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    PDD
    Earnings call· Mar 2026(Q1 FY26)

    PDD Holdings Q1 FY26 earnings call PDD

    May 27, 2026 Source

    Executive summary

    PDD Holdings Inc. Q1 FY26 — Strategic Shift to First-Party Brand Business and Supply Chain Investment

    PDD Holdings is embarking on a strategic reinvention, focusing on high-quality development and deep supply chain investments, including a new first-party brand business. The company delivered solid Q1 FY26 results, with revenue growth driven by transaction services, while prioritizing long-term value creation over short-term financial fluctuations. This strategic shift aims to empower manufacturers, enhance product quality, and strengthen the platform's ecosystem.

    Highlights

    5

    • Group revenue increased 11% year-over-year to RMB 106.2 billion in Q1 FY26.

    • Revenues from transaction services grew 20% year-over-year to RMB 56.3 billion in Q1 FY26.

    • Non-GAAP operating profit margin expanded to 20% in Q1 FY26 from 19% in Q1 FY25.

    • Net cash generated from operating activities increased to RMB 16.4 billion in Q1 FY26 from RMB 15.5 billion in Q1 FY25.

    • Non-GAAP R&D expenses increased 32% year-over-year to RMB 4 billion in Q1 FY26, reflecting investment in innovation.

    Concerns

    4

    • GAAP net income attributable to ordinary shareholders decreased to RMB 12.5 billion in Q1 FY26 from RMB 14.7 billion in Q1 FY25.

    • Non-GAAP diluted EPS decreased to RMB 9.51 in Q1 FY26 from RMB 11.4 in Q1 FY25.

    • Online marketing services and others revenue growth slowed, increasing to RMB 49.9 billion in Q1 FY26 from RMB 48.7 billion in Q1 FY25.

    • Total cost of revenues increased 15% year-over-year to RMB 46.9 billion in Q1 FY26, outpacing revenue growth.

    Guidance & targets

    2
    CategoryTargetConfidence
    Investment in first-party brand business
    RMB 100 billion
    high materiality
    High
    Strategic Goal
    Build another Pingle door
    high materiality
    High

    Operational metrics

    22
    Total cost of revenues
    RMB 46.9 billionincreased 15% from RMB 40.9 billion in Q1 FY25
    Q1 FY26

    Mainly due to increase in fulfillment fees, bandwidth and server costs and payment processing fees.

    Total operating expenses (GAAP)
    RMB 39.8 billioncompared with RMB 38.6 billion in Q1 FY25
    Q1 FY26

    On a GAAP basis.

    Total operating expenses (non-GAAP)
    RMB 38.3 billionincreased from RMB 36.5 billion in Q1 FY25
    Q1 FY26

    On a non-GAAP basis.

    Total non-GAAP operating expenses as percentage of total revenues
    36%compared to 38% in Q1 FY25
    Q1 FY26

    On a non-GAAP basis.

    Sales and marketing expenses (non-GAAP)
    RMB 33.4 billioncompared to RMB 32.8 billion in Q1 FY25
    Q1 FY26

    On a non-GAAP basis.

    Sales and marketing expenses as percentage of revenue (non-GAAP)
    31%versus 34% for Q1 FY25
    Q1 FY26

    On a non-GAAP basis.

    General and administrative expenses (non-GAAP)
    RMB 872 millionversus RMB 735 million in Q1 FY25
    Q1 FY26

    On a non-GAAP basis.

    Research and development expenses (non-GAAP)
    RMB 4 billionup 32% year-over-year
    Q1 FY26

    On a non-GAAP basis.

    Operating profit (GAAP)
    RMB 19.6 billionup 22% year-over-year versus RMB 16.1 billion in Q1 FY25
    Q1 FY26

    On a GAAP basis.

    Operating profit (non-GAAP)
    RMB 21.1 billionversus RMB 18.3 billion in Q1 FY25
    Q1 FY26

    On a non-GAAP basis.

    Net income attributable to ordinary shareholders (GAAP)
    RMB 12.5 billioncompared to RMB 14.7 billion in Q1 FY25
    Q1 FY26

    On a GAAP basis.

    Basic earnings per ADS (GAAP)
    RMB 8.94versus RMB 10.5 in Q1 FY25
    Q1 FY26

    On a GAAP basis.

    Diluted earnings per ADS (GAAP)
    RMB 8.48versus RMB 9.94 in Q1 FY25
    Q1 FY26

    On a GAAP basis.

    Net income attributable to ordinary shareholders (non-GAAP)
    RMB 14.1 billionversus RMB 16.9 billion in Q1 FY25
    Q1 FY26

    On a non-GAAP basis.

    Diluted earnings per ADS (non-GAAP)
    RMB 9.51versus RMB 11.4 in Q1 FY25
    Q1 FY26

    On a non-GAAP basis.

    Net cash generated from operating activities
    RMB 16.4 billioncompared with RMB 15.5 billion in Q1 FY25
    Q1 FY26

    Cash flow from operations.

    Cash, cash equivalents and short-term investments
    RMB 436.1 billion
    As of March 31, 2026

    Balance sheet item.

    Direct to village coverage
    over 70%
    March 2026

    Expanded through setting up last-mile delivery network like country-level transfer warehouses and vintage pickup points.

    Daily order volume at transfer warehouses
    approached 10,000 orders
    March 2026

    Related to the 'reciting villages' initiative.

    Logistics cost reduction for remote regions
    80%
    Ongoing

    Logistics costs for shipping to some remote regions have been reduced by maybe 80%.

    Food safety initiatives
    over 20
    Q1 FY26

    Introduced by the platform to strengthen oversight and compliance.

    Turnaround time for handling store violations
    within hoursshortened
    Q1 FY26

    Shortened to safeguard food safety for consumers.

    Industry KPIs

    3
    MetricValueDetails
    Regional market performanceover 30%%
    Advertising revenue take rateRMB 49.9 billionRMB
    Operating income EBIT and adjusted EBITDA20%%

    Deals & partnerships

    1
    Dedicated company in ChanganNew Business LaunchRMB 15 billion initial cash injection, RMB 100 billion planned investmentNext few years

    The dedicated company was incorporated in March 2026, marking the official launch of the first-party brand business. This initiative aims to drive deep transformation in the supply chain.

    Risks & headwinds

    3
    Supply chain challenges for manufacturersCurrent

    Many good manufacturers are constrained by factors such as talent, information and scale have not yet completed their brand transformation and our call in homogeneous competition.

    Mitigation: PDD's first-party brand model provides sales volume certainty, empowering manufacturers to invest in R&D and process innovation, cutting costs and risks.

    Intense competition in e-commerceOngoing

    The e-commerce industry is highly competitive with low switching costs for consumers.

    Mitigation: Focus on supply chain capabilities, deep transformations across teams, business processes, and organizational management to create sustainable and differentiated value.

    Fluctuation in quarter-to-quarter financial resultsShort-term

    Due to seasonality and our only open Crop -- it is normal to see some fluctuation in our quarter-to-quarter financial results.

    Mitigation: Prioritize long-term sustainable growth, healthy development of the platform ecosystem, and accumulation of supply chain capabilities over short-term financial performance.

    Q&A highlights

    3

    Why launch the first-party brand initiative now, and what are the key considerations? Also, what is the primary focus for the global business moving forward, given its user growth?

    The first-party brand model addresses supply chain challenges where manufacturers lack branding capabilities. PDD leverages its technology and scale to provide sales certainty, enabling manufacturers to focus on R&D and quality. For global business, the focus is on supply chain integration and optimization, eliminating bottlenecks, and deepening the first-party brand model to strengthen consumer mindshare and product quality standards.

    “As a platform, we have both the responsibility and capability to deepen our investment in the supply chain and bring our own solutions to the challenges that is faced by the industry.”

    asked by Alicia Yap · answered by Jiazhen Zhao

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Reinvention and High-Quality Development

    PDD Holdings is initiating a deep restructuring of its organization and internal management, centered on safety, compliance, and social responsibility. This marks the beginning of the company's second decade, with a focus on high-quality development. The leadership team is committed to creating positive value for users, the industry, and society by stepping up as a platform enterprise.

    02

    Launch of First-Party Brand Business

    A dedicated company was incorporated in Changan in March 2026, officially launching PDD's first-party brand business with an initial cash injection of RMB 15 billion and a plan to invest RMB 100 billion over the next few years. This initiative aims to consolidate supply chain resources, collaborate with global IPs for co-creation, and empower the supply chain's transition towards brand development, customizing breakthroughs across the entire supply chain.

    03

    $100 Billion Support Program Initiatives

    The $100 billion support program continues with high levels of investment, integrating initiatives like premium produce, new quality supply, and logistics support for remote regions. In agriculture, the 2026 Dudu premium products program deepens support across the value chain, including planting, cultivation coaching, logistics, and deep processing. This helps improve quality and efficiency, enabling production regions to move up the value chain.

    04

    Supply Chain Upgrades and Merchant Empowerment

    The new quality supply initiatives are yielding results in manufacturing hubs, helping merchants shift from homogeneous competition to consumer-centric R&D-driven models. Factories are transforming into automated smart facilities, offering a new roadmap for industry upgrades. The platform provides certainty of sales volume to supply chain partners, empowering manufacturers to invest confidently in R&D and process innovation, thereby cutting costs and risks in brand building.

    05

    Logistics and Rural Development

    Logistics support for remote regions has unlocked new growth opportunities, with shipping costs for large items significantly reduced (e.g., from RMB 40-50 to RMB 10 for lighting from Zhongshan). The 'reciting villages' initiative, building on logistics support, has expanded direct-to-village coverage to over 70% of local villages in some areas by March, with daily order volumes approaching 10,000 orders at transfer warehouses, creating local jobs and boosting rural economies.

    06

    Platform Governance and Compliance

    Multiple rounds of initiatives have strengthened platform oversight and compliance capabilities. In Q1, over 20 food safety initiatives were introduced, including compliance reviews, advertising moderation, a dedicated food database, and enhanced inspection of live streaming. The turnaround time for handling store violations has been shortened to within hours, safeguarding food safety for consumers.

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