Honest and dutiful.
The AI investment race among China’s major internet giants is getting increasingly intense. Alibaba and Tencent have pushed their quarterly capital expenditures to record highs of 67.7 billion yuan and 52.8 billion yuan respectively, with Tencent even reporting negative free cash flow for the first time in a single quarter. Only Pinduoduo remains sticking to its traditional development path, staying away from all hyped-up AI narratives and fancy flash sales or food delivery services.
In the second quarter of 2026, Pinduoduo’s latest investment move was purchasing two office buildings in Xiongan and Shanghai respectively. During the earnings call last night, Zhao Jiazhen, Co-Chairman and Co-CEO of Pinduoduo Group, specifically mentioned the office building in Xiongan in his opening remarks, noting that the number of full-time employees there has reportedly reached 4,000. This is one of their initiatives to “anchor new opportunities for intelligent development” and “drive the traditional manufacturing industry to move towards high value-added segments”.
According to previous statements from Pinduoduo’s management, this year marks the starting point of their “high-quality development in the new decade”. They will take this opportunity to continuously focus on supply chain investment, noting that “there is a chance to build a brand-new Pinduoduo in the next three years”.
High-quality development is a broad enough topic to accommodate all kinds of operational moves. Purchasing office buildings counts as high-quality development, developing self-operated brands serves high-quality development, and compliance construction and merchant support are even more essential paths for high-quality development. No matter what Pinduoduo does in the end, the management can always tie it back to the goal of high-quality development, claiming it has nothing to do with competition or regulatory penalties.
In this context, Pinduoduo’s recently released financial report for the second quarter of 2026 is also part of its high-quality development strategy. In that quarter, Pinduoduo’s revenue reached 112.4 billion yuan, up 8% year on year, slightly lower than market expectations. Although its adjusted net profit fell 13% year on year to 28.5 billion yuan, it still outperformed market forecasts. After the earnings release last night, Pinduoduo’s stock price first fell and then rose during trading, finally closing down 1.48%.
7.4 Billion Yuan in Other Losses
In the past, when Pinduoduo’s revenue doubled year after year, its management kept pouring cold water on overly optimistic market expectations. Now that its growth rate has slowed down and the external environment has deteriorated, the statements from Pinduoduo’s management sound surprisingly reasonable.
Throughout the entire earnings call, Zhao Jiazhen and Chen Lei, the two Co-CEOs, almost repeatedly emphasized platform governance and supply chain construction, highlighting long-term investment. Although they still have the old habit of applying standard answers without addressing specific questions, at least they no longer deliberately slash their own performance forecasts, and shareholders can finally heave a sigh of relief.
One of the costs of long-term investment may be the slowdown in growth. Pinduoduo’s revenue growth rate in this quarter dropped to 8%, the lowest level in nearly four quarters. In the second quarter of last year, Pinduoduo’s revenue growth rate once hit a low of 7.1%, and only reached 9% in the third quarter, returning to double-digit growth in the fourth quarter. In the first quarter of this year, Pinduoduo’s revenue increased by 11% year on year.
The high-growth era of the e-commerce industry is over. Alibaba’s China e-commerce business revenue fell 8% year on year in the previous quarter, and JD’s revenue in the same period dropped 2.9% year on year. LatePost reported that Pinduoduo’s GMV in the second quarter of 2026 fell below 10% year on year, marking the worst growth rate since the company was founded. Even Douyin no longer maintains its past strong momentum.
However, Pinduoduo’s profit performance still exceeded expectations. Although its net profit declined year on year in the quarter, its operating profit rose 8% year on year to 27.8 billion yuan, with the operating profit margin remaining roughly unchanged year on year, and operating cash flow increased by 18.6% year on year. In other words, Pinduoduo’s core operating performance has not declined significantly.
Even compared with other Chinese internet giants, Pinduoduo has a very strong cash position. As of the end of June, Alibaba’s cash, cash equivalents and short-term investments amounted to about 474.5 billion yuan, while Tencent held around 511.2 billion yuan. Pinduoduo, by contrast, recorded 456.4 billion yuan in the quarter, a record high, enough to buy nearly half of the company. Not to mention Pinduoduo has no huge AI capital expenditure plan yet.
However, shareholders who expect Pinduoduo to carry out share repurchases or pay dividends should not get too excited. Compared with the large-scale repurchases of Tencent and Alibaba, Pinduoduo’s management made it clear two years ago that the company is still in the investment stage, and has no plans for share repurchases or dividends in the next few years amid fierce industry competition and external uncertainties.
The year-on-year decline in Pinduoduo’s net profit in the quarter was mostly caused by non-operating factors. In the same period last year, Pinduoduo’s other income was 119 million yuan, but this quarter it accrued a loss of 7.399 billion yuan, creating a negative impact of 7.518 billion yuan year on year.
Pinduoduo Q2 2026 Earnings Report
Even though Pinduoduo’s investment income increased by 3.082 billion yuan year on year, it only offset part of the impact. Coupled with a 26.4% year-on-year increase in Pinduoduo’s income tax expense to 6.092 billion yuan in the quarter, the net profit finally dropped by 12% year on year.
Pinduoduo did not explain the source of the 7.399 billion yuan loss in its earnings report. Market speculation suggests the amount may be related to fines imposed in China and the EU. In April this year, the State Administration for Market Regulation imposed a total of 3.597 billion yuan in fines and confiscations on 7 e-commerce platforms for “ghost food delivery” practices, of which Pinduoduo’s share was about 1.522 billion yuan. In May this year, the European Commission fined Temu 200 million euros, equivalent to about 1.55 billion yuan, for violating the Digital Services Act.
Overseas Growth Slows, Domestic E-commerce Stabilizes
Pinduoduo’s earnings reports are as elusive as the company itself, as it only discloses data in rough calibers for a long time, and never reveals the specific growth performance of its businesses in the reports.
Temu and its grocery shopping business, the two biggest growth drivers for Pinduoduo in the past two years, are not even named in the earnings reports. Even during earnings calls, Pinduoduo’s management only refers to Temu as a general “global business”. In contrast, Tencent and Alibaba’s AI office products WorkBuddy and Qwen Office were heavily promoted in their earnings reports immediately after launch.
In the past, the market often used online marketing revenue (i.e. advertising revenue) to measure the performance of Pinduoduo’s domestic main platform, and transaction service revenue (i.e. commission revenue) to measure Temu’s performance. In the second quarter of this year, Pinduoduo’s commission revenue rose 13% year on year to 54.7 billion yuan, significantly lower than the market’s expected growth rate of about 22%. Its advertising revenue, while only up 3% year on year to 57.6 billion yuan, outperformed market expectations.
In the first quarter of this year, commission revenue accounted for 53% of Pinduoduo’s total revenue, surpassing advertising revenue for the first time to become its largest revenued by nearly 3% quarter on quarter, while advertising revenue rose by more than 15% quarter on quarter, regaining its position as the top revenue source
Chen Lei stated during the earnings call that the global business has faced great challenges from the regulatory and compliance environment recently, bringing both huge difficulties and opportunities to the company. “I feel that the company is at a special intersection of global economy and trade, and we are facing pressure from different regulatory policies,” he said. In the short term, cross-border orders in affected markets are facing lower fulfillment efficiency and rising costs, and the growth of related businesses has been significantly impacted.
LatePost reported recently that due to tightening global regulations, Pinduoduo’s overseas e-commerce platform Temu is no longer pursuing aggressive growth this year, but focusing on solving compliance issues, with GMV in multiple European and American markets dropping by more than 30%. LatePost also noted that Pinduoduo has shifted its focus back to its grocery shopping business, which is expected to generate revenue of over 400 billion yuan this year and create tens of billions of yuan in profits.
Against the backdrop of slowing domestic e-commerce growth, all e-commerce platforms are looking for new growth drivers. Last year, JD achieved double-digit growth thanks to national subsidies and home appliance sales, but its growth faded this year. Alibaba drove its overall performance through instant retail, with its instant retail segment including Hema and Tmall Hourly Delivery growing by 45% year on year in the previous quarter. Pinduoduo’s focus can be briefly summarized as continuing to tap into lower-tier markets and maintain subsidies.
During the earnings call, Zhao Jiazhen specifically introduced their “Delivery to Villages” and “E-commerce Westward Expansion” strategies, aiming to bring rural and remote western regions that were previously not fully covered by e-commerce logistics into the scope of growth. Zhao Jiazhen cited an example that since the end of last year, the company has increased the daily average number of parcels delivered to villages in Yishui, Shandong Province to over 10,000.
The retail growth rate in rural markets is higher than that of the overall market. According to data previously released by the Ministry of Agriculture and Rural Affairs, the total retail sales of consumer goods in rural areas reached 3.3 trillion yuan in the first half of this year, up 2.5% year on year, 1.3 percentage points faster than the growth rate in urban areas.
As for instant retail, which Alibaba calls the second growth curve of e-commerce, Pinduoduo’s management has explicitly rejected it. During the earnings call of the first quarter this year, analysts asked about Pinduoduo’s stance on instant retail, but the management only responded with vague statements, neither explicitly rejecting nor supporting it. By the second quarter, Zhao Jiazhen finally gave a clear response, stating that instant retail is significantly different from Pinduoduo’s core e-commerce and grocery shopping businesses, with very limited synergy between them.
It can only be said that Pinduoduo remains focused on its core business. During the same Q2 earnings call, JD’s management stated that the synergy value between its food delivery business and JD’s overall business is gradually being released, and they will accelerate the deep integration of the food delivery business with core operations. In that quarter, JD’s new business revenue including food delivery reached 7.26 billion yuan, down 47.6% year on year, with an operating loss of 9.854 billion yuan. JD noted that its food delivery business reduced its loss by more than 50% year on year in the quarter.
This article is from the WeChat Official Account “Shan Shang”, author: He Jian, editor: Jiang Jiao, published with authorization from 36Kr.
