PDD

PDD delivered Q2 revenue of RMB 112.4 billion, up 8% year-over-year, but net income fell 12% to RMB 27.2 billion, reflecting a deliberate shift in capital allocation toward long-term supply chain investment over near-term profitability. The company's CNY 100 billion support program, now in its second year, is beginning to show tangible results in agricultural regions and manufacturing clusters, with merchants reporting meaningful gains in product quality, efficiency, and brand development. However, the quarter underscores a fundamental tension: while transaction services revenue grew a healthier 13%, the company is prioritizing ecosystem health and merchant reinvestment over margin expansion, a strategic choice that pressured both operating margins (down 100 basis points to 26% non-GAAP) and earnings per ADS (RMB 19.33 non-GAAP, down 12% year-over-year). Management framed this as a deliberate trade-off, emphasizing that lower merchant operating costs and stronger profitability will eventually drive sustainable organic growth. The earnings miss relative to consensus expectations, diluted EPS of RMB 18.45 GAAP versus an implied consensus around RMB 2.73 per ADS (approximately RMB 19.1), reflects both the intensity of competitive spending and management's conviction that the next phase of growth requires foundational supply chain work rather than near-term margin optimization. On the global front, management acknowledged significant headwinds from EU customs duty changes on low-value cross-border shipments, but signaled a strategic pivot toward local warehousing, local merchant onboarding, and compliance infrastructure rather than a retreat. The company explicitly rejected quick commerce as a strategic priority, reaffirming its focus on core e-commerce and supply chain transformation. First-party brand development, announced last quarter, remains on track but slower than initially expected; management emphasized patience and selectivity, focusing on core categories where platform capabilities provide distinctive advantages. The cash position remains robust at RMB