How sustainable is PDD's gross profit growth trend since 2022?

PDD's gross profit growth trend since 2022 appears to be slowing down, which may raise concerns about its sustainability. Here's an analysis based on the available data:

1. **Growth Rate Slowing**: PDD's gross profit has been growing, but the rate of growth has significantly slowed down. For instance, the fourth-quarter revenue growth was 24%, which is the slowest pace of growth since the first quarter of 2022.

|code|Ticker|Name|Date|Gross Profit|Gross Profit YoY|market_code|
|---|---|---|---|---|---|---|
|PDD|PDD.O|PDD Holdings|2022 Q1|2.62396378821528E9|50.52633198597722|185|
|PDD|PDD.O|PDD Holdings|2022 Q2|3.50512864123114E9|49.397374168760166|185|
|PDD|PDD.O|PDD Holdings|2022 Q3|3.94885373867644E9|70.22717840659445|185|
|PDD|PDD.O|PDD Holdings|2022 Q4|4.47911075900751E9|37.78950088139615|185|
|PDD|PDD.O|PDD Holdings|2023 Q1|3.8604120367092E9|47.12139146306225|185|
|PDD|PDD.O|PDD Holdings|2023 Q2|4.63240548086391E9|32.16078366917869|185|
|PDD|PDD.O|PDD Holdings|2023 Q3|5.7579683284732E9|45.813664154680275|185|
|PDD|PDD.O|PDD Holdings|2023 Q4|7.5779605912462E9|69.18448770231657|185|
|PDD|PDD.O|PDD Holdings|2024 Q1|7.4951695727032E9|94.15465244203419|185|
|PDD|PDD.O|PDD Holdings|2024 Q2|8.71882337616314E9|88.21373500614075|185|

2. **Challenges to Sustainability**: Several factors may contribute to the reduced growth rate and raise questions about the sustainability of PDD's gross profit growth:
- **Increased Competition**: PDD faces intense competition from established e-commerce players like Alibaba and JD.com, which could be impacting its market share and profitability.
- **Tariffs and Regulatory Uncertainties**: Geopolitical tensions and U.S. tariffs on Chinese goods could create regulatory uncertainties that affect PDD's international expansion and profitability.
- **Investment in Platform Ecosystem**: PDD is investing heavily in its platform ecosystem to drive long-term growth, which could temporarily impact short-term profitability.
3. **Mixed Market Reaction**: The market's reaction to PDD's earnings reports has been mixed, with concerns about the sustainability of growth reflected in the initial decline in stock prices after the earnings misses.
4. **Long-Term Strategy**: PDD's management has indicated a continued focus on prioritizing investments in the platform ecosystem as a cornerstone of their long-term value creation strategy. This suggests a commitment to long-term growth, which could be seen as a positive sign for sustainability.

In conclusion, while PDD's gross profit growth trend since 2022 has been slowing down, it is important to consider the company's strategic choices and external factors that may influence its future performance. The sustainability of this trend will likely depend on PDD's ability to navigate competitive pressures, regulatory challenges, and maintain its investment in long-term growth strategies.