Pdd Holdings Inc. ((PDD)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Pdd Holdings Inc. conveyed a sentiment of cautious optimism, highlighting the company’s strategic focus on long-term growth despite short-term challenges. The management expressed confidence in their significant investments aimed at supporting the ecosystem, which are expected to foster sustainable development and help the company adapt to competitive pressures. However, concerns were raised regarding the decline in operating profit and increased costs, which pose immediate hurdles.
Revenue Growth
The company reported a 7% year-over-year increase in total revenues, reaching RMB 104 billion. This growth was primarily driven by online marketing services and transaction services, indicating a robust performance in these areas despite the challenging market conditions.
RMB 100 Billion Support Program
Pdd Holdings launched an ambitious RMB 100 billion support program for merchants. This initiative includes a RMB 10 billion fee reduction, logistics support, and quality merchant support, all aimed at fostering sustainable and high-quality platform development.
Logistics Support Initiative
The logistics support initiative has been a game-changer, significantly reducing shipping costs to remote areas. This effort has resulted in a 40% growth in order numbers from these regions, showcasing the program’s effectiveness in expanding market reach.
Duo Duo Premium Produce Program
The Duo Duo Premium Produce Program is designed to support farmers and growers by improving quality control and moving into food processing. This initiative helps them achieve higher margins and capture more value, contributing to the company’s overall growth strategy.
Global Business Initiatives
Pdd Holdings’ global business is gradually expanding, with a strategic focus on enhancing supply chain capabilities, service capabilities, and compliance. These efforts aim to meet the diverse needs of consumers worldwide, positioning the company for future growth.
Operating Profit Decline
The earnings call highlighted a 21% year-over-year decline in operating profit. This decrease is attributed to increased investments in merchant support and the intensifying competition, which have impacted short-term profitability.
Increased Costs and Expenses
The company experienced a 36% increase in the total cost of revenues, driven by higher fulfillment fees, bandwidth and server costs, and payment processing fees. These rising expenses are a concern for the company’s financial health.
Slower Revenue Growth
As competition intensified, Pdd Holdings faced slower revenue growth, affecting its ability to maintain previous growth rates. This trend underscores the challenges posed by a competitive market environment.
Profitability Fluctuations
The company anticipates fluctuations in profitability due to ongoing investments in the merchant ecosystem and competitive dynamics. While these investments are crucial for long-term growth, they contribute to short-term financial volatility.
Forward-Looking Guidance
Looking ahead to the second quarter of 2025, Pdd Holdings remains committed to long-term value creation through substantial investments in its merchant ecosystem. Despite a 21% decline in operating profit, the company expects these investments, including the RMB 10 billion fee reduction and logistics support initiatives, to drive sustainable and high-quality development. The company is focused on enhancing merchant and consumer experiences, with the expectation that these efforts will yield positive results in the future.
In conclusion, the earnings call of Pdd Holdings Inc. reflected a blend of cautious optimism and immediate challenges. While the company is making strategic investments for long-term growth, it faces short-term hurdles such as declining operating profit and increased costs. Nevertheless, the management’s commitment to enhancing the ecosystem and expanding global business initiatives provides a hopeful outlook for sustainable development.