ZTO Express (Cayman) Q4 Earnings Call Highlights

Key Points

• Volume growth outpaced industry: ZTO reported Q4 parcel volume of 10.56 billion (+9.2% YoY) versus industry growth of ~5%, and full-year volume rose 13.3% to 38.5 billion, with market share up 0.8 percentage points.
• Profitability under pressure despite revenue gains: 2025 revenue rose 10.9% to CNY 49.1 billion, but operating income declined 11.1% for the year and gross margin fell to 25.0% as unit costs and volume incentives increased (core unit cost ~RMB 1.00 in Q4).
• Strong shareholder returns and 2026 focus on “quality”: The board approved a $0.39 ADS dividend, a new $1.5 billion buyback and an enhanced return target (≥50% of prior-year adjusted net income); management issued $1.5 billion of convertibles to fund repurchases and guided 2026 parcel growth of 10–13% while prioritizing service quality and orderly competition.

ZTO Express (Cayman) NYSE: ZTO executives highlighted fourth-quarter and full-year 2025 volume growth that outpaced the broader express delivery industry, while outlining a 2026 outlook centered on service quality, cost efficiency, and network stability amid what management described as a policy-backed shift toward more rational competition.

Fourth-quarter volume growth outpaced industry

Chairman and CEO Meisong Lai said China’s express delivery industry parcel volume rose 5% year-over-year in the fourth quarter of 2025, reflecting a moderation in growth. Against that backdrop, ZTO reported parcel volume of 10.56 billion in the quarter, up 9.2% year-over-year, and said market share expanded by 0.8 percentage points.

Lai attributed performance to maintaining “industry-leading service quality” and continuing to strengthen differentiated products and capabilities. He also pointed to a recovery in industry pricing conditions, saying overall pricing “stabilized and recovered” as policy efforts against “involution” (a term management used to describe destructive price competition) took hold.

Full-year 2025 results: revenue growth with margin pressure

CFO Huiping Yan said ZTO’s parcel volume rose 13.3% to 38.5 billion for full-year 2025. Total revenue increased 10.9% to CNY 49.1 billion for the year and rose 12.3% to CNY 14.5 billion in the fourth quarter.

Profitability metrics declined year-over-year. Yan said income from operations decreased 7.6% to CNY 3.2 billion in the fourth quarter and declined 11.1% to CNY 10.5 billion for the full year. Gross profit fell 2.1% to CNY 3.7 billion in the quarter and declined 10.5% to CNY 12.3 billion for the year, with gross margin down 3.7 percentage points to 25.4% in Q4 and down 6.0 points to 25.0% for 2025.

At the same time, ZTO posted adjusted net income of CNY 2.7 billion for the fourth quarter and CNY 9.5 billion for the year, according to Yan. She also noted that SG&A expenses excluding stock-based compensation remained controlled, decreasing 1.3% to CNY 641 million in Q4 and increasing 1.6% to CNY 2.4 billion for the year. As a percentage of revenue, SG&A excluding stock-based compensation declined to 4.4% in Q4 and 4.9% for the year.

Pricing, mix, and unit cost trends

Yan said average selling price (ASP) for the core express delivery business increased 2.9% in the fourth quarter, driven by product mix—particularly a positive contribution from improved “KA” volume mix and higher value reverse logistics services—partly offset by higher volume incentives. For full-year 2025, ASP declined slightly by 1.7%, which she said reflected a gain from higher retail volume offset by volume incentives and a lower average weight per parcel.

On costs, Yan reported total cost of revenue of RMB 10.8 billion in Q4 and RMB 36.8 billion for 2025, up 18.2% and 20.5% year-over-year, respectively. Core express delivery unit cost rose RMB 0.08 to RMB 1.00 in the fourth quarter and RMB 0.07 to RMB 0.94 for the full year, which she said was mainly driven by higher KA costs, partially offset by improved transit productivity.

However, Yan highlighted improvements in transit-related unit costs. The combined unit cost for sorting and transportation decreased 4.5% in Q4 and 8.8% for the full year, citing economies of scale and productivity initiatives. She said line-haul transportation unit cost declined 7.5% in Q4 and 12.2% for the year on optimized route planning and better load efficiency, while unit sorting costs were steady in Q4 and down modestly for the year, with automation improving labor efficiency but partially offset by ramp-up and upgrade costs at facilities.

Cash flow, capex, and shareholder returns

Yan said operating cash flow increased 50.6% year-over-year to CNY 4.2 billion in the fourth quarter and reached CNY 12.0 billion for the year. She noted that, excluding a CNY 850 million one-time franchise deposit refund in the fourth quarter of the prior year under a new business policy, cash flow from operations “remained robust.” Capital expenditures totaled CNY 6.1 billion for 2025.

On capital returns, Yan said the board approved a semi-annual cash dividend of $0.39 per ADS, consistent with an established 40% payout ratio. She added that, after substantially completing the prior $2 billion repurchase program, the board authorized a new 24-month, $1.5 billion share buyback program effective through March 2028. The company also introduced an “enhanced shareholder return program” beginning in 2026, targeting an aggregate annual return of no less than 50% of the prior fiscal year’s adjusted net income through a combination of dividends and buybacks.

In the Q&A, management also discussed a February 2026 convertible bond issuance. The company said it issued $1.5 billion of five-year convertible bonds, with net proceeds of about $1.4 billion intended solely for share repurchases. Management characterized the issuance as taking advantage of low-cost financing during a period it believed the company’s market value was “underassessed,” and said the goal was to enhance earnings per share and optimize capital structure. Management said it had completed approximately CNY 600 million of share buybacks around the issuance date and subsequent trading window, and planned to complete the remaining CNY 800 million over the next year, considering market price fluctuations.

2026 outlook: volume growth and a policy-driven shift toward “quality”

For 2026, Yan guided for parcel volume growth of 10% to 13% year-over-year, implying annual parcel volume between 42.37 billion and 43.52 billion. She said the company is committed to growing faster than the industry average.

Addressing questions on “anti-involution,” Lai said policy implementation that began in the third quarter of 2025 has improved the competitive environment, supported price recovery, and strengthened protections for frontline participants such as outlets and couriers. Management said the policy continued after the Spring Festival and, with ongoing enforcement, the industry could sustain “orderly competition above the cost line.”

On industry growth, Lai cited the large base created by China’s express delivery sector reaching nearly 200 billion parcels in 2025 and said it was reasonable for industry growth to slow as low-priced parcel volume declines. He referenced the State Post Bureau’s estimate of 8% industry growth for 2026 and contrasted it with ZTO’s 10% to 13% company guidance.

Executives repeatedly described ZTO’s strategy as a “tripod” of service quality, market share, and a reasonable profit level, with network trust and policy transparency viewed as central to long-term development. Management also discussed a RMB 200 million special service incentive fund, describing it as targeted support tied to service quality and intended to be allocated across end-to-end operations from pickup through delivery to strengthen the franchise ecosystem.

Separately, management outlined ongoing digital and AI initiatives, including the use of 3D digital twins and computer vision in 25 super sorting centers, AI tools to automate customer service workflows, and AI-supported last-mile site selection and route planning. The company also described applying large-model capabilities to business analysis and parcel volume forecasting to support capacity and route planning.

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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