PDD Holdings Q2 2026 Earnings Call - Margin Compression Signals Strategic Pivot to Supply Chain Depth

Operator: Ladies and gentlemen, thank you for standing by, and welcome to PDD Holdings Inc.’s second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session. At which time, if you wish to ask a question, you will need to press star one on your telephone. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your host today. Sir, please go ahead.

IR/Translator, PDD Holdings Inc.: Thank you, operator. Hello everyone, and thank you for joining us today. PDD Holdings earnings release was distributed earlier and is available on our website at investor.pddholdings.com, as well as through the GlobeNewswire services. Before we begin, I’d like to refer you to our safe harbor statement in the earnings press release, which applies to this call, as we’ll make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures. Joining us today on the call are Mr. Chen Lei, our Co-Chairman and Co-Chief Executive Officer, Mr. Zhao Jiazhen, our Co-Chairman and Co-Chief Executive Officer, as well as Mr. Li Zhong, our Financial Director. Lei and Jiazhen will make some general remarks on our performance for the past quarter and our strategic focus.

Zhong will then walk us through our financial results for the second quarter ended June 30, 2026. On today’s call, certain management remarks will be in Chinese. I will help translate. Please kindly note that English translation is for reference only, and in case of any discrepancy, statements in the original language should prevail. Now it’s my pleasure to introduce our Co-Chairman and Co-Chief Executive Officer, Mr. Zhao Jiazhen. Jiazhen, please go ahead. Hello, everyone. This is Zhao Jiazhen, and thank you for joining our earnings call for the second quarter of 2026. Before we formally begin, we would like to take this opportunity to express our deepest condolences on the passing of our Independent Director, Professor Ivonne M.C.M. Rietjens, and to pay our highest tribute to her significant contributions and dedicated service during her tenure with us.

Professor Rietjens served a long tenure as Chair of the Toxicology Department at Wageningen University & Research in the Netherlands, and earned an international reputation in the fields of food research and drug effects. Since joining the company as an Independent Director in August 2023, Professor Rietjens provided invaluable professional advice on the company’s governance and development. At the same time, as a long-standing partner of our smart agricultural competition, Wageningen University & Research has consistently brought international perspectives and expert guidance to the event, helping it become an important global platform for innovation in agricultural technology as well as for talent development. We will carry forward her passion for agricultural research and continue to increase our investment in agriculture and agricultural research. And through these long-term commitments, honor her professional legacy and make greater contributions to agricultural and food safety research worldwide.

Now, let us return to the results for the quarter. The second quarter this year marked a new phase in the new decade of high-quality development, as we moved from initial rollout to deeper execution. Our 100 billion support program has entered a phase in which our sustained investment is beginning to yield tangible results. The positive effects across our platform and industry are being unlocked at a faster pace, with improvements in both the quality and efficiency across the supply and demand sides. At the same time, we continue to make steady progress on our strategic goal of building another PDD over the next three years. Although the initial rollout of our first-party brand model over the past six months was slower than expected due to certain external factors, the overall momentum remains positive. The operations are now fully underway and are progressing smoothly.

We will commit fully to transforming the supply chain for higher quality growth, drive the upgrading of traditional industries, and continue to unlock the supply chain’s new growth potential from within. Furthermore, to accelerate supply chain transformation and upgrades, we have established a dedicated company in the Xiong’an New Area and purchased an office building there to focus on new opportunities created by intelligent technologies. To support upgrading and high quality development of traditional manufacturing, we have also established a data processing service center for traditional industries and an integrated service center to help traditional manufacturers move up the value chain and pursue high quality development.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 过去的这个季度，我们的业绩表现保持稳健。本季度集团收入1,124亿元，同比增长8%。净利润272亿元，同比下降12%。这主要源于我们对平台以及产业生态的一系列投入，一定程度上影响了本季度的业绩表现。

IR/Translator, PDD Holdings Inc.: We delivered solid results for the quarter. Group revenue was RMB 112.4 billion, representing a year-over-year increase of 8%, while group net income was RMB 27.2 billion, declining 12% year-over-year. This mainly reflected our continued investments in our platform and a broader industry ecosystem, which partly weighed on our performance this quarter.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 今年上半年，电商行业的竞争仍然激烈，市场环境复杂多变，给平台治理、产业发展都提出了更高的要求，这些都给我们带来新的挑战。我们继续通过治理、减免、扶持的系统性举措，持续加大对平台及产业生态的投入，全力构建多方共赢的平台生态。

IR/Translator, PDD Holdings Inc.: In the first half of this year, competition in the e-commerce industry remained intense. A complex and rapidly evolving market environment placed greater demands on both platform governance and industry development, presenting us with new challenges. We continue to step up investment in our platform and industry ecosystems through a coordinated set of measures focused on governance, fee reductions, and merchant support, with the goal of building a platform ecosystem that creates value for all participants.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 在平台治理上，我们大幅增加研发费用的投入，不仅迭代升级技术反控体系，更大幅扩充专项治理团队，将治理的触角延伸至全域品类。针对垂直类目特性，我们逐一开展靶向式专项治理，推动生态治理向常态化、精细化、制度化纵深迈进。

IR/Translator, PDD Holdings Inc.: We have significantly increased our R&D spending on platform governance. In addition to upgrading our technology-enabled risk prevention and control systems, we significantly expanded our specialist trust and safety teams and strengthened our oversight across all product categories. By taking into account specific characteristics of the different categories and launching targeted governance initiatives, we made ecosystem governance more regular, granular, and rules-based.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 截至目前，平台已累计出台150余项综合治理举措，仅6月份便针对细分领域集中落地了50余个专项方案，覆盖商品准入、食品安全、药品安全、资质审核、广告治理、知识产权保护、虚假营销整治、直播带货规范、技术滥用防范等关键环节。我们坚持以制度的刚性筑牢合规底线，以系统思维重构治理逻辑，切实营造一个更安全、更规范、更值得信赖的消费环境。

IR/Translator, PDD Holdings Inc.: To date, the platform has introduced more than 150 comprehensive trust and safety measures. In June alone, we launched over 50 targeted initiatives addressing key areas such as product listing controls, food and drug safety, qualification reviews, advertising compliance, intellectual property protection, misleading marketing, livestream e-commerce standards, and the prevention of technology misuse. We are dedicated to upholding high compliance standards through rigorous rules, taking a systematic approach to reshaping our governance framework and fostering a safer, better regulated, and more trustworthy shopping environment.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 在食品安全领域，我们推出专项治理举措，全面禁售餐饮自热类商品，进一步提升商家的资质审核、信息展示等环节的准入标准，从前端防范并降低食品安全风险。与此同时，平台还对直播售卖食品的经营范围、主播行为、讲解方式等做出了细化的要求，从商品准入到直播呈现，全程引导商家诚信经营、真实展示，确保消费者在直播间能够买得安心，吃得放心。

IR/Translator, PDD Holdings Inc.: On food safety, we launched a dedicated governance initiative that prohibits the sale of freshly prepared food and beverage products. We further tightened merchant qualification reviews as well as information disclosure requirements to prevent and mitigate food safety risks early on. At the same time, the platform introduced more detailed requirements governing the permitted scope of food products sold via live streaming, live streamer conduct, and how products are described and presented. From product information to live stream presentations, we guide merchants throughout the full process to operate with integrity and present products truthfully, so that consumers can purchase and consume their food products with ease of mind.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 在6月上旬，我们还针对治理的难点、堵点的问题，专门制作发布了多项视频课程，提醒商家主动学习与自己行业相关的规则，避免违规，同时依规维护自身的合法权益。其中，店铺营业执照常见问答课程上线后，在24小时内就达到了34万次点击。

IR/Translator, PDD Holdings Inc.: In early June, we also produced and released a number of video courses addressing common challenges and pain points in platform governance. These courses encourage merchants to familiarize themselves with the rules relevant to their industries, avoid violations, and protect their legitimate rights and interests in accordance with platform rules. Namely, the course Frequently Asked Questions about store business licenses received 340,000 views within 24 hours of launch.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 在对平台治理进行系统性升级的基础上，我们的千亿扶持战略持续加大投入，扶持范围从广大商家延伸至农产区产业带的上下游，推动供应链体系实现全方位升级。在农产区，"2026多多好特产"专项行动先后走进江苏水产、重庆李子、山西香椿、海南凤梨、海南荔枝、湖南板鸭、湖北小龙虾等数十个农特产区，助力农产区培育新品、提升种植标准、完善冷链物流等，推动农产区实现价值转换。

IR/Translator, PDD Holdings Inc.: Building on the systematic upgrade of our platform governance, we have continued to step up investment in the 100 billion support program. Our support now extends beyond our broad merchant base to upstream and downstream participants across agricultural production regions and industrial clusters, helping drive comprehensive upgrades throughout the supply chain. In agricultural production regions, the 2026 Duoduo Premium Produce Initiative has reached dozens of specialty agricultural regions, including those for Jiangsu aquatic products, Chongqing plums, Shanxi Chinese chives, Hainan pineapples, Hainan lychees, Hunan preserved duck, and Hubei crayfish. Through the initiative, we help these regions develop new products, raise cultivation standards, and improve cold-chain logistics, thereby unlocking greater value for their agricultural products.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 以海南凤梨产区为例，当地商家在近年开始引进金钻凤梨等新品种。与传统品种不同，金钻凤梨口感甜而不酸，且无需挖眼，不用泡盐水。在平台秒杀、万人团等流量引擎的扶持下，迅速打开局面，成为当季的水果顶流。此外，电商的确定性订单也给了果农扩大种植的信心。截至目前，金钻凤梨在当地的种植面积从最初的零星试种已经发展到了超过10万亩。

IR/Translator, PDD Holdings Inc.: Take Hainan’s pineapple growing region as an example. In recent years, local merchants have begun introducing a new variety known as the Golden Diamond pineapple. Unlike traditional varieties, it has a distinct sweetness and requires neither removing the eyes nor soaking in saltwater before serving. Supported by high-traffic programs on our platform, including Flash Sale and 10,000 People Group Buy, the variety quickly gained market traction and became one of the season’s most popular fruits. The greater certainty provided by e-commerce orders has also given growers the confidence to expand production. To date, the local cultivation area for Golden Diamond pineapples has grown from scattered trial plots to more than 100,000 mu.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 在产业带，我们的新质供给专项团队先后走进苏州家纺、绍兴帐篷、金华户外、广州美妆、揭阳男装、信阳纺织等产业带，从流量曝光、数据赋能、市场拓围、成本减负、智能制造和仓储升级等维度为产业带商家提供系统性的扶持。很多工厂的生产周期压缩了一倍，履约能力实现了大幅度的提升，既能快速响应平台的海量订单需求，又能精准匹配用户个性化定制订单，从而实现了从传统制造到自建品牌的跨越式发展，也带动各个产业带完成了新旧动能的转换。

IR/Translator, PDD Holdings Inc.: Across the industrial belt, our dedicated new quality supply team has visited manufacturers across different regions and sectors, including home textiles in Suzhou, tent manufacturers in Shaoxing, outdoor products in Jinhua, cosmetics in Guangzhou, menswear in Jieyang, and textiles in Xinyang. We provide a suite of support measures to these merchants, such as traffic support, data enablement, expansion of market reach, cost reduction, smart manufacturing, and warehousing upgrades. As a result, manufacturers have cut their production cycles by half and have substantially improved their fulfillment capabilities. They can now rapidly handle large order volumes on our platform while tailoring to consumers’ customization needs. This has enabled manufacturers to take a transformative leap from traditional manufacturing to building brands of their own while accelerating the shift from traditional to new growth drivers across these industrial belts.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 以信阳纺织产业为例，在信阳固始县，当地曾是劳务输出大县，此前仅在江浙一带从事纺织行业的固始人就超过20万人。最近几年，当地的年轻人开始在本地设厂，通过拼多多将纺织产品卖到全国各地，年销量平均增长4到5倍，并在蚊帐等细分的小品类做出了头部品牌，在夏天销往东南亚、欧洲等地。目前，当地已经从劳务输出为主，走出了一条集资金、技术、人才、销售渠道于一体的产业化发展道路。

IR/Translator, PDD Holdings Inc.: Xinyang’s textile industry is a good example. Gushi County in Xinyang was once a major source of migrant labor, with more than 200,000 local residents previously working in the textile industry in Jiangsu and Zhejiang provinces alone. In recent years, younger generation from the county have begun establishing factories locally and selling textile products nationwide through Pinduoduo. Their annual sales have grown by an average of four to five times and have built leading brands in niche categories such as mosquito nets that are exported to Southeast Asia and Europe during the summer season. Today, the local economy has moved beyond its traditional reliance on labor migration and has established an integrated path to industrial development that brings together capital, technology, talent and sales channels.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 另外，我们的包邮进村服务推出半年来也在持续地收获成效。目前，我们已在全国十多个省市建立了县级中转仓、村级代收点等末端基地网络，为县域乡村创造了海量的工作岗位，同时也推动各类消费品、家电产品、农资农具等加速进入乡村市场，持续为各类商家开拓新增量，让偏远乡村的用户过上更好的生活。以山东省为例，作为农业大省，山东省是拼多多免费送货入村的重点布局区域。此前菏泽的鄄城、临沂沂水等地的试点已经取得了显著的成效，乡村订单量成倍增长。而青州作为国内重要的水溶肥新型化肥生产基地，众多农资企业正在借势发力，把产品卖到全国更多村庄。

IR/Translator, PDD Holdings Inc.: In addition, our free shipping to villages program has continued to deliver positive results since its launch six months ago. We have now established last mile delivery networks across more than 10 provinces and municipalities nationwide, including county level transit hubs and village pickup points. These networks have brought significant job creation to counties and rural communities, while accelerating the distribution of consumer goods, home appliances, agriculture supplies, and farming equipment to rural markets. In doing so, we are helping merchants unlock new growth opportunities and enabling consumers in remote villages to improve quality of life. Take Shandong as an example. As one of China’s leading agricultural provinces, it is a key region for Pinduoduo’s free shipping to villages program. Earlier pilots in Heze, Juancheng, and Yishui have already produced significant results, with order volumes in the villages increasing severalfold.

Qingzhou, meanwhile, is a major domestic production hub for water soluble and innovative fertilizers, and many local agriculture supply companies are building on this momentum to reach more villages across the country.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 作为一家公众平台，我们一直积极承担应尽的社会责任，持续回馈社会。前不久，受台风及强降雨影响，广西多地发生严重洪涝灾害。为全力支援一线救灾，拼多多紧急向受灾地区捐赠现金一千万元，用于采购物资和救灾设备，安置受灾群众，帮助各地灾后重建。

IR/Translator, PDD Holdings Inc.: As a platform serving the public, we have always sought to fulfill our social responsibilities and give back to the society. Recently, typhoons and heavy rainfall caused severe flooding in several parts of Guangxi. To support frontline disaster relief efforts, Pinduoduo made a cash donation of RMB 10 million to the affected areas. The funds were used to procure relief supplies and equipment, provide assistance and temporary shelter to affected residents, and support post-disaster recovery and reconstruction.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 立足于新十年的未来发展，我们更加确信，高质量发展对我们来说既是一场全力以赴的冲刺，更是一场坚持不懈的长跑。面向未来，我们将继续秉承长期主义，以十年磨一剑的耐性和定力，把新十年高质量发展的每一步走稳走实走深，继续种强供应链，持续赋能商家和产业，为消费者创造更好的商品和服务，以实际行动为用户、商家和社会创造更多的正向价值。

IR/Translator, PDD Holdings Inc.: As we embark on our next decade, we are more convinced than ever that high quality development calls for both the intensity of a sprint and, more importantly, the perseverance of a marathon. We will stay committed to taking a long-term approach and execute our new decade of high quality development strategy with patience and resolve to deliver solid and tangible progress at every step. We will continue to invest resolutely in our supply chain, empower merchants and industries, and deliver better products and services to consumers. Through concrete actions, we aim to create greater positive value for our users, merchants, and the society as a whole.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 下面我把话筒交给陈磊，请他为大家进一步的介绍。

IR/Translator, PDD Holdings Inc.: With that, I will turn the call over to Chen Lei, who will provide further details.

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: Hello, everyone. I’m Chen Lei, and thank you for joining our earnings call for the second quarter of 2026. In the first half of the year, we made tangible progress under the new decade of high quality development strategy and laid a solid foundation for long-term growth. As Jasmine just mentioned, we focus on two key areas. First, through the 100 billion support program, we continue to give back to both consumers and merchants. At the same time, we upgraded our platform governance framework across the board. These initiatives have helped foster a healthier environment both on our platform and in the broader industrial ecosystem. Second, we continue to work towards our three-year initiative of building another PDD. We stepped up supply chain investment and helped supply chain partners build and develop their own brands.

During the quarter, our long-term investment in 100 billion support program started to materialize into gains in a healthier platform ecosystem. On the supply side, our merchants benefited from a combination of fee reductions, merchant support initiatives, and a stronger platform governance. These initiatives unlocked greater innovation among merchants, leading to the launch of new products and new brands, which drove incremental demand and new sources of growth. Many manufacturers adopted digital and intelligent technology to enable customized production, and this drove improvements in quality and efficiency across the supply chain and enabled manufacturers to transition towards a new development model. On the demand side, we continue to serve consumers’ evolving needs for different product categories and diverse consumption occasions.

This was particularly evident in rural areas, where our free shipping to villages program put a much wider selection of products within the reach of consumers, helping improve their quality of life. Drawing on the supply chain capabilities and brand development experience gained through the 100 billion support program, we took steps in this quarter to further integrate the supply chain. Our teams delved into the industrial belts of different product categories and started early-stage collaborations with high-quality suppliers. By setting clear standards for products, production processes, and quality control, we helped merchants and manufacturers adapt their operations and develop a range of higher quality products with higher margins. Through these efforts, we continue to unlock the strength and the potential within the supply chain, driving the manufacturing sectors up the value chain. Since the beginning of the year, global regulatory and compliance landscapes have undergone significant shifts.

This change created challenges as well as opportunities, and they also come with greater responsibilities. We find ourselves at a unique intersection of global trade, constantly navigating diverse international regulatory frameworks. At the same time, our position is a unique one. The business touches the daily lives of billions of people around the world. While there is substantial potential for growth, it is accompanied by increased expectation and higher standards of accountability. We will stay true to our mission and continue to do every part of our work with dedication and discipline. First, we will keep strengthening our compliance capabilities and fine-tuning platform governance. To protect intellectual property, we combine screening technologies with expert review to monitor and assess product listings across all categories in real time. This enables us to address IP risks earlier in the process and has led to systematic improvements of IP protection across our platform.

Second, we continue to invest resolutely in the supply chain. By thoughtfully executing on these structural upgrades, our ultimate goal is to build a highly resilient e-commerce platform that consumers around the world can rely on for competitive price and great quality. As we step into our next decade, we remain laser-focused on our core e-commerce business. By deepening our supply chain investments, we will continue to empower our merchants and broader industry, delivering a wider range of high-quality products and services. We are confident in our ability to translate our three-year initiative of building another PDD into tangible, verifiable results. In doing so, we will strive to help the traditional supply chains to capture the opportunity in this new intelligent era and empowering them to transform and move out of value chain and build brands with global reach.

Now let me turn it over to Li Zhong, who will walk you through our results for the second quarter 2026.

Li Zhong, Financial Director, PDD Holdings Inc.: Well, thank you, Lei. Hello, everyone. This is Jiong. Now let me walk you through our financial performance for the second quarter ended June 30, 2026. First, income of income statement. In the second quarter, our total revenues increased 8% year over year to RMB 112.4 billion. This was mainly driven by an increase in revenues from transaction services. Revenues from online marketing services and others were RMB 57.6 billion this quarter, compared with RMB 55.7 billion in the same quarter of 2025. Revenues from transaction services were RMB 54.7 billion, up 13% from the same quarter last year. Moving on to costs and expenses. Our total costs of revenues increased 5% from RMB 45.9 billion in Q2 2025 to RMB 48 billion this quarter. On a GAAP basis, total operating expenses this quarter increased 13% to RMB 36.6 billion from RMB 32.3 billion in the same quarter of 2025.

On a non-GAAP basis, total operating expenses increased to RMB35.3 billion this quarter from RMB30.4 billion in Q2 2025. Our total non-GAAP operating expenses as a percentage of total revenue this quarter was 31% versus 29% in the same quarter last year. Looking into specific expense items. Our non-GAAP sales and marketing expenses this quarter were RMB29.3 billion, up 10% versus the same quarter last year. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter were 26%, in line with the same quarter last year. Our non-GAAP general administrative expenses were RMB1.7 billion versus RMB0.7 billion in the same quarter of 2025. Our research and development expenses were RMB4.3 billion this quarter on a non-GAAP basis, up 40% year-over-year.

On a GAAP basis, operating profit for the quarter was RMB27.8 billion versus RMB25.8 billion in the same quarter last year, up 8% year-over-year. Non-GAAP operating profit was RMB29.1 billion versus RMB27.7 billion in the same quarter last year. Non-GAAP operating profit margin was 26% this quarter versus 27% for the same quarter last year. Net income attributable to ordinary shareholders was RMB27.2 billion for a quarter, compared to RMB30.8 billion in the same quarter last year. Basic earnings per ADS was RMB19.32, and diluted earnings per ADS was RMB18.45 versus basic earnings per ADS of RMB22.01 and diluted earnings per ADS of RMB20.75 in the same quarter of 2025. Non-GAAP net income attributable to ordinary shareholders was RMB28.5 billion versus RMB32.7 billion in the same quarter last year. Non-GAAP diluted earnings per ADS was RMB19.33 versus RMB22.07 in the same quarter of 2025.

That completes the income statement. Now let me move on to cash flow. Our net cash generated from operating activities was RMB25.7 billion compared with RMB21.6 billion in the same quarter last year. As of June 30, 2026, we had RMB456.4 billion in cash equivalents and short-term investments. Thank you, and this concludes my prepared remarks.

IR/Translator, PDD Holdings Inc.: Well, thank you, Joan. We’ll now move on to the Q&A session. In today’s Q&A session, Lei, Jiazhen, and Joan will take questions from analysts on the line. We could take a maximum of two questions from each analyst. Lei and Jiazhen will answer questions in Chinese, and we’ll help translate for convenience purpose. Operator, we’re open for questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. Participants are requested to restrict to 2 questions at each time. Your first question comes from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong, Analyst, Jefferies: I will translate myself. My first question is about the company’s global business. We noticed that the E.U. introduced a temporary customs duty on low-value cross-border consignments starting from July this year. Can management help us understand the expected impact of this change on the company’s overall order volume? In light of these policy headwinds, what will be the company’s growth strategy for the global business going forward? My second question is on the company’s first-party brand business announced last quarter. Could management provide an update about the rollout and the progress made so far? More broadly, how should investors frame the potential impact of this initiative on the company? How are you thinking about the mix and the positioning of first party versus third-party products, and what will guide your pricing strategy for first party products.

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 你好，Thomas，我是陈磊。那我先回答一下你的第一个问题，关于全球化业务的问题。近段时间，全球化的业务的确面临着监管和合规环境比较大的变化，给我们的业务带来了困难和机遇都很大，我们感觉到的自己的责任也很大。

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: Hi Thomas, this is Chen Lei. Let me take your first question about our global business. Over this period, the regulatory and compliance landscape facing our global business has changed significantly. These changes have created challenges as well as opportunities for our business. They also come with great responsibilities.

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 我感到公司正处在一个特殊的全球经济贸易交汇口，我们在面临着不同的监管政策的压力。但我们也处在一个非常特殊的位置，目前公司的业务关系到全球几十亿人的正常生活，发展空间很大，对应的责任也很大。

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: We believe we stand at a unique intersection in the global economy and global trade. We face pressure from different regulatory policies while also occupying a distinctive position. Currently, our business touches the daily lives of billions of people around the world. While there is substantial potential for growth, it is accompanied by increased expectations and higher standards of accountability.

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 针对你刚才提到的欧盟关税政策的变动，团队一直在积极地研究和适应。我们结合过去积累的经验，在调整供应链，优化履约的链路。在严守合规底线的前提下，我们要积极地兼顾消费者的体验、商家的经营和业务的长期发展。从短期上来看，受影响的市场的跨境订单会面临着履约效率降低以及成本上升的问题，相关的业务增长的确会受到不少的影响。

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: On the changes to the EU customs duties that you mentioned, our team is actively assessing and adapting to them. Drawing on the experience that we have gained over the years, we have adjusted our supply chain and we are optimizing our fulfillment processes. With compliance as our bottom line, we are working to balance consumer experience, merchant operations, and the long term development of our business. In the short term, cross-border orders in the affected markets will face lower fulfillment efficiency and higher costs, which will have a considerable impact on those parts of our business.

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 但是，如果我们从中长期去看，其实外部环境的变化进一步地凸显了供应链投入的重要性，这也是在促使我们加快相关能力的建设。一方面，我们会继续地引入和支持更多本土的优质商家，丰富本地商品的供给。另外一方面，我们也正在加快本地化仓储履约基建的布局，扩大本地发货的覆盖面。通过这些通路，我们希望能够更深入地融入我们服务的每一个市场，夯实供应链的基础，增强韧性，更好地适应环境的变化和波动。

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: However, over the medium to long term, changes in the external environment have further underscored the importance in our supply chain, and has prompted us to accelerate the development of the relevant capabilities. First, the platform will continue to onboard and support more high quality local merchants to broaden the supply of local products. Second, we are accelerating the build out of local warehousing and fulfillment infrastructure and expanding the coverage of local fulfillment. Through these investments, we hope to integrate more deeply into every market we serve, strengthen the foundation and resilience of our supply chain, and better navigate changes and volatility in the environment.

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 除了供应链能力，合规能力的建设和平台治理也是我们长期投入的重要基础能力。那么我们会持续地优化平台治理，进一步提升商品的质量，把消费者保护做到位。目标是为全球的消费者提供一个值得信任的平台。

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: In addition to supply chain capabilities, compliance capabilities and platform governance are also critical foundational capabilities in which we will invest for the long term. We will continue to enhance platform governance, further improve product quality, and strengthen consumer protection, with the goal of providing consumers around the world with a platform they can trust.

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 同时，为了给全球的商家提供一个健康公平的营商环境，我们在知识产权合规方面做了大量的工作。目前平台已经在技术监测和人工审查的基础之上，构建了系统化的知识产权保护能力。近期我们和友商在知识产权诉讼案件中的全面胜诉，也证明了我们平台知识产权保护机制的有效性。坚定地保护平台生态伙伴的正当权益，创造公平可靠的经营环境。

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: At the same time, we have done extensive work on intellectual property compliance to provide a healthy business environment and level playing field for merchants around the world. Building on technology-enabled monitoring and manual review, the platform has developed systematic IP protection capabilities. Our recent favorable ruling in the IP litigation involving an industry peer has further demonstrated the effectiveness of our IP protection mechanism. We will remain committed to protecting the legitimate rights and interests of our ecosystem partners and to fostering a fair and reliable business environment.

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 监管和政策的变化，应该来说是整个行业要共同面临的课题。我们对团队的执行力和组织韧性都有充分的信心，也不会因为短期的波动而改变全球化业务的长期方向。接下来我们将继续踏实地做好供应链、预约、合规和消费者服务，争取为全球的消费者提供一个长期稳定、价格优惠、质量过硬、可以被信赖的购物平台，获得消费者的喜爱和信任。谢谢。

Chen Lei, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: Regulatory and policy changes are issues that the entire industry must address. We are confident in our execution capabilities and organizational resilience. Short-term volatility will not change the long-term direction of our global business. Going forward, we will continue to steadily advance our work across supply chain fulfillment, compliance, and consumer service. We will strive to provide consumers around the world with a shopping platform that remains stable over the long term and offers compelling prices and reliable quality. A platform that they can count on, trust, and enjoy using. Thank you.

IR/Translator, PDD Holdings Inc.: 你好，我是赵继正。关于你的第二个问题，我来回答。品牌自营业务是我们在长期供应链投资方向的一个重要的延伸。我们也希望与有能力同时有意愿的制造企业建立深度的产品共创的关系，发挥平台在市场洞察、全球渠道方面的能力，去提升产业链的品牌化发展和价值创造的确定性，并且能把这些增量价值实实在在地带给整个产业链。Hi, this is Zhao Jiazhen.

Regarding your second question, our first party brand business is an important extension of our long-term investment in supply chain capabilities. We aim to work closely with manufacturers that have strong capabilities and willingness to invest in long-term product development.

By leveraging the platform’s market insights and global reach, we seek to bring greater certainty to brand development and value creation across the industry value chain, and in turn turn that incremental value into tangible benefits for all the participants. [Foreign language] And in terms of execution, we will first focus selectively on core product categories where our platform and supply chain capabilities provide some distinctive advantages.

We will work with manufacturers over the long term, from product planning and R&D, to setting quality standards and market testing. [Foreign language] The business requires an extended period of development and collaboration, and the initial rollout has taken longer than we originally expected.

Nevertheless, it remains a clear long-term strategic priority for the platform, and we will remain patient and focused on getting every step right.

We are confident in the long-term prospects of our first-party brand model. 关于运营策略，平台开放和公平的底层机制并不会发生改变。我们始终认为，为消费者持续地提供优质的商品和服务，离不开健康、公平、多元化的供应端生态。在未来，我们的品牌自营商品和第三方商家的商品将共同去满足消费者在不同场景、不同定位的多元需求，最终能够创造多方共赢的平台生态。谢谢。In terms of operating strategy, our commitment to maintaining an open and fair marketplace will not change.

We have always believed that consistently delivering quality products and services to consumers requires a healthy, fair, and diverse supply chain ecosystem. Going forward, our first-party brand products and products offered by third-party merchants will complement each other in meeting consumers’ diverse needs across different use cases and market segments, and ultimately creating an ecosystem that benefits all participants. Thank you. [Foreign language].

Thank you. Thank you so much. Operator, we can move on to the next analyst on the line.

Operator: Your next question comes from Alicia Yap with Citigroup. Please go ahead.

Alicia Yap, Analyst, Citigroup: Hi，thank you。管理层晚上好，谢谢接受我的提问，两个问题。第一个问题是我们看到全球其他的头部电商平台，随着他们的业务的规模扩大，也会选择加大物流和履约基础设施的投资，譬如在自建仓储、网络和配送的团队。所以想请问管理层如何思考未来在物流履约层面的投入策略。第二个问题是我们过去一段时间我们也看到不少全球的同行，就 global peers，都在即时零售上做了大量的投入。请问管理层如何评估这种新消费习惯对行业竞争格局和公司核心业务的潜在影响？然后在行业加速布局半小时达、小时达的这个情况下，公司有什么好的策略去持续巩固用户心智和市场的份额？我自己翻译一下。Thanks for taking my question.

So two questions. First is that we have seen many global e-commerce company invest in their own warehousing and also delivery capabilities as their skill, for example, by building out their own warehouse networks and also delivery capabilities. How should we think about the company investment priority in this area over the long term? The second question is on the quick commerce. Many global peers have made significant investment in this area. How does management assess the potential impact of the shift in consumer behavior on the industry competitive landscape and also the company’s core business? As the industry ramp up investment in the same day delivery, what strategy is the company pursuing to strengthen user mind share and also defend your market share? Thank you.

IR/Translator, PDD Holdings Inc.: 你好，我是赵继正。关于物流履约投资，这个和其他的投入一样，我们始终是立足消费者体验，与商家在做生意的时候遇到的一些痛点，我们去做一些能够创造现实价值，有针对性的审慎的投入。因此我们针对不同的市场和业务形态，我们的投入重点是会有所不同的。Hi, this is Zhao Jiazhen.

As with our other investments, our investments in logistics and fulfillment are guided by the need to improve consumer experience and address the practical challenges that merchants face in doing business. We make prudent and targeted investments where we believe we can create tangible value.

accordingly, our investment priorities vary across markets and business models。那在国内市场呢，大部分地区的电商物流网络已经比较成熟了。但是呢，在西部偏远地区，还有广大的乡村，末端的配送依然存在着明显的瓶颈。为此我们投入大量的资源去深入物流的链路。在千亿的扶持战略下，坚决地推进送货进村以及电商西进。In the domestic market, e-commerce logistics networks are already quite well developed across most regions.

However, last mile delivery remains a significant bottleneck in remote western regions and many rural communities. To address this problem, we have committed substantial resources to strengthening logistics network.

Under our hundred billion support program, we are firmly advancing the free shipping to villages initiative and our logistics support for remote regions. 年底以来，比如我们在这个湖南优县的免费送货入村业务已经建成了覆盖全县177个村的村级驿站。在山东沂水呢，我们也将日均的进村的包裹派送量提升至了上万件。这些基建不仅帮助化肥、农资等生产资料能够直达田间地头，也让更多的高品质的商品能够顺畅地进村，释放偏远地区巨大的消费潜力，也显著地提升了商家销往这些区域的订单转化。Since the end of last year, under the free shipping to villages initiative, we have established local service stations covering all 177 villages in You County.

In Shandong Yishui, we have increased the number of parcels delivered to villages to more than 100,000 per day. This infrastructure not only helps agriculture supplies such as fertilizers reach farmers more directly, but also enables a wider range of high quality products to reach rural consumers more efficiently.

And in doing so, we are helping unlocking significant consumer demand in underserved regions and meaningfully improve order conversion for merchants that serve these communities. [Foreign language] In certain overseas markets, fragmented point to point shipping by individual merchants oftentimes makes it very difficult to achieve economies of scale that is made possible through the consolidation of shipments.

This results in higher overall fulfillment costs and leaves some consumer demand unmet. In markets facing these challenges, we invest targetedly in development and operations of transit warehouses. These investments help local merchants streamline their fulfillment processes and lower logistics barriers, while providing local consumers with a more reliable delivery experience.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 回到你的问题，未来我们将继续坚持这种以解决实际问题为导向的履约投入策略。我们把供应链的能力做扎实，通过提升履约效率和确定性去改善消费者体验，推动供需之间的正向循环，从而增加平台长期的内生的增长动力。

IR/Translator, PDD Holdings Inc.: Back to your question, we will continue to take a practical and solution-oriented approach to fulfillment related investments. By building stronger supply chain capabilities and improving the efficiency and reliability of fulfillment services, we aim to enhance the consumer experience, create a virtuous cycle between supply and demand, and strengthen the platform’s capacity for sustainable organic growth over the long term.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 那针对你的第二个问题，零售与电商的形态始终是在快速地演进。我们也关注到市场上不断地涌现出各种创新的业务模式，即使零售和我们核心的电商和买菜业务满足的是消费者在不同场景下的多元化的诉求。从我们现阶段的业务基础来看，它们在底层的业务脉络和业务模式上还是有较大的差异的。我们觉得能够形成的协同相对有限。因此在这个阶段，我们还是选择把精力和资源集中投入到自身更有积累，也更加能够创造独特价值的地方。

IR/Translator, PDD Holdings Inc.: To your second question, retail and e-commerce business models are constantly evolving, and we are seeing a growing range of innovative business models emerge across the market. Quick commerce serves different consumer needs and use cases as compared to our core e-commerce and grocery businesses. Given the current stage of our business, these are fairly different in terms of both supply chain requirements and operating model, with limited scope for synergies. We have therefore chosen to focus our resources and efforts on areas where we have established strength and are best positioned to create differentiated value.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 随着行业走向成熟，各个平台在服务消费者的过程中，基于各自的能力和积累，会选择不同的路径。那对我们来说，这条路径一直比较清晰，就是继续把供应链做扎实。当前我们平台在重仓供应链上的投入是双管齐下的，我们的目标是既要备好货，也要修好路。

IR/Translator, PDD Holdings Inc.: As the industry matures, platforms will take different approaches to serving consumers based on their respective capabilities and experience. Our path has always been quite clear, which is we will continue strengthening our supply chain capabilities. Our current supply chain investments have two complementary priorities. Firstly, is ensuring a strong supply of quality products, and second is building the infrastructure to deliver them efficiently.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 在备好货方面，我们在持续地通过新知供给、多做好特产等这些专项，去帮助有能力的传统代工厂，去提升产品和品牌的能力，去推动供给侧的价值跃迁，让消费者能够享受到更高性价比的优质的国货。那在修好路方面，我们通过送货进村等基建的项目，去完善中转的网络，打通偏远地区的物流末端的断点，让更多地区的消费者能够享受到电商带来的便利和实惠。

IR/Translator, PDD Holdings Inc.: On the product supply side, through initiatives such as new quality supply and Duoduo Premium Produce, we continue to help capable traditional manufacturers strengthen their product development and brand building capabilities, enabling them to move up the value chain and giving consumers greater access to high quality products at compelling value. On the infrastructure side, through projects such as free shipping to villages, we are improving our distribution network and addressing last mile delivery gaps in remote areas, and enabling consumers in more regions to benefit from the convenience and affordability of e-commerce.

Zhao Jiazhen, Co-Chairman and Co-Chief Executive Officer, PDD Holdings Inc.: 我们选择的供应链投入方向在短期内可能不是见效最快的，但是在长期来看，这些举措能够实实在在地为行业、消费者、商家生态带来价值。我们也会继续做好这些基础但重要的工作，为消费者和商家创造我们独特的价值。谢谢。

IR/Translator, PDD Holdings Inc.: The supply chain investments we have chosen to make may not yield immediate results, but we believe over the long term, they will create tangible value for the industry, consumers, and our merchant ecosystem. We will remain focused on this foundational, yet very important work, and continue creating differentiated value for consumers and merchants. Thank you. Operator, I think we have time for one more analyst.

Operator: Thank you. Your final question comes from Joyce Ju with Bank of America. Please go ahead.

Joyce Ju, Analyst, Bank of America: 蕾、家珍、囧，晚上好，感谢接受我的提问。我的第一个问题是关于平台的长期商业化潜力的。公司推出千亿扶植计划已经接近一年了，经过这一系列的投入，目前平台商家生态的健康度和活跃度有什么变化？商家生态的改善未来是否能进一步地转化成为广告投放意愿和平台商业化率的提升？第二个问题是关于收入增长的展望的。管理层能否结合上半年的表现，对全年的消费趋势做一些展望？往后看，在整体消费大盘增长的基础上，我们的平台收入是否有机会实现快于大盘的增长？谢谢。我自己翻译一下。My first question is on long term commercialization potential.

It has been like almost a year since the company launched the RMB 100 billion support program. Could management provide an update on the health and activity of the merchant ecosystem following the investments? As the ecosystem improves, are you seeing or would you expect to see a corresponding increase in merchants willingness to spend on advertising? My second question is on the revenue growth outlook. Based on the trends observed in the first half, how are you thinking about the consumer spending outlook for the full year? Looking ahead, does platform revenue have the potential to outgrow the broader consumer market? Thank you very much.

IR/Translator, PDD Holdings Inc.: 你好，我是赵佳珍。正如刚才讲话中有提到，千亿扶持其实目前已经逐步进入到了产业效能释放的阶段。我们从2024的百亿费用的减免，到去年初开始的千亿扶持，平台在这期间的资源的倾斜与供应链的反哺，已经覆盖了各大的农产区和制造业的产业带。Hi, this is Zhao Jiazhen. As mentioned earlier, the hundred billion support program is starting to show results from the 10 billion fee reduction program introduced in 2024 to the hundred billion support program early last year.

The resources and the supply chain support that we have provided have reached major agricultural regions and manufacturing clusters. [Foreign language] And we are encouraged to see that these efforts have enabled many merchants in industrial belts to make meaningful gains in both quality and efficiency. For example, with the support from the platform, a cosmetics company in Guangdong significantly reduced its customer acquisition and operating costs. This company reinvested the profits in a two-year R&D effort, successfully transitioning into patented and national brands. And merchants in Zhongshan Lighting manufacturing belt have also leveraged the platform’s fast product testing capabilities to increase investment in high-quality lighting components and smart product features, which led to the launch of a best-selling product that generated several millions in sales within just a few months. [Foreign language] And these tangible results demonstrate that our efforts to reinvest in the supply chain ecosystem are working. Of course, building a healthier merchant ecosystem takes time. We will remain committed to these investments and help more merchants achieve healthier and more sustainable growth. [Foreign language] E-commerce platforms are two-sided networks. The merchants growth prospects are closely tied to a high-quality consumer experience and a healthy platform ecosystem. Our hundred billion support program is therefore focused first and foremost on improving product quality, strengthening the supply chain, and supporting the merchant ecosystem, such that small and medium-sized merchants can reinvest their efficiency gains in product upgrades. Over the long term, lower operating costs, stronger profitability, and greater business confidence among merchants will ultimately drive sustainable organic value creation across the platform. Thank you.

Li Zhong, Financial Director, PDD Holdings Inc.: Hi, this is John.

Let me take your second question. In the first half of the year, as consumption support policies continue to take effect, China’s consumer market expanded steadily, and online retail penetration continued to grow. We remain confident in the long-term potential of China’s consumer market and e-commerce industry. As e-commerce enters a new stage of development, platforms need to take a more proactive role in unlocking new growth by addressing fundamental supply chain bottlenecks. Like, for example, through our free shipping to village initiative, we are investing in more comprehensive last mile delivery network, including transit warehouses and village pickup points. These efforts are helping strengthen rural commerce and distribution networks, and stimulate consumer demand in these regions. In the first half this year, retail sales in rural areas grew faster than the overall market, showing significant potential. On monetization, just as Zhao mentioned, we remain focused on strengthening the platform ecosystem and helping our merchant grow. Over time, by getting these fundamentals right, we believe the sustainable growth in the platform’s intrinsic value will naturally follow. Thank you.

IR/Translator, PDD Holdings Inc.: Okay, thank you, John. Thank you all for joining us today. It is about time, and we look forward to seeing you next quarter.

Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.