PDD Holdings Stock Down 19.4% After Earnings Miss, Margin Pressure

PDD Holdings reported Q1 revenue of $13.18 billion, up 10% YoY, but below the $14.17 billion consensus estimate. Adjusted earnings per ADS dropped to $1.56, well below the expected $2.49, and operating margins fell sharply from 32.9% to 19.1%. The company attributed the margin compression to significant investments in merchant support and platform ecosystem enhancements. Shares plunged 19.4% to $95.60.

PDD Holdings Inc. (NASDAQ: PDD) announced its unaudited financial results for the first quarter ended March 31, 2025. The company reported total revenues of RMB 95.67 billion (approximately US $13.18 billion), a 10% increase from the previous year, but this figure fell short of the $14.17 billion consensus estimate [1]. Despite the revenue growth, the company's adjusted earnings per ADS dropped to $1.56, significantly below the expected $2.49. Additionally, operating margins fell sharply from 32.9% to 19.1%.

The decline in profitability was primarily attributed to significant investments in the company's merchant support and platform ecosystem enhancements. These investments aimed to support merchants and enhance consumer experiences amid challenging market conditions. Management emphasized that while these strategic investments may impact short-term profitability, they are designed to foster long-term growth and sustainability within the merchant ecosystem.

Shares of PDD Holdings plunged 19.4% to $95.60 following the announcement, reflecting investor concerns about the company's financial health and the impact of these investments on profitability.

Key non-GAAP metrics for Q1 2025 include a non-GAAP operating profit of RMB 18,259.7 million (US $2,516.3 million) and a non-GAAP net income of RMB 16,916.0 million (US $2,331.1 million), both down significantly from the previous year [1]. The company's cash position also improved, with cash, cash equivalents, and short-term investments rising to RMB 364.5 billion (US $50.2 billion) [1].

The company's next earnings conference call is scheduled for May 27, 2025, at 7:30 AM ET [1].

References:
[1] https://www.nasdaq.com/articles/pdd-holdings-inc-reports-first-quarter-2025-financial-results-10-revenue-growth-amid