PDD's revenue growth in the second quarter slowed slightly, but thanks to the control of marketing expenses, the company's net profit decline significantly narrowed, and overall performance exceeded expectations. Meanwhile, in the context of fierce competition in e-commerce, PDD chose to increase support for merchants, which is both a bet on long-term value and a test of short-term performance.
On Monday evening, PDD announced its second-quarter financial report, with the following key points:
Financial Status
<ul>
<li>Total revenue of 103.98 billion yuan (14.35 billion USD), a year-on-year increase of 7%, market estimate 103.93 billion yuan</li>
<li>Operating profit of 25.79 billion yuan, a year-on-year decrease of 21%; net profit of 30.75 billion yuan, a year-on-year decrease of 4%</li>
<li>Non-GAAP net profit decreased by 5% year-on-year to 32.71 billion yuan, but significantly exceeded the market estimate of 22.39 billion yuan; Non-GAAP adjusted earnings per ADS of 22.07 yuan, market expectation of 15.50 yuan</li>
<li>Sales and marketing expenses of 27.21 billion yuan, a year-on-year increase of 4.5%, significantly slowing from the 43% growth in the first quarter</li>
<li>Operating cash flow of 21.64 billion yuan, a significant decrease of 51% compared to 43.8 billion yuan in the same period last year</li>
</ul>
Core Business Performance
<ul>
<li>Online marketing revenue of 55.7 billion yuan exceeded expectations, a year-on-year increase of 13%, showing relatively strong performance</li>
<li>Transaction service (commission) revenue of 48.3 billion yuan, basically flat compared to the same period last year, slightly below market expectations</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8e6b5d37-fcc4-4cd0-8b6c-c7612ffe21e4.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/8e6b5d37-fcc4-4cd0-8b6c-c7612ffe21e4.png"/>
PDD's U.S. stock pre-market surged, currently up nearly 10%.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1d831ad7-6d2b-4dcd-b949-7fb2f20be022.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/1d831ad7-6d2b-4dcd-b949-7fb2f20be022.png"/>
<h2>Overall Revenue Growth Slows, Marketing Services Perform Strongly, Commission Revenue Stagnates</h2>
The total revenue of 103.98 billion yuan basically meets market expectations, but the 7% year-on-year growth indeed reflects the intensity of industry competition.
In the earnings report statement, Vice President of Finance Liu Jun admitted: &#34;In fierce competition, revenue growth has further slowed.&#34;
It is noteworthy that the revenue structure shows a clear trend of optimization:
Online marketing service revenue reached 55.7 billion yuan, a year-on-year increase of 13%, indicating that the platform's advertising monetization capability is strengthening, which usually means that merchants' recognition of the platform's value is increasing.
In contrast, transaction service revenue of 48.28 billion yuan is basically flat compared to the same period last year, which to some extent reflects the pressure of GMV growth. However, considering the current macro environment and competitive situation, maintaining this level is already not easy.
<h2>Profitability Far Exceeds Expectations, Marketing Expense Growth Significantly Slows</h2>
What surprised the market the most was the unexpected profitability performance: adjusted net profit of 32.71 billion yuan significantly exceeded the market estimate of 22.39 billion yuan
This huge &#34;expectation gap&#34; is likely due to the market's overly pessimistic expectations regarding PDD's merchant investment strategy.
However, data shows that while the company is increasing its investments, it still maintains a relatively strong profitability. The operating profit margin remains at a high level of 24.8%, although it has decreased year-on-year, it still has a significant advantage compared to its peers.
It is worth noting that the cost side has risen sharply by 36% to 45.86 billion yuan, mainly due to increases in fulfillment costs, bandwidth server costs, and payment processing fees.
Research and development expenses increased by 23.5% year-on-year to 3.59 billion yuan, still maintaining a high growth rate, while sales and marketing expenses were 27.21 billion yuan, a year-on-year increase of 4.5%, significantly slowing down from the 43% growth rate in the first quarter.
Co-CEO Chen Lei stated, &#34;We continue to invest in merchant support initiatives and are encouraged by the progress towards a healthier and more sustainable development of the platform ecosystem.&#34;
One detail to note is that operating cash flow decreased from 43.79 billion yuan in the same period last year to 21.64 billion yuan, a decline of over 50%. Management explained that this was mainly due to a decrease in net profit and changes in working capital. Although the company's cash reserves remain ample (cash and short-term investments of 387.1 billion yuan), the trend of cash flow changes is worth continuous monitoring.
<h2>&#34;Hundred Billion Support&#34; New Strategy Tests Short-term Performance</h2>
It is reported that in the second quarter, PDD launched the &#34;Thousand Billion Support&#34; new strategy based on initiatives like &#34;Hundred Billion Exemptions,&#34; marking the first time in the e-commerce industry that a &#34;thousand billion level&#34; merchant support action has been initiated.
Co-CEO Zhao Jiazhen stated in the earnings report: &#34;In the second quarter, we invested a large amount of resources to launch a comprehensive suite of merchant support measures.&#34; This investment strategy will indeed put pressure on profit margins in the short term, but from the earnings report data, this pressure is within a controllable range.
PDD's current strategic choice is quite subtle: in a slowing growth environment, it chooses to increase support for merchants, which is both a bet on long-term value and a test of short-term performance.
From the performance in the second quarter, the company has excelled in this balance—achieving better-than-expected profitability while advancing strategic transformation. However, the ultimate effect of this strategy still needs to be validated in the coming quarters

Pinduoduo will release its first quarter 2025 financial report on May 27, 2025. According to general estimates by institutions, Pinduoduo will achieve operating revenue of 103.368 billion yuan in the first quarter of 2025, a year-on-year increase of 19.07%, and expected earnings per share of 17.107 yuan, a year-on-year decrease of 9.77%.

Pinduoduo will release its first quarter 2025 financial report on May 27, 2025. According to general estimates by institutions, Pinduoduo will achieve operating revenue of 103.368 billion yuan in the first quarter of 2025, a year-on-year increase of 19.07%, and expected earnings per share of 17.107 yuan, a year-on-year decrease of 9.77%.

Pinduoduo financial report, understand it at a glance!

PDD's revenue growth in the second quarter slightly slowed down, but thanks to the control of marketing expenses, the company's net profit decline significantly narrowed, with Non-GAAP net profit decreasing by 5% year-on-year to 32.71 billion yuan, greatly exceeding the market estimate of 22.39 billion yuan. Sales and marketing expenses were 27.21 billion yuan, a year-on-year increase of 4.5%, significantly slowing down from the 43% growth rate in the first quarter

- Pinduoduo's Q2 revenue growth slowed slightly, but effective marketing cost control led to a significant narrowing of net profit decline, resulting in better-than-expected overall performance.  
- The company reported total revenue of 1039.8 billion yuan, a 7% year-on-year increase, with online marketing revenue rising 13%, while transaction service income remained flat.  
- Pinduoduo's strategy of increasing support for merchants amid fierce e-commerce competition reflects a long-term value bet, though it poses short-term performance challenges.

Wallstreetcn

PDD's Q2 revenue growth slowed to 7%, net profit decline narrowed to 4%, better than expected, and marketing expenses only increased by 4.5% | Financial Report Insights