Affected by the fierce competition in the e-commerce industry and the continuous increase in merchant support, PDD's net profit continued to decline in the second quarter, but still significantly exceeded market expectations. PDD's management emphasized in the conference call that they are willing to sacrifice short-term profits and are committed to long-term ecological support.
On Monday evening, PDD Chairman and Co-CEO Chen Lei stated during the conference call: &#34;As the external environment continues to evolve and competition intensifies, we will remain committed to long-term value creation rather than short-term performance. Our team will prioritize high-quality growth by creating long-term opportunities for merchants and investing in consumer experience. As we increase our investment, profitability will inevitably fluctuate, and this quarter's performance may not represent future conditions.&#34;
PDD Group Executive Director and Co-CEO Zhao Jiazhen stated: &#34;With real monetary investment, this quarter's revenue and profit have once again been affected to some extent. As Chen Lei mentioned, compared to short-term performance, we are more focused on investments that can bring long-term returns to the platform ecosystem. This is also the reason why we are willing to sacrifice profits and are committed to long-term ecological support.&#34;
The conference call is still ongoing, and PDD's U.S. stock pre-market turned to decline after previously rising nearly 12%.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/574c5cae-ee8e-4091-8802-bf4df71f454f.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/574c5cae-ee8e-4091-8802-bf4df71f454f.png"/>
Below is the transcript of PDD's second-quarter earnings conference call (translated with AI assistance):
<blockquote>
Host:
Today, participating in our conference call are our Chairman and Co-CEO Chen Lei, our Executive Director and Co-CEO Zhao Jiazhen, and our VP of Finance Liu Jin. Chen Lei and Zhao Jiazhen will share some overall views on our performance over the past quarter and strategic priorities. Liu Jin will introduce our financial performance for the second quarter ending June 30, 2024. During the Q&amp;A session, Chen Lei and Zhao Jiazhen will answer questions in Chinese and assist with translation. Please note that the English translation is for reference only, and any discrepancies should be based on the original text. Now, I am honored to introduce our Chairman and CEO Chen Lei.
Chen Lei:
Hello everyone, thank you for joining our Q2 2025 earnings conference call. In the first half of 2025, the external environment changed rapidly. At a critical juncture when platform merchants faced challenges, we increased our investment in high-quality development and launched the &#34;Billion Support Plan.&#34; Through this project, we have invested and will continue to invest substantial resources to support the merchant ecosystem. We are working hand in hand with merchants to actively explore new business models for global operations, seeking new growth opportunities to cope with the ups and downs of market cycles.
These significant ecosystem investments are reflected in our Q2 financial performance. Revenue growth further slowed, and operating profit decreased by 21% year-on-year. However, as we have emphasized in the past, we prioritize long-term value creation over short-term financial performance. Our focus remains on long-term investments, such as strengthening ecosystem construction, promoting value chain upgrades, and bringing tangible benefits to consumers. Due to our investment in the 100 Billion Support Plan, we are pleased to see that the platform ecosystem is steadily moving towards sustainable and high-quality development
Since August last year, our 10 billion cost reduction initiative has brought significant savings to merchants, creating space for them to innovate and provide more quality products to consumers. At the same time, our logistics support measures have significantly reduced transportation costs to remote areas, resulting in a 40% increase in order volume in these regions, injecting new vitality.
In the past quarter, the entire company has worked together to support the 100 billion support plan to provide innovative solutions to help merchants expand their businesses while further reducing their costs and commissions. We have seen businesses of all sizes, from well-known brands to small merchants, gaining new momentum in our ecosystem.
Yes, let me add a few examples. We have seen some successful consumer brands shorten their product launch cycles and reduce costs by leveraging consumer insights, thus achieving self-transformation. By entering new market segments, many industrial belt manufacturers have transitioned from private label products to branded products, breaking free from homogeneous competition. With the help of the premium agricultural products program, we have seen farmers and growers achieve higher profits by strengthening quality control and venturing into food processing for higher added value.
In addition to merchant support, we have also expanded our consumer rewards program. In addition to the 10 billion plan, we have launched new long-term consumer initiatives, such as the 10 billion coupon program.
During this year's 618 shopping festival, in addition to the national trade program, we also offered additional coupons, driving record sales across multiple categories, including fresh agricultural products, electronics, applicants, and apples, providing more value to consumers.
At the same time, in our global business, merchants and our platform are facing a more complex business environment. In response to market cycles, we are working hand in hand with merchants to explore new business models and new markets while providing innovative solutions to improve efficiency.
As a platform originating from agriculture, we continue to invest in agriculture through initiatives such as the Smart Agriculture Competition, which is now in its fifth edition. 46 global teams participated in the preliminaries held in July this year, showcasing cutting-edge technologies in AI agriculture, hydroponics, and ecological necessary systems. This event is gradually becoming an important platform for agricultural technology research and application. In the competition later this year, participants will take their technologies from the lab to practical applications, testing the commercial viability of their research results.
Looking ahead, as the external environment continues to evolve and competition intensifies, we remain committed to long-term value creation rather than short-term performance. Our team will prioritize driving high-quality growth by creating long-term opportunities for merchants and investing in consumer experiences. As we increase our investment, profitability will inevitably fluctuate, and this quarter's performance may not represent future conditions. This is the trend.
Now I will hand the microphone over to Zhao Jiazhen to share more details about our second-quarter performance.
Zhao Jiazhen:
Thank you, Chen Lei. Hello everyone, I am Zhao Jiazhen. Thank you for joining our Q2 earnings call for the 25th year. For the quarter ended June 30, 2020, we achieved revenue of 37 billion USD, a year-on-year increase of 10%
The company has accelerated the implementation of a new strategy with a trillion yuan support, elevating the investment in high-quality development to a whole new level, and for the first time, initiating a trillion-level benefit action in the e-commerce industry.
With substantial financial investment, this quarter's revenue and profit have once again been affected to some extent. As Chen Lei mentioned, compared to short-term performance, we are more focused on investments that can bring long-term returns to the platform ecosystem. This is also the reason why we are willing to sacrifice profits, persist in the long term, and continuously reinvest in the ecosystem.
In the past quarter, based on the space investment from the trillion yuan support, we have invested more energy and resources in areas such as hundred billion yuan reductions, e-commerce expansion to the west, and mental supply, continuously reducing commissions and increasing efficiency for millions of merchants. Many merchants can save millions of yuan annually just from the refund of service fees, creating more momentum and space for industrial upgrades. Driven by the e-commerce expansion to the west, the supply and demand between the east and west are moving towards each other, with a rapid increase in order volume in the western regions, greatly enriching the material and spiritual lives of consumers in remote areas.
Updating
</blockquote>

Affected by the intense competition in the e-commerce industry and the ongoing increase in merchant support, PDD's net profit continued to decline in the second quarter, but it was still significantly better than market expectations. PDD

- Pinduoduo's Q2 net profit declined due to intense competition and increased merchant support, yet it exceeded market expectations.  
- The management emphasized prioritizing long-term value creation over short-term profits, with significant investments aimed at enhancing the ecosystem and consumer experience.  
- Despite a 21% year-on-year drop in operating profit, the company remains committed to sustainable growth through initiatives like the 100 billion support plan, which aims to foster innovation and reduce costs for merchants.

PDD conference call: Willing to sacrifice short-term profits, long-term commitment to nurturing the ecosystem