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Pinduoduo's commission revenue in the second quarter surged by 2.3 times year-on-year, propelling a revenue increase of 86%, bringing it closer to the milestone of breaking the 100 billion yuan mark, with net profit growing by 1.4 times year-on-year.

Chen Lei, Chairman and Co-CEO of Pinduoduo Group, stated that due to the intensifying competition in the e-commerce industry, the company will sacrifice some profits in exchange for long-term healthy growth, and will waive 10 billion yuan in transaction fees for high-quality merchants in the coming year.

On August 26th, Pinduoduo released its financial report for the second quarter of 2024, which ended on June 30th.

1) Key financial data:

Revenue: The company's revenue in the second quarter was 97.06 billion yuan (approximately 11.34 billion USD), a year-on-year increase of 86%, below market expectations of 99.99 billion yuan; the quarter-on-quarter growth slowed to 11.8%.

Profit: Operating profit was 32.56 billion yuan, a year-on-year increase of 156%;

Net profit attributable to ordinary shareholders was 32.01 billion yuan (approximately 440 million USD), a year-on-year increase of 144%;

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Adjusted earnings per ADS were 23.24 yuan, higher than the market estimate of 20.52 yuan.

Cash flow: The net cash generated from operating activities in the quarter was 43.79 billion yuan, a 87.2% increase compared to 23.396 billion yuan in the same period of 2023.

2) Main business performance:Advertisement: In Q2, online marketing services and other revenues reached 49.12 billion yuan, a year-on-year increase of 29%, while the market expected a growth of 33.1%;

Commission: Transaction service revenue was 47.9 billion yuan, a year-on-year increase of 234%, while the market expected 248.6%.

3) Performance Outlook:

A reduction of 10 billion yuan in transaction fees over the next year, with increased investment in agriculture and high-quality development.

Pinduoduo stated that future profits will gradually trend downward, which is a necessary price for long-term health.

After the financial report was released, Pinduoduo's U.S. stock price dived before the market, currently down by more than 12%.

Pinduoduo's CFO, Liu Jun, said, "Last quarter, our revenue growth slowed down quarter-on-quarter. Looking ahead, due to intensified competition and external challenges, revenue growth will inevitably face pressure." "As we continue to invest heavily, profitability may also be affected."

Commission revenue increased by 2.3 times year-on-year, Pinduoduo: Plans to waive 10 billion yuan in fees, prepared to sacrifice profits.

Pinduoduo's revenue nearly doubled, mainly thanks to the high growth in commissions.

In Q2, Pinduoduo's online marketing services and other revenues (mainly advertising income) were 49.12 billion yuan (about 6.8 billion USD), a 29% increase from 37.933 billion yuan in the same period of 2023.Transaction services continued the high growth trend of the first quarter, with revenue in the second quarter reaching 47.944 billion yuan (approximately 660 million US dollars), an increase of 234% compared to the 14.3479 billion yuan in the same period of 2023. Although the year-on-year growth rate has slowed down from the 327% seen in the first quarter, it remains robust.

Chen Lei, Chairman and Co-CEO of Pinduoduo Group, stated that the platform's overall scale has reached a considerable volume, and perfecting the ecosystem is not an overnight task. The management has reached a consensus and is prepared to sacrifice short-term profits for long-term investment.

Chen Lei also indicated that since the beginning of this year, competition in the e-commerce industry has intensified. The platform will invest billions of resources to support high-quality merchants, waive 10 billion yuan in service fees for quality merchants over the next year, and continuously improve the quality and efficiency of the supply chain, as well as perfect ecosystem governance to cope with the increasingly fierce industry competition.

It is reported that Pinduoduo has introduced refundable rights for merchants on resource position technology service fees and promotional software service fees, continuously helping merchants improve quality and efficiency through a package of support policies.

In the second quarter, Pinduoduo's R&D investment reached 2.9 billion yuan, a year-on-year increase of 6%, mainly due to a new round of investment in operations and R&D.

Zhao Jiazhen, Director and Co-CEO of Pinduoduo, introduced that in order to further strengthen the governance of the merchant ecosystem, the platform has optimized the processes for merchants to join and products to be listed. It also actively patrols products that have been listed through technical means, combined with a detailed review by the regulatory team, to crack down on illegal cheating merchants and create a better business environment for quality merchants.