20-F: ZKH Group Reports Reduced Net Loss in 2025

ZKH Group Limited announced its annual results for the fiscal year ended December 31, 2025, reporting a significant reduction in net loss and a slight increase in net revenues.

Summary

• ZKH Group Limited's net revenues increased by 2.6% to RMB8,987.7 million (US$1,285.2 million) in 2025, up from RMB8,761.3 million in 2024.
• The company reported a net loss of RMB139.7 million (US$20.0 million) for 2025, a substantial improvement from a net loss of RMB268.0 million in 2024.
• Operating expenses decreased by 8.7% to RMB1,689.0 million (US$241.5 million) in 2025, contributing to the reduced net loss.
• Fulfillment, sales and marketing, research and development, and general and administrative expenses all saw decreases in 2025 compared to 2024.
• The company's cash, cash equivalents, and restricted cash decreased to RMB1,092.4 million (US$156.2 million) as of December 31, 2025, from RMB1,516.9 million as of December 31, 2024.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing as cautiously negative due to the decline in service revenues and gross margin, despite the reduction in net loss and revenue growth. The decrease in operating cash flow is also a concern.

Positives

• Net loss significantly reduced by 47.9% to RMB139.7 million (US$20.0 million) in 2025.
• Net revenues increased by 2.6% to RMB8,987.7 million (US$1,285.2 million) in 2025.
• Operating expenses decreased by 8.7% to RMB1,689.0 million (US$241.5 million) in 2025, with all major categories of operating expenses showing reductions.
• Gross margin improved slightly in the product sales model on the ZKH platform, reaching 15.9% in 2025.
• The company's marketplace model maintained a high gross margin of 100% in 2025.
• The number of customers served increased significantly to over 155,000 in 2025.
• The company's AI coding generation rate increased from 6.6% to 27.1% in 2025, improving per capita efficiency.

Negatives

• Net service revenues decreased by 30.0% to RMB171.3 million (US$24.5 million) in 2025.
• Other revenues decreased by 25.9% to RMB49.7 million (US$7.1 million) in 2025.
• Gross margin for the overall business decreased from 17.2% in 2024 to 16.4% in 2025, primarily due to changes in customer and product mix.
• Cash, cash equivalents, and restricted cash decreased by 27.9% to RMB1,092.4 million (US$156.2 million) as of December 31, 2025.
• Net cash provided by operating activities decreased significantly from RMB229.1 million in 2024 to RMB13.7 million (US$2.0 million) in 2025.

Risks

• The company faces risks related to the evolving and dynamic MRO procurement service industry, with uncertainties regarding its growth and profitability.
• Failure to manage growth effectively or execute strategies could materially and adversely affect the business and prospects.
• The company is exposed to fluctuations in the supply of, or demand for, MRO products, which could adversely affect trading volume and prices on its platform.
• Quality issues with products sold on the platform, either by the company or third-party suppliers, could materially and adversely affect the business.
• Failure or perceived failure to comply with cybersecurity and data security laws and regulations could result in claims, negative publicity, legal proceedings, and increased costs.
• The company faces risks related to the PRC legal system, including uncertainties in the interpretation and enforcement of laws and regulations.
• The PRC government has significant oversight and discretion over the company's business operations, which could result in material adverse changes.
• The company may be adversely affected by the complexity, uncertainties, and changes in PRC regulation of internet-related businesses.
• The company's ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate auditors located in China.
• The company faces risks related to foreign currency exchange rate fluctuations, which could increase the cost of purchasing products and impact foreign sales and product sourcing.
• The company may be subject to risks associated with artificial intelligence and machine learning technology, including unexpected results, bias, and potential legal or regulatory challenges.
• The company may be subject to higher scrutiny regarding environmental protection and work safety, especially concerning hazardous products, which may increase costs and create restrictions.

Future Outlook

The company intends to retain most of its available funds and future earnings to operate and expand its business. It may seek additional capital and finance funding to enhance its liquidity position or increase its cash reserve for future business operations and investments.

Management Comments

• The company's AI coding generation rate increased from 6.6% to 27.1% in 2025, significantly improving per capita efficiency.
• The company's AI Material Management Agent can process 1,000 lines of material data in approximately three minutes, a task that previously required 15 person-days of manual labor.
• ProductRecom Agent, launched in Q4 2024, served over 30,000 customers in 2025 and generated over RMB200 million in cumulative sales.
• AI Smart Workbench autonomously executed over 520,000 system operations in 2025, improving customer service productivity by approximately 45% and procurement productivity by 50% year-over-year.

Industry Context

StockSavvy.ai notes that ZKH Group's performance reflects ongoing efforts to optimize operations and reduce losses in a competitive MRO procurement market. The company's strategic focus on AI integration and efficiency improvements, alongside a slight revenue increase, indicates a path towards potential profitability, though challenges remain in service revenue streams and overall gross margin.

Comparison to Industry Standards

• The company's gross margin of 16.4% in 2025 is within the typical range for e-commerce platforms, but the significant difference between the product sales model (15.9% for ZKH platform) and the marketplace model (100%) highlights the strategic importance of scaling the higher-margin marketplace business.
• The company's customer retention rate of 96.6% for its top 500 customers by GMV in 2025 is a strong indicator of customer loyalty, which is a key competitive advantage in the MRO sector.
• The company's investment in AI and automation, as evidenced by the increase in AI coding generation rate and the deployment of RPA bots, aligns with industry trends towards digital transformation and operational efficiency in supply chain management.

Corporate Governance

Legal Proceedings

• The company is not presently a party to any legal proceedings that, if determined adversely, would individually or taken together have a material adverse effect on its business, results of operations, financial condition, or cash flows.

Related Party Transactions

• For the years ended December 31, 2023, 2024 and 2025, the Group had no material related party transactions and no material related party balance as of December 31, 2024 and 2025.

Stakeholder Impact

• Shareholders: The reduction in net loss and revenue growth are positive, but the decline in service revenues, gross margin, and operating cash flow, along with the decrease in cash reserves, may be viewed negatively. The company's controlled status and reliance on home country practices could also impact shareholder protections.
• Employees: The company has reduced its workforce from 3,262 to 2,933 employees from end of 2024 to end of 2025, which could impact morale. However, the company continues to invest in R&D and AI, suggesting a focus on future growth and technological advancement.
• Suppliers: The company's ability to manage its supplier relationships and payment terms remains crucial, with accounts payable turnover days on a GMV basis at 111.1 days in 2025.
• Customers: The increase in customer numbers to over 155,000 in 2025 is positive. The company's focus on AI-driven solutions and improved fulfillment aims to enhance customer experience.

Next Steps

• Continue to invest in technology and innovation to expand platform capabilities.
• Focus on customer acquisition and retention to drive revenue growth.
• Optimize product mix and explore opportunities for margin expansion, particularly in private label products.
• Further develop and integrate agentic AI tools to enhance customer experience and operational efficiency.
• Continue to expand international presence, focusing on serving Chinese enterprises abroad and implementing localized strategies in markets like the U.S.
• Manage working capital effectively, including accounts receivable, inventory, and accounts payable.
• Monitor and comply with evolving cybersecurity, data privacy, and anti-monopoly regulations in China and other operating jurisdictions.
• Continue to manage operating expenses efficiently across all departments.

Key Dates

Recommendation

While ZKH Group has shown progress in reducing its net loss and growing revenues, the decline in service revenues, overall gross margin, and operating cash flow, coupled with a decrease in cash reserves, indicates ongoing operational challenges. The company's heavy reliance on the Chinese market and the associated regulatory risks, along with the controlled company status, warrant a cautious approach. The positive aspects, such as customer growth and AI investments, are noted, but the mixed financial performance suggests a 'hold' recommendation until clearer signs of sustained profitability and operational improvement emerge.

Keywords

ZKH Group, SEC Filing, Form 20-F, Annual Report, MRO Procurement, Industrial Supplies, E-commerce, China, Financial Results, Net Loss Reduction, AI in Procurement, Supply Chain