The real estate transaction and financial services businesses face challenges, with conditions worsening significantly in the fourth quarter.

As the property sector enters its fifth year of deep adjustment, the annual report of KE Holdings Inc., a leader in property transactions, serves as a critical indicator of market conditions. In 2025, the company delivered a complex and nuanced report: total revenue barely maintained positive growth, but profitability reflected increasing pressure.

On the surface, the company attempted to signal stability through store expansion and improved user engagement. However, declining transaction volumes in both existing home sales and new home sales directly reduced overall gross profit margins. Faced with persistent downward pressure in property transactions, KE Holdings has accelerated its search for growth in non-transactional sectors. Rental services have emerged as the brightest growth area, shifting the company's identity from a transaction platform toward a comprehensive residential service provider.

Behind this difficult transition, however, concerns linger over risk management in financial services, marginal changes in collection capabilities, and fluctuating market confidence, adding uncertainty to KE Holdings' future.

**Net Profit Plummets as Core Business Struggles**

The pressure on KE Holdings is evident. In 2025, full-year revenue reached 94.6 billion yuan, a slight increase of 1.2% from 93.5 billion yuan in 2024. However, net profit plummeted 26.65% to 2.991 billion yuan from 4.078 billion yuan the previous year. Adjusted net profit was 5.017 billion yuan, also significantly lower than the 7.211 billion yuan recorded in 2024.

This "revenue growth without profit growth" highlights ongoing strain in the core business. Specifically, net revenue from existing home sales fell 11.3% to 25 billion yuan, while net revenue from new home sales declined 9.1% to 30.6 billion yuan. The drop in profit contribution was even more pronounced, decreasing 19.29% and 8.4% year-over-year, respectively. Consequently, the company's overall gross margin fell from 24.6% in 2024 to 21.4%.

Despite operational pressures, KE Holdings continued to expand its store network and user reach. By the end of 2025, the total number of stores reached 61,139, an increase of 18.5% year-over-year. Average monthly active mobile users were 43.8 million, slightly higher than the previous year.

However, this expansion failed to offset the decline in transaction value. Total platform transaction value in 2025 was 3.18 trillion yuan, down 5% year-over-year. Existing home transaction value decreased 4.2% to 2.15 trillion yuan, while new home transaction value fell 8.2% to 890.9 billion yuan.

The fourth quarter was particularly challenging. Revenue in Q4 2025 was 22.19 billion yuan, and net profit was only 87.85 million yuan, representing year-over-year declines of 28.71% and 84.95%, respectively. Total property transaction value for the quarter dropped 36.7%, with existing and new home transaction values falling 35.3% and 41.7%.

Amid the performance pressure, KE Holdings still returned capital to shareholders through share repurchases and dividends, spending $921 million on buybacks for the year and planning dividends of approximately $300 million.

**1.9 Billion Yuan in Stock-Based Compensation Sparks Renewed Debate**

According to the financial report, stock-based compensation at KE Holdings was 1.904 billion yuan in 2025, down from 2.726 billion yuan in 2024 but still a substantial expense. This was a key factor contributing to the significant gap between net profit and adjusted net profit.

In 2023, stock-based compensation totaled 2.98 billion yuan, with CEO Peng Yongdong receiving approximately 713 million yuan and co-founder Shan Yigang receiving about 507 million yuan, together accounting for 41% of the total. In 2024, their combined compensation was 681 million yuan, representing 25% of the total, with Peng receiving roughly 401 million yuan and Shan about 299 million yuan.

Based on these proportions, estimates suggest their combined stock-based compensation for 2025 could be nearly 800 million yuan if the 40% share held, or around 500 million yuan if the 25% share applied. Full details await the complete financial report disclosure.

From 2021 to 2024, the total compensation for Peng and Shan exceeded 3 billion yuan, setting a record for executive pay in Chinese corporate history.

In response to public criticism over executive compensation, KE Holdings has explained that the majority of the founders' pay consists of restricted shares granted in May 2022 to comply with Hong Kong's dual-class share structure requirements. These are accounted for under "share-based compensation" using straight-line amortization and are not traditional cash payments. The company also noted that Peng had never sold or transferred these shares prior to 2025, meaning the compensation had not been realized.

Nevertheless, the stark financial figures have highlighted a perceived inequity between top executives and frontline agents, fueling widespread discussion and collective criticism from brokers.

To address the controversy, Peng Yongdong and Shan Yigang donated approximately 840 million yuan within a year to establish a special fund for employee health. In December 2025, Peng sold 9 million Class A shares for the first time, donating the post-tax proceeds of about 440 million yuan entirely to public welfare—50% for rental assistance for new graduates and 50% for improving healthcare for service providers and their families.

On February 24, 2026, ahead of the 25th anniversary of KE Holdings and Lianjia, Peng and Shan donated another 10 million Class A ordinary shares, valued at approximately 400 million yuan, to establish the "Health and Family Guardian Fund."

Despite these substantial donations, core questions remain unanswered regarding wealth distribution fairness within the agency industry and whether high executive pay aligns with performance and responsibility.

**Cost-Cutting and Diversification: Workforce Reduced by Nearly 16,000**

Confronted with a downturn in its main business, KE Holdings has demonstrated strong execution in cost control and business diversification.

On the cost-cutting front, the company optimized its expense structure by reducing administrative, marketing, and personnel costs. General and administrative expenses decreased 9.9% from 9 billion yuan in 2024 to 8.1 billion yuan in 2025, primarily due to lower share-based compensation and reduced credit loss provisions. Sales and marketing expenses fell 5.8% from 7.8 billion yuan to 7.3 billion yuan, reflecting savings in labor costs, advertising, and promotion.

The total number of employees fell to 119,200 by the end of 2025, down from 135,100 at the end of 2024. Additionally, the fourth quarter included one-time expenses related to "cost optimization measures," indicating significant organizational adjustments.

On the diversification front, non-transaction businesses, particularly home rental services, have become crucial for offsetting declines in the core business. In 2025, the number of rental units under management exceeded 700,000, a 62% year-over-year increase. Net revenue from rental services surged 52.8% to 21.9 billion yuan, with profit contribution soaring 162.86% to 1.879 billion yuan. The segment's contribution margin also improved by 3.6 percentage points to 8.6%. The "Worry-Free Lease" model has been key to profitability, wherein KE Holdings acts as a rental agent and manager while property owners retain control and beneficial interests.

The home renovation and furnishing business also contributed to revenue growth, with net revenue rising 4.4% to 15.4 billion yuan and profit contribution increasing 6.72% to 4.844 billion yuan.

Furthermore, KE Holdings strengthened its collection efforts, reducing accounts receivable from 5.5 billion yuan in 2024 to 3.9 billion yuan in 2025.

Despite these efforts in diversification and strict cost control, the company could not fully counter the impact of declining existing and new home sales. By the end of 2025, total cash, cash equivalents, restricted cash, and short-term investments fell to 55.5 billion yuan, down 6.1 billion yuan from 61.6 billion yuan a year earlier.

**Compliance Concerns and Transparency Questions in Financial Services**

Within KE Holdings' business portfolio, the volatility of its emerging and other businesses warrants caution. Net revenue from this segment plummeted 36% from 2.5 billion yuan in 2024 to 1.6 billion yuan in 2025.

According to the company, this segment primarily includes financial services and other new ventures. While financial services were previously a growth driver, the sharp decline in 2025 suggests the business may be undergoing significant adjustments.

KE Holdings has a deep presence in financial services. To support its platform, the company developed advanced technology, including an e-wallet for its "Lifangtong" platform. This wallet facilitates high-frequency, high-value monetary transactions within the KE ecosystem, essentially functioning as a digital transfer, clearing, and settlement system.

The company also engages in financing guarantee services. Its financial reports mention "off-balance sheet arrangements," stating that subsidiaries provide financial guarantees to lending partners or individual lenders, assuming responsibility for principal and interest payments in case of borrower default—effectively offering credit risk protection.

In the first half of 2025, "other costs" rose 27.6% year-over-year to 1.1 billion yuan from 900 million yuan, partly due to increased risk provisions and funding costs related to financial services.

Lifangtong, an online payment platform established in 2014, provides digital payment processing for property transactions, handling deposits, down payments, and final payments.

However, financial services impose higher regulatory and control demands. Public records show Lifangtong has been involved in 11 legal cases and received an administrative penalty in 2025 for violations including "failure to ensure transaction information authenticity, completeness, and traceability" and "improper non-like-name transfers from payment accounts to bank accounts." Such penalties negatively impact KE Holdings' reputation.

Additionally, the company has faced criticism over opaque use of platform funds. The KE app offers financial services such as "mortgage redemption," where users can use down payments to release property mortgages. Fees are 1,000 yuan per transaction for amounts up to 100,000 yuan, and 1% of the guaranteed amount for larger sums.

Given the platform's annual existing home transaction value of 2.15 trillion yuan, such services demand rigorous risk control. While periodically referenced in reports, disclosures regarding fund flows, risk exposure, and control measures in specific operations remain insufficiently transparent.

**Major Shareholders Continue Exits**

As industry conditions shift, the pressure on KE Holdings' performance has affected shareholder confidence. In recent years, the company has faced ongoing exits by long-term shareholders.

Public information shows that in 2021, strategic investor Sunac China Holdings conducted two large-scale divestments, cashing out over $1 billion before fully exiting its position. Sunac cited "withdrawal of financial investment to support focused main business development."

From 2024 to 2025, another strategic investor, China Vanke, accelerated its sell-off, completing its exit in November 2025. Vanke described the move as part of its "streamlining and strengthening" strategy.

SoftBank, a financial investor, reduced its stake in 2022, with media describing the move as "Masayoshi Son fleeing KE Holdings," before eventually exiting entirely. Another financial investor, Hillhouse Capital, also engaged in减持.

Affiliates and executives have also reduced holdings. In June 2023, a trust representing the interests of late founder Zuo Hui's family announced the sale of 11.9 million shares, worth approximately $180 million. Vice Chairman and Executive Director Xu Wangang, through Blossom South Limited, conducted multiple sales in 2023.

Chairman, Executive Director, and CEO Peng Yongdong also initiated his first sale since the IPO in 2025, though this was not for personal gain but to fulfill a pledge made in April 2025 to donate 9 million shares.

In response to shareholder exits and stock price pressure, KE Holdings has implemented buybacks and dividends, which have helped stabilize market expectations. However, with its core business still unstable and new ventures yet to be fully proven, the company must continue to rebuild long-term market trust through sustained operational improvement and transparent corporate governance.