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    PDD
    Earnings call· Mar 2025(Q1 FY25)

    PDD Holdings Q1 FY25 earnings call PDD

    May 27, 2025 Source

    Executive summary

    PDD Holdings Q1 FY25 — Ecosystem Investments Impact Profitability

    PDD Holdings reported a notable slowdown in Q1 FY25 revenue growth to RMB 95.7 billion, coupled with a significant decline in profitability due to substantial ecosystem investments and external headwinds. The company is prioritizing long-term intrinsic value over short-term financial performance, committing to the RMB 100 billion support program to aid merchants through intensified competition and policy changes, despite the expected continued pressure on profitability.

    Highlights

    5

    • Revenues increased 10% year-over-year to RMB 95.7 billion.

    • Online marketing services and others revenues were RMB 48.7 billion, up 15% from the same quarter of 2024.

    • Transaction services revenues were RMB 47 billion, up 6% from the same quarter last year.

    • Accumulated substantial supply chain and operational know-how through long-term investments and new business models.

    • RMB 10 billion fee reduction program delivered solid results, leading to the upgraded RMB 100 billion support program.

    Concerns

    5

    • Revenue growth slowed notably amid rapid change in the external environment and mismatch between business investment and return cycles.

    • Sustained ecosystem investments led to a significant drop in profit, with non-GAAP operating profit margin at 19% this quarter, down from 33% last year.

    • Non-GAAP diluted earnings per ADS was RMB 11.41, down from RMB 20.72 in the same quarter of 2024.

    • Intensified competition in Chinese e-commerce sectors, with inherent limitations as a third-party marketplace compared to first-party competitors.

    • Radical change in external policy environment, such as tariffs, created significant pressure for merchants in global business.

    Operational metrics

    23
    Total Revenues
    RMB 95.7 billionincreased 10% year-over-year
    Q1 FY25
    Online marketing services and others revenues
    RMB 48.7 billionup 15% from the same quarter of 2024
    Q1 FY25
    Transaction services revenues
    RMB 47 billionup 6% from the same quarter last year
    Q1 FY25
    Total cost of revenues
    RMB 40.9 billionincreased 25% from RMB 32.7 billion in Q1 2024
    Q1 FY25
    Non-GAAP total operating expenses
    RMB 36.5 billionincreased from RMB 25.6 billion in Q1 2024
    Q1 FY25
    Non-GAAP total operating expenses as percentage of total revenue
    38%compared to 29% in the same quarter last year
    Q1 FY25
    Non-GAAP sales and marketing expenses
    RMB 32.8 billionup 44% versus the same quarter last year
    Q1 FY25
    Non-GAAP sales and marketing expenses as percentage of revenue
    34%versus 26% for the same quarter last year
    Q1 FY25
    Non-GAAP general and administrative expenses
    RMB 735 millionversus RMB 572 million in the same quarter of 2024
    Q1 FY25
    Non-GAAP research and development expenses
    RMB 3 billionup 23% year-over-year
    Q1 FY25
    GAAP research and development expenses
    RMB 3.6 billionup 23% year-over-year
    Q1 FY25
    GAAP operating profit
    RMB 16.1 billionversus RMB 26 billion in the same quarter last year
    Q1 FY25
    GAAP net income attributable to ordinary shareholders
    RMB 14.7 billioncompared to RMB 28.0 billion in the same quarter last year
    Q1 FY25

    Transcript stated 'RMB 28 million' for Q1 2024, which is an ASR error. Corrected to 'RMB 28.0 billion' based on context and other financial figures.

    Basic earnings per ADS (GAAP)
    RMB 10.59versus RMB 20.33 in the same quarter of 2024
    Q1 FY25
    Diluted earnings per ADS (GAAP)
    RMB 9.94versus RMB 18.96 in the same quarter of 2024
    Q1 FY25
    Non-GAAP net income attributable to ordinary shareholders
    RMB 16.9 billionversus RMB 30.6 billion in the same quarter last year
    Q1 FY25
    Non-GAAP diluted earnings per ADS
    RMB 11.41versus RMB 20.72 in the same quarter of 2024
    Q1 FY25
    Net cash generated from operating activities
    RMB 15.5 billioncompared with RMB 21.1 billion in the same quarter last year
    Q1 FY25
    Cash, cash equivalents and short-term investments
    RMB 364.5 billion
    as of March 31, 2025
    RMB 10 billion fee reduction program
    —
    since H2 2024

    Key initiative in driving high-quality development of the platform ecosystem, delivered solid results.

    RMB 100 billion support program
    —
    since Q1 2025

    Major strategic decision for the next phase of high-quality development strategy, committing significant resources to support the platform ecosystem.

    RMB 10 billion merchant giveback program
    —
    Q1 FY25

    Launched under the RMB 10 billion program, offering additional coupons across all categories.

    RMB 10 billion consumer coupon program
    —
    Q1 FY25

    Introduced through dedicated campaigns to deliver additional coupons across all product categories.

    Industry KPIs

    3
    MetricValueDetails
    Segment revenue mixRMB 95.7 billionRMB
    Customer management revenueRMB 48.7 billionRMB
    Operating income EBIT and adjusted EBITDARMB 18.3 billionRMB

    Risks & headwinds

    5
    Slowdown in growth rateQ1 FY25, further accelerated by changes in the external environment

    Revenue growth slowed notably (10% YoY) and significantly.

    Mitigation: Sustained investments in ecosystem, supporting merchants and consumers.

    Significant drop in profit due to investment-return cycle mismatchQ1 FY25, expected to persist for some time to come

    Non-GAAP operating profit margin 19% in Q1 FY25, down from 33% YoY. Non-GAAP diluted EPS RMB 11.41, down from RMB 20.72 YoY.

    Mitigation: Long-term investments in platform ecosystem, prioritizing long-term intrinsic value over short-term financial performance.

    Intensified competition in Chinese e-commerceOngoing

    Inherent limitations as a third-party marketplace compared to first-party competitors, putting merchants at a clear disadvantage.

    Mitigation: Increased investments to help merchants grow business and reduce costs, RMB 100 billion support program.

    External policy environment changes (tariffs)Q1 FY25

    Radical change in external policy environment such as tariffs has created significant pressure for merchants in global business.

    Mitigation: Increasing support for merchants, RMB 100 billion support program, strengthening operations in served markets, helping local merchants grow and fulfilling orders from local warehouses.

    Profitability challenges from sustained investmentsNear-term and potentially over a longer period

    Financial impact on revenue growth and expenses, with profitability likely to face challenges.

    Mitigation: Focus on long-term intrinsic value and building a stronger, higher-quality merchant ecosystem.

    What to watch in Q2 FY25

    5

    Impact of RMB 100 billion support program

    Next quarter and beyond
    CurrentProgram launched in Q1 FY25, committing significant resources.
    TargetIncreased merchant sales, reduced costs, improved business environment, especially for SMEs.

    Why it matters

    This program is a major strategic decision impacting merchant ecosystem health and long-term growth.

    On one hand, the program is designed to further lower fees for our merchants, improving the business environment of our platform. On the other hand, we'll also invest more to drive sales for our merchants and to help them better adapt to new challenges.

    Q&A highlights

    6

    How is PDD responding to macro policy changes and tariffs, especially in its global business, and what adjustments are being made to its business model?

    Chen Lei stated PDD will continue proactive actions, upholding regulatory compliance, and leveraging supply chain know-how. The RMB 100 billion support program is designed to help merchants manage risks from policy changes, stabilize sales, and lower costs. The global business is working with local merchants to bring stable prices and supply, focusing on local fulfillment and differentiated products.

    “No matter how policies shift, we'll continue to strengthen our operations in the markets we serve, helping more local merchants grow on our platform and enabling more orders to be fulfilled from local warehouses.”

    asked by Alicia Yap · answered by Lei Chen

    2 min read7 chapters

    Detailed Narrative

    01

    High-Quality Development Strategy & Ecosystem Investments

    PDD accelerated its high-quality development strategy, expanding efforts from platform operations to a broader ecosystem covering supply and demand sides. Initiatives like the RMB 10 billion fee reduction program and logistics support for remote regions broadened product selection and accelerated supply chain transformation, marking a new chapter in e-commerce prioritizing merchant support and ecosystem investments.

    02

    RMB 100 Billion Support Program

    The company launched the RMB 100 billion support program in Q1 FY25, a major strategic decision to increase merchant support and ecosystem investments. This program aims to further lower fees for merchants, improve the business environment, drive sales, and help them adapt to new challenges, particularly focusing on small and medium-sized merchants.

    03

    Impact of External Environment & Competition

    PDD faced intensified competition in Chinese e-commerce, noting inherent limitations as a third-party marketplace compared to first-party competitors in passing on policy incentives. Additionally, radical changes in external policy, such as tariffs, created significant pressure for merchants in its global business. The company views its ecosystem investments as crucial to help merchants navigate these challenges.

    04

    Profitability Impact and Long-Term Focus

    Revenue growth slowed significantly, and sustained ecosystem investments led to a notable drop in profit. The non-GAAP operating profit margin fell to 19% from 33% year-over-year. Management attributes this to a mismatch between investment and return cycles, emphasizing a focus on long-term intrinsic value over short-term quarterly results, expecting profitability challenges to persist.

    05

    Merchant Support Initiatives

    On the supply side, the RMB 100 billion program extends comprehensive support to SMEs, including fee reductions, traffic resources, premium store programs, and digital/technology capabilities. This involves dedicated teams visiting manufacturing bases and enhancing support for agriculture products, exploring new distribution models, and modernizing traditional supply chains.

    06

    Consumer Giveback Initiatives

    On the demand side, the RMB 10 billion program introduced a new RMB 10 billion merchant giveback program and RMB 10 billion consumer coupons. Direct discount programs were enhanced by benchmarking prices against national subsidy programs across multiple categories, aiming to provide real savings to consumers and stimulate demand.

    07

    Response to National Subsidy Program

    Recognizing its third-party platform's disadvantage in benefiting from macro policy initiatives like national subsidies, PDD launched a dedicated page for the national subsidy program in January. It provides additional coupons on top of government subsidies and benchmarks prices to offer further savings to consumers and support merchants' competitiveness.

    AI-generated summary of the company’s earnings call. Not investment advice.