PDD Holdings Inc. (NASDAQ:PDD) Q4 2025 Earnings Call Transcript

PDD Holdings Inc. (NASDAQ:PDD) Q4 2025 Earnings Call Transcript March 25, 2026

PDD Holdings Inc. misses on earnings expectations. Reported EPS is $2.53 EPS, expectations were $17.98.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to PDD Holdings Inc. Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference call is being recorded. I would now like to hand the conference over to your host today. Sir, please go ahead.

Unknown Executive: Thank you, operator, and hello, everyone, and thank you for joining us today. PDD Holdings earnings release was distributed earlier and is available on our website at investor.pddholdings.com as well as through the Globe Newswire services. Before we begin, I would like to refer you to our safe harbor statement in the earnings press release, which applies to this call as we will make certain forward-looking statements. This call also includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures. Joining us today are Mr. Chen Lei, our Co-Chairman and Co-Chief Executive Officer; and Mr. Zhao Jiazhen, our Co-Chairman and Co-Chief Executive Officer.

Our VP of Finance, Ms. Liu Jun, is unfortunately on medical leave. Delivering the prepared remarks today will be Mr. Li Jiong, our Finance Director. Jiazhen and Lei will make some general remarks on our performance for the past quarter and our strategic focus. Jiong will then walk us through our financial results for the fourth quarter and fiscal year ended December 31, 2025. During the Q&A session, Lei and Jiong will answer questions in Chinese and will help translate. Please kindly note that English translation is for reference only. In case of any discrepancy, statements in the original language should prevail. Now it’s my pleasure to introduce our Co-Chairman and Co-Chief Executive Officer, Jiazhen. Jiazhen, please go ahead.

Jiazhen Zhao: [Foreign Language]

Unknown Executive: [Interpreted] Hello, everyone, and thank you for joining our earnings call for the fourth quarter and fiscal year 2025. In 2025, we celebrated the 10th anniversary of the company’s founding, and it is also the year in which we made our largest investments in high-quality development. For the first time in the e-commerce industry, we launched a 100 billion support program to support merchants. The entire company joined efforts in stepping up our support to farmers and merchants. And during the shareholders’ meeting at the end of last year, we improved our corporate governance structure by introducing the code share structure and further sharpened our strategic focus to investing deeply in the supply chain and concentrating on high-quality brand-oriented growth to drive the entire supply ecosystem to move up the value chain.

In the past year, we delivered steady results. This quarter, the group’s revenue reached RMB 123.9 billion, growing 12% year-on-year, while full year revenue reached RMB 431.8 billion, up 10% year-on-year. Both this quarter and the annual net income decreased year-on-year, which primarily reflects our sustained investments on both the supply side and demand side. As we have communicated in the past, we prioritize long-term value generation by nurturing our ecosystem rather than short-term financial results. And benefiting from long-term investments on both supply and demand side through initiatives like the RMB 100 billion support program, the platform and supply chain ecosystem have been moving steadily in the right direction. Key participants of the supply chain, such as agricultural regions and industrial belts have become core pillars supporting the platform and ecosystem, while also bringing consumers more affordable, high-quality products.

With the continued investments under the RMB 100 billion support program, dedicated projects such as Duo Duo Local Specialties, new quality supply and logistics support for remote regions have gradually broadened our support from top merchants and SMEs to every segment of the supply chain, helping businesses across all categories pursue differentiated growth. This has enabled the transition from merely supplying products to pursuing quality and to brand building, greatly improving supply chain efficiency and overall industrial capabilities, while at the same time, create room for profit and innovation for agricultural regions and industrial belts. In the fourth quarter, the Duo Duo Local specialties team visited agricultural regions such as Anyue lemons, Pu’er coffee, Wuhan seeds, Meizhou pomelos, Wenshan blueberries, Fuzhou abalone and Lianyungang seaweed.

Through customized One Product One Plan support programs, the team addressed issues such as the lack of product standardization and low value add. These efforts guided farmers and growers to adopt standardized planting, premiumization and deep processing, effectively increasing the added value of agricultural products and retaining more profits in the places of origin, thereby enable sustainable growth in specialty agriculture industries. In industrial belt, we accelerated the execution of new quality supply program by doubling down on our support efforts. Our dedicated teams visited manufacturing clusters such as Yiwu Accessories, Pinghu down jackets, Hunan Spicy Snacks, Anhui Roasted Seeds, Tianjin Potato Chips, Zhongshan Small Appliances and Shanghai Chocolate and delved deep into every segment of the supply chain from raw materials to components.

Through a combination of fee reduction and support, we helped unlock the potential in the supply chain, driving an overall upgrade in supply chain operations and helping industrial belt transition from commoditized competition to brand building. While stepping up our investments in the supply chain, we also unlocked the consumption potential in remote regions through our logistics support program, driving new growth opportunities for merchants. In the fourth quarter, building on the success of this campaign, we continue to tackle the last mile of parcel delivery into villages across multiple provinces and cities, extending the benefits of new e-commerce from western provinces to vast rural areas. To date, we have deployed and built end-to-end delivery networks, including country-level transfer warehouses and village level pickup points in over 10 provinces and municipalities.

We also covered the transshipping fees for orders delivered to villages, bringing more remote rural areas into the free shipping zones. In terms of trust and safety, we continue to improve the business environment and further enhance the service levels for both consumers and merchants. During the spring festival, we rolled out a series of food safety measures, including compliance checks on business qualifications, reviews of food advertisements, controls on full live streaming, protection of miners, IP protection and the development of a food database, all to safeguard the food safety for consumers during the festivities. In our global business, despite the drastic changes in external environment, we delivered steady growth over the past year, mainly reflecting the competitive advantages built through our long-term focus on the supply chain.

At the last shareholders’ meeting, we announced our all-out efforts in investing in the transformation of the supply chain and in building another Pinduoduo. This remains our duty and primary focus. Over the past few months, the 3-year strategy we committed to during the Annual General Meeting has been translated into concrete actions and fundamental changes are taking place within the business and our organizations. In the next phase of our journey, our strategic priority will not be business diversification, but rather concentrating on the high-quality development of the supply chain. Leveraging our strength in the supply chain accumulated over the years, we will reinvent the platform and propel the ecosystem of the value chain. 2026 marks PDD’s 11th year and a new starting point as we head into our next decade.

We are starting a refresh and moving forward with an all-in attitude and a persistent focus on execution. We will dedicate more talent and resources to deepen our investments in the supply chain, accelerating its upgrade and transformation. We believe that in the next 3 years, we will have the opportunity to build another Pinduoduo. Now I’ll hand it over to Chen Lei for further remarks.

Lei Chen: Thanks, Jiazhen, and hello, everyone. 2025 marked our 10th anniversary. As Jiazhen just mentioned, we took on greater responsibilities this past year and launched the RMB 100 billion support program to move back to the virtual ecosystem. We also established a co-chair structure to further improve our governance and firmly anchored our company’s strategic focus on the high-quality development of supply chain. Through these efforts, we continue to create long-term value for consumers, for merchants, the industry and society has been nearly a year since we launched RMB 100 billion support program. During this time, we continue to reinvest in our ecosystem through measures such as fee reductions, merchant support, trust and safety initiatives.

Our dedicated team has gone deep into agriculture regions and manufacturing hubs to have hundreds of regions establish standardized production system and to explore differentiated and brand-oriented growth models. This effort has significantly improved the efficiency and quality of supply chain operations, driving the supply chain transformation from scale driven to value driven. This also brings more high-quality affordable products to our consumers. Our consistent investment in the supply chain have unlocked strong consumer demand on Pinduoduo platform. The platform delivered strong performance during major promotions such as June 18, Double 11 as Spring Festival. [Quality products] from different regions flow through geographic boundaries and offering consumers more diverse selection and further enhancing their quality of life.

Our global e-commerce business continued to deliver steady growth and has reached meaningful scale in most countries we serve, accomplished in 3 years was to build a Pinduoduo business 10 years to complete. However, over the past year, the global geopolitical landscape has grown more complex. Trade and regulatory policies across different countries and regions continue to evolve. This has introduced greater uncertainty to our global business and will impact and even reshape our development model. In this context, we need to rely more than ever on the collective capabilities of our supply chain ecosystem. Therefore, we will continue to anchor our strategy in investing deeply in supply chain capabilities and direct more efforts, capital and resources to its transformation.

We aim to empower our merchants and manufacturers to become innovators with go-to-market capabilities, developing consumer insights, coming up product size and building brands. This will drive towards high-quality and brand-oriented growth, creating real value for consumers. Over the past few months, we have been making steady progress on the execution of 3-year strategy adopted at a shareholders’ meeting, and we are pleased to see some results. In the fourth quarter, our long-term investment in agriculture research achieved new results. Last October, for the second consecutive year, we were invited to attend World Food Forum hosted by UN Food and Agriculture Organization, representing Asian enterprises. We shared our experience and achievements in supporting digital agriculture innovation, and we also sponsored 2 great agriculture research teams that took the stage at the forum, bringing new energy into agriculture research and development.

Since the start of 2026, competition in e-commerce sector has continued to intensify around new business models and new technologies. At the same time, the global environment has become more complex than last year with increased uncertainty in the economic and trade climate as well as in regulatory policies across various countries and regions. This will inevitably bring more challenges and weigh on our future performance, putting pressures on our profitability in short term. However, we will continue to uphold our long-term philosophy and faithfully execute our strategy of investing deeply in the supply chain, dedicating more resources to give back to the industry and the society. And now I will turn the call over to Li Jiong, who will walk you through our financial performance for the fiscal year of 2025.

Jiong Li: Well, thank you, Lei. Hello, everyone. This is Jiong. Now let me walk you through our financial performance in the fourth quarter and fiscal year ended December 31, 2025. In terms of income statement, in Q4, our total revenues increased 12% year-over-year to RMB 123.9 billion and 10% year-over-year to RMB 431.8 billion for full year 2025. This was mainly driven by the increase in revenues from both online marketing services and transaction services. Revenues from online marketing services and others were RMB 60 billion this quarter, up 5% compared to the same period 2024. Our transaction services revenues this quarter were RMB 63.9 billion, up 19% versus the same period of 2024. Moving on to costs and expenses. Our total cost of revenues increased 15% from RMB 47.8 billion in Q4 2024 to RMB 55.2 billion this quarter.

For the full year, our total cost of revenues increased 23% to RMB 188.8 billion, mainly due to increased fulfillment fees, bandwidth and server costs and payment processing fees. On a GAAP basis, total operating expenses this quarter increased 10% to RMB 41 billion from RMB 37.2 billion in the same quarter of 2024. On a non-GAAP basis, our total operating expenses increased to RMB 39.3 billion this quarter from RMB 35.1 billion in Q4 2024. Our total non-GAAP operating expenses as a percentage of total revenues was 32% in Q4. For full year 2025, total non-GAAP operating expenses were RMB 140.7 billion, up from RMB 122 billion in 2024. Looking to specific expense items. Our non-GAAP sales and marketing expenses this quarter were RMB 34 billion, up 9% versus the same quarter of 2024.

On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was 27% compared to 28% in Q4 of 2024. For the full year, non-GAAP sales and marketing expenses increased from RMB 109.1 billion to RMB 123.3 billion in 2025. Our non-GAAP G&A expense were RMB 907 million in Q4 versus RMB 998 million in the same quarter of 2024. Our annual non-GAAP G&A expenses were RMB 3.2 billion in 2025 versus RMB 2.8 billion last year. Our research and development expenses were RMB 4.4 billion in the fourth quarter on a non-GAAP basis and RMB 5 billion on a GAAP basis. On a GAAP basis, operating profit for the quarter was RMB 27.7 billion versus RMB 25.6 billion in the same quarter 2024. Non-GAAP operating profit was RMB 29.5 billion versus RMB 28 billion in the same quarter 2024.

Non-GAAP operating profit margin was 24% this quarter compared with 25% for the same quarter 2024. For the full year, non-GAAP operating profit was RMB 102.6 billion compared with RMB 18.3 billion in 2024. Net income attributable to ordinary shareholders was RMB 24.5 billion for the quarter and RMB 99.4 billion for the full year. In the fourth quarter, basic earnings per ADS was RMB 17.50 and diluted earnings per ADS was RMB 16.51 versus basic earnings per ADS of RMB 19.76 and diluted earnings per ADS of RMB 18.53 in the same quarter of 2024. Non-GAAP net income attributable to ordinary shareholders was RMB 26.3 billion for the quarter and RMB 107.3 billion for the full year. In the fourth quarter, non-GAAP diluted earnings per ADS was RMB 17.69 versus RMB 20.15 in the same quarter of 2024.

That completes the income statement. Now let me move on to cash flow. Our net cash flow generated from operating activities was RMB 24.1 billion in Q4 and RMB 106.9 billion for the full year of 2025, compared with RMB 29.5 billion in the same quarter of 2024 and RMB 121.9 billion in 2024. As of December 31, 2025, the company had RMB 422.3 billion in cash, cash equivalents and short-term investments. Thank you, and this concludes my prepared remarks.

Unknown Executive: Thank you, Jiong. Next, we’ll move on to the Q&A session. Today’s Q&A session, Lei and Jiazhen will take questions from analysts on the line. We could take a maximum of 2 questions from each analyst. Lei and Jiazhen will answer questions in Chinese, and we will help translate. Operator, we are open for questions.

Operator: [Operator Instructions] Your first question comes from Alicia Yap with Citigroup.

Q&A Session

Alicis a Yap: [Foreign Language] I have 2 questions. First is that the company made some organization adjustment at the shareholder meeting at the end of last year. So currently, the company is operating in over 90 markets and at the same time, also face new challenges from the complex regulatory environment. So how does the company maintain the flexibility and also the quality of execution in such an environment? And then second question is, over the past quarter, we have seen a slowdown in the growth of e-commerce platform in China and the company’s online marketing revenue growth also show a slowdown over the past 2 quarters. So could management share with us your view on the current state of China e-commerce market and where the next phase of growth for the industry might come from?

Jiazhen Zhao: [Foreign Language]

Unknown Executive: [Interpreted] This is Zhao Jiazhen. Let me take your first question. Over the past few years, our global business has indeed achieved some progress, now serving nearly 100 markets and achieving meaningful scale. And throughout this process, our corporate governance and the development of internal talent have lagged behind the business growth, and that leaves us difficult to keep up in many areas. At the same time, the international geopolitical landscape is evolving rapidly with trade and regulatory policies across regions changing quickly and becoming increasingly tightened. This places new demands on our company as a whole. And therefore, we believe there is both an opportunity and a necessity to undertake a systemic and structural transformation of our organization, culture and corporate governance.

And of course, this will be a gradual process. The culture, structure and the appointment of new leaders that was announced at our shareholders’ meeting last December is the beginning of this systematic transformation. In the period ahead, we will dedicate greater energy, capital and resources to upgrading and reinventing the supply chain and to achieve an overall transformation of our supply chain operations. I will also address the second question. As you mentioned, over the past few quarters, we have seen e-commerce industry enter a new phase of intensified competition and slowing growth. In this new stage, our strategy of investing deeply in the supply chain was formulated. It was formulated from the recognition that an e-commerce platform should not just be a simple transaction platform, rather, it can and should do more and creating greater value for all participants across the entire supply chain.

Our deep investments in the supply chain covers multiple aspects and initiatives recently such as Duo Duo local specialties and logistics support for remote regions are all projects empowering the supply chain to be more inclusive. Here, I will also highlight 2 specific programs. The first program is free delivery to villages. This is a new project we piloted in the fourth quarter of last year, aimed at addressing the challenges of high logistics costs and merchants lack of incentives to shift to remote rural villages, bringing more villages into the free shipping zone. And currently, we have built last-mile logistics infrastructure, including transit warehouses at the country level and pickup points at the villages level across multiple regions in China and with the platform covering the transshipping fees for orders delivered to these villages.

And under this new model, merchants only need to send their products to the transport warehouses and the transportation from the warehouse to the village level pickup points is then handled by the transit warehouse. And building on our existing experience, we applied the transshipping model to the last-mile delivery to the villages, improving the shopping experiences in remote areas and helping our merchants to tap into new market opportunities. The second example is new quality supply. For merchants willing to improve their product quality and services, the platform empowers them by providing industry insights and supply chain support. These measures support merchants to upgrade their operations across the entire product life cycle from R&D and production to manufacturing and sales and driving the transformation of the supply chain system.

There is actually a lot the platform can do here. For instance, in product development, traditional approaches often rely on trial and error. However, within today’s ecosystem, critical product information is compiled by our merchant development teams and promptly relate to the merchants. Together with traffic support for new product testing, these measures enable merchants to iterate their products with more success and improve the ROI of their R&D investments. And these are 2 examples of our efforts to upgrade the supply chain. Faced with slowing industry growth and heightened competition, we are proactively choosing to channel resources into building a high-quality supply chain. Our investments in foundational capabilities like new quality supply and delivery to villages will become the driving force behind the company’s sustainable and healthy growth in the next decade.

Operator, we are ready for the next analyst on the line.

Operator: Your next question comes from Kenneth Fong with UBS.

Kenneth Fong: [Foreign Language] The company global business has experienced some ups and downs. Since last year, we have seen high-profile regulatory inquiries in some key markets and significant changes in trade policy highly relevant to our operations. Could management share your thoughts on the current external environment and under such conditions, where is your global business strategic focus in the next phase? And my second question is about the profitability. The company profitability over the past 2 quarters has experienced some fluctuation. So could management share how different business model launch that might impact the profitability? And how should we think about the company long-term profit margin level?

Lei Chen: [Foreign Language]

Unknown Executive: [Interpreted] This is Chen Lei. I will take your first question. Over the past period, we have indeed received inquiries from regulatory authorities. As our global business grew rapidly and reached a meaningful scale in different countries, it is understandable that this has drawn surprise, concerns and closer scrutiny. However, our management believes that the current regulatory scrutiny will lay a solid foundation for our next stage of growth and will also provide direction for iterating our model amid the rapidly evolving international political and regulatory landscape. Since the launch of our global business, we have consistently focused on the long term. Building on our deep roots in the supply chain, we are committed to achieving sustainable development in each market and creating real value for consumers.

As our business skills and regulatory environment across regions change rapidly, we deeply recognize that regulatory compliance is the baseline requirement. As a company operating within local communities, it is our fundamental responsibility as an e-commerce platform to meet local needs and stay true to our core mission, fulfill our duties and contribute meaningfully to the societies we operate in. Therefore, our management team invests significantly in business compliance. However, trade policies, taxation, data regulations, product compliance requirements and other regulatory frameworks are undergoing significant changes across different countries and regions. These requirements often vary considerably and can sometimes contradict one another, inevitably bringing greater challenges and uncertainty.

We are actively learning, adapting to these changes and continuously enhancing our compliance capabilities to create sustainable value for society. You also mentioned changes in global trade policies. Since the beginning of last year, we have indeed seen some shifts in trade policies in many major markets. Ensuring business compliance, the team has quickly iterated our business model based on the regulatory environment and market conditions in different regions to deliver reliable services to consumers. This is closely tied to the supply chain capabilities we have accumulated over the years. Therefore, moving forward, the strategic focus of our company’s global business will remain on investing in supply chain capability. Every aspect of this directly impacts the consumer shopping experience, and accordingly will be a key area of our investment.

Thank you.

Jiazhen Zhao: [Foreign Language]

Unknown Executive: This is Zhao Jiazhen. Let me answer your second question. First, I want to emphasize that currently, the company is still in a strategic investment phase. The external environment and competitive landscape are changing rapidly. And to meet the consumers’ evolving needs, we are working closely with our merchants to explore and launch new business models that is suited to the new conditions. Any new model from launching to a full rollout requires the platform to commit substantial resources in its early stages. Whether it is exploring the new business models or making strategic investments in the supply chain, these are fundamental and long-term initiatives. The timing difference between investment and return will inevitably have a direct impact on our performance in certain stages.

As we have communicated on multiple occasions, between short-term financial performance and the long-term value of the platform ecosystem, we will resolutely choose the latter. And therefore, as we continue our strategic investments, coupled with a complex and volatile macro environment, it could be normal to see fluctuations in our profit margins from quarter-to-quarter. And over the past few months, the strategy we announced at the shareholders’ meeting is being translated into concrete projects. The business and organization are undergoing deep transformation. And we suggest not to focus too much on the profitability of a single quarter, but rather pay more attention to the high-quality development of our platform ecosystem because only with a healthy platform ecosystem and a robust supply chain, can the platform achieve sustainable growth in the long-term intrinsic value.

Operator, let’s move on to the next analyst on the line. Hi Joyce, please go ahead.

Unknown Analyst: [Foreign Language] I will translate myself. My first question is related to the profit margin as well. Since last year, the company launched several investment initiatives, including last year’s RMB 100 billion support program and the management just mentioned heavy investment in the supply chain in the remarks. Could management elaborate a bit on how the company thinks about the investment and return cycles for these projects? And what will be the long-term impact on the company’s financial performance? My second question is online retail sales showed very strong growth momentum in the first 2 months of the year. Could the management share the company’s view on the consumer market like regarding categories with faster growth in the market? Does the company have targeted strategies to capture new opportunities in the fast-growing product categories?

Jiazhen Zhao: [Foreign Language]

Unknown Executive: [Interpreted] This is Zhao Jiazhen. I’ll answer your question. About a year ago, we further recognized the importance of the long-term development of the ecosystem, and we launched a series of merchant support initiatives such as the RMB 10 billion fee reduction and RMB 100 billion support programs, committing tangible resources to help the merchants and the industries, creating more room for innovation. Our management unanimously agrees that as the platform grows into a public platform with social influence, we should consider the company’s development from the broader perspective of public interest and the long-term health of the industry ecosystem. The strategy of focusing on core business and investing deeply in supply chain upgrades that was announced at the shareholders’ meeting at the end of last year is an extension and reinforcement in this direction.

And after years of development, the e-commerce industry’s ecosystem is becoming more mature and merchants demand on the platform have also become more diverse. The platform’s role has evolved from initially being a transaction platform to now becoming a comprehensive business partner. Accordingly, the support that merchants need the most from the platforms has also extended from traffic support to all aspects of their operations, including R&D, production and sales. This requires us to go deeper in our operations to come up with targeted support plans tailored to different industries and thereby building a more competitive supply chain. Such investments involve thousands of merchants and cannot be achieved overnight. We are prepared for long-term and patient investments and are very pleased to see that many of these investments have already yielded some results.

For example, with the support of the new quality supply project I just mentioned, some merchants have chosen to reinvest the fee reductions provided by the platform into expanding their R&D teams and upgrading production lines. And together with the platform’s digital solutions, they have started on a path of product differentiation and transformation. These long-term structural investments will not be immediately reflected in the financial performance in the short run, but they are a crucial part of the long-term sustainable growth of the platform and ecosystem. We will diligently implement these long-term projects by reinvesting concrete resources back into the ecosystem. We target to lower merchant costs, enhance supply chain quality and improve consumer experience.

Through investing in the supply chain, we will seek to reinvent the platform and move the ecosystem up the value chain. And regarding your second question, we are also very pleased to see the improvement in the overall consumption market. However, at the same time, we also clearly recognize that in today’s competitive landscape, we still face some challenges. The future performance of e-commerce platforms will increasingly be dependent on how much incremental value they can create for the entire supply chain rather than relying solely on traffic acquisition and allocation. And therefore, at this juncture, we have made a firm decision to invest deeply in the supply chain. And for different product categories, our merchant development teams will work closely with sellers.

And based on industry insights, we will provide them with tailored industry solutions to help merchants achieve new quality transformation and driving the high-quality development of the supply chain. And we firmly believe that these investments are essential for the e-commerce high-quality development in the next stage, and we are committed to patiently furthering these efforts in the long run. Thank you. Thank you, Joyce. And thank you, Jiazhen. Thank you for joining us today. We look forward to speaking with you early again next quarter. Thank you, and have a great day.

Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.