BEKE 1Q26 First Take: Overall, the quarter screened as a solid beat vs. expectations. Despite most segments posting YoY revenue declines on a high base, profit inflected as the company streamlined headcount, lifted productivity, and tightened opex, with Adj. net profit up nearly 16% YoY and well ahead of the Street.

In detail:

1) Track 1 brokerage remains under pressure. GTV and revenue were both down YoY, with existing-home transactions proving resilient at a low-teens decline, while new-home fell 40%+ YoY.

2) In Track 2, home improvement revenue fell Approx. 21% YoY on macro headwinds and a strategic refocus, notably worse than the Street’s -11% view. Leasing revenue dipped 1% YoY, mainly due to a recognition change for the high-touch 'Steward Rental' model from gross to net; underlying volume likely still grew Approx. 20–30%.

3) While macro headwinds persist, margins improved across business lines. In Track 1 brokerage, segment margins expanded by 200–300bps YoY, slightly above expectations, driven by headcount rationalization and a modest reduction in agent commission splits.

Margins in Track 2 exceeded expectations by a wider margin. Home improvement, despite smaller scale, delivered a 36% margin after materially optimizing the upstream supply chain and cutting customer acquisition spend. Leasing benefited from rapid growth in higher-margin 'Steward Rental,' lifting segment margin from 10.4% in the prior quarter to nearly 15%.

4) Cost discipline also contributed meaningfully. Total opex fell Approx. 22% YoY vs. total revenue down 19% YoY, led by a sharp 39% cut in marketing spend, which came in just over RMB 1bn vs. the Street’s ~RMB 1.5bn.

5) Overall, margin expansion did more of the heavy lifting, beating by Approx. RMB 240mn, while opex undershot by Approx. RMB 160mn. As a result, Adj. profit was Approx. RMB 1.6bn, nearly RMB 500mn above the Street. $KE(BEKE.US) $BEKE-W(02423.HK)