To The Moon

$PDD Holdings Inc(PDD)$ (HOLD) reported 3Q25 results showing a modest re-acceleration in revenue growth alongside stable profitability. The Tiger Research team notes that management reaffirmed its commitment to long-term ecosystem investments and cautioned that quarterly performance will remain volatile. Total revenue grew 9% YoY to RMB 108.3bn, an improvement from 7% YoY in 2Q25, but still below the high-growth levels seen in prior years. Management highlighted that intensified competition, greater merchant support, and external uncertainties are weighing on monetization, and refrained from providing quantitative guidance.

Segment Performance
Revenue from online marketing services and others increased 8% YoY to RMB 53.3bn, while transaction services rose 10% YoY to RMB 54.9bn. Marketing growth moderated as the company increased investments in the merchant ecosystem amid a rapidly evolving industry landscape. Total cost of revenues grew 18% YoY to RMB 46.8bn, driven by higher fulfillment, bandwidth/server, and payment processing costs. Operating expenses were largely contained, with sales and marketing flat YoY (~RMB 30.3bn), G&A slightly down, while R&D expenses surged 41% YoY to RMB 4.3bn, reflecting continued investment in core technology and supply-chain innovation.

Operating profit came in at RMB 25.0bn, up modestly from RMB 24.3bn a year ago, while non-GAAP operating profit increased to RMB 27.1bn from RMB 26.8bn.

Long-Term Ecosystem Strategy
On the company’s tenth anniversary, management restated its mission of “high-quality development” and “benefits all” in e-commerce. Initiatives under the RMB 100bn support program, such as Duo Duo premium produce campaigns, logistics support in remote regions, and quality-upgrade programs across key categories, are driving agricultural sales growth and attracting younger merchants. While structurally positive, these investments compress take-rates and limit near-term revenue and profit growth.

Competition and Regulatory Landscape
Management described the current environment as a new investment cycle in China e-commerce, with multiple large peers aggressively introducing new business models and promotions. PDD will continue to invest substantial capital in fee reductions, merchant support, and product/technology upgrades, willing to sacrifice short-term profits to support ecosystem development. Globally, the company faces complex regulatory challenges across trade, taxation, data security, and product compliance. While compliance teams and merchant onboarding processes are being strengthened, regulatory shifts introduce unpredictable risks affecting both short- and long-term financial performance.

Outlook
Looking ahead, the Tiger Research team notes that as the platform scales and competition intensifies, revenue growth is likely to remain pressured despite the modest pickup this quarter. Profitability will fluctuate as PDD prioritizes ecosystem health and long-term intrinsic value over short-term results. Overall, 3Q25 demonstrates that PDD can still deliver mid-teens earnings growth and strong cash generation even at a lower topline run-rate, but ongoing volatility should be expected rather than a clear inflection in growth or margins.

The Tiger Research team maintains a HOLD rating with a $120 price target, slightly increasing the 4Q total revenue estimate +2%, while decreasing 4Q non-GAAP EBIT by 10%.