PDD Stock Jumps on Q2 Earnings Beat Despite Profit Decline
Shares rise over 3% as strong user spending outweighs a 21% drop in operating profit amid heavy investment and competition.
PDD Holdings Inc. (NASDAQ: PDD) saw its shares climb more than 3% after the e-commerce giant reported second-quarter earnings that significantly surpassed analyst expectations, even as profits declined due to rising costs and strategic investments.
The parent company of Pinduoduo and Temu announced adjusted earnings of RMB22.07 per share for the quarter ending June 30, 2025, easily beating the consensus estimate of RMB14.80. Total revenues rose 7% year-over-year to RMB103.98 billion (US$14.52 billion), also exceeding forecasts. The top-line growth was driven by a 13% increase in revenues from online marketing services.
However, the strong earnings figures were tempered by a notable contraction in profitability. Non-GAAP operating profit fell 21% from the prior year to RMB27.75 billion (US$3.87 billion). The company attributed the decline to a 36% surge in costs of revenues, stemming from increased fulfilment fees, server costs, and payment processing fees. Total operating expenses also climbed 5%.
Management framed the increased spending as a deliberate strategy to bolster its e-commerce ecosystem for the long term. "We remain steadfast in our commitment to supporting the vitality of the ecosystem, prioritizing long-term impact over short-term results," said Lei Chen, Chairman and Co-CEO of PDD Holdings.
VP of Finance, Jun Liu, acknowledged the challenging environment, stating, "Revenue growth further moderated this quarter amid intense competition." She added that the company's focus on long-term value creation meant that "sustained investments may continue to weigh on short-term profitability."
Investors appeared to focus on the resilient revenue growth and the substantial earnings beat, pushing the stock higher on trading volume 2.6 times the daily average. The results suggest that despite a competitive landscape, PDD's platform continues to capture strong consumer spending, giving the market confidence in its growth trajectory over immediate profit margins.