PDD Holdings’ Earnings Call: Strategic Focus Amid Challenges

Pdd Holdings Inc. ((PDD)) has held its Q1 earnings call. Read on for the main highlights of the call.

PDD Holdings Inc. recently held its earnings call, shedding light on its strategic focus amid current financial challenges. The company emphasized its commitment to long-term investments in merchant support and ecosystem development. While revenue growth was positive, the call also highlighted a significant decline in profit and the challenges posed by increased competition.

Revenue Increase

PDD Holdings reported a 10% year-over-year increase in total revenues, reaching RMB95.7 billion. This growth was primarily driven by the company’s online marketing services and transaction services, indicating a robust performance in these areas despite broader market challenges.

Merchant Support Initiatives

The company has launched a substantial merchant support initiative, upgrading from a previous 10 billion fee reduction program to a new 100 billion support program. This initiative is designed to provide fee reductions and additional resources to merchants, demonstrating PDD Holdings’ commitment to supporting its merchant base.

Continued Ecosystem Investments

Significant investments have been made in the platform ecosystem to assist merchants, particularly small and medium-sized businesses, in navigating market challenges. These investments are part of the company’s strategy to build a resilient and supportive ecosystem for its merchants.

Profit Decline

Despite revenue growth, PDD Holdings experienced a decline in operating profit, falling from RMB26 billion to RMB16.1 billion year-over-year. The non-GAAP operating profit margin also decreased from 33% to 19%, highlighting the financial pressures faced by the company.

Increased Costs and Expenses

The company’s total operating expenses increased by 37% year-over-year to RMB38.6 billion. This rise was attributed to higher fulfillment and payment processing fees, reflecting the increased costs associated with maintaining and expanding its operations.

Challenges from External Environment

External policy changes, including tariffs, have created significant pressure on merchants, contributing to a slowdown in revenue growth. These external factors pose ongoing challenges for PDD Holdings and its merchant partners.

Intensified Competition

The Chinese e-commerce sector has seen intensified competition, posing challenges to PDD Holdings’ third-party marketplace model. The company must navigate this competitive landscape to maintain its market position.

Forward-Looking Guidance

Looking ahead, PDD Holdings reported a revenue of RMB95.7 billion for the first quarter of 2025, marking a 10% year-over-year increase. However, the company also experienced a significant drop in profitability, with the non-GAAP operating profit margin declining from 33% to 19%. This decrease is attributed to increased investments in the platform ecosystem, including merchant support initiatives. Despite the short-term impact on profitability, management emphasized these investments as strategic long-term commitments to foster a robust merchant ecosystem.

In summary, PDD Holdings’ earnings call highlighted its strategic focus on long-term investments in merchant support and ecosystem development. While the company achieved positive revenue growth, it faces challenges from declining profits and intensified competition. The management remains committed to its strategic initiatives, aiming to build a resilient merchant ecosystem despite the current financial pressures.