Temu Parent PDD Warns Current Profits Not Sustainable As Competition Heats Up In China
PDD Holdings, parent of Temu, reported a 7% year-on-year revenue increase to $14.52 billion for Q2 2025, exceeding estimates. However, executives warned that current profit levels are unsustainable due to rising competition and necessary investments in the merchant ecosystem, leading to potential short-term volatility. Adjusted operating profit fell 20.7% to $3.87 billion, with margins declining from 36.0% to 26.7%. Despite challenges, PDD remains optimistic about China's consumer market and holds $54 billion in cash. PDD stock rose 3.37% to $131.39 following the report.
Temu parent PDD Holdings PDD stock is trading higher on Monday after the company reported fiscal second-quarter 2025 results.
Revenue grew 7% year-on-year (Y/Y) to $14.52 billion (103.98 billion Chinese yuan), topping the analyst consensus estimate of $14.35 billion.
During the earnings conference call, PDD executives highlighted steady growth in retail sales and expressed strong confidence in the long-term potential of China's consumer market.
However, they cautioned that the current quarter's profit levels are not sustainable and expect fluctuations in future profitability.
Management noted that changes in the external environment and intensifying competition will require increased investments in the merchant ecosystem, which could lead to short-term volatility in financial results.
Revenues from online marketing services and others rose 13% Y/Y to $7.78 billion, and revenues from transaction services grew 0.7% Y/Y to $6.74 billion.
Total costs of revenues rose 36% Y/Y to $6.40 billion, mainly due to higher fulfilment fees, bandwidth and server costs, and payment processing fees. Total operating expenses rose 5% Y/Y to $4.51 billion.
Adjusted operating profit declined by 20.7% Y/Y to $3.87 billion. The adjusted operating margin plunged from 36.0% to 26.7% Y/Y.
The Chinese online retailer's adjusted earnings per ADS of $3.08 (22.07 Chinese yuan) decreased from 23.24 Chinese yuan Y/Y, topping the analyst consensus estimate of $1.91.
PDD Holdings held $54.0 billion in cash and equivalents as of June 30, 2025. The company generated $3.02 billion in operating cash flow during the quarter.
PDD Holdings Chairman and Co-CEO Lei Chen said the company invested heavily in merchant support initiatives last quarter, driving progress toward a stronger and more sustainable platform ecosystem.
Vice President of Finance Jun Liu noted that revenue growth slowed further amid intense competition and cautioned that continued investments could pressure short-term profitability as the company prioritizes long-term value creation.
Price Action: PDD stock is trading higher by 3.37% to $131.39 at last check Monday.
