To The Moon

• Revenue: ¥95.7B (~$13.2B) → +10% YoY

• Operating Profit (GAAP): ¥16.1B → -38% YoY

• Net Income: ¥14.7B (~$2.03B) → -47% YoY

• Non-GAAP EPS (ADS): ¥11.41 ($1.56) → -45% YoY

Despite top-line growth, PDD’s earnings tumbled as the company aggressively ramped up spending — particularly in sales and marketing — to support its merchant ecosystem. 🛒

What’s Behind the Profit Drop?🔍

• The most significant driver was a 43% surge in sales and marketing expenses, hitting ¥33.4B (~$4.6B). That spending spike reflects what management calls a deliberate, strategic decision:

  • “We made substantial investments in our platform ecosystem to support merchants and consumers amid rapid changes in the external environment.” — Lei Chen, Chairman and Co-CEO

• Additionally:

  • Cost of revenues increased 25% YoY due to higher fulfillment and processing fees.💰

  • R&D spending rose to ¥3.6B (~$493M), showing continued investment in innovation.💡

Cash & Liquidity 💰

• Cash, equivalents & short-term investments: ¥364.5B (~$50.2B)

• Net cash from operations: ¥15.5B (~$2.14B), down 26% YoY

Despite the earnings drop, the balance sheet remains robust. PDD holds over $50B in liquidity — giving it ample room to continue its reinvestment strategy.💸

Strategic Outlook 📝

• Management openly acknowledged that a slower growth rate is expected as scale and external pressures mount:

  • “This trend has been further accelerated by the changes in the external environment… Our results may continue to reflect the impact of sustained investments.” — Jun Liu, VP of Finance

• In short, PDD is prioritizing ecosystem health over short-term profitability — a classic move for long-term positioning in a competitive e-commerce space.🌍

Key Takeaways 📝

• Revenue growth shows demand remains strong

• Profitability down sharply due to ecosystem investments

• Strategy signals long-term focus amid a maturing business

• Massive cash reserves = strategic flexibility