You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties about our business and operations. Our actual results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those we describe under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report. A.Operating Results Overview We are a leading fresh grocery e-commerce company in mainland China, with sustainable long-term growth. We directly provide users and households with fresh groceries, prepared food, and other food products through delivering a convenient and excellent shopping experience supported by an extensive self-operated frontline fulfillment grid. Leveraging our deep insights into consumers' evolving needs and our strong food innovation capabilities, we have successfully launched a series of private label products spanning a variety of food categories. Many of our private label products are produced at our Dingdong production plants, allowing us to more efficiently produce and offer safe and high-quality food products. We aim to be the first choice for fresh and food shopping. Since our initial entry into Shanghai in May 2017, we have successfully expanded our business to many cities across mainland China. Demonstrating our ability to leverage our core capabilities and replicate our success in new markets. Starting from the third quarter of 2021, we strategically shifted our focus to “efficiency first with due consideration of scale”, aiming to achieve profitability to maximize our investors’ interests in us. Ever since our strategic shift, we have been focusing on further strengthening our product competitiveness while optimizing our fulfillment network, so as to increase user stickiness and secure their loyalty with us. In 2024, our GMV and other financial and operating data achieved year-on-year growth compared to 2023, which is mainly due to the further penetration across regions, as well as the growth in user scale, penetration rate, user conversion rate and user ARPU. Building on this, we maintained positive annual scale growth and sustained profitability in 2025. In addition to the continuous improvement in user-related metrics, we further shifted our expansion focus to more small and medium-sized cities within the Jiangsu, Zhejiang and Shanghai regions. We newly entered three cities in 2025, namely Xuancheng, Chuzhou and Taizhou. By exploring and developing small city markets in Jiangsu, Zhejiang, and Shanghai, we have found a clear strategic path to breakthrough and sustainable growth in an increasingly competitive environment. By the end of 2025, we had opened a total of 61 new frontline fulfillment stations throughout the year, which also boosted the GMV growth. Our focus on operational efficiency, along with our commitment to scalability, has proven instrumental in strengthening our user base and driving higher levels of customer engagement. As such, we believe that this will enhance our operating efficiency and cost-effectiveness in the longer term. Our total revenues has increased from RMB19,971.2 million in 2023 to RMB23,066.3 million in 2024 and further increased to RMB24,359.9 million (US$3,483.4 million) in 2025. We have recorded positive year-over-year revenue growth for eight straight quarters in 2025. Our total GMV has increased from RMB21,969.3 million in 2023 to RMB25,557.4 million in 2024, and further increased to RMB26,436.2 million (US$3,780.3 million) in 2025. We recorded net loss of RMB91.3 million in 2023 with net loss margin of 0.5%, and recorded a full year net income of RMB304.4 million, and RMB231.7 million (US$33.1 million) in 2024 and 2025 with net income margin of 1.3% and 1.0%, respectively. In addition, we have achieved non-GAAP profitability for thirteen consecutive quarters. We recorded non-GAAP net income of RMB45.4 million, RMB422.9 million, and RMB310.1 million (US$44.3 million) in 2023, 2024 and 2025, respectively, and our non-GAAP net income margin was 0.2%, 1.8% and 1.3%, in 2023, 2024 and 2025, respectively. 82 Key Factors Affecting Our Results of Operations General Factors Affecting Our Results of Operations Our results of operations and financial condition are affected by the general factors driving mainland China’s retail industry, including levels of per capita disposable income and consumer spending in mainland China. In addition, they are also affected by factors driving online retail in mainland China, the availability of improved logistics infrastructure and the increasing variety of payment options and channels, and competition in the industry. As a result, unfavorable changes in any of these general factors could materially and adversely affect our results of operations. Specific Factors Affecting Our Results of Operations While our business is influenced by the general factors set forth above, our results of operations are also more directly affected by specific factors relating to our business, including: Our ability to further enhance product competitiveness to efficiently drive average order value Product competitiveness is a fundamental driver of our business growth. Our ability to continually introduce compelling and quality new products and refine our current product offering maintains the stability of our average order value. Our average order value was RMB72.1, RMB71.4 and RMB70.1 in 2023, 2024, and 2025, respectively. The slight decrease in 2025 was primarily due to the impact of declining consumer prices for certain commodities. Our ability to continually improve the product competitiveness depends on our ability to (i) improve our product development and in-house production capabilities to launch more popular private label products so as to yield competitive advantage among our peers, (ii) offer more distinguished products, for example, prepared food to attract and retain more users on Dingdong Fresh, (iii) continue our direct sourcing procurement, in particular for fresh groceries directly from farms and cooperatives, to exert more control over supply chain and quality control, and (iv) further enhance end-to-end quality control measures to ensure food safety and quality. Our ability to manage our costs and expenses Our results of operations are directly affected by our ability to further increase our business scale, realize economies of scale in our costs and expenses and further improve our operating efficiency. Cost of goods sold and fulfillment expenses are the two largest components of our costs and expenses, representing 69.3% and 23.5%, respectively, of our revenues in 2023, 69.9% and 22.0%, respectively, of our revenues in 2024, 70.8% and 21.9%, respectively, of our revenues in 2025. As we further enhance our product competitiveness, improve our operating efficiency and our business further grows in scale, we expect to further optimize our costs of goods sold and fulfillment expense structures and operating efficiency, benefiting our cash flow with favorable mix of trade payables, trade receivables and receivable turnover days. Cost of goods sold consists of finished goods procurement cost and cost of fresh groceries and private label products. Cost of fresh groceries and private label products consists primarily of material procurement cost, labor cost and processing costs which mainly includes rental charges, utilities and depreciation of assets associated with food processing. We believe our costs of goods sold will be further optimized, as we (i) continue to deepen our relationship with suppliers and offer more value proposition to them through large order flow and order projections, which in turn enable us to have stable supplies of products at more attractive prices, (ii) continue to develop and launch private label products or prepared food to further refine our product mix, and (iii) continue to enhance in-house production capabilities for private label products, to further reduce costs. Our fulfillment expenses primarily consist of (i) outsourcing expenses charged by third-party labor service companies for provision of delivery riders and workers at our regional processing centers and frontline fulfillment stations, (ii) lease expenses for our regional processing centers and frontline fulfillment stations, and (iii) logistics expenses charged by third party couriers. We expect our fulfillment expenses to decrease as a percentage of our revenues as we improve operating efficiency and leverage our business scale in the long run. 83 Our ability to improve our sourcing capabilities Our results of operations are also affected by our ability to improve our sourcing capabilities and optimize products offerings on Dingdong Fresh. Direct source procurement assures us a stable and diverse supply of high quality products, while continuously strengthen our bargaining power and reducing procurement costs. In 2025, we sourced a cumulative total of over 16,000 SKUs, including fresh groceries, prepared food and other food products from approximately 1,700 suppliers. In particular, direct source procurement of fresh groceries, where directly sourcing from cooperatives and farms, accounted for approximately 85% of total fresh groceries procurement costs in the same period. Additionally, we carefully chose reliable farms to implement order-based production, where we determine the selection and quantity of products to procure based on project demand. We plan to further enhance our upstream procurement and direct sourcing capabilities as we deepen our relationships with our suppliers. In addition, to improve supply chain efficiency, we will continue to empower our upstream farms and suppliers and our own supply chain management through further enhancing digitalization and promoting standardization, and ensure end-to-end quality control over products on Dingdong Fresh. Our ability to improve our sourcing capabilities will also let us offer a wider variety of products on Dingdong Fresh, which will increase our total revenues while help us maintain an efficient cost structure. Our ability to effectively invest in our fulfillment infrastructure and technology Our results of operations depend in part on our ability to invest in our fulfillment infrastructure and technology to cost-effectively meet the demands of our anticipated growth. As of December 31, 2025, we operated in 28 cities in mainland China, with a self-operated grid of over 40 regional processing centers and more than 1,100 frontline fulfillment stations on our leased properties. We plan to continue our investment in core technology areas such as AI, big data and algorithm optimization to strengthen our existing technical advantages to support the proper functions of our fulfillment infrastructure. We expect these technology initiatives to provide innovative features, solutions and services to our users and suppliers, while increasing our operational efficiency. Our ability to effectively invest in our fulfillment infrastructure and technology may decrease our fulfillment expenses as a percentage of our total revenues in the long run, but require upfront capital investments and expenditures in the short run, both of which would affect our operating costs and expenses. Seasonality We have experienced seasonal fluctuations in customer purchases in our business. These seasonality patters are attributable to various factors, such as public holidays and the breakout of pandemics. For example, we typically experience higher user traffic and more purchase orders during summer holidays as families tend to cook more often for children at home and lower user traffic during the Chinese New Year. Other than the foregoing, shopping for fresh grocery and other food products is a frequent occurrence for consumers, and our sales are not normally subject to fluctuations, including during promotional events. 84 Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods indicated. The period-to-period comparisons of results of operations should not be relied upon as indicative of future performance. For the year ended December 31, 2023 2024 2025 2025 RMB RMB RMB US$ (in thousands) Revenues: Product revenues 19,721,428 22,743,113 24,017,888 3,434,512 Service revenues 249,791 323,141 342,000 48,905 Total revenues 19,971,219 23,066,254 24,359,888 3,483,417 Operating costs and expenses: Cost of goods sold (13,847,949 ) (16,120,363 ) (17,253,005 ) (2,467,147 ) Fulfilment expenses (4,700,879 ) (5,076,530 ) (5,334,875 ) (762,877 ) Sales and marketing expenses (392,834 ) (523,088 ) (477,201 ) (68,239 ) Product development expenses (802,890 ) (799,969 ) (821,969 ) (117,540 ) General and administrative expenses (359,096 ) (424,376 ) (486,163 ) (69,520 ) Total operating costs and expenses (20,103,648 ) (22,944,326 ) (24,373,213 ) (3,485,323 ) Other operating income, net 2,307 92,625 145,006 20,736 (Loss)/income from operations (130,122 ) 214,553 131,681 18,830 Interest income 157,486 154,430 125,555 17,954 Interest expenses (98,954 ) (47,298 ) (16,788 ) (2,401 ) Other income/(expenses), net (269 ) (1,270 ) 407 59 (Loss)/income before income tax (71,859 ) 320,415 240,855 34,442 Income tax expenses (19,420 ) (16,016 ) (9,159 ) (1,310 ) Net (loss)/income (91,279 ) 304,399 231,696 33,132 Non-GAAP Measures We report our financial results in accordance with generally accepted accounting principles in the U.S. (“GAAP”); however, management evaluates our results of operations using, among other measures, non-GAAP net income or non-GAAP net income margin in evaluating our operating results and for financial and operational decision-making purposes. We believe that the non-GAAP financial measures help identify underlying trends in our business by excluding the impact of share-based compensation expenses, which are non-cash charges and do not correlate to any operating activity trends. We also believe that the non-GAAP financial measures provide useful information about our company’s results of operations, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical consolidated financial statements and related notes thereto included in this annual report. 85 The following tables present a reconciliation of net (loss)/income to non-GAAP net income for the periods presented: For the year ended December 31, 2023 2024 2025 2025 RMB RMB RMB US$ (in thousands) Net (loss)/income (91,279 ) 304,399 231,696 33,132 Add: share-based compensation expenses 136,646 118,490 78,437 11,216 Non-GAAP net income 45,367 422,889 310,133 44,348 For the year ended December 31, 2023 2024 2025 Net (loss)/income margin (0.5 )% 1.3 % 1.0 % Add: share-based compensation expenses 0.7 % 0.5 % 0.3 % Non-GAAP net income margin 0.2 % 1.8 % 1.3 % Key Components of Results of Operations Revenues Revenues consist of (i) product revenues and (ii) service revenues. The following table sets forth a breakdown of our revenues by type in absolute amounts for the periods indicated: For the year ended December 31, 2023 2024 2025 2025 RMB RMB RMB US$ (in thousands) Revenues: Product revenues 19,721,428 22,743,113 24,017,888 3,434,512 Service revenues 249,791 323,141 342,000 48,905 Total revenues 19,971,219 23,066,254 24,359,888 3,483,417 We generate product revenues from sale of products on Dingdong Fresh, accounting for significantly all of our revenues in 2023, 2024 and 2025. We also generate a small amount of service revenues primarily from Dingdong membership fees paid by our members. We record revenues net of discounts, return allowances and value-added taxes, or VAT. Operating costs and expenses Our operating costs and expenses consist of (i) costs of goods sold, (ii) fulfillment expenses, (iii) sales and marketing expenses, (iv) product development expenses, and (v) general and administrative expenses. In 2021, we shifted our strategic focus to “efficiency first, with due consideration of scale.” We expect that our operating costs and expenses to decrease as a percentage of our revenues as we further improve our supply chain capabilities and operating efficiency and realize benefits from economies of scale in line with our growth. The following table sets forth a 86 breakdown of our operating costs and expenses both in absolute amounts and as a percentage of our revenues for the periods indicated: For the years ended December 31 2023 2024 2025 RMB % RMB % RMB US$ % (in thousands, except for percentage) Operating costs and expenses: Cost of goods sold 13,847,949 69.3 % 16,120,363 69.9 % 17,253,005 2,467,147 70.8 % Fulfilment expenses 4,700,879 23.5 % 5,076,530 22.0 % 5,334,875 762,877 21.9 % Sales and marketing expenses 392,834 2.0 % 523,088 2.3 % 477,201 68,239 2.0 % Product development expenses 802,890 4.0 % 799,969 3.5 % 821,969 117,540 3.4 % General and administrative expenses 359,096 1.9 % 424,376 1.8 % 486,163 69,520 2.0 % Total operating costs and expenses 20,103,648 100.7 % 22,944,326 99.5 % 24,373,213 3,485,323 100.1 % Costs of goods sold. Costs of goods sold primarily consists of procurement costs of finished goods and material procurement costs, labor costs and processing costs for fresh groceries and private label products. Fulfillment expenses. Fulfillment expenses consist primarily of (i) outsourcing expenses charged by third-party labor service companies for provision of delivery riders and workers at our regional processing centers and frontline fulfillment stations, (ii) warehouse leasing of regional processing centers and frontline fulfillment stations and (iii) logistics expenses charged by third-party couriers. Outsourcing expenses amounted to RMB2,603.5 million, RMB2,982.1 million and RMB3,121.0 million (US$446.3 million) in 2023, 2024 and 2025, representing 55.4%, 58.7% and 58.5% of total fulfillment expenses, respectively. We expect our fulfillment expenses to decrease as a percentage of our revenues in the near future, as we further improve our operating efficiencies. Sales and marketing expenses. Sales and marketing expenses primarily consist of (i) advertising expenses and (ii) staff costs, including share-based compensation expenses, for our sales and marketing personnel. We expect to continue to incur sales and marketing expenses to grow our user base and strengthen our brand image, but as we are more focused on increasing user stickiness to secure their loyalty with us and driving the growth through our improved product capabilities, our marketing efficiency will improve significantly. Product development expenses. Product development expenses consist primarily of staff costs, including share-based compensation expenses, for research and development personnel involved in platform development, product development and system support. General and administrative expenses. General and administrative expenses consist primarily of (i) staff costs, including share-based compensation expenses, for general and administrative personnel, (ii) payment processing fees on Dingdong Fresh and (iii) fees charged by professional parties. We plan to continue to hire additional qualified employees to support our business operations and sustainable growth. Interest income Interest income is mainly generated from bank deposits and other interest earning financial assets and is recognized on an accrual basis using the effective interest method. Interest expenses Interest expenses consist primarily of interest incurred from short-term bank loans, notes payable and reversed factoring arrangements. 87 Taxation Cayman Islands The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains, or appreciation, and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties, which may be applicable on instruments executed in, or brought within the jurisdiction of, the Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments. Hong Kong On March 21, 2018, the Hong Kong Legislative Council passed The Inland Revenue (Amendment) (No. 7) Bill 2017, which introduces the two-tiered profits tax rates regime. The bill was signed into law on March 28, 2018 and was gazetted on the following day. Under the two-tiered profits tax rates regime, the first HK$2 million of profits of the qualifying group entity will be taxed at 8.25%, and profits above HK$2 million will be taxed at 16.5%. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of 16.5%. Accordingly, the Hong Kong profits tax of the qualifying group entity is calculated at 8.25% on the first HK$2 million of the estimated assessable profits and at 16.5% on the estimated assessable profits above HK$2 million. Mainland China Under the PRC Enterprise Income Tax Law and its implementation rules, our PRC subsidiaries, are subject to the statutory rate of 25%, subject to preferential tax treatments available to qualified enterprises in certain encouraged sectors of the economy. Enterprises that qualify as SSE are eligible for a preferential enterprise income tax rate of 20%. A number of our PRC operating subsidiaries are qualified as SSE and thus entitled to enjoy a preferential tax rate of 20% in 2023, 2024 and 2025. Pursuant to the PRC Enterprise Income Tax Law and its implementation rules, normally a 10% withholding tax is levied on dividends declared to foreign investors from mainland China. We incurred income tax expenses of RMB19.4 million, RMB16.0 million and RMB9.2 million (US$1.3 million) for the years ended December 31, 2023, 2024 and 2025. Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Revenues Our revenues increased from RMB23,066.3 million in 2024 to RMB24,359.9 million (US$3,483.4 million) in 2025. Product revenues. Product revenues increased from RMB22,743.1 million in 2024 to RMB24,017.9 million (US$3,434.5 million) in 2025, mainly due to the rise of number of orders resulting from rise in the average monthly number of transacting users and higher monthly order frequency, and new opened frontline fulfillment stations with density and market penetration improved in East China. Additionally, our B2B revenue achieved year-over-year growth, with the revenue contribution from overseas B2B operations continuing to increase and posting rapid sequentially. Service revenues. Service revenues increased from RMB323.1 million in 2024 to RMB342.0 million (US$48.9 million) in 2025, primarily driven by the increase of customers subscribing to our membership program. 88 Operating costs and expenses Cost of goods sold. Our cost of goods sold increased by 7.0% from RMB16,120.4 million in 2024 to RMB17,253.0 million (US$2,467.1 million) in 2025. Cost of goods sold as a percentage of revenues increased slightly from 69.9% in 2024 to 70.8% in 2025. Fulfillment expenses. Our fulfillment expenses increased by 5.1% from RMB5,076.5 million in 2024 to RMB5,334.9 million (US$762.9 million) in 2025, primarily due to an increase of RMB139.0 million in outsourcing expenses. Fulfillment expenses as a percentage of revenues slightly decreased from 22.0% in 2024 to 21.9% in 2025, primarily due to the increased order volume which boosted operational efficiency and was driven by the improved efficiency of regional processing centers. Sales and marketing expenses. Our sales and marketing expenses decreased by 8.8% from RMB523.1 million in 2024 to RMB477.2 million (US$68.2 million) in 2025, primarily due to an decrease of RMB58.1 million in spending on sales and marketing activities and RMB37.5 million in staff costs. Product development expenses. Our product development expenses increased by 2.8% from RMB800.0 million in 2024 to RMB822.0 million (US$117.5 million) in 2025. While advocating for energy and resource saving, we will continue to invest in our product development capabilities, agricultural technology, data algorithms, and other technology infrastructure, to further enhance our competitiveness. General and administrative expenses. Our general and administrative expenses increased by 14.6% from RMB424.4 million in 2024 to RMB486.2 million (US$69.5 million) in 2025, mainly due to an increase of RMB62.2 million in staff costs. Other operating income, net Our other operating income, net was RMB145.0 million (US$20.7 million) in 2025, compared with RMB92.6 million in 2024, mainly due to an increase of RMB26.4 million in government subsidies. Income from operations As a result of the foregoing, we had income from operations of RMB131.7 million (US$18.8 million) in 2025, compared to income from operations of RMB214.6 million in 2024. Interest income Our interest income decreased by 18.7% from RMB154.4 million in 2024 to RMB125.6 million (US$18.0 million) in 2025. We have been continuously optimizing the efficiency of our capital utilization and financing structure. While proactively reducing short-term borrowings, the cash and cash equivalents as well as short-term investments have correspondingly decreased, which resulted in a decline in interest income. Interest expenses Our interest expenses decreased by 64.5% from RMB47.3 million in 2024 to RMB16.8 million (US$2.4 million) in 2025, primarily due to less reversed factoring arrangements. Income before income tax Primarily as a result of the foregoing, our income before income tax was RMB240.9 million (US$34.4 million) in 2025, compared to income before income tax of RMB320.4 million in 2024. 89 Income tax expenses As compared to RMB16.0 million income tax expenses we incurred in 2024, we incurred income tax expenses of RMB9.2 million (US$1.3 million) in 2025. Our income tax expenses in 2025 was primarily due to taxable profit generated in the same period. Net income As a result of the foregoing, our net income was RMB231.7 million (US$33.1 million) in 2025, compared to the net income of RMB304.4 million in 2024. Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Revenues Our revenues increased from RMB19,971.2 million in 2023 to RMB23,066.3 million in 2024. Product revenues. Product revenues increased from RMB19,721.4 million in 2023 to RMB22,743.1 million in 2024, primarily attributed to the increased numbers of transacting users, improved user conversion rates, higher user ARPU, increased frequency of monthly purchases and expanding our station network in Jiangsu, Zhejiang, and Shanghai this year. Service revenues. Service revenues increased from RMB249.8 million in 2023 to RMB323.1 million in 2024, primarily driven by the increase of customers subscribing to our membership program. Operating costs and expenses Cost of goods sold. Our cost of goods sold increased by 16.4% from RMB13,847.9 million in 2023 to RMB16,120.4 million in 2024. Cost of goods sold as a percentage of revenues increased slightly from 69.3% in 2023 to 69.9% in 2024. Fulfillment expenses. Our fulfillment expenses increased by 8.0% from RMB4,700.9 million in 2023 to RMB5,076.5 million in 2024, primarily due to an increase of RMB378.6 million in outsourcing expenses. Fulfillment expenses as a percentage of revenues slightly decreased from 23.5% in 2023 to 22.0% in 2024, primarily due to the increased order volume which boosted operational efficiency and was driven by the improved efficiency of regional processing centers. Sales and marketing expenses. Our sales and marketing expenses increased by 33.2% from RMB392.8 million in 2023 to RMB523.1 million in 2024, primarily due to an increase of RMB62.2 million in spending on sales and marketing activities and RMB48.2 million in staff costs. Product development expenses. Our product development expenses decreased by 0.4% from RMB802.9 million in 2023 to RMB800.0 million in 2024. While advocating for energy and resource saving, we will continue to invest in our product development capabilities, agricultural technology, data algorithms, and other technology infrastructure, to further enhance our competitiveness. General and administrative expenses. Our general and administrative expenses increased by 18.2% from RMB359.1 million in 2023 to RMB424.4 million in 2024, mainly due to an increase of RMB29.8 million in staff costs and RMB17.6 million in professional service fees. Other operating income, net Our other operating income, net was RMB92.6 million in 2024, compared with RMB2.3 million in 2023, mainly due to (i) an increase of RMB42.9 million in government subsidies, and (ii) a decrease of RMB17.5 million in compensation or penalties paid for early termination of contracts. 90 (Loss)/income from operations As a result of the foregoing, we had income from operations of RMB214.6 million in 2024, compared to loss from operations of RMB130.1 million in 2023. Interest income Our interest income decreased by 2.0% from RMB157.5 million in 2023 to RMB154.4 million in 2024. We have been continuously optimizing the efficiency of our capital utilization and financing structure. While proactively reducing short-term borrowings, the cash and cash equivalents as well as short-term investments have correspondingly decreased, which resulted in a decline in interest income. Interest expenses Our interest expenses decreased by 52.2% from RMB99.0 million in 2023 to RMB47.3 million in 2024, primarily due to less reversed factoring and short-term borrowings. (Loss)/income before income tax Primarily as a result of the foregoing, our income before income tax was RMB320.4 million in 2024, compared to loss before income tax of RMB71.9 million in 2023. Income tax expenses As compared to RMB19.4 million income tax expenses we incurred in 2023, we incurred income tax expenses of RMB16.0 million in 2024. Our income tax expenses in 2024 was due to taxable profit generated in the same period. Net (loss)/income As a result of the foregoing, our net income was RMB304.4 million in 2024, compared to the net loss of RMB91.3 million in 2023. Critical Accounting Policies, Judgments and Estimates We have identified certain accounting policies, judgments, and estimates that are significant to the preparation of our historical financial information in accordance with the U.S. generally accepted accounting principles (“U.S. GAAP”). Our accounting policies, which are important for an understanding of our financial position and results of operations, are set forth in detail in Note 2 to the consolidated financial statements included elsewhere in this annual report. Some of our accounting policies require us to apply estimates and assumptions as well as complex judgments relating to accounting items. The estimates and assumptions that we use and the judgments that we make in applying our accounting policies have a significant impact on our financial position and results of operations. Actual results could differ from those estimates. Our management continually evaluates such estimates, assumptions, and judgments based on past experience and other factors, including industry practices and expectations of future events that we believe to be reasonable under the circumstances. Our critical accounting judgments and estimates that were used in the preparation of our historical financial information are set forth in Note 2 to the consolidated financial statements included elsewhere in this annual report. Revenue Recognition We recognize revenues from (i) product sales of primarily fresh groceries, prepared food and other food products through “Dingdong Fresh” APP, mini-programs and third-party platforms, and (ii) membership services. 91 We recognize revenues when we satisfy a performance obligation by transferring a promised good or service (that is, an asset) to a customer in an amount of consideration to which we expect to be entitled to in exchange for the good or services. An asset is transferred when the customer obtains control of that asset. Product Sales We evaluate whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. When we are a principal, we obtain control of the specified goods or services before they are transferred to the customers and revenues are recognized at the gross amount of consideration to which we expect to be entitled in exchange for the specified goods or services transferred. When we are an agent and our obligation is to facilitate third parties in fulfilling their performance obligation for specified goods or services, revenues are recognized at the net amount for the amount of commission which we earn in exchange for arranging for the sales of the specified goods or services to be provided by other parties. We recognize product sales made through Dingdong Fresh APP, mini-programs and third-party platforms on a gross basis because we are acting as the principal in these transactions as we (i) are responsible for fulfilling the promise to provide the specified goods, (ii) take on inventory risks and (iii) have discretion in establishing price. Revenues generated from product sales are recognized at a point in time when the control of the product is transferred to the customer. We are subject to VAT on revenue generated from sales of products. This VAT may be offset by qualified input VAT paid by us to suppliers. The net VAT balance between input VAT and output VAT is recorded in “Other current assets” or “Accrued expenses and other current liabilities” on the consolidated balance sheets. We recognize revenues net of discounts and return allowances. We rarely issue coupons concurrent with the completion of a sales transaction, and any revenue allocated to such coupons was immaterial for all periods presented. The discounts and coupons are recorded as a deduction of revenue when used by customers, except for referral coupons, which are recognized as sales and marketing expenses when customers provide a customer referral. We allow for return of fresh groceries and other products within 24 hours and 7 days, respectively. We estimate a provision for product returns based on historical experience. We also sell prepaid cards which can be redeemed to purchase products sold on Dingdong Fresh APP and mini program. Cash collected from the sales of prepaid cards is initially recorded as “Customer advances and deferred revenue” in the consolidated balance sheets and subsequently recognized as revenues upon the sales of products through redemption of prepaid cards. The prepaid card balances do not expire according to the current user agreement. We estimate the revenue related to breakage of unused balances in prepaid cards based on historical usage and redemption. Revenue from breakage or forfeiture of unused balances of prepaid cards were not significant for all periods presented. Customers are also granted loyalty points primarily from the purchases of goods. Loyalty points can be used as cash coupons to buy any products sold by us, which will directly reduce the amount paid by the customer. Consideration from the sales transaction is allocated to the products and loyalty points based on the relative standalone selling price of the products and loyalty points awarded. The amount of revenue we recognize upon the redemption of loyalty points considers breakage, which is estimated based on our historical experience. Impairment of long-lived assets We evaluate the recoverability of our long-lived assets, including property and equipment and operating lease right-of-use assets, for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. For purposes of assessing recoverability, we identified each individual geographical region that is serviced by various regional processing centers and frontline fulfillment stations to be the lowest level of independent cash flows. A long-lived asset group is not recoverable if the carrying value is higher than the undiscounted future cash flows expected to result from their use. Impairment losses are measured based on the excess of the asset group’s carrying amount over its fair value and reduces the carrying amount of the long-lived assets in the asset group on a pro rata basis using the relative carrying amounts of those assets. The adjusted carrying amounts after 92 an impairment charge represent the new cost basis and are depreciated over their remaining useful lives. No impairment losses were recognized for the years ended December 31, 2023, 2024 and 2025. In determining the fair value of our long-lived asset groups with impairment indicators, we consider the highest and best use of their long-lived assets from a market participants’ perspective, which is determined to be the higher of the discounted future cash flows from operating the long-lived asset groups and the price market participants would pay to sub-lease the leased properties, even if that use differs from our current or intended use of the asset group. We estimate the fair value of our long-lived asset groups with the assistance of an independent third-party valuation firm. We use considerable judgement to estimate the price market participants would pay to sub-lease the leased properties, which are based on comparable market rental information that could be reasonably obtained for the property. These assumptions are also affected by economic and market conditions with uncertain future outcomes. We also perform sensitivity analyses over the estimates of market rental rates that market participants would be willing to pay to sub-lease the leased properties. The quantitative impairment assessment performed by us as of December 31, 2023, 2024 and 2025 indicated that the fair value of the long-lived assets exceeded their carrying value and, therefore, did not result in an impairment charge. Recently Issued Accounting Pronouncements A list of recently issued accounting pronouncements that are relevant to us is included in Note 2 of our consolidated financial statements included elsewhere in this annual report. B.Liquidity and Capital Resources To date, we have financed our capital requirements primarily through cash generated by historical equity and debt financing activities and capital contributions from our shareholders. We had cash and cash equivalents, restricted cash and short-term investments of RMB5,309.7 million, RMB4,452.2 million and RMB3,976.8 million (US$568.7 million) as of December 31, 2023, 2024 and 2025, respectively. We are continuously improving the efficiency of capital use and our financing structure. After deducting the balance of short-term borrowings from the aggregate amount of cash and cash equivalents, restricted cash, short-term investments and long-term deposits included in the other non-current assets, the actual balance of our own funds was RMB2,009.5 million, RMB2,845.9 million and RMB3,140.3 million (US$449.1 million) as of December 31, 2023, 2024 and 2025, respectively. We believe that our current cash and cash equivalents, restricted cash and short-term investments and our anticipated cash flows from financing activities will be sufficient to meet our anticipated working capital requirements, capital expenditures and debt repayment obligations for at least the next 12 months from the date of this annual report. We may consider enhancing our liquidity position or increase our cash reserves for future operations and investments through additional equity or debt financings. The issuance and sale of additional equity would result in further dilution to our shareholders, and the incurrence of indebtedness would result in increasing fixed obligations and may result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. As of December 31, 2025, substantially all of our cash and cash equivalents were held in mainland China and substantially all were denominated in Renminbi and U.S. dollars. As of December 31, 2025, 99.9% of our cash and cash equivalents were held by our subsidiaries. Substantially all of our revenues have been, and we expect will likely continue to be, denominated in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our PRC subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of mainland China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. 93 Cash Flow Summary The following table sets forth a summary of our cash flows for the periods indicated: For the year ended December 31, 2023 2024 2025 2025 RMB RMB RMB US$ (in thousands) Net cash (used in)/generated from operating activities (234,606 ) 929,027 535,514 76,577 Net cash generated from investing activities 519,329 475,500 429,602 61,432 Net cash generated used in financing activities (934,424 ) (1,723,923 ) (743,342 ) (106,296 ) Effect of exchange rate changes on cash and cash equivalents and restricted cash 456 (94) (4,854) (693 ) Net (decrease)/increase in cash and cash equivalents and restricted cash (649,245 ) (319,490 ) 216,920 31,020 Cash and cash equivalents and restricted cash at the beginning of the year 1,858,950 1,209,705 890,215 127,299 Cash and cash equivalents and restricted cash at the end of the year 1,209,705 890,215 1,107,135 158,319 Operating activities For the year ended December 31, 2025, net cash generated from operating activities was RMB535.5 million (US$76.6 million), which was primarily attributable to (i) net income of RMB231.7 million (US$33.1 million), as adjusted by non-cash items, which primarily comprised (a) share-based compensation expenses of RMB78.4 million (US$11.2 million), (b) depreciation and amortization expenses of RMB97.5 million (US$13.9 million), (c) Non-cash operating lease expense to reduce operating lease right-of-use assets of RMB717.5 million (US$102.6 million), and (ii) changes in operating assets and liabilities, was primarily the result of (a) an increase of RMB259.9 million (US$37.2 million) in accounts payable, partially offset by (b) a decrease of RMB691.0 million (US$98.8 million) in operating lease liabilities, (c) an increase of RMB68.3 million (US$9.8 million) in accounts receivable, and (d) an increase of RMB51.4 million (US$7.3 million) in advance to suppliers. For the year ended December 31, 2024, net cash generated from operating activities was RMB929.0 million, which was primarily attributable to (i) net income of RMB304.4 million, as adjusted by non-cash items, which primarily comprised (a) share-based compensation expenses of RMB118.5 million, (b) depreciation and amortization expenses of RMB114.6 million, (c) Non-cash operating lease expense to reduce operating lease right-of-use assets of RMB717.1 million, and (ii) changes in operating assets and liabilities, was primarily the result of (a) an increase of RMB238.3 million in accounts payable, (b) an increase of RMB95.0 million in accrued expenses and other current liabilities, and (c) an increase of RMB84.1 million in salary and welfare payable, partially offset by (d) a decrease of RMB721.0 million in operating lease liabilities, and(e) an increase of RMB81.7 million in inventories. For the year ended December 31, 2023, net cash outflow of operating activities was RMB234.6 million, which was primarily attributable to (i) net loss of RMB91.3 million, as adjusted by non-cash items, which primarily comprised (a) share-based compensation expenses of RMB136.6 million, (b) depreciation and amortization expenses of RMB155.0 million, (c) Non-cash operating lease expense to reduce operating lease right-of-use assets of RMB790.0 million, and (ii) changes in operating assets and liabilities, was primarily the result of (a) a decrease of RMB464.5 million in accounts payable, (b) a decrease of RMB800.0 million in operating lease liabilities, (c) a decrease of RMB135.4 million in accrued expenses and other current liabilities, and (d) a decrease of RMB96.0 million in salary and welfare payable, partially offset by (e) a decrease of RMB133.0 million in inventories. Investing activities For the year ended December 31, 2025, net cash inflow of investing activities was RMB429.6 million (US$61.4 million), which was primarily attributable to (i) maturities from short-term investments of RMB5,342.9 million (US$764.0 million), partially offset by (ii) purchases of short-term investments of RMB4,731.7 million (US$676.6 million), (iii) purchase of property and equipment of RMB177.8 million (US$25.4 million). 94 For the year ended December 31, 2024, net cash inflow of investing activities was RMB475.5 million, which was primarily attributable to (i) maturities from short-term investments of RMB6,272.7 million, partially offset by (ii) purchases of short-term investments of RMB5,704.1 million, (iii) purchase of property and equipment of RMB98.2 million. For the year ended December 31, 2023, net cash inflow of investing activities was RMB519.3 million, which was primarily attributable to (i) maturities from short-term investments of RMB8,734.8 million, partially offset by (ii) purchases of short-term investments of RMB8,167.4 million, (iii) purchase of property and equipment of RMB83.3 million. Financing activities For the year ended December 31, 2025, net cash used in financing activities was RMB743.3 million (US$106.3 million), which primarily comprised of (i) repayment of short-term borrowings of RMB5,699.9 million (US$815.1 million), partially offset by (ii) proceeds from short-term borrowings of RMB4,965.1 million (US$710.0 million). For the year ended December 31, 2024, net cash used in financing activities was RMB1,723.9 million, which primarily comprised of (i) repayment of short-term borrowings of RMB10,089.3 million, partially offset by (ii) proceeds from short-term borrowings of RMB8,395.4 million. For the year ended December 31, 2023, net cash used in financing activities was RMB934.4 million, which primarily comprised of (i) repayment of short-term borrowings of RMB12,824.3 million partially offset by (ii) proceeds from short-term borrowings of RMB11,886.6 million. Capital expenditures Our capital expenditures are primarily incurred for purchases of property and equipment. Our total capital expenditures were RMB83.3 million, RMB98.2 million and RMB177.8 million (US$25.4 million) in 2023, 2024 and 2025, respectively. We intend to fund our future capital expenditures with our existing cash balance. We will continue to make capital expenditures to enhance our supply chain and product capability and meet the expected growth of our business. Contractual Obligations The following table sets forth our material contractual obligations as of December 31, 2025. Payment Due by Period Total 2026 2027 2028 2029 2030 and thereafter (RMB in thousands) Operating lease commitments 1,741,859 753,350 455,631 303,780 151,821 77,277 Capital expenditure commitment 12,021 12,021 — — — — Other than as shown above, we did not have any material capital and other commitments, long-term obligations, guarantees or other reasonably likely material cash requirements (even if not contractual and not recognized as liabilities) as of December 31, 2025. Holding Company Structure Dingdong (Cayman) Limited is not a Chinese operating company, but a Cayman Islands holding company with no material operations of its own. We mainly conduct our operations through our PRC subsidiaries. As a result, our ability to pay dividends depends significantly upon dividends paid by our PRC subsidiaries. If our existing PRC subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. To the extent our cash or assets in the business are in mainland China or Hong Kong or a mainland China or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of mainland China or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of Dingdong (Cayman) Limited or our subsidiaries to transfer cash or assets. 95 There is no assurance that the PRC government will not intervene in or impose restrictions on the ability of Dingdong (Cayman) Limited or our subsidiaries to transfer cash or assets. In addition, our wholly foreign-owned subsidiaries in mainland China are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under relevant PRC law, each of our subsidiaries in mainland China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. The statutory reserve funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of mainland China is subject to examination by the banks designated by the SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. Under PRC laws and regulations, our PRC subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of mainland China is also subject to examination by the banks designated by State Administration of Foreign Exchange, or SAFE. These restrictions are benchmarked against the paid-up capital and the statutory reserve funds of our PRC subsidiaries. For risks relating to the fund flows of our operations in China, see “Consolidated Financial Statements” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in Mainland China—Restrictions on the remittance of Renminbi into and out of China and governmental control of currency conversion may limit our ability to pay dividends and other obligations, and affect the value of your investment.” For the years ended December 31, 2023, 2024 and 2025, no dividends or distributions were made to Dingdong (Cayman) Limited by our PRC subsidiaries. We have never declared or paid any dividends on our ordinary shares since our inception, nor have any present plan to pay any dividends on our ordinary shares or ADSs in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. See “Item 8. Financial Information —A. Consolidated Statements and Other Financial Information—Dividend Policy.” For PRC and United States federal income tax considerations of an investment in our ADSs, see “Item 10. Additional Information—E. Taxation.” Under PRC laws, Dingdong (Cayman) Limited may fund our PRC subsidiaries only through capital contributions or loans, subject to satisfaction of applicable government registration and approval requirements. For the years ended December 31, 2023, 2024 and 2025, the aggregate amount of capital contribution by Dingdong (Cayman) Limited and our intermediate holding companies to our PRC subsidiaries were RMB12.3 million, nil and nil, respectively. For the years ended December 31, 2023, 2024 and 2025, the Cayman Islands holding company and our intermediary holding companies provided loans of RMB16.6 million, RMB0.1 million and nil, respectively, to our PRC subsidiaries, and received loan repayments of nil, nil and nil, respectively. Under PRC laws and regulations, our PRC subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of mainland China is also subject to examination by the banks designated by State Administration of Foreign Exchange, or SAFE. These restrictions are benchmarked against the paid-up capital and the statutory reserve funds of our PRC subsidiaries. For risks relating to the fund flows of our operations in China, see “Consolidated Financial Statements” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in Mainland China—Restrictions on the remittance of Renminbi into and out of China and governmental control of currency conversion may limit our ability to pay dividends and other obligations, and affect the value of your investment.” For the years ended December 31, 2023, 2024 and 2025, no dividends or distributions were made to Dingdong (Cayman) Limited by our PRC subsidiaries. C.Research and Development See “Item 4. Information on the Company—B. Business Overview—Technology” and “Item 4. Information on the Company—B. Business Overview—Intellectual Property.” D.Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2025 that are reasonably likely to have a material and adverse 96 effect on our income, expenses, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions. E.Critical Accounting Estimates For our critical accounting estimates, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies, Judgments and Estimates.”