KE Holdings Shares Advance Following Expanded Buyback Authorization and Mixed Second-Quarter Results

Technology Platform KE Holdings Gains After Expanding Share Repurchase Program

KE Holdings Inc. (NYSE: BEKE), a prominent integrated online and offline platform for housing transactions and services in China, experienced an 8.0% surge in its stock on recent trading days. This advance followed the company's announcement of a significant expansion to its equity share repurchase program, increasing the authorization by US$2 billion to a total of US$5 billion and extending it through August 31, 2028. The positive market reaction occurred despite the release of mixed second-quarter financial results, which showcased robust revenue growth but a notable decline in net income.

Second Quarter Performance Highlights Revenue Growth Amid Profitability Pressures

For the second quarter of 2025, KE Holdings reported net revenues of RMB26.0 billion (US$3.6 billion), an increase of 11.3% year-over-year. This top-line growth was supported by a 4.7% rise in gross transaction value (GTV) to RMB878.7 billion (US$122.7 billion), with existing home transactions contributing RMB583.5 billion and new home transactions RMB255.4 billion. The company also demonstrated significant platform expansion, with the number of stores growing by 31.8% to 60,546 and agents increasing by 21.6% to 557,974 as of June 30, 2025.

However, this revenue growth was accompanied by considerable profitability pressures. Net income for the quarter decreased by 31.2% year-over-year to RMB1.307 billion (US$182 million). Adjusted net income also saw a 32.4% decline, reaching RMB1.821 billion (US$254 million). Despite these declines, the company's adjusted earnings per share (EPS) of US$1.55 surpassed consensus estimates.

A key strategic shift for KE Holdings has been the diversification into non-housing transaction services, which now account for a record high of 41% of total net revenues. Revenue from home rental services notably surged by 78.0% to RMB5.7 billion, and home renovation and furnishing services increased by 13.0% to RMB4.6 billion.

Strategic Buyback Signals Management Confidence Despite Sector Headwinds

The expansion of the share repurchase program is widely interpreted as a strong signal of management's confidence in the company's intrinsic value and a commitment to enhancing shareholder returns. This latest authorization builds upon previous efforts, where KE Holdings has repurchased approximately US$2.18 billion in shares since 2022, including 156,083,457 shares for over US$2.019 billion in a completed prior program. Share buybacks can reduce the number of outstanding shares, thereby boosting earnings per share and potentially supporting stock price.

Supporting this aggressive capital allocation strategy is the company's robust financial position. As of June 30, 2025, KE Holdings maintained a substantial cash reserve, with cash, cash equivalents, restricted cash, and short-term investments totaling RMB53.1 billion (US$7.4 billion), alongside a healthy current ratio of 1.33x. This liquidity provides a buffer against market volatility and allows the company to execute its buyback plans effectively.

Navigating a Challenging Chinese Real Estate Landscape

KE Holdings operates within a persistently challenging Chinese real estate market, which continues to face a significant downturn. Data from August 2025 indicated that new home prices fell for the fifth consecutive month, declining by 0.3% monthly and 2.5% annually. Resale prices also showed widespread weakening, with annual declines ranging from 3.5% in tier-one cities to 6.0% in tier-three cities. Property investment dropped by 12.9% year-over-year, and sales by floor area declined by 4.7%.

The sector has been in a four-year crisis marked by oversupply and developer bankruptcies, with no broad-based recovery expected in 2025. Consumer confidence remains weak, and a substantial portion of Chinese household wealth is tied to real estate, making ongoing price declines a significant concern. Government interventions, such as mortgage rate cuts and eased purchase restrictions, have yet to yield a long-term recovery.

These market dynamics directly contribute to the profitability pressures faced by KE Holdings. Gross margin for Q2 2025 fell to 21.9% from 27.9% in Q2 2024, and operating margin dropped to 4.1% from 8.6%. These declines are attributed to factors such as higher fixed compensation costs, a strategic shift towards lower-margin services, and rising operational expenses. The company also faces risks from regulatory uncertainty and a 6.7% year-over-year decline in mobile Monthly Active Users (MAUs) to 44.5 million, coupled with a credit rating downgrade in Q2 2025.

Despite these headwinds, KE Holdings is strategically responding by accelerating its diversification into non-housing transaction services and focusing on efficiency-driven development, including leveraging AI technology, to mitigate the impact of the core real estate market's structural challenges.

Valuation and Future Outlook

Valuation perspectives on KE Holdings remain varied. While some analyses suggest the company trades above its fair value with a price-to-earnings (P/E) ratio of 37x, other assessments indicate a P/E ratio of 8.2x as of August 2025, significantly below its five-year average of 12.5x, potentially signaling undervaluation. This divergence underscores the complexity of valuing companies heavily exposed to volatile sectors like Chinese real estate.

The expanded share buyback program can be viewed as a strategic tool to reinforce shareholder value rather than merely a short-term fix. However, its ultimate success hinges on **KE Holdings'