Following a first quarter marked by revenue growth without a corresponding profit increase, e-commerce major PDD has delivered another mixed set of results for the second quarter. According to the financial report, PDD generated 112.4 billion yuan in revenue for the quarter, up 8% year-over-year, yet net profit attributable to shareholders fell 12% to 27.2 billion yuan. The company attributed the decline to increased investment in its platform ecosystem and losses from overseas non-operating projects.

Amid the profit slide, PDD's overseas operations are encountering fresh hurdles. Starting in July, the European Union abolished the tariff exemption for small parcels valued under 150 euros, imposing a flat 3-euro duty per item during the transition period. This policy shift is expected to directly impact the performance of Temu, PDD's core international platform. However, the company's globalization strategy remains unchanged, with management confirming a long-term response plan focused on upgrading supply chain localization.

Back in the domestic market, PDD is ramping up its presence in instant retail. On August 10, the company launched a primary home-page entry point labeled "Fastest Delivery by Tomorrow," covering categories such as fresh produce and daily necessities. Industry data shows that Alibaba's Taobao Flash Purchase and Meituan Flash Purchase together hold over 90% of the instant retail market share as of the fourth quarter of last year, leaving latecomer PDD positioned at the edge of the sector.

Second Quarter: Revenue Up, Net Profit Down 12%

On August 24, PDD disclosed its second-quarter results. Revenue reached 112.4 billion yuan, an 8% increase from 104 billion yuan in the same period of 2025. The growth was primarily driven by a 13% rise in transaction services revenue, which climbed from 48.3 billion yuan to 54.7 billion yuan. Online marketing services and other businesses contributed 57.6 billion yuan, up less than 4% year-over-year, a notable slowdown from the 13% growth recorded in the prior year period.

On the cost side, total operating costs rose 4.7% to 48 billion yuan, while operating expenses increased 13% to 36.6 billion yuan, largely due to higher sales and marketing spending. Sales and marketing expenses reached 29.7 billion yuan, up 9%, and general and administrative expenses surged over 50% to 2.3 billion yuan. Research and development costs grew 27% to 4.6 billion yuan.

Operating profit came in at 27.8 billion yuan, up about 8% from 25.8 billion yuan a year earlier, with Non-GAAP operating profit rising 5% to 29.1 billion yuan. Despite this steady operating performance, net profit attributable to shareholders declined 12% to 27.2 billion yuan, which PDD attributed to continued ecosystem investment and losses from overseas non-operating items.

Co-Chairman and Co-CEO Zhao Jiazhen stated that the company has strengthened platform ecosystem governance and implemented category-specific trust and safety measures, treating compliance as a core priority. Finance Vice President Liu Jun noted that the company increased ecosystem investment in the second quarter, with the primary focus on helping merchants grow and solidifying the industry ecosystem.

Cash flow performance was relatively strong, with net cash generated from operating activities reaching 25.7 billion yuan, up 18.6% year-over-year. As of June 30, 2026, PDD held 456.4 billion yuan in cash, cash equivalents, and short-term investments, compared with 422.3 billion yuan at the end of last year.

Overseas Market Pressures and PDD's Response

In addition to the profit decline, PDD's overseas business is facing increasing scrutiny. European and American markets have strengthened regulatory oversight of Temu, the company's core international platform launched in September 2022. Temu targets price-sensitive consumers with a broad, low-cost product assortment, leveraging China's vast supply chain and prior duty-free policies for small parcels to rapidly expand its market share.

EU data shows that nearly 4.6 billion low-cost cross-border small parcels entered Europe in 2024, with 91% originating from China, and Temu being a significant participant. Starting July 1 of this year, the EU removed the tariff exemption for parcels under 150 euros, applying a flat 3-euro duty per item during the transition period, plus 15% to 20% value-added tax, bringing the total tax burden to approximately 20% to 30% of the product price.

Co-Chairman and Co-CEO Chen Lei acknowledged during the earnings call that the new policy will lead to reduced fulfillment efficiency and higher operating costs for cross-border orders in the EU, significantly impacting short-term growth. The EU has also shifted more compliance responsibilities to e-commerce platforms under the Digital Services Act, with Temu facing potential fines of up to 6% of annual turnover for product compliance issues.

Despite these challenges, PDD management emphasized that its globalization direction will not change. In the short term, the company will optimize its supply chain and streamline fulfillment processes to mitigate policy impacts. Over the long term, PDD plans to use localized operations to hedge against overseas policy volatility, focusing on recruiting and nurturing local merchants to diversify product supply and accelerating local warehousing and distribution infrastructure.

Corporate records show that in February, PDD registered two new subsidiaries in Shanghai with combined registered capital of 15 billion yuan. In March, the company formally established "Xinpinmu," with an initial cash injection of 15 billion yuan and plans to invest a total of 100 billion yuan over the next three years. This initiative integrates PDD and Temu supply chain resources to build a self-operated brand model targeting global markets.

According to reports, this business has quietly launched in select overseas markets such as Japan and Canada, focusing on home goods and standard apparel, with co-branded products featuring established labels. Core markets like the United States and the EU are still in preparation.

Instant Retail: Can PDD Catch Up From Behind?

While expanding overseas, PDD is also seeking domestic growth opportunities. On August 10, the company introduced a primary home-page entry point for "Fastest Delivery by Tomorrow," covering fresh produce and daily necessities. Products under this entry point carry clear delivery-time promises, with core cities offering next-morning delivery and broader regions guaranteeing delivery within two days. Late deliveries qualify users for at least 3 yuan in no-threshold vouchers, excluding special orders and force majeure.

Previously, PDD only displayed "Tomorrow Delivery" labels dynamically within product pages and search results. Elevating this service to a core home-page navigation position signals a more aggressive push into instant retail. Industry data indicates that China's instant retail transaction volume exceeded 1.19 trillion yuan in 2025, up 48.25% year-over-year, with a five-year cumulative growth of about 692% and an average annual growth rate of 51.3%.

Competitors have already established strong positions. Alibaba's Tmall Supermarket launched a 4-hour delivery service in Hangzhou in January, while Taobao Flash Purchase has built a system offering delivery as fast as one hour. JD.com has integrated its services into JD Seconds, partnering with over 500,000 stores across more than 2,300 counties and districts, achieving delivery in as little as 9 minutes, supplemented by its 7Fresh short-time delivery offerings.

As of the fourth quarter of 2025, Taobao Flash Purchase held a 45.2% market share in instant retail, followed closely by Meituan Flash Purchase at 45%, with the remaining less than 10% divided among JD Seconds, Douyin, and others. Facing this competitive landscape, PDD is doubling down on supply chain capabilities.

Zhao Jiazhen explained that the company is concentrating resources on areas where it can create the most value, primarily by strengthening its supply chain. He noted that instant retail and e-commerce differ significantly in underlying supply chain and business models, meaning the synergies may be relatively limited at this stage. PDD's future developments will continue to be closely watched.