ZTO Express (Cayman) Q1 Earnings Call Highlights

Key Points

• ZTO outpaced the broader industry in Q1, with parcel volume rising 13.2% year over year to 9.67 billion versus 5.8% industry growth. Management said market share increased by 1.4 percentage points, helped by pricing discipline and a stronger mix of higher-value parcels.
• Revenue and profitability improved, but costs were mixed. Revenue climbed 22% to CNY 13.3 billion, adjusted net income rose 5.2% to CNY 2.4 billion, and adjusted operating profit increased 22%, while operating margin slipped to 19.2% as higher key-account mix pushed core unit costs up.
• The company is leaning into automation, reverse logistics and AI while keeping full-year parcel growth guidance unchanged at 10% to 13%. ZTO said AI and automation have already cut missorting and service costs, and it expects 2026 capital spending of about CNY 6 billion.

ZTO Express (Cayman) NYSE: ZTO reported stronger first-quarter volume growth than the broader Chinese express delivery industry, with management citing improved pricing discipline, lower transit costs and growth in higher-value parcel categories as key drivers of the quarter.

Chairman and Chief Executive Officer Meisong Lai said China’s express delivery industry parcel volume rose 5.8% year over year in the first quarter of 2026, while ZTO’s parcel volume increased 13.2% to 9.67 billion parcels. Chief Financial Officer Huiping Yan said the company gained 1.4 percentage points of market presence during the period.

Lai said the industry benefited from “anti-involution” policies that have helped restore pricing order and move competition back toward more rational behavior. He said ZTO supported those policies and remained focused on network health, service quality and profitability rather than short-term aggressive expansion.

Revenue rises 22% as adjusted profit increases

Yan said total revenue increased 22% year over year to CNY 13.3 billion. Adjusted net income rose 5.2% to CNY 2.4 billion, while adjusted operating profit, excluding non-operating factors such as government subsidies and tax rebates, increased 22% to CNY 2.6 billion.

Income from operations increased 5.8% to CNY 2.5 billion, with the operating margin declining 2.9 percentage points to 19.2%. Gross profit rose 20.3% to CNY 3.2 billion, while gross margin decreased slightly by 0.3 percentage points to 24.4%.

• Parcel volume increased 13.2% to 9.67 billion parcels.
• Total revenue rose 22% to CNY 13.3 billion.
• Adjusted net income increased 5.2% to CNY 2.4 billion.
• Adjusted EBITDA rose 6.9% to CNY 3.9 billion.
• Operating cash flow increased 18% to CNY 2.8 billion.

Yan said selling, general and administrative expenses, excluding share-based compensation, increased 14.9% to CNY 594.5 million. As a percentage of revenue, that expense category declined to 4.5%, which she said reflected corporate cost efficiency.

Pricing improves, but KA mix raises core unit costs

ZTO’s average selling price for core express delivery increased CNY 0.11, or 8.2%, Yan said. She attributed the increase mainly to a CNY 0.18 positive impact from higher key account volume mix, led by higher-value reverse logistics, partly offset by a CNY 0.09 increase in volume incentives. Higher average parcel weight added another CNY 0.02 to ASP.

Total cost of revenue increased 22.5% to CNY 10 billion. Yan said overall unit cost for the core express delivery business increased 8.8%, or CNY 0.08, including a CNY 0.15 increase tied to the company’s strategic expansion of key account volume.

At the same time, management emphasized efficiency gains in transportation and sorting. The combined unit cost of transportation and sorting fell CNY 0.06 year over year. Yan said unit line-haul transportation cost declined 10.5% to CNY 0.37 because of optimized route planning and better load efficiency. Unit sorting cost declined 6.4% to CNY 0.25, aided by labor productivity and automation improvements.

Responding to an analyst question from Morgan Stanley’s Qianlei Fan, management said ZTO improved transportation costs through route optimization, better loading efficiency, tiered incentives tied to volume levels and refined fleet management. On sorting costs, the company cited automation, digital monitoring, equipment upgrades and workforce accountability mechanisms.

Management said fuel price volatility was expected to have a limited impact on second-quarter network-wide costs. Yan said diesel prices rose significantly in March because of Middle East tensions but declined somewhat in late April. She added that pricing recovery driven by anti-involution policies and, in some provinces, fuel surcharges had largely offset the impact of higher fuel costs.

Retail and reverse logistics remain a growth focus

Lai said ZTO continued to optimize its product mix by focusing on higher-value retail parcels, reverse logistics and other differentiated offerings. He said this was part of a shift away from reliance on traditional e-commerce parcel volume toward a more diversified structure.

In response to UBS analyst Aaron Luo, management said average daily retail parcel volume reached approximately 9.7 million in the first quarter. In the second quarter, reverse logistics parcel volume rose further, with average daily volume exceeding 9.4 million. Although reverse logistics pricing declined slightly because of competition, management said unit costs continued to improve through scale and cost controls. Lai said the unit profit contribution from reverse logistics remained higher than that of traditional e-commerce parcels.

Management highlights AI and automation initiatives

Goldman Sachs analyst Steve Chu asked how ZTO planned to maintain its technology lead in the AI era. Management said AI had become a core strategic priority and was being integrated across sorting, customer service and last-mile dispatch.

The company said 3D digital twins and machine vision had been deployed across about 25 sorting centers, reducing missorting rates by more than 60%. ZTO also said its AI-powered customer service system automatically processes more than 70% of end-to-end service tickets, while intelligent agents cover more than 80% of daily business inquiries from network outlets.

For last-mile operations, management said proprietary high-precision mapping is being used in site selection and delivery route optimization, helping large outlets reduce short-distance transportation costs by more than 20%. The company said it plans to complete an AI upgrade of voice customer service within six months, covering nearly 6,000 network outlets nationwide.

Guidance maintained as company expects continued volume growth

ZTO maintained its previous full-year guidance for parcel volume growth of 10% to 13% year over year. Yan said that represents a parcel volume range of 42.37 billion to 43.52 billion parcels. She said the estimate reflects management’s current preliminary view and remains subject to change.

Yan also corrected her prepared remarks to say ZTO expects 2026 capital expenditures of about CNY 6 billion. First-quarter capital expenditures totaled CNY 1.8 billion.

Looking ahead, Lai said ZTO would continue to focus on high-quality development, cost reduction, service quality, network management and shareholder returns. He said the company also aims to protect frontline courier rights and improve courier income, while supporting network partners in lowering costs and improving profitability.

Asked by CITIC Securities analyst Mujin Lin about potential social security requirements for delivery workers, management said such policies could increase per-parcel costs in the short term but may improve network stability and reduce turnover over the long term. Yan said ZTO’s consolidated group already has a higher level of compliance, while outlet-level practices vary, and said the company would support network partners in becoming compliant.

About ZTO Express (Cayman) NYSE: ZTO

ZTO Express (Cayman) Inc is one of China's leading express delivery companies, specializing in both domestic and cross-border parcel logistics. The company operates a technology-enabled network that connects shippers, independent pickup and delivery stations, regional sorting hubs and end customers. ZTO's service portfolio includes standard express, heavy-weight parcel delivery, time-definite shipments and e-commerce logistics solutions tailored for online retailers and marketplaces.

Founded in 2002 and headquartered in Shanghai, ZTO has grown rapidly by leveraging a franchise-style operating model that engages a broad network of independent contractors.

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