Shares of ZKH Group Limited (NYSE:ZKH) tumbled over 7% in pre-market trading Tuesday after the Chinese industrial procurement platform reported a larger-than-expected adjusted net loss for the first quarter of 2025, even as revenue edged higher.
The company reported a non-GAAP net loss of RMB50.2 million (approximately -$0.31 per American Depositary Share), widening from a loss of RMB43.5 million (-$0.27 per ADS) in the same period last year. Revenue rose 4% year-over-year to RMB1.94 billion ($266.7 million), buoyed primarily by growth in product sales.
However, service-related revenue dropped sharply—falling 43.1%—as the company scaled back lower-margin business lines. This shift contributed to a year-over-year decline in gross margin, which slipped to 17.2% from 18% in Q1 2024.
“Our strategic focus on improving operational efficiency and prioritizing high-quality revenue streams is beginning to show encouraging signs,” said Max Chun Chiu Lai, ZKH’s Chief Financial Officer.
Despite the wider bottom-line loss, the company pointed to improving profitability indicators, including a narrower net operating loss margin, which improved by 279 basis points to -4.2%.
Cash and short-term investments declined during the quarter, falling to RMB1.80 billion from RMB2.06 billion at the close of 2024.
ZKH also highlighted rapid progress in its international strategy, particularly in the United States. The company noted that both revenue and customer growth in the U.S. have nearly doubled on a monthly basis since the start of 2025.