KE Holdings' Q2 2025 Earnings Call: Contradictions Emerge on Existing Home Market, Expansion Strategy, Policy Support, Recovery Outlook, and AI Integration Impact

The above is the analysis of the conflicting points in this earnings call

Date of Call: August 26, 2025

Financials Results

• Revenue: RMB 26.0B, up 11.3% YOY
• Gross Margin: 21.9%, down 6.0 percentage points YOY; up 1.2 points sequentially
• Operating Margin: 4.1% GAAP, down 4.5 percentage points YOY; up 1.5 points sequentially

Guidance:

- Shift focus from scale to efficiency; keep store/agent counts broadly stable ex-Beijing/Shanghai; consolidate lower performers in those cities.- Expand AI tools (Sheniu, Pudding, AI CRM) to raise agent productivity and conversion.- Home renovation: scale community-centric premium stores near contract centers; deepen centralized procurement and efficiency programs.- Home rental: drive maximum efficiency via role specialization, SaaS digitization, and AI automation to scale profitably.- Beihaojia: remain asset-light; additional self-owned capital capped at ≤RMB 1B; cap to decline after exiting Chengdu/Shanghai projects.- Shareholder returns: repurchase authorization increased to USD 5B through August 31, 2028.

Business Commentary:

Real Estate Market Trends and Business Performance:* - KE Holdings reported total GTV of RMB 878.7 billion in Q2 2025, representing a year-over-year increase of 4.7%. - The company's revenue reached RMB 26 billion, up 11.3% year-over-year. - However, the gross margin declined by 6 percentage points year-over-year to 21.9%, and GAAP net income was down 31.2% year-over-year to RMB 1.31 billion. - The slowdown in the real estate market, due to international trade frictions and early policy measures, affected the company's financial performance.

• Housing Transaction Services Growth:
• The platform's existing home sales increased by 26% year-over-year, outpacing the market growth rate estimated at 19%.
• New home orders on the platform rose by 19%, despite the market declining by 6%.
• The company expanded its agent and store network, with the number of active stores increasing by 30% and active non-Lianjia stores soaring by 36.8% year-over-year.

• The growth was driven by proactive network expansion and refined operations, including AI-driven technology applications.

• R&D and Technology Innovation:

• KE Holdings focused on AI-driven refinements to boost operational efficiency, employing innovative measures such as integrated online and offline marketing services.
• The company's AI solutions, such as Sheniu and Pudding, were applied to enhance customer acquisition, conversion, and overall service efficiency.

• These technological advancements are aimed at reshaping the residential service industry and improving the company's long-term competitive position.

• Home Rental and Renovations Business Growth:

• The home rental services sector achieved RMB 5.7 billion in revenue, up 78% year-over-year, with the number of rental units under management increasing to over 590,000.
• Revenue from the home renovation and furniture business reached RMB 4.6 billion, increasing by 13% year-over-year.
• The growth in these segments was driven by enhanced product offerings, operational efficiency, and AI-driven process improvements.
  

  Sentiment Analysis:

  • “Revenue reached RMB 26 billion, up 11.3% year-over-year.” “Gross margin was 21.9%, down 6 percentage points year-over-year.” “GAAP net income totaled RMB 1.31 billion, down 31.2% year-over-year.” “Board approved an expansion of the share repurchase program to USD 5 billion.”

  Q&A:

  • Question from Timothy Zhao (Goldman Sachs): Please discuss Q2 secondary market trends, 2H trajectory, and potential policy tools.
  • Response: Secondary market weakened in Q2 and accelerated in July; recovery depends on stronger policy support to stimulate demand and improve supply quality, which authorities have signaled could intensify.
  • Question from John Lam (UBS): How will management deliver in a sector downturn, and what is the strategy for market share, agent/store productivity, and network growth?
  • Response: We’re pivoting from expansion to efficiency—stabilizing the store/agent base (consolidating in Beijing/Shanghai), tightening ROI for new stores, and deploying AI/scientific management to lift per-store/agent productivity.
  • Question from Griffin Chan (Citi): How do new development models (e.g., move-in-ready, quality homes) create opportunities for Beike?
  • Response: Policy shift to high-quality/move‑in‑ready homes creates service opportunities where we use data/AI for pricing, unit‑mix, and full‑cycle marketing; brokerage impact is limited overall while penetration should rise.
  • Question from Qi Chen (JPMorgan): What drives home renovation growth/margin gains, is there more cost optimization, and how will store coverage evolve?
  • Response: Centralized procurement and streamlined operations materially cut material/labor/S&M costs and lifted productivity; we’re shifting to smaller community‑centric premium stores and see further efficiency upside.
  • Question from Xiaodan Zhang (CICC): What are Beihaojia’s future plans, business model, and capital limits?
  • Response: Beihaojia will remain asset‑light (not a developer), offering C2M product and marketing services; incremental self‑owned capital is capped at ≤RMB 1B and will decline after exiting the two self‑run projects.