Earnings call transcript: PDD Holdings beats Q2 2025 forecasts with strong EPS

PDD Holdings Inc. reported its second-quarter 2025 earnings, surpassing expectations with an earnings per share (EPS) of 22.07, significantly above the forecasted 14.8. The company’s revenue also exceeded projections, reaching 103.98 billion RMB against a forecast of 103.2 billion RMB. Despite these positive results, PDD’s stock saw a pre-market decline of 2.06%, trading at 124.49, reflecting investor concerns over profitability fluctuations and intense market competition. According to InvestingPro data, PDD maintains excellent financial health with an overall score of 3.96, and analysis suggests the stock may be undervalued at current levels.

Key Takeaways

• PDD Holdings exceeded EPS forecasts by 49.12%.
• Revenue grew by 7% year-over-year, reaching 103.98 billion RMB.
• Operating profit declined by 21% year-over-year, impacting investor sentiment.
• Stock price fell 2.06% in pre-market trading despite earnings beat.
• Company emphasizes long-term value creation amidst competitive pressures.

Company Performance

PDD Holdings demonstrated robust revenue growth, with InvestingPro data showing an impressive 35.67% revenue growth over the last twelve months. The company maintains strong fundamentals with a healthy gross profit margin of 59.73% and a solid current ratio of 2.27. However, the company faced challenges with a 21% decline in operating profit, influenced by strategic investments and competitive pressures in the e-commerce sector. This decline in profitability, coupled with a drop in non-GAAP operating profit margin from 36% to 27%, raised concerns among investors. InvestingPro subscribers have access to 8 additional key insights about PDD’s financial health and market position.

Financial Highlights

• Revenue: 103.98 billion RMB, up 7% year-over-year.
• Earnings per share: 22.07 RMB, surpassing the forecast by 49.12%.
• Non-GAAP operating profit margin: 27%, down from 36% last year.
• Net cash from operating activities: 21.6 billion RMB, down from 43.8 billion RMB.

Earnings vs. Forecast

PDD Holdings reported an EPS of 22.07, significantly beating the analyst forecast of 14.8, marking a 49.12% surprise. The revenue of 103.98 billion RMB also exceeded expectations, with a surprise of 0.76%. This performance contrasts with previous quarters, where the company faced tighter margins and increased competition.

Market Reaction

Despite the positive earnings report, PDD’s stock experienced a 2.06% decline in pre-market trading, settling at 124.49. This movement reflects investor concerns about the sustainability of profit levels and the competitive landscape. The stock remains within its 52-week range of 87.11 to 155.67.

Outlook & Guidance

Looking forward, PDD Holdings plans to continue investing in its merchant support program and expand its global business capabilities. The company anticipates continued fluctuations in profitability, with a focus on high-quality development and deepening investments in the grocery and agricultural sectors. Trading at a P/E ratio of 11.96 and showing strong cash flow generation, PDD presents an interesting investment case. For detailed analysis and comprehensive insights, investors can access the full Pro Research Report available on InvestingPro, which covers all crucial aspects of PDD’s business model and growth prospects.

Executive Commentary

Chen Lei, Chairman and Co-CEO, emphasized, "We prioritize long-term value creation over short-term financial results." Co-CEO Zhao Zhen added, "We do not believe this quarter’s profit levels are sustainable, and fluctuations in profitability are likely to continue in the coming quarters."

Risks and Challenges

• Intensifying e-commerce competition may pressure margins.
• Profitability fluctuations could affect investor confidence.
• Global economic uncertainties might impact consumer demand.
• Supply chain disruptions could hinder operational efficiency.
• Regulatory changes in China could pose challenges to business strategies.

Q&A

During the earnings call, analysts focused on competitive dynamics, the rationale behind the merchant support program, and the company’s global business strategy. Executives addressed concerns about consumer sentiment and market trends, reiterating their commitment to long-term investments and value creation.

Full transcript - PDD Holdings Inc DRC (PDD) Q2 2025:

Conference Operator: Ladies and gentlemen, thank you for standing by and welcome to the PVD Holdings Inc. Second Quarter twenty twenty five Earnings Conference Call.

At this time, all participants are in listen only mode. There will be a presentation followed by a question and answer session. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your host today. Sir, please go ahead.

Earnings Call Host/Moderator, PDD Holdings: Thank you, operator, and hello, everyone, and thank you for joining us today. PDD Holdings earnings release was distributed earlier and is available on our website at investor.pddholdings.com and also through the GlobeNewswire services. Before we begin, I would like to refer you to our Safe Harbor statement in earnings press release, which applies to this call as we will make certain forward looking statements. Also, this call includes discussions of certain non GAAP financial measures. Please refer to our earnings press release, which contains a reconciliation of non GAAP measures to GAAP measures.

Joining us today on the call are Mr. Chen Lei, our Chairman and Co Chief Executive Officer Mr. Zhaojiazeng, our Executive Director and Co Chief Executive Officer and Mr. Liu Jin, our VP of Finance. Lei and Jiajun will make some general remarks on our performance for the past quarter and our strategic focus.

Jun will walk us through our financial results for the second quarter ended 06/30/2024. During the Q and A session, Lei and Zhaojun will answer questions in Chinese and will help translate. Please note that English translation is for reference only. And in case of any discrepancy, statements in the original language should prevail. Now it’s my pleasure to introduce our Chairman and Co Chief Executive Officer, Mr.

Chen Lei. Lei, please go ahead.

Chen Lei, Chairman and Co-CEO, PDD Holdings: Hello, everyone, and thank you for joining our second quarter twenty twenty five earnings conference call. The 2025 has seen rapid change in the external environment. At this critical juncture, when merchants doing business on a platform face challenges, we stepped up our commitment in high quality development and launched the 100,000,000,000 support program. Through this program, we have invested and will continue to invest substantial resources to support the merchant ecosystem. Together with our merchants, we are actively exploring new business models for the global business, seeking new growth opportunities and navigating the ups and downs of the market cycles.

These significant ecosystem investments were reflected in our Q2 financial performance. Revenue growth further moderated and operating profit declined by 21% year over year. However, as we have emphasized in the past, we prioritize long term value creation over short term financial results. Our focus remains on investing for the long term, such as strengthening the ecosystem, driving value chain upgrades and delivering tangible benefits to our consumers. As a result of our investments in a 100,000,000,000 support program, we are pleased to see that the platform ecosystem is making steady progress towards sustainable and high quality development.

Since August, our $10,000,000,000 fee reduction initiative has brought substantial savings for our merchants, creating room for them to innovate and to offer a wider selection of high quality products to the consumers. At the same time, our logistic support initiative significantly reduced the cost of shipping to remote areas and led to a 40% growth in order numbers from the regions injecting new energy into the economy. In this past quarter, the entire company rallied behind the $100,000,000,000 support program to deliver innovative solutions to help merchants grow their business, while further reducing costs and commissions for merchants. We are seeing business of all sizes from established brands to small merchants gaining new momentum in our ecosystem. Let us look at a few examples.

We are seeing established consumer brands successfully reinventing themselves by leveraging consumer insights to shorten product launch cycles, lower R and D costs and enter into new market segments. Many industrial belt manufacturers were able to make the transition from white label products to a branded offering, breaking away from commoditized competition. With the help of our Duo Duo Premier Produce program, we are seeing farmers and growers earn higher margins by improving quality control and by moving into food processing to capture higher value add. Alongside merchant support, we have also expanded our consumer give back program. In addition to the $10,000,000,000 program, we introduced new long term consumer campaigns such as the $10,000,000,000 coupon program.

During this year’s June 18 shopping festival, we provided additional coupons on top of the national trading program, driving record sales across multiple categories, including fresh produce, electronics, home applicants and apparel, offering more value for the consumers. Meanwhile, in our global business, merchants and our platform face more complex business environment. To navigate through the market cycles, we are working together with merchants to explore new business models and new markets, while at the same time deliver innovative solutions to drive efficiency. As a platform that has its root in agriculture, we continue to invest in agri tech through initiatives like the Smart Agriculture Competition, which is now in its fifth iteration. 46 global teams competed in a preliminary held in July, showcasing cutting edge technology in AI farming, hydroponics and eco necessary systems.

This event is emerging as an important platform for agricultural technology research and application. Later in this year’s competition, the participants will bring their technology from labs to fields, testing the commercial applications of their research findings. Looking ahead, as external environment continue to evolve and competition intensify, we remain committed to long term value creation over short term results. Our team will prioritize high quality growth by creating long term opportunities for merchants and investing in consumer experience. As we ramp up our investments, profitability will inevitably fluctuate and this quarter’s result may not represent future earnings trends.

And now I will hand it over to Zhaojiazhu to share more details about our performance in the second quarter.

Earnings Call Host/Moderator, PDD Holdings: Thank you, Lei, and hello, everyone. This is Zhao Zhao Zhen. Thank you for joining our second quarter twenty twenty five earnings call. In Q2, to help merchants tackle emerging challenges, we actively leveraged our role as a platform to take on more social responsibilities. We accelerated our execution of the RMB100 billion support program, which represents a significant commitment to high quality development.

This also marks the first merchant support program of this scale. These substantial investments once again affected our quarterly revenue and profit. As Lei noted, comparing to short term financial performance, we focus more on investments that bring long term value to the platform ecosystem. And this is why we are willing to accept lower profits to consistently reinvest in the platform ecosystem in the long run. This tough quarter under the unprecedented investments through the RMB100 billion support program, we dedicated significant resources to initiatives such as RMB10 billion fee reduction program, logistic support initiative and new quality merchant support program.

We continued to lower costs and increase efficiencies for millions of merchants. Many saved millions of RMB each year just from service fee reductions. These efforts created more momentum and space for industrial upgrades. The logistic support initiative also bridged supply and demand and helped drive rapid order volume growth from remote regions, greatly enriching the daily lives of consumers in these regions. On the supply side, the RMB100 billion support program expanded support for SMEs, new quality merchants and branded merchants ensuring all types of businesses could benefit from the platform’s resource support.

This helped agriculture and manufacturing regions achieve all rounded high quality development to meet diverse consumer needs. Our Doudu premium produce team visited multiple agricultural regions, including Suzhou rice, Jiaotong potatoes, Kueming flowers, Shangqiu eggs, bamboo shoots in Fuzhou, seafood in Shantao and Zhaoshan and prickly bears in Guizhou to provide customized support based on local specialties and industry advantages. By enriching product offerings and store metrics, we helped fresh produce merchants overcome seasonal shortages and achieve sustainable growth. In Jiaotong Yunnan, for example, local potatoes are particularly tasty and nutritious and have been a main source of income for local farmers. However, due to geographic constraints, these potatoes were traditionally sold as low added value raw produce.

In recent years, one of our merchants set up automated production to turn these potatoes into flavored chips. With the platform’s help, the product gained national popularity creating its own online followings. This turned agricultural produce into a key local industry that increased income for 11,000 local farmers. This quarter new quality supply team also visited industrial belts such as Yiwu small merchandise, Xinyang snacks, apparel in Guanyuan, children’s wear in Foshan and Fishing Gear in Weiha. By making these visits, we gained deeper understanding of merchant needs and challenges faced by them.

Following these visits, leveraging the platform’s digital capabilities and promotional tools such as the Black Label stores and Dodo short videos, we were able to help merchants explore new growth models. In Yiwu, after decades of development, the local small merchandise market is facing intense commoditized competition with many merchants and factories operating with same profit margins and low barriers to entry. Our team integrated the merchant systems with the platform’s back end to help them identify hit products. Together with the referral support from the platform, this significantly improved the success rate of new product development, reducing the cost of trial and error. Our support measures created room for merchants to innovate and injected new energy in the transformation of the local industries.

In addition to merchants in agricultural regions and industry belts, the RMB100 billion support program is also empowering consumer brands, especially traditional national brands facing new consumer trends. Many of these traditional brands are dealing with challenges such as lack of product innovation and slowing growth. Leveraging deep consumer insights, our team worked with brand partners on an end to end solution covering product planning, marketing and store operations. These partnerships have enabled brands to successfully tap into younger and niche market segments, unlocking new growth opportunities and achieving strategic transformation. Our supply side investments also stimulated consumption demand.

During the June 2018 promotion, sales hit new highs across dozens of categories. The Super Double Discount event alone reached over 3,760,000 orders in a single day, meeting consumers’ evolving needs. And as competition in the e commerce industry intensifies around new business models, we remain committed to long term thinking. We will continue to deepen the RMB100 billion support program, investing substantial resources in improving user experience, merchant services and industrial upgrades to build a win win ecosystem. We also hope our efforts can help guide industry toward a more inclusive and more open environment, creating greater value for the society.

I will now hand it over to Jun. She will provide you with an update on our Q2 financial performance.

Liu Jin, VP of Finance, PDD Holdings: Thank you, Zhejiang. Hello, everyone. Let me walk you through our financial performance for the second quarter ended 06/30/2025. In terms of income statement, in the second quarter, total revenues increased 7% year over year to billion. This was driven by an increase in revenues from online marketing services and transaction services.

Revenues growth further moderated as competition intensified and as we help merchants increase efficiencies. Revenues from online marketing services and others were billion this quarter, up 30% from the ’24. Revenues from inspection services were billion, up 1% from the same quarter last year. Moving on to costs and expenses. Our total cost of revenues increased 36% from RMB33.7 billion in Q2 twenty twenty four to RMB45.9 billion this quarter, mainly due to increase in fulfillment fees, bandwidth and civil courts and payment processing fees.

A GAAP basis, total operating expenses this quarter increased 5% to RMB32.3 billion from billion in the same quarter of 2024. On non GAAP basis, total operating expenses increased to RMB30.4 billion this quarter from billion in Q2 twenty twenty four. In the second quarter, invested in significant resources in rolling out a series of merchant support initiatives. Looking ahead, we are committed to supporting the vitality of the ecosystem and we’ll continue to prioritize long term value creation over short term results. Our total non GAAP operating expenses as a percentage of total revenues this quarter was 29% in line with the same quarter last year.

Looking to specific expense items. Our non GAAP sales and marketing expenses this quarter were RMB26.7 billion, up 5% versus the same quarter last year. Sales and marketing expenses as a percentage of our revenues this quarter was 26% in line with the same quarter last year. Our non GAAP general and administrative expenses were RMB667 million versus RMB594 million in the same quarter of 2024. Our research and development expenses were 3,100,000,000.0 this quarter on a non GAAP basis and RMB 3,600,000,000.0 on a GAAP basis, up 23% year over year.

On a GAAP basis, operating profit for the quarter was RMB25.8 billion versus RMB32.6 billion in the same quarter last year, non 21 times year over year. Non GAAP operating profit was RMB27.7 billion versus RMB35 billion in the same quarter last year. Non GAAP operating profit margin was 27% this quarter, down from 36% from the same quarter last year. The year on year decline of operating profit reflects our continued investments in supporting our merchants and its ecosystem. Net income attributable to ordinary shareholders was billion for the quarter compared to billion in the same quarter last year, down 4% year over year.

Base earnings per ADS was RMB22.01 and diluted earnings per ADS was RMB20.75 versus basic earnings per ADS of RMB23.14 and diluted earnings per ADS of RMB21.61 in the same quarter of 2024. Non GAAP net income attributable to ordinary shareholders was RMB32.7 billion versus RMB34.4 billion in the same quarter last year. Non GAAP diluted earnings per ADS of RMB22.07 versus RMB23.24 in the same quarter of 2024. The net income in Q2 benefited from e commerce seasonality and may not represent future earnings. As we remain focused on long term dollar creation, the sustained investments may continue to weigh on short term profitability.

That completes the income statement. Now let me move on to cash flow. Our net cash generated from operating activities was RMB21.6 billion compared with RMB43.8 billion in the same quarter last year. As of 06/30/2025, we have billion in cash, cash equivalents and short term investments. Thank you.

This concludes prepared remarks.

Earnings Call Host/Moderator, PDD Holdings: Thank you, Jun. Next, we’ll move on to the Q and A session. In today’s Q and A session, Lei, Jiajun and Jun will take questions from analysts on the line. We could take a maximum of two questions from each analyst. Lei and Zhaojun will answer questions in Chinese and we will help translate for convenience purposes.

Operator, we are open for questions.

Conference Operator: Thank you, ladies and gentlemen. We will now begin the question and answer session. Your first question comes from Alicia Yap with Citigroup. Please go ahead.

Liu Jin, VP of Finance, PDD Holdings: Thank you.

Alicia Yap, Analyst, Citigroup: Thanks management for taking my questions. Two questions. First is that this quarter we saw our e commerce platform have made substantial investment in the instant retail, instant shopping, launching a new wave of industry investment. At the same time, we also saw some content platforms also continue to step up their e commerce effort. So compared to the peers, the lead in the company’s revenue growth rate has narrowed this quarter.

So could management elaborate on the reasons behind these and how management is thinking about navigating these competitive dynamics? Then the second question is, the external environment has shifted rapidly in the first half of this year. So looking ahead, how does management think about the next phase for your global business? What new directions or evolutions do you see in terms of the business model? And then from a financial perspective, where do you think the main growth opportunities are?

And how should we think about the growth target?

Earnings Call Host/Moderator, PDD Holdings: Hello, this is Xiao Zhan. Let me take your first question. And in the past quarter, industry competition intensified further as the major market participants invested heavily in new business models. And again, in this backdrop, our revenue growth slowed further in Q2, while operating profit declined meaningfully for the second consecutive quarter. In response to the intensified competition, we will adopt a proactive and long term approach, taking the competition as an opportunity to strengthen the high quality development of the platform ecosystem.

And then accordingly, we have chosen to increase investment and to forego part of the profits in order to create growth opportunities for the SME merchants. And from management’s perspective, we believe this is a responsibility that the platform is best placed to take on and at the same time represents a long term investment in strengthening our ecosystem. We do not believe this quarter’s profit level are sustainable and fluctuations in profitability is likely to continue in the coming quarters. Currently, the industry is going through a critical stage of high quality development. We realize that only by taking the initiative and working closely with the supply chain partners can the platform drive sustainable growth for the industry and also achieve high quality development.

Amid the intensifying competition, we will choose to turn our focus on the individual merchants and the specific merchant support cases to deepen our merchant support measures one case at a time. For example, we are seeing merchants on our platform collaborating with college research teams to design and build smart factories and automated production lines, which are then used to produce high quality, ready to eat fresh salad products. In the past, these products could only be found offline and now available to consumers through our platform and deliver to their doorsteps. The platform paid special attention to this technology enabled agricultural product and provided targeted support under the 100,000,000,000 support program, which helped merchants increase its online sales, offered tangible savings to consumers and at the same time broadened the supply of high quality innovative products on the platform. There are many more examples of such cases that benefit all parties involved.

And each of these cases is made possible only through the close collaboration between the platform, the merchants and the supply chain. We understand that to deliver effective support and to ensure that RMB100 billion support program truly gets to the SME merchants who need it most, we need to go deep into agricultural regions and the industry belts and carefully understand the pain points and difficulties that merchants are dealing with. And looking ahead, changes in the external environment and intensifying competition will inevitably lead us to step our investment in the merchant ecosystem. And these factors combined will cause the short term financial results to fluctuate. However, in the long run, if we execute well on each and every one of these merchant support cases, we are confident in achieving sustainable high quality growth together with our merchants.

This is how we are approaching today’s competitive environment.

Chen Lei, Chairman and Co-CEO, PDD Holdings: Hello, this is Chen Lei. Let me take your questions on our global business. We noted that in the past few quarters, we have seen significant changes across countries and regions and also shifts in the global We may continue to see some short term volatility in different markets. Overall, however, we observed steady consumer demand and consumer trust in our platform is gradually growing. We will proactively adapt to changes in each region, make timely adjustment and meet the changing regulatory requirements of each region as well as the diverse needs of consumers.

Now our global business has gone through an initial phase of growth. We are encouraged to see that our products and services are well received by consumers around the world. But at the same time, our business is still in its early stages and there is plenty of room for improvement. The vision of our global business has always been to bring more high quality products to consumers worldwide. Looking ahead, we will continue to invest in our supply chain capabilities, surface capabilities and compliance capabilities to strengthen the fundamentals for the next phase of the global business.

On the supply chain capabilities, we are continuously strengthening our localized operations, working closely with local merchants to diversify product offerings and improve supply stability and delivery efficiency. On the surface capabilities, we are constantly iterating collaborations with our logistics partners to enhance the fulfillment experience. We are continuously building our team’s capabilities to meet the high expectations of consumers worldwide. Looking forward, the level of surface we currently provide is still in its early stage. Our team will continue to work hard day by day through the continuous improvement in surface quality.

We hope to win over more and more consumers. Thank you for your questions.

Liu Jin, VP of Finance, PDD Holdings: You.

Conference Operator: Next question comes from Thomas Chong with Jefferies.

Thomas Chong, Analyst, Jefferies: Thanks management for taking my question. My first question is about since the launch of the RMB100 billion support program last quarter, what are the key changes that management has observed in your business operations? From a financial perspective, how is the impact of these investments shown in your financial performance? And on a mid to long term horizon, what will these affect the company’s monetization and spending? My second question is about what’s the company’s view on the Dodo grocery business?

We noticed that some of the company’s main competitors in this business have exited certain markets. What are the company’s future plans for this business? Thank you.

Earnings Call Host/Moderator, PDD Holdings: Hi. Thank you, Thomas. This is Zhao Zhao Zhao. Let me answer your first question. And since the second half of last year with escalating competition and accelerating changes in the external environment, we have scaled up commission reductions across the platform.

Initiatives such as the RMB10 billion fee reduction initiative, the new quality merchant support program and the logistic support initiatives have been rolled out to lower merchants’ operating costs and help drive efficiencies. And earlier this year the management unanimously decided to launch the 100,000,000,000 support program as our next strategic initiative dedicating significant resources and sacrificing the platform’s profits to cultivate a sustainable and healthy platform ecosystem. The RMB100 billion support program is very broad in scope. We focus on our support measures where merchants need it most. Over the past quarter, we have begun to see some of the early effects.

For instance, in agriculture sector, we launched twenty twenty five total premium produce initiative, expanding support to merchants across hundreds of high quality agricultural regions. It helped our merchants explore new ways to bring agricultural food products online, increase the added value captured by the merchants and drive higher production and income. And beyond agriculture, our dedicated teams for a new quality merchant support program also visited hundreds of manufacturing belts assisting more SME merchants with their transformation and accelerating the manufacturers shift towards high quality development. And similarly, through our logistic support initiatives, the platform waived shipping fees from transit warehouses to final destination for orders shipping to remote regions, allowing the merchants to sell their products to these regions by paying only the euro shipping fees, which significantly expanded the market reach. This initiative not only brought down costs and improved efficiency for merchants, but also stimulated regional consumption and allows high quality products to reach more consumers and benefiting the wider consumer base.

Going forward, we’ll continue to do our best to understand the pain points and difficulties faced by our merchants and through the RMB100 billion support program, increase our investments to deliver targeted and meaningful support to deepen our support to the merchant ecosystem. From a financial perspective, the investments made over the past quarter have resulted in slower revenue growth and year on year profit decline. This reflects the platform’s commitment to investing substantial resources to support merchants. We will continue to ramp up our investments to enable merchants to thrive, while building a more sustainable and robust platform ecosystem. And as such, we do not believe this quarter’s profits are sustainable.

There will be fluctuations in profitability in the coming quarters. And about your second question on total grocery. And first of all, total grocery is a hard business requiring significant long term investments. The competition chose to exit the business at this juncture to concentrate on investing in new business models. But to us, this is not a time to relax.

We need to further increase investments based on our own business model and to address the impact from the intensifying competition with relentless execution. As to the grocery business itself, when evaluating whether to pursue a new business, the first question that comes to us is always whether we can create our unique value. When we launched the total grocery business in 2020, we viewed it as a natural extension of our e commerce operations. The initial reason for us to start this business was seeing that traditional e commerce supply chains struggle to meet the users’ demand for fresh produce. And for example, certain fresh products incurred significant spoilage during traditional e commerce fulfillment.

And in response to these pain points, we decided to increase our investments in the supply chain to better match demand and local supply, building a supply chain suited for agricultural and fresh products and creating value for both users and merchants in terms of product variety and fulfillment efficiency. After five years of investment, total grocery now covers 70% of villages nationwide, addressing last mile delivery challenges in many areas and meeting consumer demand for high quality affordable products. At the same time, we have established an efficient agricultural product distribution network, connecting local farmers and SME merchants with local consumers and expanding their market reach. Since the beginning of this year, with the 100,000,000,000 support program, the platform has increased support and traffic allocation to remote regions. In regions where total grocery services were recently launched, local product offerings have greatly improved and expanding the reach of inclusive consumption network to meet local consumers’ growing demand for better products.

And meanwhile, the grocery business has created competitive local employment opportunities contributing to the economic growth in these communities. As I just mentioned, while Doulu Grocery business requires substantial investment, we believe it is quite meaningful and we will continue to increase our investments. And going forward, we’ll deepen our long term commitments across product, supplies, service quality and delivery efficiency for the total grocery business, creating tangible benefits for consumers and supply chain participants. Thank you for your question.

Chen Lei, Chairman and Co-CEO, PDD Holdings: You.

Earnings Call Host/Moderator, PDD Holdings: Thank And you, then I think we have time for one more analyst. Thank you.

Conference Operator: Thank you. Joyce Ju with Bank of America.

Joyce Ju, Analyst, Bank of America: Let me translate my questions. First, in last quarter’s earnings call, management mentioned the mismatch between investment cycles and the return cycle was a primary cause of the profit decline in the first quarter. Looking at the second quarter results, it seems company’s expense ratio and profit margin levels show signs of stabilization. Just wonder, does it indicate like the company’s investment cycle has already like stabilized? And how should we actually expect the profit margin trends going forward both long term and short term?

My second question is recently we have seen some signs of improving consumer demand from some industry data. Has management observed a similar trend lately? Any updates on consumer sentiment or behaviors will be appreciated. And how does management view macro trends in the third and fourth quarter this year? Thank you very much.

Liu Jin, VP of Finance, PDD Holdings: Hello, Joyce. This is Jane. I would take your first questions. First of all, our profits in Q2 benefited from e commerce seasonality. And so this quarter may not represent future earnings.

If we’re looking at the numbers, our Q2 revenue growth further slowed to seven percent and for operating profit to up to 21%. We believe there are several reasons for this. First, under the platform has increased its investment to support merchants, which naturally impacts profitability. And for second, intensified industry competition continue to create challenges for our merchants and platform. So to help merchants navigate market cycles, the platform will continue to scale up investments.

So Q2 profit levels should not be seen as a reference for future performance. We do not believe this quarter’s profit level is sustainable. Will see fluctuations in profitability in the coming quarters. As we have communicated in the past, in the current market environment increasing platform investment to help merchants through the cycles is a responsibility the platform can and must take home. We believe that these investments will create a healthier merchant ecosystem in the long run.

Our focus remains on long term value creation rather than short term financial performance. As Lei and Jasmine just mentioned, we will continue to increase our Thank you.

Earnings Call Host/Moderator, PDD Holdings: Hi, this is Xiao Zhan. Let me answer your second question. China’s consumer market demonstrates remarkable potential and resilience. And driven by sustained pro consumption policies, we have observed steady growth in overall retail sales alongside a continuous rise in online retail penetration. We remain very confident in overall potential of China’s consumer market.

However, from an industry structure perspective, we are seeing escalating competition and it is increasingly convenient for consumers to switch between different platforms. And the competitive landscape is at risk of being reshaped. And in this environment, the platform must take on a more proactive role by increasing investments. And during the June twenty eighteen Shopping Festival in Q2, we not only provided substantial support to high quality agriculture and national brands, but also offered extra coupons to consumers to provide consumers more savings for their mid year shopping needs. And during the promotion, number of agricultural and new quality merchants participating in the RMB10 billion program doubled, enabling many SME merchants across multiple categories to reach new milestones.

And moreover, categories such as beauty, skincare, maternity and baby and pet supplies also experienced good growth through the promotion. The 2025 Doudu premium produce program has reached hundreds of high quality agricultural regions, helping high quality agricultural products reach urban consumers. For example, leeches from Guangdong Maoming quickly sold over 50,000 kilograms after being featured in the RMB10 billion program. Our dedicated team for new quality merchant support program also continued to engage with hundreds of manufacturing regions such as footwear and apparel in Jingjiang and cameras in Guangdong. Leveraging the momentum of the shopping festival, we helped a large number of quality products quickly reach the market.

And then the platform’s proactive investments have created a positive feedback from both consumers and merchants. And going forward, in this intensifying competitive environment, we will continue to increase our support on both the supply and demand side, sacrificing part of the platform’s profit to foster healthier and more vibrant ecosystem. And by doing so, we hope to help more SME reduce costs and drive sales and offer consumers more tangible benefits. Thank you.

Liu Jin, VP of Finance, PDD Holdings: Thank

Earnings Call Host/Moderator, PDD Holdings: you, George. And I think it’s about time. And thank you again for joining our call today. And we look forward to speaking to you again next quarter.

Conference Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.

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