KE Q1 Earnings Call Highlights

Key Points

• KE Holdings posted a sharp profit rebound in Q1 even as revenue and transaction volume fell, with non-GAAP operating profit up 45.1% and GAAP net income up 46.7% year over year. Management credited cost cuts, operating efficiency, and better margins rather than a cyclical recovery.
• Margins improved significantly across the business, led by existing-home services, where contribution margin hit 41.3% and gross margin rose to 24.1%. Operating expenses dropped 22.3% year over year, showing aggressive cost control.
• The company highlighted a strategic shift toward higher-quality housing decisions supported by AI and more standardized services, while maintaining confidence in full-year margin expansion. Management also said it continued share buybacks and held about CNY 65.6 billion in cash excluding customer deposits.

KE NYSE: BEKE reported a sharp improvement in first-quarter profitability despite lower transaction volume and revenue, as management said cost controls, operating efficiency gains and higher contribution margins across core businesses helped offset a softer year-over-year property market comparison.

On the company’s first-quarter 2026 earnings call, Tao Xu, executive director and chief financial officer, said non-GAAP operating profit rose 45.1% year-over-year to CNY 1.67 billion, while non-GAAP operating margin reached 8.8%, the highest level in seven quarters. GAAP net income increased 46.7% year-over-year to CNY 1.26 billion, and non-GAAP net income rose 15.7% to CNY 1.61 billion.

Xu said the quarter reflected “structural improvement rather than a cyclical one,” citing cost structure optimization in 2025, more refined management and technology-driven productivity improvements. Total gross transaction value, or GTV, declined 15.6% year-over-year to CNY 711.2 billion, and revenue fell 19% to CNY 18.9 billion, reflecting a high base in the prior-year period.

Margins Improve as Revenue Declines

KE’s gross margin expanded to 24.1%, up 3.5 percentage points from a year earlier and 2.7 percentage points sequentially. Xu attributed the year-over-year improvement to higher contribution from rental services, a more favorable mix toward existing-home transactions and improved contribution margin in existing-home services.

Total GAAP operating expenses fell 22.3% year-over-year to CNY 3.3 billion, which Xu said was the lowest level in nearly three years. Sales and marketing expenses declined 39%, general and administrative expenses fell 8.6%, and research and development expenses decreased 15.6%.

Xu said the company spent approximately $195 million on share repurchases during the quarter, which he said reflected both shareholder returns and management’s confidence in the company’s medium- to long-term development. He also said KE’s broader cash balances, excluding customer deposits, stood at approximately CNY 65.6 billion.

Existing-Home Business Shows Resilience

Existing-home transaction services remained KE’s largest business line by GTV. First-quarter GTV in the segment was CNY 534.4 billion, down 7.9% year-over-year but up 10.9% quarter-over-quarter. Revenue from existing-home transaction services was CNY 6.1 billion, down 10.7% year-over-year and up 12.7% sequentially.

Xu said the segment’s contribution margin reached 41.3%, the highest level in seven quarters, driven by lower fixed labor costs following optimization of Lianjia’s agent and store scale and improved organizational efficiency.

Stanley Peng, co-founder, chairman and chief executive officer, said the existing-home market saw a “noticeable spring rebound” after Chinese New Year, with improved transaction momentum, buyer decisiveness and seller sentiment. He cautioned, however, that the market remains in a phase of structural adjustment and confidence rebuilding.

In response to a question from Jefferies analyst Thomas Chong, Xu said the latest recovery differed from prior rebounds because it was not solely driven by short-term policy stimulus, because prices had shown signs of stabilization, and because seller expectations and supply mix were improving. He said existing-home transactions on KE’s platform grew 12% year-over-year in the first quarter, while March set a new monthly record, up 21% year-over-year.

New Homes, Renovation and Rental Businesses

New-home transaction services saw a steeper year-over-year decline. GTV fell 37.2% to CNY 145.9 billion, while revenue declined 37% to CNY 5.1 billion. Xu said the segment’s contribution margin rose 2.3 percentage points year-over-year to 25.7%, supported by cost structure optimization and refined operations.

Home renovation and furnishing revenue fell 20.6% year-over-year to CNY 2.3 billion. Xu said the decline reflected KE’s proactive exit from low-quality customer acquisition channels and cities with weaker unit economics. The segment’s contribution margin improved 3.6 percentage points year-over-year to 36.2%, helped by material cost savings through centralized purchasing and tender-based local procurement, as well as improved labor assignment efficiency.

Peng said the company is prioritizing profitability, standardization, product capabilities and delivery quality in the renovation business rather than near-term scale. In response to Goldman Sachs analyst Timothy Zhao, Peng said revenue had been affected by business adjustments, reduced exposure in certain cities and weaker market demand, but added that underlying capabilities were improving.

Home rental services revenue slipped 1.5% year-over-year to CNY 5 billion. Xu said the decline was tied to the continued shift of Carefree Rent toward a lighter, lower-risk product model, with more units recognized on a net revenue basis. Managed rental units exceeded 740,000 at the end of the quarter, up about 47% year-over-year. The rental services contribution margin reached 14.8%, marking the sixth consecutive quarter of sequential improvement.

Strategic Shift Toward Decision Support

Peng used much of the call to describe KE’s strategic and organizational restructuring, saying the housing services industry is moving away from a listings-driven model toward one centered on decision support. He said consumers increasingly need help evaluating whether to buy, where to buy, how to price a property and how to make trade-offs involving school districts, commute, comfort and asset quality.

“KE Holdings is evolving from a platform that organizes transactions into one that supports higher quality housing decisions,” Peng said through the call’s English interpretation.

Peng said the company is sending managers back to the front lines, improving agent specialization and turning non-standard services into more standardized products. He cited “Commit to Sell,” a Beijing pilot designed to help sellers set reserve prices online and allow buyers to bid with deposits, as one example of a product intended to improve price discovery and transaction efficiency.

Peng said Commit to Sell remains in an early pilot stage with a small sample size, but early signs show shorter transaction cycles and high homeowner satisfaction. He also said KE is testing other services such as community open days to concentrate buyer interest.

AI and Outlook

Management repeatedly emphasized artificial intelligence as part of KE’s operating transformation. Peng said AI can commoditize basic information sorting while amplifying the value of service providers who help customers make complex housing decisions. He said an internal application-building platform for frontline employees had covered more than 7,100 employees by the end of April, with more than 4,400 applications seeing actual traffic and total visits exceeding 4.12 million.

Xu said KE is maintaining a disciplined approach to AI investment, scaling spending in core business models and foundational AI capabilities while reallocating resources away from lower-return projects.

Asked about the sustainability of margins, Xu said the first-quarter improvement was not driven by a single business or one-off factor, but by operating quality, resource allocation, cost structure and unit economics. He said quarterly margins may fluctuate seasonally, but management remains confident in year-over-year margin improvement for the full year.

About KE NYSE: BEKE

KE Holdings Inc NYSE: BEKE is a technology-driven real estate services company that operates an integrated online and offline platform for housing transactions and related services in mainland China. The company provides consumer-facing property listing marketplaces alongside a broad network of offline brokerage offices and agents, aiming to facilitate sales, rentals and new-home transactions for individual and institutional clients.

The company’s offerings span property listings for new and resale homes, rental listings, brokerage representation and transaction facilitation.

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