at the individual level for clear rewards and penalties, thereby improving labor productivity. Cost reduction targets. We expect our core costs in transit operations to decline by CNY 0.03 for the full year. Beyond transit operations, we are putting greater emphasis on end-to-end cost reduction. By leveraging digital tools to strengthen outlet operations, we are confident to improve service quality and reduce overall cost to help with our end-to-end total cost reduction for the entire year. Hope that answers your question.

Aaron Luo
Aaron Luo
Analyst at UBS

Thank you so much.

Sophie Li
Sophie Li
Company Secretary and Director of Capital Markets at ZTO Express

I believe this takes us to the bottom of the hour, and we thank everybody for joining us for the call. We look forward to have further conversations with you, to share with you our view and on-the-ground practice as we move forward towards higher quality development and sustainable return for express delivery participants as well as our shareholders. Thank you very much.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Analysts
    • Sophie Li
      Company Secretary and Director of Capital Markets at ZTO Express
    • Meisong Lai
      Chairman and CEO at ZTO Express
    • Translator
    • Huiping Yan
      CFO at ZTO Express
    • Steve Qiu
      Analyst at Goldman Sachs
    • Qianlei Fan
      Analyst at Morgan Stanley
    • Aaron Luo
      Analyst at UBS
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