Financial Data and Key Metrics Changes - In Q1 2025, total revenues increased by 10% year over year to RMB 95.7 billion, driven by growth in online marketing services and transaction services [23] - Total cost of revenues rose by 25% to RMB 40.9 billion, primarily due to increased fulfillment and payment processing fees [24] - GAAP operating profit decreased to RMB 16.1 billion from RMB 26 billion in the same quarter last year, while non-GAAP operating profit fell to RMB 18.3 billion from RMB 28.6 billion [26] - Net income attributable to ordinary shareholders was RMB 14.7 billion, down from RMB 28 billion in the same quarter last year [27] Business Line Data and Key Metrics Changes - Revenues from online marketing services were RMB 48.7 billion, up 15% year over year, while transaction services revenues were RMB 47 billion, up 6% [23] - Non-GAAP sales and marketing expenses increased by 44% to RMB 32.8 billion, reflecting increased promotional programs and marketing support for merchants [25] Market Data and Key Metrics Changes - The company noted intensified competition in the Chinese e-commerce sector, impacting merchant performance and profitability [10] - The external policy environment, including tariffs, has created significant pressure for merchants, affecting their ability to adapt [11] Company Strategy and Development Direction - The company is focusing on a high-quality development strategy, emphasizing ecosystem investments and merchant support programs, including a RMB 100 billion support initiative [8][17] - The strategy aims to enhance support for small and medium-sized merchants, driving broader supply chain upgrades and improving product offerings [18][46] - The company is committed to long-term intrinsic value over short-term financial results, prioritizing merchant and consumer needs [14][40] Management Comments on Operating Environment and Future Outlook - Management acknowledged that the slowdown in revenue growth and profit decline are due to external uncertainties and the mismatch between investment and return cycles [10][38] - The company expects continued challenges to profitability in the near term but remains focused on long-term investments in the ecosystem [40][41] Other Important Information - The company has launched initiatives to support agricultural products and enhance digital systems for local merchants, aiming to modernize the agriculture supply chain [19][20] - The company is enhancing consumer initiatives, including coupon programs and direct discounts, to stimulate demand and support merchants [21][48] Q&A Session Summary Question: What preparations has the platform made in response to macro policy changes and the decline in net profit margins? - Management emphasized proactive actions and increased support for merchants through the RMB 100 billion support program to help them navigate external uncertainties [34][36] Question: What is the long-term impact of the RMB 100 billion support program on financial performance? - Management believes that investments in the merchant ecosystem will lead to higher quality products and services, fostering long-term healthy development [46][49] Question: How does management view competition in the current market environment? - Management acknowledged the challenges faced by merchants due to competition and the need for the platform to support them to ensure collective success [56] Question: What updates can be provided on overall consumption momentum during the June promotion? - Management highlighted efforts to simplify mechanisms and provide real savings to consumers, enhancing the shopping experience during promotional events [60]

Core Viewpoint - PDD Holdings is expected to report first-quarter 2025 results on May 27, with revenue estimates at $14.17 billion, reflecting a 17.82% year-over-year growth, while earnings per share are projected at $2.49, indicating a 12.01% decline from the previous year [1]. Financial Performance - The Zacks Consensus Estimate for earnings per share (EPS) for the current quarter is $2.49, with no changes in estimates over the past 30, 60, and 90 days [2]. - PDD has a history of earnings surprises, with a 7.81% surprise in the last quarter and an average surprise of 22.35% over the last four quarters [3]. Earnings Expectations - The current Earnings ESP for PDD is 0.00%, and it holds a Zacks Rank of 3 (Hold), indicating uncertainty regarding an earnings beat this time [4]. Strategic Factors - PDD is navigating strategic transitions and competitive pressures, with a notable deceleration in revenue growth to 24% year-over-year in Q4 2024, down from 59% for the full year [5]. - The company has intensified investments in its "high-quality development strategy," including a 10 billion RMB fee reduction program and merchant support initiatives [6]. - These strategic investments are expected to create near-term pressure on profitability margins and revenue growth [7]. Competitive Landscape - The competitive dynamics in China's e-commerce market have intensified, leading PDD to increase marketing expenditures to maintain its market position against competitors like Amazon, eBay, and Alibaba [8]. - Sales and marketing expenses accounted for 28% of revenues in Q4 2024, suggesting continued elevated spending levels into Q1 2025 [9]. Global Operations - PDD's global business segment faces complexities due to external environment changes and potential macro policy shifts, which may have impacted overseas performance [10]. Overall Outlook - The combination of strategic investments, competitive intensity, and external uncertainties suggests that PDD's first-quarter results may show continued revenue growth moderation and margin fluctuations [11]. - PDD shares have increased by 22.9% year-to-date, outperforming the industry growth of 0.5% and the S&P 500 index's decline of 1.8% [12]. - Currently, PDD is trading at a forward 12-month P/E of 9.46X, significantly lower than the industry average of 22.79X, indicating a potential investment opportunity [15]. Investment Thesis - PDD presents a compelling risk-reward proposition with discounted valuations amid strategic transformation challenges, although competitive pressures and investment uncertainties suggest careful timing for entry points [18]. - Current shareholders are advised to maintain positions due to ecosystem investments, while prospective investors may benefit from waiting for clearer execution evidence [19].

Financial Data and Key Metrics Changes - In Q4 2024, total revenues increased by 24% year-on-year to RMB 110.6 billion, while full-year revenue reached RMB 393.8 billion, growing 59% year-on-year, indicating a moderation in revenue growth [10][33] - Total cost of revenues rose by 36% in Q4 2024 to RMB 47.8 billion, and for the full year, it increased by 68% to RMB 153.9 billion, primarily due to higher fulfillment and payment processing fees [34] - Non-GAAP operating profit for Q4 was RMB 28 billion, compared to RMB 24.6 billion in the same quarter of 2023, with a non-GAAP operating profit margin of 24% [39][41] Business Line Data and Key Metrics Changes - Revenue from online marketing services in Q4 was RMB 57 billion, up 17% year-on-year, while transaction services revenue was RMB 53.6 billion, up 33% year-on-year [33] - The quality merchant support program expanded its reach across agricultural and industrial sectors, providing comprehensive support and driving new consumption trends [21][56] Market Data and Key Metrics Changes - Logistics support measures for remote regions drove double-digit order growth, extending free shipping to nearly 100 million consumers [12][20] - The platform's ecosystem investments have enriched consumer choices, with a broader range of high-quality products available across various categories [25][26] Company Strategy and Development Direction - The company is focused on high-quality development, emphasizing ecosystem upgrades and supply chain transformation to foster a mutually beneficial environment for consumers and merchants [18][20] - A 10 billion fee reduction program and logistics support measures are part of the strategy to enhance operational efficiency for merchants and improve service quality [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that external uncertainties and intense competition have impacted short-term revenue growth, but they remain committed to long-term investments in the platform ecosystem [81] - The company plans to continue prioritizing investments in supply chain improvements and service quality to ensure sustainable growth [70][72] Other Important Information - The establishment of the Merchant Rights Protection Committee aims to enhance communication with merchants and optimize their experiences [27][29] - The company is committed to corporate social responsibility, seeking to create greater value for the communities it serves [74][75] Q&A Session Summary Question: Long-term goals for platform ecosystem development - Management highlighted that initiatives like the RMB 10 billion fee reduction program are aimed at lowering operational costs for merchants and driving meaningful supply chain upgrades [49][50] Question: Recent consumer-side initiatives - The company upgraded its super level savings initiative during the fourth quarter, providing substantial savings to consumers and enhancing brand growth [54][56] Question: Insights into the competitive landscape - Management noted that competition drives continuous advancement in the e-commerce industry, and they are refining strategies to meet shifting consumer preferences [64][66] Question: Changes in global business due to macro conditions - The company will comply with laws and regulations while refining services and compliance standards in response to external changes impacting global operations [69][71] Question: Revenue and profit trends - Management expects fluctuations in revenue growth and profits due to increased investments in merchant support and platform ecosystem development [81][82] Question: Balancing platform responsibility with shareholder duties - The company aims to build an inclusive ecosystem that creates value for all participants, aligning long-term accountability to shareholders with social responsibility [86][88]