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PDD Holdings Inc. (PDD) stock traded at $100.48, down 15.73%, as of 1:13 PM EDT on May 27, 2025, after the company released its first-quarter earnings.

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PDD Holdings Inc. (PDD)

Despite a 10% rise in revenue, profits took a steep hit, reflecting heavy spending aimed at supporting its merchant ecosystem.

Earnings Highlights

For Q1 2025, PDD Holdings reported total revenues of RMB 95.67 billion (US$13.18 billion), a 10% increase from RMB 86.81 billion in the same period last year. This growth was fueled by a 15% rise in online marketing services revenues and a 6% increase in transaction services.

However, the company’s operating profit fell 38% to RMB 16.09 billion (US$2.22 billion), down from RMB 25.97 billion last year. On a non-GAAP basis, operating profit dropped 36% to RMB 18.26 billion (US$2.52 billion). Net income attributable to shareholders plunged 47% to RMB 14.74 billion (US$2.03 billion), compared to RMB 27.99 billion in the same quarter of 2024.

Key Takeaways from $PDD's Earnings Call

- PDD Holdings reported Q1 2025 revenues of RMB 95.7 billion, showing a notable slowdown in growth amid rapid changes in the external environment.

- The company experienced a significant drop in profit due to slowed revenue growth and… pic.twitter.com/aJbivL3D14

— AlphaSense (@AlphaSenseInc) May 27, 2025

Strategic Investments Impact

Management attributed the profitability decline to substantial investments in its platform ecosystem, designed to help merchants adapt amid a shifting market. Mr. Lei Chen, Chairman and Co-CEO, emphasized that while these investments hurt short-term profits, they are intended to secure long-term platform health.

Mr. Jiazhen Zhao, Executive Director and Co-CEO, added that strengthening merchant support is essential to delivering high-quality consumer experiences. VP of Finance Jun Liu warned that financial results might continue reflecting these ecosystem investments as the company navigates uncertain conditions.

Operational Costs and Cash Flow

Total costs of revenues jumped 25% to RMB40.95 billion (US$5.64 billion), mainly due to higher fulfillment and payment processing fees. Operating expenses surged 37% to RMB38.64 billion (US$5.32 billion), driven by a 43% rise in sales and marketing expenses, reaching RMB33.40 billion (US$4.60 billion).

General and administrative costs slightly decreased, while research and development expenses climbed to RMB3.58 billion (US$493 million). Net cash from operating activities declined sharply to RMB15.52 billion (US$2.14 billion), compared to RMB21.07 billion last year, pointing to weakened cash flow.

Strong Liquidity Position

Despite the profit pressures, PDD Holdings reported robust liquidity. Cash, cash equivalents, and short-term investments rose to RMB364.5 billion (US$50.2 billion) as of March 31, 2025, compared to RMB331.6 billion at the end of December 2024. Other non-current assets stood at RMB 76.2 billion (US$10.5 billion).

While PDD Holdings faces immediate profitability challenges, its strategic ecosystem investments aim to drive long-term, sustainable growth. Investors will be watching closely to see if the company’s bet pays off in the coming quarters.

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