PDD Holdings Inc. Q2 FY2025 earnings call

• PDD launched the RMB 100 billion support program to back the merchant ecosystem. This program includes initiatives like the RMB 10 billion fee reduction, logistics support that led to a 40% growth in orders from remote areas. - Established brands and small merchants are gaining momentum within the ecosystem. The Duo Duo premium produce program helped farmers boost their margins. - Visits to industrial belts enabled merchants to explore new growth models. During the June 18 shopping festival, record sales were achieved across multiple categories such as fresh produce, electronics, and apparel.

In the second quarter of 2025, total revenues increased 7% year-over-year to RMB 104 billion. Revenue from online marketing services and others was RMB 55.7 billion, an increase from the same quarter in 2024. Revenue from transaction services was RMB 48.3 billion, up 1% year-over-year. Total cost of revenues rose 36% to RMB 45.9 billion. On a GAAP basis, operating expenses increased 5% to RMB 32.3 billion. Non-GAAP operating loss was RMB 3.4 billion, down from RMB 28.4 billion in the same quarter of 2024. Net income attributable to ordinary shareholders was RMB 30.8 billion, a 4% year-over-year decline.

• Prioritizes long-term value creation over short-term financial results. - Sustained investments in the merchant ecosystem may continue to put pressure on short-term profitability. - Will keep investing in the merchant ecosystem for long-term growth.

• External environment changes. - Intensifying competition, which may affect financial performance.

Q: This quarter, the e-commerce platform made substantial investments in instant retail, and the revenue growth rate narrowed compared to peers. Elaborate on the reasons and how management is thinking about navigating these competitive dynamics.

A: Intensified industry competition led to a further slowdown in revenue growth in Q2. In response, management will adopt a proactive and long-term approach, using competition as an opportunity to strengthen the high-quality development of the platform ecosystem and deepen merchant support cases.

Q: About the global business, what new directions or evolutions are seen in terms of the business model and growth opportunities?

A: Will proactively adapt to changes in each region, adjust in a timely manner, and meet the diverse needs of consumers. Will continue to invest in supply chain, service, and compliance capabilities to strengthen the foundation for the next phase of the global business.

Q: Since the launch of the RMB 100 billion support program, what are the key changes observed in business operations and how is the financial impact shown?

A: Increased commission reductions, rolled out various initiatives like RMB 10 billion fee reduction and logistics support, and early effects are seen in agriculture and manufacturing. Financially, revenue growth has slowed and profit has declined.

Q: What is the company's view on the Duo Duo Grocery business?

A: Duo Duo Grocery requires substantial long-term investment. The company will continue to increase investments, deepening commitments in product, supply, service quality, and delivery efficiency.

Q: The expense ratio and profit margin showed signs of stabilization in Q2, does this indicate that the investment cycle has stabilized and what about profit margin trends?

A: Q2 profit was benefited by e-commerce seasonality and may not represent future earnings. The platform will continue to invest to support merchants, and profit fluctuations are likely to continue in the coming quarters.

Q: Have management observed improving consumer demand lately? How to view macro trends in the third and fourth quarters this year?

A: China's consumer market has remarkable potential. Observed steady growth in overall retail sales and online retail penetration. During promotions, multiple categories saw good growth. Will continue to increase support on both supply and demand sides to foster a healthy ecosystem.