Pinduoduo 2025 Q2 Earnings Report Interpretation - Profits Stop Declining and Rebound, Pressure Remains

01

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Revenue

Q2 revenue was 103.98 billion, a year-on-year increase of 7.1%; among which, online marketing revenue was 55.7 billion, a year-on-year increase of 13.4%; transaction service fee revenue was 48.28 billion, a year-on-year increase of 0.7%.

The total revenue for the first half of the year was 199.66 billion, a year-on-year increase of 8.6%; among which, online marketing revenue was 104.43 billion, a year-on-year increase of 14.0%; transaction service fee revenue was 95.23 billion, a year-on-year increase of 3.2%.

02

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Revenue Proportion

In Q2, online marketing revenue accounted for 53.6%, and transaction service fee revenue accounted for 46.4%.

In the first half of the year, online marketing revenue accounted for 52.3%, and transaction service fee revenue accounted for 47.7%.

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Gross Profit, Gross Margin

Q2 gross profit was 58.13 billion, a year-on-year decrease of 8.3%, with a gross margin of 55.9%, compared to 65.3% in the same period last year.

In the first half of the year, gross profit was 112.85 billion, a year-on-year decrease of 3.9%, with a gross margin of 56.5%, compared to 61.4% in the same period last year.

04

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Expenses, Expense Ratio

Q2 total expenses were 32.33 billion, with an expense ratio of 31%, compared to 32% in the same period last year and 40% in the previous quarter, a year-on-year decrease of one percentage point, and a quarter-on-quarter increase of 9 percentage points.

Marketing expenses were 27.21 billion, with an expense ratio of 26.2%, compared to 26.8% in the same period last year and 34.9% in the previous quarter, a year-on-year decrease of 0.6 percentage points, and a quarter-on-quarter increase of 8.7 percentage points.

R&D and administrative expense ratios remained relatively stable.

05

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Profit, Profit Margin

Q2 operating profit was 25.79 billion, a year-on-year decrease of 20.8%, and a quarter-on-quarter increase of 60.3%; operating profit margin was 24.8%, a year-on-year decrease of 8.8 percentage points, and a quarter-on-quarter increase of 8 percentage points.

In the first half of the year, operating profit was 41.88 billion, a year-on-year decrease of 28.5%; operating profit margin was 21.0%, a year-on-year decrease of 10.8 percentage points.

06

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Cash Flow, Cash

Net cash generated from operating activities was RMB 21.6417 billion (USD 3.0211 billion), compared to RMB 43.7926 billion in the same period in 2024, mainly due to a decrease in net income and changes in working capital.

As of June 30, 2025, cash, cash equivalents, and short-term investments were RMB 387.1 billion (USD 54 billion), compared to RMB 331.6 billion as of December 31, 2024.

07

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Brief Review

From the perspective of revenue growth rate:

It is still declining, with an overall growth rate of 7.1%, online marketing year-on-year 13.4%, transaction service fee year-on-year 0.7%.

Roughly speaking, the domestic main site has a growth rate of about 13.4%, and overseas TEMU is expected to be flat; whether it is good or not needs to be viewed from multiple dimensions. In absolute terms, the growth rates of the domestic main site and TEMU are average, and cannot be compared with growth stocks in the market.

However, compared with the degree of internal competition in China and competitors, it is not bad, after all, domestic e-commerce has already reached its limit. Additionally, JD.com, riding the wave of State Subsidies, has a growth rate of about 20%. State Subsidies are not Pinduoduo's strong suit, and coupled with the disadvantages in the State Subsidies system, a domestic growth rate of 13.4% is acceptable. As for TEMU, there is too little disclosed data, and geopolitical factors have more influence, making it difficult to evaluate and see through at present.

Therefore, in terms of growth rate, I personally think this quarter is mediocre, not outstanding, but not bad either.

From the perspective of profit:

Operating profit was 25.79 billion, a year-on-year decrease of 20.8%, and a quarter-on-quarter increase of 60.3%. The significant quarter-on-quarter increase in operating profit was mainly due to a substantial reduction in marketing expenses.

However, from this quarter's perspective, the profit exceeded expectations. After several consecutive quarters of heavy losses, people's expectations for Pinduoduo are no longer as irrational as before. On the other hand, in the context of fierce domestic e-commerce competition, JD.com has the advantage of State Subsidies, and Taotian has also increased subsidies. Maintaining this profit scale is not easy, in my opinion.

However, there is still short-term uncertainty. First, the internal competition shows no signs of ending, and secondly, flash sales as a new shopping form, I believe, have long-term strategic value. Although flash sales will not significantly erode online shopping share in the short term, in the long term, I believe there will be conflicts and overlaps. If Pinduoduo enters the flash sales market, the profit data may look bad for a considerable time in the future, or it may be difficult to grow. I personally judge that in the long term, Pinduoduo has the necessity and possibility to enter flash sales, possibly waiting for a good entry point or timing?

In conclusion, I think Pinduoduo is in a situation similar to Meituan, with a relatively high long-term success rate, but in the short term, their business and financial pressures will be relatively high. This is also the main reason why Pinduoduo and Meituan's valuations have been suppressed and remain low in the current market excitement. $PDD(PDD.US) $Alibaba(BABA.US) $JD.com(JD.US)