The main site has begun to stabilize, while Temu falls short of expectations.
Pinduoduo, which is also showing signs of aging management, released its Q2 2026 financial report on the evening of August 24. Overall, its actual performance is better than the extremely low market expectations. The main driver is that the growth rate of advertising revenue has bottomed out and rebounded, while the profit of the main site has also recovered to a considerable extent. The details are as follows:
<strong>1. Revenue miss? Advertising revenue bottoms out and rebounds: In this quarter, Pinduoduo’s total revenue increased by 8% year-on-year, missing the average Bloomberg consensus expectation of 11% (expectations from top-tier banks are lower than Bloomberg’s), and the quarter-on-quarter growth continued to slow down. At first glance, it seems that Pinduoduo’s growth has “blown up” once again, slightly spooking the market in pre-market trading.
But specifically, the underperformance is mainly reflected in the commission-based revenue from Temu, while advertising revenue slightly exceeded expectations instead.
Actual advertising revenue increased by about 3.5% year-on-year, although the absolute growth rate is still very low, it has outperformed market expectations. In terms of trend, the growth rate of the overall e-commerce market slowed down compared with the previous quarter, while Pinduoduo’s advertising growth rate rebounded slightly against the trend, which is the most important positive message delivered by this financial report.
Dolphin Research believes that the company’s GMV growth rate is most likely to decelerate quarter-on-quarter. In other words, the year-on-year decline in the advertising monetization rate of the main site should have narrowed (according to our calculation, it has not yet risen year-on-year). However, it is worth noting that the 100-billion-yuan support plan for merchants was launched in April last year, so the drag on the monetization rate has moved past the base effect period.
2. Commission revenue misses expectations significantly, overseas business faces headwinds: In contrast, transaction-based revenue in this quarter only increased by 13% year-on-year, significantly below Bloomberg’s consensus expectation of 21%, and the quarter-on-quarter growth also slowed down markedly. The main fluctuation of this revenue comes from Temu, and April last year was the low base point caused by Trump’s tariffs. Even with such a low base, the growth rate still slowed down more than expected, it can be inferred that Temu’s growth performance is quite unsatisfactory.
Combined with the recent year-on-year decline in the MAU of the Temu App, as well as reports of frequent EU investigations and penalties against Temu, Dolphin Research believes that Temu’s GMV growth in this quarter is indeed underperforming. However, the impact of the transition to semi-hosted / localized business that reduces the revenue caliber should also be counted.
3. Profit slightly exceeds expectations, the main site sees stronger recovery: Overall, Pinduoduo’s growth performance is actually mixed, and is affected by changes in revenue structure and caliber to a certain extent. Therefore, profit data that is not affected by caliber changes is needed to draw a final conclusion on whether this quarter’s performance is good or bad.
Then the company’s adjusted operating profit (adding back share-based payment expenses) reached 29.1 billion yuan in this quarter, slightly exceeding Bloomberg’s consensus expectation. While top-tier banks have even lower expectations, their profit forecasts are only around 26 billion+ yuan, with negative year-on-year growth, so the performance is good compared to the very low expectations. But in terms of trend, under the low profit base hit by national subsidies last year, the profit in this quarter only increased by less than 5% year-on-year, the absolute performance is still mediocre.
(Due to the lack of reliable official information, the following segment profit data is for reference only) There are two considerations for whether Temu’s loss in this quarter has expanded or narrowed: first, Temu’s overseas marketing spending should have been reduced recently; on the other hand, Temu’s recent localization transformation will lead to a lot of investment in warehousing, and logistics and customs clearance costs may also increase.
Combining the two points, and referring to external estimates, Dolphin Research assumes that Temu’s operating loss in this quarter has narrowed quarter-on-quarter to more than 1 billion yuan, then it is back-calculated that the operating profit growth rate of the main site is about 10%, which shows a stronger recovery than revenue under the low base caused by national subsidies last year.
4. Marketing investment is lower than expected: From the perspective of cost and expense, Pinduoduo’s overall gross margin in this quarter is 57.3%, rising both year-on-year and quarter-on-quarter, and also significantly higher than market expectations. We believe that in addition to the recovery of advertising monetization on the main site this quarter, the changes in Temu’s revenue structure (from full-hosted to semi-hosted) and loss reduction and efficiency improvement are the long-term driving forces for the rise in gross margin.
Another point worthy of attention is that the marketing expense expenditure in this quarter is 29.7 billion yuan, about 1 billion yuan less than market expectations. The low marketing expenditure corresponds to the underperformance of Temu’s revenue growth. According to recent surveys, Temu has significantly reduced its investment intensity (the overseas regulatory environment is unfavorable, and business development is not going smoothly).
In terms of trend, marketing expenses in this quarter still increased by about 9% year-on-year, slightly higher than the total revenue growth rate. But after breaking down the data, Dolphin Research believes that the marketing investment of the domestic main site should have declined to a certain extent year-on-year. On the one hand, part of the marketing expenditure is recorded as a deduction item of advertising revenue in terms of caliber; on the other hand, the company no longer needs to spend its own money to act as “national subsidies” as it did last year.
As for the seemingly high year-on-year growth rate of overall marketing expenses, it is also because the same period last year was at the stage of severe tariff impact, when Temu’s marketing investment was extremely low. Therefore, although the investment intensity in this quarter is not high, it still shows significant growth from a year-on-year perspective.
5. Overview of core information in the financial report
1. Performance in the current quarter: the main site begins to stabilize, Temu underperforms expectations
As can be seen from the above analysis, Pinduoduo’s performance in this quarter is good from the perspective of exceeding expectations. The main highlight is that the growth of core advertising revenue went up against the trend when domestic e-commerce generally weakened in Q2, indicating that the downward trend of monetization rate has at least improved significantly, even if it is not reversed. The slightly better-than-expected operating profit also indicates that the profit of the domestic main site has returned to a good growth of around 10%.
That is, the revenue and profit performance of the domestic main site both show signs of bottoming out and rebounding. But the downside is that Temu, which is regarded by the market as Pinduoduo’s second growth curve and the maingnificantly underperformed expectations
In other words, the overall story is more about recovery, without much upward space. This can also be seen from the year-on-year growth rate of only 8% for overall revenue and less than 5% for overall profit. At the same time, the narrative of Temu can only settle for second best: instead of expanding its scale further, it should make its overseas business profitable as soon as possible.
1) First of all, domestic main site business: Frankly speaking, after this performance, Dolphin Research’s cautious sentiment towards Pinduoduo’s domestic business has improved. In short, the core driving factors of the main site’s business performance are only two points: one is the GMV growth rate, and the other is the changing direction of monetization rate.
a. According to general market expectations, the GMV growth rate of Pinduoduo’s main site still slightly outperforms the industry average (i.e. the growth rate of online physical retail sales of total social consumer goods), but the leading margin is narrowing quarter by quarter. For example, for the past Q2, Bloomberg’s consensus expectation for Pinduoduo’s main site GMV growth rate in this quarter is only 4.5%, compared with 2.6% of the overall online retail market. Even if some top-tier banks have slightly higher expectations, it is only mid-single digit percentage.
Therefore, although Pinduoduo is logically a beneficiary of the withdrawal of national subsidies, the general trend that the growth of its main site is converging to the overall market growth rate has not changed, and Dolphin Research does not see any incentive for it to significantly outperform again in the future.
b. The good point is that the monetization rate of Pinduoduo’s main site does not have as much room for further decline as previously worried.
The problem that domestic regulation is tightening tax collection on e-commerce merchants, which reduces the profit margin of affected merchants and further affects their advertising investment capacity is still fermenting recently. Dolphin Research believes this is one of the main reasons why the market is bearish on Pinduoduo.
Although Pinduoduo itself has not given much feedback on this issue, Kuaishou’s weak guidance for 3Q e-commerce business growth clearly pointed out the impact of stricter e-commerce tax collection. Live-streaming e-commerce is the most affected because most of its participants are individual KOLs or small and medium-sized merchants. From the perspective of merchant composition, Pinduoduo should be the second most affected after live-streaming e-commerce, and the poor advertising monetization performance recently should also be partly attributed to this factor.
But judging from this quarter’s performance, the impact does not seem to be that large, at least the company seems to have the ability to eliminate or hedge the above negative impacts.
Combining the above points, although we cannot say that we have very optimistic expectations for the subsequent GMV growth rate of Pinduoduo’s main site, its subsequent revenue and profit growth rate of the main site is expected to approach the GMV growth rate, or even slightly outperform, instead of underperforming as it does now.
2) Temu: Temu’s poor performance in this quarter actually has traceable reasons. On the one hand, high-frequency data shows that Temu’s MAU is indeed declining quarter-on-quarter, in addition, the frequent regulatory issues that have been reported recently also make it hard to be optimistic.
a. Regulatory issues: Not only in China, Temu has also been in a “strong supervision” cycle overseas recently, which has brought a lot of drag.
In addition to the United States canceling the tax exemption for small parcels under 800 US dollars, Europe also officially canceled the policy of exempting VAT (value-added tax) for parcels under 150 euros from July 1. Besides the VAT, an additional temporary fixed tax of 3 euros per parcel is levied (an additional fixed processing fee of 2 euros per parcel may be levied later).
In addition, at the end of May, the European Union also fined Temu (together with Alibaba’s AliExpress) 200 million euros for selling illegal and inferior products. At the same time, it is also conducting a regulatory investigation on whether Temu has distorted local market competition through subsidies based on the FSR (Foreign Subsidies Regulation), and if it is judged to be in violation, it may be fined up to 10% of its global annual revenue.
It can be seen that after being forced to shrink its business in the largest market, the United States, due to regulatory issues, and then expanding to other countries/markets, it has encountered similar problems in the new largest market, Europe. It is obvious that for cross-border businesses like Temu that cover multiple countries, how to properly handle regulatory issues in multiple countries is indeed a long-standing difficult problem.
b. Localization transformation: In order to reduce the impact of the above various regulatory issues, Temu has recently increased the construction of overseas warehouses. Although we believe that moving towards localization is a correct long-term approach, it means that Temu has to make a lot of investment in heavy assets such as overseas warehousing and logistics.
Further localization also puts higher requirements on operation. Previously, one country’s team could serve the whole world, but localization means more local teams need to be deployed, which will eliminate the scale effect. All these may lead to some twists and turns in Temu’s growth and its path to profitability in the short and medium term.
Overall, Dolphin Research believes that after this quarter’s performance, the valuation of the domestic main site should have a certain degree of recovery. Our expected profit growth rate of Pinduoduo’s main site in 2026 has been slightly raised from the previous ~10% to 14%.
As for Temu, the mainslightly lowered its GMV expectation to 10
