PDD Holdings Inc. reported Q2 2025 results: revenue of RMB 103.98 billion (+7% y/y) and adjusted earnings per ADS of RMB 22.07, both well above consensus. However, net income attributable to shareholders came in at RMB 30.75 billion (-4% y/y) and operating profit fell 21% y/y, underscoring ongoing margin pressure amid intensified competition and higher investments.

Results Snapshot: Revenue & EPS Beat; Profit Trend Weakens

Total revenue reached RMB 103.98 billion (+7% y/y), topping market estimates; adjusted EPS per ADS (non-GAAP) of RMB 22.07 also decisively beat. At the same time, reported net income was RMB 30.75 billion (-4% y/y); on a non-GAAP basis, net income was RMB 32.71 billion (-5% y/y). Operating profit was approximately RMB 25.8 billion, down 21% y/y. The print confirms strong positive surprises on revenue and EPS, while also extending the trend of year-over-year net income declines for a second straight quarter.

Mix: Resilient Top Line vs. Rising Costs

By segment, online marketing services and others delivered RMB 55.70 billion (+13% y/y), remaining the primary growth driver; transaction services revenue was RMB 48.28 billion, roughly flat year-on-year, reflecting a “user experience and quality first” approach and a more moderate transaction momentum. Overall revenue growth leaned more on marketing resiliency and merchant-ecosystem stickiness.

Costs and opex explain the profit pressure: cost of revenue rose 36% y/y to RMB 45.86 billion, driven by fulfillment, bandwidth/servers, and payment processing; together with sustained sales & marketing spend (non-GAAP) of about RMB 26.7 billion (+5% y/y), this diluted operating margin. Management reiterated prioritizing long-term value over short-term profit and will continue sizeable merchant-support programs, implying a continued near-term squeeze on margins.

Market & Trading Focus

Shares popped nearly double digits in pre-market trading after the release before turning choppy, as bulls and bears debated whether the “EPS beat” or the “weaker y/y profit” should dominate pricing. On trading desks, investors are gauging whether Q3 spend will ease at the margin, if marketing ROI can recover, and how much room there is to tweak domestic monetization (ads/commissions). If accompanied by improved efficiency in cross-border logistics, the profit curve could find a more convincing trough.

Near to mid term, margin stabilization hinges on two levers: (1) easing on the cost side—fulfillment, shipping/tariff pass-throughs, bandwidth and payments; and (2) sustaining growth—keeping marketing resilient while re-accelerating transaction services, effectively letting “stability drive re-acceleration.” While heavier merchant support and ecosystem investment should lift long-term quality, margin trajectory will likely remain “watch-and-adjust” absent a clear improvement in macro and competitive intensity.

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