KE Holdings Q2 profit jumps 75% as margins expand despite revenue dip
- KE Holdings Q2 non-GAAP net income surged 74.9% to 3.185 billion RMB, beating EPS estimates
- Revenue fell 5.7% to $3.6 billion due to strategic exits in renovation and asset-light rental shifts
- Existing home GTV grew 8% YoY with contribution margin expanding to 46.1%
- Managed rental units increased 34% to over 790,000 despite a 14.8% drop in rental revenue
- Company spent US$460 million on share buybacks in H1, totaling US$2.99 billion since 2022
*this image is generated using AI for illustrative purposes only.
KE Holdings Inc. (NYSE: BEKE) reported second-quarter 2026 non-GAAP net income of 3.185 billion RMB, a 74.9 percent year-over-year increase. The company’s adjusted earnings per share of $0.42 beat the analyst consensus estimate of $0.28 by 50 percent.
Total gross transaction volume (GTV) grew 6.3 percent year-over-year to reach new highs in existing home services. However, revenue declined 5.7 percent to $3.6 billion due to strategic shifts toward asset-light rental models and exits from inefficient home renovation markets.
Financial Performance
Analysts had previously projected earnings of 28 cents per share on revenue of $3.51 billion. The actual reported diluted net income per ADS was $0.35, while adjusted diluted net income per ADS reached $0.42. Non-GAAP net margin reached 13 percent, up six percentage points year-over-year, marking a three-year high.
| Metric | Q2 2026 | Q2 2025 | YoY Change |
|---|---|---|---|
| Net Revenues | $3.6 billion | $3.8 billion | -5.7% |
| Net Income | $387 million | $193 million | +100.8% |
| Gross Margin | 28.6% | 21.9% | +6.7 pts |
| Operating Margin | 12.3% | 4.1% | +8.2 pts |
GAAP operating expenses fell 14.1 percent year-over-year to 3.989 billion RMB, driven by improved organizational efficiency and optimized marketing spend. This cost discipline fueled profit growth despite the top-line contraction.
Segment Highlights
Existing home transaction services revenue increased 4.5 percent to $1.0 billion, supported by an 8.0 percent rise in GTV to 629.89 billion RMB. Non-Lianjia platform service revenue grew 27.8 percent year-over-year, reflecting a shift toward higher-margin platform service recognition on a net basis.
New home transaction services revenue grew 3.8 percent to $1.3 billion, with GTV rising 1.2 percent to 258.39 billion RMB. The segment maintained stable scale through collaboration on high-quality projects in core cities.
Home renovation and furnishing revenue dropped 30.1 percent to $0.5 billion (3.19 billion RMB) as the company exited inefficient markets and cities with weak unit economics. Despite the revenue decline, contribution margins improved to 39.6 percent from 32.1 percent, driven by centralized procurement and lower material costs.
Home rental services revenue fell 14.8 percent to $0.7 billion (4.83 billion RMB) due to the transition of Carefree Rent to a lighter, net-basis revenue recognition model. However, managed rental units grew 34 percent year-over-year to exceed 790,000, with the net-basis product comprising over 50 percent of the portfolio.
Contribution margins improved across all major segments. Existing home services contribution margin rose to 46.1 percent from 39.9%, while new home services reached 28.8 percent from 24.4%. Home rental contribution margin jumped to 15.3 percent from 8.4%.
Operational Metrics
As of June 30, 2026, the number of stores decreased slightly by 0.4 percent to 60,274, with active stores down 1.5 percent to 57,803. The total number of agents fell 3.1 percent to 540,634, while active agents declined 7.5 percent to 454,571.
Mobile monthly active users averaged 45.7 million, down from 48.7 million in the same period last year. Management emphasized that effective organization and refined operations now matter more than mere headcount expansion.
Balance Sheet and Shareholder Returns
Q2 net operating cash inflow was 6.61 billion RMB. New home accounts receivable turnover was around 39 days, down approximately 12 days year-over-year, reflecting effective risk management. Excluding customer deposits, the end-of-Q2 broad cash balance remained at around 67.3 billion RMB.
The company spent around 250 million RMB on share repurchases in Q2, including its first buyback in the Hong Kong market. In the first half, it spent around US$460 million on repurchases, up 14 percent year-over-year. Since September 2022, total repurchases have reached approximately US$2.99 billion, representing around 14.8 percent of outstanding shares prior to the program start.
Analyst Ratings
Recent rating actions reflect mixed sentiment:
| Analyst | Firm | Action | Price Target Change | Date |
|---|---|---|---|---|
| Jiong Shao | Barclays | Maintained Overweight | Raised from $23 to $26 | May 21, 2026 |
| Alex Yao | JP Morgan | Maintained Overweight | Cut from $24 to $22 | Aug 12, 2025 |
| Harry Chen | Citigroup | Maintained Buy | Cut from $25.8 to $24.8 | May 16, 2025 |
What the Numbers Show
The divergence between declining revenue and doubling profitability highlights KE Holdings’ successful cost optimization strategy. Operating expenses decreased 14.1 percent year-over-year, allowing gross margin to expand by 6.7 percentage points to 28.6 percent, its highest level in three years. This operational leverage enabled adjusted operating margin to reach 14.6 percent, significantly outpacing the 5.7 percent revenue contraction. The shift toward net-basis revenue recognition in rental services and platform services in existing homes artificially suppresses top-line growth while boosting bottom-line margins, indicating a structural change in how value is captured rather than just volume traded.
How sustainable is the current margin expansion given the deliberate contraction in top-line revenue and active agent headcount?
What specific risks does KE Holdings face in maintaining its asset-light rental model as the net-basis recognition continues to suppress reported revenue growth?
Will the exit from inefficient home renovation markets permanently cap the company's total addressable market, or can centralized procurement drive profitable scale in remaining segments?
17
Create Custom Screeners 
Access 200+ Pre-built Filters 
Use 50+ Readymade Screener 
