20-F: PDD Holdings Reports Strong 2025 Performance

PDD Holdings Inc. announced its fiscal year 2025 results, showcasing significant revenue growth and net income, driven by its Pinduoduo and Temu platforms.

Summary

• PDD Holdings Inc. reported total revenues of RMB431,845.7 million (US$61,753.1 million) for the fiscal year ended December 31, 2025, a 9.7% increase from RMB393,836.1 million in 2024.
• Net income for 2025 was RMB97,842.5 million (US$13,991.3 million), a decrease from RMB112,434.5 million in 2024.
• The company's Pinduoduo platform continues to drive growth through its value-for-money merchandise and interactive shopping experiences, while the Temu platform is expanding globally.
• Sales and marketing expenses increased to RMB125,287.9 million (US$17,915.9 million) in 2025, reflecting continued investment in brand promotion and user engagement.
• Research and development expenses also rose to RMB16,496.2 million (US$2,358.9 million) in 2025, supporting advancements in AI and big data analytics.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this filing as positive due to continued revenue growth and strategic investments in R&D, despite a dip in net income, indicating a focus on long-term market positioning.

Positives

• Revenue growth of 9.7% to RMB431,845.7 million (US$61,753.1 million) in fiscal year 2025.
• Continued expansion of active merchants on the platform, reaching 16.8 million in 2025.
• Strong interest and investment income of RMB25,583.8 million (US$3,658.4 million) in 2025.
• Commitment to investing in R&D, with expenses increasing to RMB16,496.2 million (US$2,358.9 million) to enhance AI and big data capabilities.

Negatives

• Net income decreased to RMB97,842.5 million (US$13,991.3 million) in 2025 from RMB112,434.5 million in 2024.
• Operating profit decreased to RMB93,102.1 million (US$13,313.4 million) in 2025 from RMB108,422.9 million in 2024.
• Costs of revenues increased significantly, driven by higher fulfillment fees, bandwidth and server costs, and payment processing fees.
• The company faces ongoing legal proceedings and regulatory investigations in multiple jurisdictions, including potential fines and compliance costs.

Risks

• Intense competition in the e-commerce industry could lead to loss of market share, buyers, and merchants.
• Complex and evolving laws and regulations regarding privacy and data protection in various operating jurisdictions may result in claims, investigations, and penalties.
• The VIE structure and contractual arrangements carry inherent risks related to enforceability and potential regulatory challenges in China.
• Potential for delisting from U.S. exchanges under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect auditors.
• Geopolitical tensions and changes in international trade policies could adversely impact business operations and operating results.
• The company's business is subject to cybersecurity threats, and any failure to protect data could have a material adverse effect.
• Potential liabilities for counterfeit, unauthorized, illegal, or infringing products sold on its platforms.
• Uncertainty regarding the interpretation and enforcement of PRC laws and regulations, which could materially affect operations.

Future Outlook

The company expects continued investment in sales and marketing and research and development to drive future growth and enhance its platforms. While net income saw a decrease in 2025, the company's revenue growth and expanding merchant base indicate a positive underlying business trajectory.

Management Comments

• The company aims to bring more businesses and people into the digital economy so that local communities and small businesses can benefit from increased productivity and new opportunities.
• PDD Holdings is committed to leveraging its platforms to better the lives of millions and promote sustainable development, with a particular focus on agriculture.
• The company believes its business model has significant operating leverage, enabling structural cost savings and creating value for merchants through effective sales channels.

Industry Context

StockSavvy.ai notes that PDD Holdings' performance reflects the continued robust growth in the global e-commerce sector, particularly in China, where its Pinduoduo platform has established a strong market position. The expansion of its Temu platform internationally highlights the company's strategy to diversify and capture global market share, aligning with broader trends of cross-border e-commerce growth.

Comparison to Industry Standards

• PDD Holdings' revenue growth of 9.7% in 2025, while strong, is slightly below the average growth rate of major global e-commerce players which have seen double-digit growth in similar periods.
• The company's investment in R&D as a percentage of revenue (approximately 3.8%) is in line with industry leaders focused on technological innovation in e-commerce.
• The decrease in net income margin in 2025, while potentially concerning, is often seen in companies prioritizing market share expansion and user acquisition over short-term profitability, a strategy employed by competitors like Amazon in its earlier growth phases.

Legal Proceedings

• The company is involved in multiple legal proceedings and regulatory investigations globally, including consumer protection lawsuits in the U.S. and an investigation by the European Commission into Temu's compliance with the Digital Services Act.
• A formal investigation by the European Commission into Temu for alleged sale of illegal products and issues with its recommendation systems is ongoing.
• Vietnamese and Uzbekistani authorities suspended Temu platform operations pending registration and tax compliance, respectively; operations have not resumed.
• Putative securities class actions have been filed against the company and its officers in the U.S. alleging false and misleading statements regarding data security and compliance with the Uyghur Forced Labor Prevention Act.
• Temu filed a complaint against SHEIN in the U.S. District Court for the District of Columbia for intellectual property infringement and unfair competition, which is ongoing.
• SHEIN initiated a separate lawsuit against PDD Holdings Inc. asserting copyright and trademark infringement, unfair competition, and false advertising claims.

Related Party Transactions

• Purchases of services from Tencent Group, including payment processing, advertising, and cloud services, amounted to RMB6,476.2 million (US$926.1 million) in 2025.
• Loans provided to Ningbo Hexin Equity Investment Partnership, an entity controlled by executive officers, for the acquisition of Shanghai Fufeitong Payment Service Co., Ltd.

Stakeholder Impact

• Shareholders may experience continued volatility in ADS prices due to market factors and ongoing legal/regulatory scrutiny.
• Merchants benefit from access to a large customer base and value-added services, but face evolving platform rules and potential regulatory impacts on their operations.
• Consumers benefit from a wide selection of products at competitive prices and interactive shopping experiences.
• Employees are subject to standard labor contracts and benefit plans, with ongoing investment in career development and training.

Next Steps

• Continue to invest in technology infrastructure and network, including AI and big data capabilities.
• Expand global operations for the Temu platform.
• Enhance buyer and merchant engagement on both Pinduoduo and Temu platforms.
• Continue to offer a wide selection of merchandise at attractive prices and fun shopping experiences.
• Focus on improving the value and variety of online platform services offered to merchants.

Key Dates

Recommendation

PDD Holdings demonstrates strong revenue growth and strategic investments, but the decrease in net income, coupled with significant legal and regulatory risks, warrants a cautious 'hold' stance. Investors should monitor the resolution of ongoing investigations and the company's ability to manage costs effectively.

Keywords

PDD Holdings, Pinduoduo, Temu, e-commerce, annual report, financial results, China, Nasdaq