Beike outlines AI-driven operational shift and targets expansion of home rental services following record 660,000 managed units

Earnings Call Insights: KE Holdings Inc. (BEKE) Q3 2025

MANAGEMENT VIEW

* CFO Tao Xu reported, "In Q3, under the strategy of balancing scale and efficiency, we further optimized our business structure, enhanced operational and middle and back office efficiency through AI technology and achieved city level profitability in both our home renovation and rental business before deducting headquarter expenses. The combined contribution profit to company's total gross profit reached a record high."
* Xu highlighted revenue growth in home rental and home renovation, increased share repurchases, and continued adoption of AI across business lines. He stated, "Total revenues reached RMB 23.1 billion, up 2.1% year-over-year. Gross margin declined by 1.3 percentage points year-over-year to 21.4%. GAAP net income was RMB 747 million, down 36.1% year-over-year. Non-GAAP net income was RMB 1.29 billion, down 27.8% year-over-year."
* CEO Yongdong Peng emphasized the strategic shift "from scale to efficiency" and detailed the rollout of agent specialization, AI-powered listing scores, and the integration of AI across rental operations. Peng explained, "Since midyear, we have been working to restructure our capabilities across both buyer and seller agents. In Shanghai, we piloted a seller and buyer agent specialization mechanism... This in turn allowed buyer-side agents to prioritize quality listings and improve transaction conversion."

OUTLOOK

* Management is focused on expanding city-level profitability in home renovation and rental businesses, aiming to replicate recent successes beyond core markets. Peng stated, "We will continue to track its progress and explore new initiatives on the homebuyers agent side."
* Xu indicated ongoing improvements in operational efficiency and the intent to "deepen AI integration across business scenarios to advance both service providers' capabilities and consumer experiences."

FINANCIAL RESULTS

* Total revenues for Q3 reached RMB 23.1 billion, while total GTV was RMB 736.7 billion, remaining flat year-over-year. Gross profit dropped to RMB 4.9 billion, with gross margin at 21.4% due to a lower proportion of high-margin business lines. GAAP net income fell to RMB 747 million, and non-GAAP net income to RMB 1.29 billion.
* Home rental service revenue reached RMB 5.7 billion, climbing 45.3% year-over-year, with over 660,000 rental units under management at quarter-end. Contribution margin for this segment was 8.7%, up 4.3 percentage points year-over-year.
* Home renovation and furniture revenue was RMB 4.3 billion, flat year-over-year, while contribution margin improved to 32%.
* Share repurchase activity intensified, with RMB 281 million spent in Q3, a single-quarter record.

Q&A

* John Lam, UBS: Asked why new home business "alpha" is narrowing and about growth prospects. Xu responded that new home transaction business outperformed until Q2, but in Q3, year-over-year growth narrowed due to more attractive pricing in existing homes, base effects, and the maturing market. Xu highlighted plans to expand into more cities, pilot "B+" products in lower-tier cities, and increase broker channel penetration.
* Griffin Chan, Citi: Inquired about how the leasing service business turned losses into profit and future drivers. Xu explained city-level profitability was reached due to economies of scale and a shift to a light asset model, stating, "The total number of managed units exceeding 660,000 by end of Q3, up 75% year-over-year... The contribution profit from our home rental services also rose significantly to nearly 500 million in Q3, up 186% year-over-year." Xu noted further margin improvement potential as operational efficiency increases.
* Jiong Shao, Barclays: Asked about the success factors for renovation in Beijing/Shanghai and strategies for lower-tier cities. Xu noted larger renovation budgets outside tier-1 cities and a conservative expansion strategy, with operational focus remaining in core markets until models are proven. AI is being leveraged to improve contract conversion efficiency.
* Timothy Zhao, Goldman Sachs: Sought details on cost control and expected future trends. Xu described significant cost reductions from organizational optimization, AI-driven labor productivity, and centralized procurement, noting, "The procurement unit price of some products has decreased by over 20%."

SENTIMENT ANALYSIS

* Analyst tone was constructive but focused on structural shifts, sustainability of profit improvements, and scalability of new strategies; questions were direct and occasionally probing about margins and future prospects.
* Management demonstrated confidence in both prepared remarks and Q&A, frequently referencing operational achievements and AI-driven gains. Peng and Xu maintained an optimistic yet pragmatic tone, with phrases emphasizing ongoing transformation and measurable efficiency improvements.
* Compared to the previous quarter, analyst sentiment shifted from cautious optimism to a more evaluative stance, seeking specifics on execution and future growth levers. Management sustained a confident outlook, but with more emphasis on cost discipline and operational restructuring.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted from emphasizing network expansion and diversification (Q2) toward efficiency, profitability at city level, and AI-driven optimization (Q3).
* Strategic focus moved decisively from scale to efficiency, with new business models for agent specialization and AI-native rental operations taking center stage.
* Key metrics such as total revenues and GTV declined quarter-over-quarter, with notable pressure on gross margin and net income. Rental business contribution margins improved, and share repurchase activity accelerated.
* Analyst questions in Q3 focused more on margin sustainability and future growth drivers, compared to previous quarter inquiries about market trends and network expansion.
* Management’s confidence in AI integration and operational leverage was more pronounced in Q3, with specific achievements and pilot initiatives highlighted.

RISKS AND CONCERNS

* Management identified external fluctuations and internal strategic transformation as ongoing challenges, emphasizing cost reduction and organizational optimization as mitigating steps.
* Xu noted, "Our operational efficiency enhancement strategy has a clear execution path. We firmly believe that with the market environment stabilized, our continuous operation optimization will fully release the operating leverage effort."
* Analysts raised concerns about new home business momentum, cost controls, and scalability of renovation and rental initiatives beyond core cities.

FINAL TAKEAWAY

KE Holdings management underscored a strategic pivot from expansion to operational efficiency, leveraging AI to drive profitability in home rental and renovation segments. Despite pressure on revenues and margins, the company achieved record rental unit management and intensified shareholder returns through increased share repurchases. The leadership remains focused on scaling AI-driven innovations, operational optimization, and selective geographic expansion to sustain long-term growth and value creation for investors.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/beke/earnings/transcripts]

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