Key Takeaways:
PDD Holdings reported Q2 revenue of RMB 112.4 billion, up 8% year-over-year but missing consensus by about 2.5%, as EU tariffs pressured Temu's European business.
"We stepped up our ecosystem investments in the second quarter," Jun Liu, vice president of finance at PDD Holdings, said. "Our priority is helping merchants thrive and strengthening the broader industry ecosystem."
Net income attributable to shareholders fell 12% to RMB 27.2 billion, the third straight quarterly decline. Online marketing revenue rose 3.5% to RMB 57.6 billion, beating the 1.6% consensus, while transaction services revenue grew 13.3% to RMB 54.7 billion, missing the roughly 21% consensus. Gross margin reached 57.3%, above the 55.5% expected, and non-GAAP diluted earnings per ADS came in at RMB 19.33, ahead of estimates.
Shares rose about 3% in premarket trading to roughly $91 after closing Friday at $88.38. The EU's July removal of the de-minimis exemption, with a €3 per-parcel customs fee, hit Temu, which draws about one-third of its GMV from Europe. Temu's global monthly active users fell 11% year-over-year to 467 million, according to Sensor Tower data cited by Caixin, the first major measured decline in the platform's four-year history.
Goldman Sachs, Jefferies, and Morgan Stanley all maintained Buy ratings, trimming targets to $134, $118, and $129 respectively. Goldman projects a 2026 price-to-earnings ratio of 9 times, arguing the low valuation already prices in regulatory and investment pressure. The current share price implies a 2026 P/E of about 9.2 times, or roughly 4 times excluding cash.
The company recorded about RMB 7.4 billion in other losses, which Goldman attributes mainly to regulatory fines tied to domestic operations and Temu. PDD is investing RMB 100 billion to support domestic merchants and expanding its first-party brand business, Xin Pin Mu, whose first label Bemuvo launched in June. Cash and short-term investments stood at RMB 456.4 billion, more than 60 percent of market value, with management committing to no dividends or buybacks.
The results signal management is trading near-term margins for supply-chain investment, betting the low valuation limits further downside. Investors will watch Temu's August 28 compliance filing with the European Commission under the Digital Services Act for the next catalyst.
This article is for informational purposes only and does not constitute investment advice.
