Temu Owner PDD's Q2 Profit Falls Less Than Expected Amid Revenue Growth Slump

Temu owner PDD reported a smaller-than-expected profit decline in Q2 despite revenue growth hitting a three-and-a-half-year low due to tariffs and increased support for domestic merchants weighing on profitability. The company's revenue growth was its lowest since Q2 2021, while its net income fell 21% YoY. Despite this, the decline was less than expected, with the company citing efforts to support merchants during a challenging economic environment.

PDD Holdings, the parent company of Temu, released its Q2 2025 financial results, revealing a mixed performance that underscores the company's strategic focus on long-term growth. The company reported total revenues of RMB103,984.8 million (US$14,515.7 million), representing a 7% year-over-year (YoY) increase [1]. This growth was primarily driven by online marketing services, which saw a 13% YoY increase to RMB55.7 billion.

However, the company's profitability metrics paint a more concerning picture. Operating profit declined by 21% to RMB25,792.9 million (US$3,600.6 million), and non-GAAP operating profit also decreased by 21% to RMB27,747.8 million (US$3,873.4 million) [1]. These declines were attributed to a 36% surge in costs of revenues, which jumped to RMB45.86 billion, primarily due to increased fulfillment fees, bandwidth costs, and payment processing expenses.

Net income attributable to ordinary shareholders fell by 4% to RMB30,753.5 million (US$4,293.0 million), while non-GAAP net income decreased by 21% to RMB32,708.4 million (US$4,565.9 million) [1]. These declines highlight the impact of the company's aggressive merchant investment strategy on short-term profitability.

Despite the decline in profitability, PDD Holdings maintains a strong cash position, with cash, cash equivalents, and short-term investments totaling RMB387.1 billion (US$54.0 billion) as of June 30, 2025 [1]. The company's management emphasized their focus on merchant support initiatives and long-term ecosystem sustainability, acknowledging that these investments may impact short-term profitability.

The earnings report will provide insights into the company's financial health and operational performance. Analysts will be closely watching for any signs of improvement or further decline in earnings. Investors and financial professionals should closely monitor the earnings call and subsequent analyst coverage for any updates on the company's strategy and future prospects.

References:
[1] https://www.stocktitan.net/news/PDD/pdd-holdings-announces-second-quarter-2025-unaudited-financial-d24q8tlo2zqe.html