ZKH Group's Q1 2025 Earnings Call: Unpacking Contradictions in Market Strategy, Margins, and Tariff Management

Market expansion and product strategy, gross margin growth, tariff management strategy, market expansion and entry strategy, and impact of tariffs and geopolitical risks are the key contradictions discussed in ZKH Group Limited's latest 2025Q1 earnings call.



Revenue and Profitability Improvement:
- ZKH Group Limited reported first quarter revenue of RMB 1.94 billion, representing a 4% increase year-over-year.
- Operating loss was approximately RMB 80 million, and net loss was around RMB 66 million, showing significant improvements of 37.7% and 26.6% year-over-year, respectively.
- This improvement was due to seasonal impact from the Chinese New Year and investments in U.S. operations, despite the absence of government subsidies.

Platform and Customer Growth:
- ZKH's platforms gained momentum with the total number of customers exceeding 60,000, representing a 30.3% year-over-year increase.
- Sales to industry key accounts and regional SME customers both achieved double-digit growth.
- The growth was driven by targeted efforts to curate and manage industry-specific and customer-specific product pools, leveraging AI for deeper customer insights and product recommendations.

AI Technology and Operational Efficiency:
- ZKH has developed and deployed over 10 AI-powered applications to improve operational efficiency and customer service capabilities.
- Implementation of AI Smart Workbench led to a 60.4% quarter-over-quarter increase in average orders processed per team member.
- AI technologies, such as the AI material management agent and the AI product recommendation agent, have significantly improved efficiency and accuracy in order processing and material management.

Global Expansion and U.S. Market Strategy:
- The U.S. subsidiary, North Sky, and the U.S. stand-alone website launched in December 2024, with over 500 SKUs available by March 2025.
- Both revenue and customer numbers doubled month-over-month in the first quarter.
- The localization strategy in the U.S. market leveraged supply chain strengths and innovative technologies for a strong presence.