---
title: "PDD: Dated, 'Arrogant', and Universally Disliked"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/41178256.md"
description: "$PDD(PDD.US) Pre-mkt on May 27, released Q1 2026 results, with both revenue and profit missing expectations, making it the worst performer in the e-com group.1) Growth weakened against the trend: unlike the sector and peers that showed QoQ improvement, PDD’s revenue growth slowed vs. last quarter. Total revenue rose 11% YoY, below the 13.5% consensus and lower than Q4’s 12%.More notably, the shortfall was in ad revenue, up only 2.5%..."
datetime: "2026-05-27T15:14:15.000Z"
locales:
  - [en](https://longbridge.com/en/topics/41178256.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/41178256.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/41178256.md)
author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)"
---

# PDD: Dated, 'Arrogant', and Universally Disliked

$PDD(PDD.US) **Pre-mkt on May 27, PDD posted Q1 FY26 results with both revenue and profit missing estimates, turning it into the laggard within China e-comm.**, 具体来看：

**1) Growth weakened against the tide: unlike peers that showed sequential improvement, PDD’s top-line growth slowed vs. last quarter.**

Specifically, total revenue rose 11% YoY, below the 13.5% Bloomberg cons. and slower than Q4’s 12%. More notably, ad revenue missed with just 2.5% YoY growth, far under the ~8% cons.

Dolphin Research believes domestic core-site GMV growth likely slowed QoQ again. The bigger driver, however, was a meaningful decline in ad monetization, likely linked to tighter tax compliance that hurt SME merchants’ profitability and ad budgets.

**2) Temu kept recovering, but was not a big upside surprise:** in contrast, transaction-commission revenue was approx. RMB 63.9bn, with YoY growth ticking up to 20%, topping the 18% Bloomberg cons.

Given weak domestic core-site growth, overseas Temu (and/or Duoduo Grocery) likely outperformed expectations. By Dolphin’s initial model, Temu’s revenue growth accelerated from ~20% in Q4 to ~25% in Q1.

That said, with Temu expanding across Europe, LatAm and SE Asia, our prior expectations were higher. The print, while better, was not especially exciting.

**3) Marketing did not decline YoY: gross profit rose 8.4% YoY,** slightly below expectations. GPM reached 55.9%, rebounding QoQ and above the 55.6% cons., and its YoY compression should keep narrowing ahead.

On opex, the market had expected lower marketing spend given last year’s peak phase when the company funded state subsidies itself. Instead, marketing expense rose 1% YoY, which likely reflects heavier Temu spend amid multi-market expansion, while core-site marketing probably fell.

G&A declined YoY and R&D stayed strong, underscoring continued AI feature investment.

**4) Profit inflected but lacked punch:** as state subsidies faded, profit bottomed and turned up, with OP up 22% YoY to RMB 19.6bn.

However, domestic core-site revenue missed and marketing did not fall meaningfully, leaving profit below expectations. We think Temu’s loss-narrowing likely undershot, while domestic core-site OP growth was limited and likely did not exceed RMB 1bn.

**Dolphin Research view:**

PDD’s quarter was clearly weak. Key signals are as follows:

1) While sector peers improved sequentially, PDD’s growth weakened, marking a shift from prior outperformance to underperformance. Whether due to core-site GMV slowing or the tax normalization impact on SME merchants that drags monetization, the hoped-for post-subsidy rebound in core-site revenue and profit now looks less likely.

2) With multi-country exposure, Temu’s growth kept accelerating and beat expectations, but its loss-narrowing appears slower than hoped.

**2) Outlook:**

1) For PDD’s domestic core site, our stance is more cautious than last quarter. First, while the fade of state subsidies helped profit bottom, the benefit was milder than expected.

PDD was expected to relatively benefit post-subsidy given lower exposure to 3C and home categories. In reality, it has not outpaced peers.

b. As regulators push platforms to handle merchant tax filings centrally, tax evasion gets harder. This hits SMEs on Taobao and PDD most, squeezing merchant margins and ad budgets, and weighing on platform ad monetization.

This concern appears validated this quarter. c. Post the Apr-26 incident, regulators issued a formal penalty totaling nearly RMB 3.6bn across platforms including PDD, Meituan, JD and Taotian, with PDD fined the most at RMB 1.5bn.

Reasons included lax license checks allowing ‘ghost’ stores to sell food like cakes without proper qualifications, and improper order-routing to third parties whereby orders placed at well-known stores were fulfilled by unknown workshops. PDD’s higher fine also reflected obstruction of regulation related to the incident.

With fines settled, the RMB 1.5bn impact is immaterial vs. over RMB 100bn in annual profit. Regulators did not address a potentially tougher issue — bans on forcing merchants into auto price-matching to the lowest across the web — so regulatory risk appears meaningfully reduced for PDD.

Overall, we still expect domestic core-site profit to repair from the bottom and return to growth. But with sector growth slowing and monetization still pressured, the recovery strength will likely be mild.

2) The domestic business is mature, and PDD is not leaning into instant retail or AI as core growth pillars. Share-price and valuation optionality therefore hinges on Temu receiving a standalone valuation.

Given recent headlines (Temu now the No.2 e-comm site by global users) and faster growth this quarter, the odds of a separate Temu valuation are not low. The timing, however, could be pushed out as profitability breakeven may be delayed amid multi-front expansion.

3) As for the newly announced ‘Xin PimMu’ line last quarter, reports suggest a model akin to overseas grocers’ private labels, like Costco’s Kirkland.

Current pilots span apparel, home and outdoor. ‘Xin PimMu’ handles design/selection, pricing, marketing, sales and fulfillment, outsourcing only manufacturing, and targets overseas starting with the U.S. before Europe and SE Asia, aiming for cost-plus pricing with low GPM to ensure price competitiveness.

Strategically, unlike Shein’s small-batch fast-turn model, ‘Xin PimMu’ focuses on classic evergreen SKUs with steady demand. This can be viewed as Temu’s self-operated arm and an additional controllable supplier for Temu, though it will tie up more capital and management bandwidth.

**3) Valuation:** we continue to value the domestic core site and Temu separately.

For the core site, we lower FY26 GMV growth from 10%+ to ~8–9%. Given heavier-than-expected monetization pressure from tax normalization, we also cut FY26 OP growth for the core site to ~10%.

We now assume total core-site OP around RMB 114bn in FY26 (with interest/other roughly offsetting taxes), implying ~7x pre-mkt PE post-print. After this pullback, PDD’s prior premium vs. JD and Taotian has largely evaporated, and the recent fundamentals do not warrant a premium.

What could repair valuation and share price are two levers: a standalone Temu valuation, and shareholder returns via buybacks/dividends, unlocking over RMB 500bn of cash (vs. current mkt cap ~RMB 800bn) and a Hong Kong listing. The second path may be more straightforward.

For Temu, we model GMV at $110bn in FY26 and a 2% margin on GMV, implying steady-state profit of ~$2.2bn. With a better growth outlook, we lift the PE to 25–30x, suggesting Temu could account for ~46–55% of PDD’s current mkt cap as upside optionality.

That said, with PDD’s performance now average and few clear advantages vs. peers, if management keeps its stance of limited communication and no dividends/buybacks, it will be hard to win investors back.

**Detailed read-through of this quarter:**

**I. Ad growth slowed against the trend — is PDD now the sector’s laggard?**

This quarter, PDD reported total revenue of approx. RMB 106.2bn, up 11% YoY and below the 13.5% cons., also decelerating vs. Q4’s 12%, contrary to sector trends where Q1 typically outperforms Q4.

Worse, ad revenue that reflects the domestic business rose just 2.5% YoY, far below the ~8% market view and Q4’s 5%.

With sector GMV accelerating QoQ, even a slower core-site GMV at PDD should not translate to only ~2.5% ad growth. The more plausible explanation is a notable drop in ad monetization.

While the exact drivers need more work, the previously discussed tax normalization likely hit SME merchants’ profitability and ad spend the most.

**II. Temu accelerated — solid, but not spectacular**

This quarter, transaction-commission revenue was approx. RMB 63.9bn, up 20% YoY and above the 18% Bloomberg cons. Given the weak domestic core site, Temu and Duoduo Grocery likely beat.

By Dolphin’s initial estimate, Temu’s revenue growth rose from ~20% in Q4 to ~25% in Q1.

Despite rapid expansion across Europe, LatAm and SE Asia, and reports that Temu reached 366mn monthly unique visitors globally to rank No.2 after Amazon, our prior bar was higher. The result was good, but not a big surprise.

**III. GPM has likely bottomed; marketing spend did not fall**

PDD’s GP was RMB 59.3bn (+8.4% YoY), slightly light. GPM was 55.9%, still down YoY but up QoQ (vs. 55.5% in Q4) and above the 55.6% cons., and should keep narrowing its YoY decline as Temu’s drag eases.

Total opex was approx. RMB 38.0bn (+3% YoY), well below revenue growth, indicating continued cost discipline. Marketing expense was nearly RMB 33.8bn, up ~1% YoY, versus expectations for a decline given last year’s subsidy peak.

By segment, we think domestic marketing likely fell YoY, while Temu’s spend rose meaningfully amid multi-market expansion. G&A fell ~5% YoY and R&D jumped ~24% on AI feature development, with PDD reportedly testing AI search.

**IV. Profit did inflect, but missed expectations**

With domestic revenue light and marketing not falling much, OP rebounded post-subsidy fade to RMB 19.6bn (+22% YoY) but still missed.

Given faster Temu growth and heavier marketing, Temu likely narrowed losses less than expected. Even so, domestic core-site OP growth looks limited and likely rose less than RMB 1bn YoY.

Adj. OP growth (ex-SBC) was 15.5%. Also, with ~RMB 2.0bn of other losses this quarter vs. over RMB 3.0bn of other gains a year ago (likely investment-related), net income fell ~15% YoY.

<End\>

**Dolphin Research coverage on PDD:**

**Earnings season**

Nov 18, 2025 review: [PDD’s awkward turn: aging at light speed, yet no buybacks](https://longportapp.cn/zh-CN/topics/36473230)

Nov 18, 2025 call notes: [PDD (Trans): the classic self-inflicted cut](https://longbridge.com/zh-CN/topics/36479826)

Aug 25, 2025 review: [PDD: cash machine again? Can’t beat management’s strong hand](https://longportapp.cn/zh-CN/topics/33307103)

Aug 25, 2025 call notes: [PDD (Trans): yet another self-swing of the knife!](https://longbridge.com/zh-CN/topics/33309763)

May 27, 2025 review: [Self-inflicted and aggressive! PDD’s big spending with a clear agenda?](https://longportapp.cn/zh-CN/topics/30075141)

May 27, 2025 call notes: [PDD (Trans): investing in consumers and merchants creates long-term value](https://longbridgeapp.cn/zh-CN/topics/30078846)

Mar 20, 2025 review: [PDD: fallen from the pedestal, how long can pride hold?](https://longportapp.cn/zh-CN/topics/28247992)

Mar 20, 2025 call notes: [PDD (Trans): do not judge the company by short-term financials!](https://longbridgeapp.cn/zh-CN/topics/28248347)

Nov 22, 2024 review: [PDD: real and man-made bombs, turning into ‘Pinxixi’?](https://longportapp.com/zh-CN/topics/25681618)

Nov 22, 2024 call notes: [PDD: management’s new ‘self-criticism edict’](https://longbridgeapp.cn/zh-CN/topics/25683826)

**Deep dives**

Apr 12, 2023: [Value-for-money war: when will Alibaba, JD, and PDD stop the spiral?](https://longportapp.com/en/topics/5002728)

Sep 30, 2022: [PDD vs Vipshop: are your ‘hard times’ their ‘good times’?](https://longbridgeapp.com/topics/3486500)

Apr 27, 2022: [Alibaba vs PDD: after a brutal fight, only coexistence?](https://longbridgeapp.com/topics/2435389)

Sep 22, 2021: [Alibaba, Meituan and PDD at full throttle: is there a real moat after the traffic war?](https://longbridgeapp.com/topics/1159514?invite-code=032064)

**Risk disclosure and statement:** [**Dolphin Research disclaimer and general disclosure**](https://support.longbridge.global/topics/misc/dolphin-disclaimer)

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## Comments (6)

- **保持无知 · 2026-05-27T16:54:28.000Z**: Not optimistic, on a downward trend.
- **链上美股OK444.cc · 2026-05-27T15:46:18.000Z**: I didn't see it either.
- **佳佳117 · 2026-05-27T15:43:27.000Z**: LOL, e-commerce at 7x P/E is considered overvalued
- **龙场悟道忘忧草 · 2026-05-27T15:35:37.000Z**: What does this title of yours mean? I don't get it.
- **傳說級韭菜 · 2026-05-27T15:23:12.000Z**: Honestly, I don't really like this company.