Pinduoduo's net profit declines by 12%, with the CEO setting the tone that "profits will fluctuate long-term"

Why is Pinduoduo increasing supply chain investment during profit declines?

After experiencing several quarters of stock price volatility following earnings releases, Pinduoduo has finally stabilized this time.

On the evening of March 25, Pinduoduo released its Q4 2025 and full-year financial reports. During the earnings call, management did not continue the previously market-panicking tone of “being bearish on itself,” but instead firmly conveyed a long-term strategic commitment to reshaping the supply chain and transitioning toward brand self-operation. As a result, Pinduoduo’s US pre-market stock price temporarily rose over 4%.

Looking deeper into the financials, Pinduoduo’s full-year 2025 revenue reached 431.8 billion yuan, a 10% increase year-over-year, but its net profit attributable to shareholders declined by 12%, down to 99.4 billion yuan. The profit decline is directly linked to Pinduoduo’s “trillion-yuan support” strategy launched in 2025, which involves sustained heavy investments on both supply and demand sides.

For a player not focused on AI large models or local lifestyle delivery wars, but solely on e-commerce, Pinduoduo is pouring massive cash flow into the depths of China’s supply chain.

Behind the Profit Decline

From a revenue perspective, Pinduoduo is shifting gears and slowing down.

In 2025, total revenue was 431.8 billion yuan, up 10%. Notably, Alibaba’s overall revenue growth during the same period was 11%. This marked the first time in a decade that Alibaba’s total revenue growth surpassed Pinduoduo’s. Compared to Pinduoduo’s 59% revenue growth in fiscal 2024, the slowdown in 2025 is quite evident.

Specifically, in Q4 2025, Pinduoduo achieved revenue of 123.91 billion yuan, up 12% year-over-year, slightly above market expectations of 123.72 billion yuan. In terms of revenue segments, online marketing services—representing core domestic e-commerce—grew only 5.3% YoY, below Bloomberg’s consensus estimate of 8%. Amid a generally weak domestic e-commerce market in Q4, Pinduoduo’s domestic business remained relatively stable, with the impact of government subsidies tapering off.

The main driver behind the better-than-expected revenue in Q4 was transaction-based income, which grew 19% YoY, significantly exceeding market expectations. Since domestic main site growth was modest, this excess growth was mainly due to the strong performance of overseas business Temu.

On the profit side, Pinduoduo reported a pressured performance. In Q4, adjusted net profit was 26.3 billion yuan, below the market forecast of 31.16 billion yuan; adjusted EPS was only 17.69 yuan, far below the expected 20.84 yuan. For the full year, net profit (non-GAAP) declined 12% YoY to 107.3 billion yuan.

The direct cause of profit decline is sustained high expenses. In Q4, gross profit growth was 9%, lower than the 12% revenue growth. This change is mainly due to the increasing proportion of overseas Temu’s relatively low-margin business in total revenue. Meanwhile, operating profit grew only 8%, lower than gross profit growth, primarily because of a surge in R&D expenses, which increased 32% YoY. Although administrative expenses decreased 19% YoY, marketing expenses remained large, reaching 34.4 billion yuan in Q4, up 9.6%. Looking ahead, sales expense growth has accelerated compared to the previous two quarters.

Pinduoduo’s cash flow has shown significant volatility, especially in Q4 2025, when operating cash flow sharply declined by 18% YoY, turning negative.

Management explicitly explained the profit decline. In April 2025, Pinduoduo officially launched the “Trillion Support” merchant assistance plan, aiming to invest over 100 billion yuan in capital and traffic resources over the next three years to build a win-win ecosystem for users, merchants, and the platform. This continuous heavy investment on both supply and demand sides inevitably weighed on current profits.

During the earnings call, Co-CEO Zhao Jiazhen clearly stated: “For long-term ecosystem health and supply chain upgrading, the company will resolutely implement a heavy investment strategy. Future profits will fluctuate over the long term.” This statement dispelled market expectations of rapid profit recovery and signaled that Pinduoduo is moving away from a model solely reliant on platform traffic monetization for high profits, entering a deep phase of “exchanging profit for growth” and “heavy investment in supply chain” to solidify its underlying competitiveness.

What is the “New Pinduoduo” for Brand Self-Operation?

Alongside the profit decline, Pinduoduo announced the formation of “New Pinduoduo,” establishing a dedicated company in Shanghai with an initial cash injection of 15 billion yuan. Over the next three years, Pinduoduo plans to invest 100 billion yuan to develop a brand self-operation model, further upgrading its strategic focus to “heavy investment in China’s supply chain.”

What exactly is “New Pinduoduo”?

In the current e-commerce landscape, Alibaba dominates with Taobao and Tmall, while JD.com has built a moat through its strong self-operated logistics and 3C appliance supply chain. Pinduoduo has long relied on a pure third-party platform model, leveraging white-label products, direct factory shipments, and social group buying to capitalize on the lower-tier market’s benefits. But as traffic dividends peak and customer acquisition costs rise, relying solely on “hundred-billion subsidies” and ultra-low prices can no longer sustain high-quality growth or meet consumers’ increasing demand for product quality.

The emergence of “New Pinduoduo” marks an attempt to shift from a lightweight asset platform model to a heavy-asset brand self-operation model. During the earnings call, Zhao Jiazhen emphasized “focusing and heavily investing in supply chain upgrades for high-quality development,” aiming to “recreate Pinduoduo in three years.”

Pinduoduo’s decision to heavily invest in self-operation at this juncture has its rationale.

The domestic e-commerce competition has entered a stock game phase. Without participating in the current AI large model arms race or engaging in Meituan, Alibaba, and JD’s “food delivery triopoly,” Pinduoduo chooses to deploy its abundant cash—422.3 billion yuan—into its core retail business. By building its own brands and self-operated supply chains, Pinduoduo aims to establish new barriers in product quality, quality control, and fulfillment that differ from the pure white-label era.

Overseas, Temu’s rapid expansion employs a highly similar “fully managed/semi-managed” supply chain model. This approach has proven Pinduoduo’s strong organizational and bargaining power over supply chains abroad. Bringing this capability back domestically through “New Pinduoduo” to integrate high-quality local production and develop a high-cost-performance private label matrix is also within Pinduoduo’s expertise.

In the short term, “New Pinduoduo” needs to build self-operated teams, acquire inventory, develop warehousing and logistics infrastructure, and initiate initial branding efforts—all requiring significant capital investment. This explains Zhao Jiazhen’s cautious outlook that “profits will fluctuate long-term.” In the long run, controlling the supply chain allows Pinduoduo to eliminate middlemen and significantly improve product margins.

Therefore, major investment banks like Citigroup and Goldman Sachs maintain a “Buy” rating and have raised target prices, largely recognizing this strategy of sacrificing short-term profits to build long-term supply chain barriers. However, whether Pinduoduo can successfully complete a high-quality transformation and improve its brand image through “New Pinduoduo” remains to be seen.