PDD's "Hard" Profits Defy Revenue Slowdown in Earnings Beat, Why Pre-Market Spike Turned Into Drop?

TradingKey - PDD released its Q2 2025 financial results on Monday, delivering overall performance better than expected. Despite a slight slowdown in revenue growth, the net profit decline narrowed significantly due to effective control of marketing expenses.

Financial report data showed total revenue reached RMB 103.9848 billion, up 7% year-over-year, essentially in line with the market estimate of RMB 103.93 billion.

The slowdown in revenue growth to 7% also reflects intensifying competition in the e-commerce sector, with industry-wide growth under pressure. CFO Jun Liu frankly stated in the earnings release, "Amid fierce competition, revenue growth has further slowed."

The Non-GAAP net profit metric stood out, declining only 5% year-over-year to RMB 32.71 billion — far exceeding the market estimate of RMB 22.39 billion. Adjusted earnings per ADS was RMB 22.07, also significantly higher than the market-expected RMB 15.50, highlighting a strong rebound in profitability.

Marketing expenses growth slowed significantly, with this quarter's expenditure at RMB 272.1 billion, growing only 4.5% year-over-year—far below Q1's 43% growth rate.

In Q2, PDD expanded its existing "Billion-Yuan Subsidy" merchant support policy by first introducing the "Trillion-Yuan Support" new strategy, increasing support for small and medium-sized merchants, new quality merchants, and brand merchants through reduced commissions and efficiency improvements.

While this strategic investment temporarily weighed on revenue growth, it laid the foundation for long-term ecosystem optimization. For example, after one year of implementing the "Billion-Yuan Subsidy" policy, it has already saved hundreds of billions of yuan in promotional service fees and other costs for millions of merchants, with some merchants saving millions annually. The "Trillion-Yuan Support" further expands resource allocation to assist industrial transformation and release consumer potential.

The "2025 PDD Specialty Products" project now covers multiple specialty product regions such as Suizhou rice and Guizhou cactus pear, with agricultural product sales on the platform growing 47% year-over-year, driving supply chain upgrades and consumer potential release.

PDD Group Executive Director and Co-CEO Jia Zhen Zhao emphasized that through continuous investment with "real money," the platform has helped millions of merchants reduce commissions and improve efficiency. He stated: "The e-commerce industry is entering a new round of competition around new business models, and we will adhere to long-termism and deeply advance the 'Trillion-Yuan Support' strategy."

He also frankly noted that due to continued increased investment going forward, "Therefore, we do not believe this quarter's profit level is sustainable, and future fluctuations will still be relatively large."

Following the earnings release, PDD's pre-market stock price initially surged over 10%, but subsequently retreated and fell more than 2%.

Source: Yahoo Finance