PDD Holdings Inc.

Ladies and gentlemen, thank you for standing by and welcome to the PDD Holdings Inc. Second Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press the star key followed by the number one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today. Sir, please go ahead.

Thank you, operator. And hello, everyone, and thank you for joining us today. PDD Holdings earnings release was distributed earlier and is available on our website at investor.pddholdings.com and also through the Globe Newswire services. Before we begin, I would like to refer you to our safe harbor statement in earnings press release, which applies to this call. as well as make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings press release, which contains a reconciliation of non-GAAP measures to GAAP measures. Joining us today on the call are Mr. Chen Lei, our Chairman and Co-Chief Executive Officer, Mr. Zhao Jiazhen, our Executive Director and Co-Chief Executive Officer, and Mr. Liu Jin, our VP of Finance. Lei and Jiajun will make some general remarks on our performance for the past quarter and our strategic focus. Jun will walk us through our financial results for the second quarter ended June 30, 2024. During the Q&A session, Lei and Jiajun will answer questions in Chinese that will help translate. Please note that English translation is for reference only. And in case of any discrepancy, statements in the original language should prevail. Now it's my pleasure to introduce our chairman, and Co-Chief Executive Officer, Mr. Chen Lei. Lei, please go ahead.

Hello, everyone, and thank you for joining our second quarter 2025 earnings conference call. The first half of 2025 has seen rapid change in the external environment. At this critical juncture, when merchants doing business on the platform face challenges, We stepped up our commitment in high quality development and launched the 100 billion support program. Through this program, we have invested and will continue to invest substantial resources to support the merchant ecosystem. Together with our merchants, we are actively exploring new business models for the global business, seeking new growth opportunities, and navigating the ups and downs of the market cycles. These significant ecosystem investments were reflected in our Q2 financial performance. Revenue growth further moderated and operating profits declined by 21% year over year. However, as we have emphasized in the past, we prioritize long-term value creation over short-term financial results. Our focus remains on investing for the long term, such as strengthening the ecosystem, driving value chain upgrades, and delivering tangible benefits to our consumers. As a result of our investments in a hundred billion support program, we are pleased to see that the platform ecosystem is making steady progress towards sustainable and high quality development. Since August last year, our $10 billion fee reduction initiative has brought substantial savings for our merchants, creating room for them to innovate and to offer a wider selection of high-quality products to the consumers. At the same time, our logistic support initiative significantly reduced the cost of shipping to remote areas, and led to a 40% growth in order numbers from the regions, injecting new energy into the economy. In this past quarter, the entire company rallied behind a $100 billion support program to deliver innovative solutions to help merchants grow their business, while further reducing costs and commissions for merchants. We are seeing business of all sizes, from established brands to small merchants, gaining new momentum in our ecosystem. Let us look at a few examples. We are seeing established consumer brands successfully reinventing themselves by leveraging consumer insights to shorten product launch cycles, lower R&D costs, and enter into new market segments. Many industrial belt manufacturers were able to make the transition from wide-label products to a branded offering, breaking away from commoditized competition. With the help of the Door-to-Door Premium Produce program, we are seeing farmers and growers earn higher margins by improving quality control and by moving into food processing to capture higher value adds. Alongside merchant support, we have also expanded our consumer give-back program. In addition to the $10 billion program, we introduced new long-term consumer campaigns, such as the $10 billion coupon program. During this year's June 18th shopping festival, we provided additional coupons on top of the national trading program, driving record sales across multiple categories, including fresh produce, electronics, home applicants, and apparel, offering more value for the consumers. Meanwhile, in our global business, merchants and our platform face a more complex business environment. To navigate through the market cycles, we are working together with merchants to explore new business models and new markets, while at the same time deliver innovative solutions to drive efficiency. As a platform that has its roots in agriculture, we continue to invest in agri-tech through initiatives like the Smart Agriculture Competition, which is now in its fifth iteration. 46 global teams competed in the preliminary held in July this year, showcasing cutting-edge technology in AI farming, hydroponics, and air conditioning systems. This event is emerging as an important platform for agricultural technology research and application. Later in this year's competition, the participants will bring their technology from lab to field, testing the commercial applications of their research findings. Looking ahead, as external environments continue to evolve and competition intensifies, we remain committed to long-term value creation over short-term results. Our team will prioritize high-quality growth by creating long-term opportunities for merchants and investing in consumer experience. As we ramp up our investments, profitability will inevitably fluctuate, and this quarter's results may not represent future earning trends. And now, I will hand it over to Zhao Jiazhen to share more details about our performance in the second quarter.

Thank you, Lei. Hello, everyone. I am Zhao Jiazhen. Thank you for participating in the second quarter earnings conference.

Thank you, Lei. And hello, everyone. This is Zhao Jiazhen. Thank you for joining our second quarter 2025 earnings call.

In the second quarter of this year, In Q2, to help merchants tackle emerging challenges, we actively leveraged our role as a platform to take on more social responsibilities.

we accelerated our execution of the 100 billion support program, which represents a significant commitment to high-quality development. This also marks the first merchant support program of this scale.

With the investment of Zhenjing Baiyun, the revenue and revenue of this quarter have been affected to a certain extent. As Chen Lei said, compared to the short-term performance, we are more concerned about the long-term return on investment that can be brought to the platform ecosystem. This is also because we have to sacrifice the long-term

These substantial investments once again affected our quarterly revenue and profit. As Lei noted, comparing to short-term financial performance, we focus more on investments that bring long-term value to the platform ecosystem. And this is why we are willing to accept lower profits to consistently reinvest in the platform ecosystem in the long run.

过去这个季度基于千亿扶持的空间投入, We have invested more energy and resources in hundreds of billions of RMB relief, e-sports, and new jobs. We continue to contribute to tens of millions of business owners. Many business owners only refund the service fee, which can save millions of yuan every year. We have created more power and space for industrial upgrades. Under the push of e-sports, the supply and demand in the east and west regions have doubled, and the supply and demand in the western regions has increased rapidly.

This top quarter, under the unprecedented investment through the $100 billion support program, we dedicated significant resources to initiatives such as $10 billion fee reduction program, logistics support initiative, and new quality merchant support program. We continued to lower costs and increase efficiencies for millions of merchants. Many saved millions of RMB each year, just from service fee reductions. These efforts created more momentum and space for industrial upgrades. The Logistics Support Initiative also bridged supply and demand and helped drive rapid order volume growth from remote regions, greatly enriching the daily lives of consumers in these regions.

In the supply and demand side, Qian Yi supports the full-scale expansion of the support of small and medium-sized buyers, new buyers, and brand buyers.

On the supply side, the $100 billion support program expanded support for SMEs, new quality merchants, and branded merchants, ensuring all types of businesses could benefit from the platform's resource support. This helped agricultural and manufacturing regions achieve all-rounded, high-quality development to meet diverse consumer needs.

在二季度以来,我们的多多好特产专项团队先后走进隋州稻米、昭通土豆、昆明鲜花、山丘鸡蛋、福州竹笋、仙桃水产、舟山海鲜、贵州翅梨等农特产区。 针对各地的商品特点、产业优势,继续实施定制化扶持,通过丰富产品、店铺矩阵、

Our Dodo Premium Produce team visited multiple agricultural regions, including Suizhou rice, Zhaotong potatoes, Kunming flowers, Shangqiu eggs, bamboo shoots in Fuzhou, seafood in Xiantao and Zhoushan, and prickly pear pears in Guizhou, to provide customized support based on local specialties and industry advantages. By enriching product offerings and store matrix, we helped fresh produce merchants overcome seasonal shortages and achieve sustainable growth.

In Wumong Mountain, Zhaotong, Yunnan Province, local Huaxing potatoes are rich in flavor and nutrition, and have always been the main source of income for the villagers. However, they have been limited to their local location, and can only be sold with local agricultural products for a long time. The value of the industry is low. In recent years, our business has opened a factory in the local area, and introduced intelligent equipment. In Zhaotong Yunnan, for example, local potatoes are particularly tasty and nutritious, and have been a main source of income for local farmers.

However, due to geographic constraints, These potatoes were traditionally sold as low added value raw produce. In recent years, one of our merchants set up automated production to turn these potatoes into flavored chips. With the platform's help, the product gained national popularity, creating its own online followings. This turned agricultural produce into a key local industry that increased income for 11,000 local farmers.

This quarter,

New quality supply team also visited industrial belts such as Yiwu Small Merchandise, Xinjiang Snacks, Apparel in Guanyuan, Children's Square in Foshan, and Fishing Gears in Weihai. By making these visits, we gained deeper understanding of merchant needs and challenges faced by them. Following these visits, leveraging the platform's digital capabilities and promotional tools such as the black label stores and dodo short videos,

we were able to help merchants explore new growth models.

In Yiwu, after decades of development, the local small merchandise market is facing intense commoditized competition, with many merchants and factories operating within profit margins and low barriers to entry. Our team integrated the merchant systems with the platform's backend to help them identify hit products. Together with the regional support from the platform, this significantly improved the success rate of new product development, reducing the cost of trial and error. Our support measures created room for merchants to innovate and injected new energy in the transformation of the local industries.

In addition, Qian Yi Support is actively participating in the supply of energy brands, especially traditional state-owned brands. In the face of new changes in the market, In addition to merchants in agricultural regions and industry belts,

The $100 billion support program is also empowering consumer brands, especially traditional national brands. Facing new consumer trends, many of these traditional brands are dealing with challenges such as lack of product innovation and slowing growth. Leveraging deep consumer insights, our team works with brand partners on an end-to-end solution covering product planning, marketing, and store operations. These partnerships have enabled brands to successfully tap into younger and niche market segments, unlocking new growth opportunities and achieving strategic transformation.

We have invested in a series of supply chains, and have further inspired the consumer potential of demand chains. During the 628 boom, the platform's full-time consumption continued to heat up, and the sales of dozens of items reached a new high, exceeding 3.76 million orders of single-day orders of hundreds of millions of subsidies. Our supply-side investments also stimulated consumption demand.

During the June 18 promotion, sales hit new highs across dozens of categories. The super double discount event alone reached over 3.76 million orders in a single day, meeting consumers' evolving needs.

目前,电商行业正在围绕新业态进行新一轮的集结竞争。 We insist that the long-term idea will not change. We will continue to deeply advance the 100 billion support strategy, to optimize the customer service and promote the industry, and to build a multi-party supply ecosystem. We also hope that through our own efforts, we can guide the industry to a more universal and open direction, and to create a greater value for society.

And as competition in the e-commerce industry intensifies around new business models, we remain committed to long-term thinking. We will continue to deepen the 100 billion support program, investing substantial resources in improving user experience, merchant services, and industrial upgrades to build a win-win ecosystem. We also hope our efforts can help guide the industry toward a more inclusive and more open environment, creating greater value for the society.

I will now hand it over to Jun.

She will provide you with an update on our Q2 financial performance.

Thank you, Jiazhen. Hello, everyone.

Let me walk you through our financial performance for the second quarter ended June 30, 2025. In terms of... In the second quarter, total revenues increased 7% year-over-year to RMB 104 billion. This was driven by an increase in revenues from online marketing services and transaction services. Revenues growth further moderated as competition intensified, and as we helped, merchants increased efficiencies. Revenues from online marketing services and others were RMB 55.7 billion this quarter, up 13% from the quarter of 2024. Revenues from transaction services were RMB 48.3 billion, up 1% from the same quarter last year. Moving on to costs and expenses. Our total cost of revenues increased 36% from RMB $33.7 billion in Q2 2024 to RMB $45.9 billion this quarter, mainly due to increase in fulfillment fees, bandwidth and server costs, and payment processing fees. To get basis, total operating expenses this quarter increased 5% to RMB 32.3 billion, from RMB 30.8 billion in the same quarter of 2024. On known gases, total operating expenses increased to RMB 30.4 billion this quarter, from RMB 28.4 billion in Q2 2024. In the second quarter, in significant resources in rolling out a series of margin support initiatives. Looking ahead, we are committed to supporting the fidelity of the ecosystem and will continue to prioritize long-term value creation over short-term results. Our total non-GAAP rating expenses as percentage of total revenues this quarter was 29%. In live, it's the same quarter last year. Looking to specific expense items, our known gap sales and marketing expenses this quarter were RMB 26.7 billion, up 5% versus the same quarter last year. Sales and marketing expenses as a percentage of our revenues this quarter was 26%. in line with the same quarter last year. Our known gap general and administrative expenses were RMB $667 million versus RMB $594 million in the same quarter of 2024. Our research and development expenses were RMB $3.1 billion this quarter, our known gap basis RMB 3.6 billion on a GAAP basis, up 23% year-over-year. On a GAAP basis, operating profit for the quarter was RMB 25.8 billion versus RMB 32.6 billion in the same quarter last year, up 21% year-over-year. Non-GAAP operating profit was RMB 27.7 billion versus RMB 35 billion in the same quarter last year. Non-GAAP operating profit margin was 27% this quarter, down from 36% from the same quarter last year. The year-on-year decline of operating profit reflects our continued investments in supporting our merchants Nothing Contributable to Ordinary Shareholders was RMB 30.8 billion for the quarter, compared to RMB 32 billion in the same quarter last year, down 4% year-over-year. Base Earnings per ADS was RMB 22.01, and Deloitte Earnings per ADS was RMB 20.75. versus base earnings per ADS of RMB 23.14 and delayed earnings per ADS of RMB 21.61 in the same quarter of 2024. Non-GAAP net income attributable to ordinary shareholders was RMB 32.7 billion versus RMB 34.4 billion in the same quarter last year. Non-GAAP diluted earnings per ADS of RMB 22.07 versus RMB 23.24 in the same quarter of 2024. The net income in Q2 benefited from e-commerce seasonality and may not represent future earnings. As we remain focused on long-term dollar creation, the sustained investments may continue to weigh on short-term profitability. That completes the income statements. Now, let me move on to cash flow. Our net cash generated from operating activities was RMB 21.6 billion, compared with RMB 43.8 billion in the same quarter last year. As of June 30, 2025, we have RMB 387.1 billion in cash cash equivalents, and short-term investments. Thank you. This concludes the prepared remarks.

Thank you, Jun. Next, we'll move on to the Q&A session. In today's Q&A session, Lei, Jiajun, and Jun will take questions from analysts on the line. We could take a maximum of two questions from each analyst. Lei and Jiajun will answer questions in Chinese, and we will help translate for convenience purposes. Operators, we're open for questions.

Thank you, ladies and gentlemen. We will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Participants are requested to restrict the number of questions to two at each time. Your first question comes from Alicia Yak with Citigroup. Please go ahead.

Thank you. 管理层,晚上好。谢谢接受我的提问。 我有两个问题。 第一个问题是,这个季度我们看到电商平台围绕即时零售做了非常大的投入, 然后也掀起了新一轮行业的投入。 我们也看到一些内容平台在电商业务上还是持续的加大投入。 This reflects the performance of this quarter. Compared to some other platforms, our company's revenue gain is actually lower. I would like to ask the management to talk about what the main reason is here, and what kind of strategy the company will use to deal with it. The second question is that in the first half of this year, the external environment has also changed very quickly. 那经过半年的发展 公司对未来全球化业务的发展有什么样新的想法 未来业务模式有哪些新的演化方向呢 然后从财务表现来看 全球化业务未来的增长点在哪里 我们应该如何思考这个增速的目标 我自己翻译一下 Thanks, management, for taking my questions. Two questions. First is that this quarter we saw our e-commerce platform have made substantial investment in the instant retail, instant shopping, launching a new wave of industry investment. At the same time, We also saw some content platforms also continue to step up their e-commerce effort. So compared to the peers, the lead in the company's revenue growth rate has narrowed this quarter. So could management elaborate on the reasons behind this and how management is thinking about navigating these competitive dynamics? And then the second question is the external environment has shifted rapidly in the first half of this year. So looking ahead, how does management think about the next phase for your global business? What new directions or evolutions do you see in terms of the business model? And then from a financial perspective, where do you think the main growth opportunities are and how should we think about the growth target? Thank you.

Hello, this is Xiaojiazhen.

Let me take your first question.

In the past, industry competition has been increasing. We have also seen that the main market participants have invested a lot of resources in the new business model. In this context, the company's second quarter revenue index has slowed down.

In the past quarter, industry competition intensified further, as the major market participants invested heavily in new business models. And again, in this backdrop, our revenue growth slowed further in Q2, while operating profit declined meaningfully for the second consecutive quarter.

为了应对这样愈发激烈的金融态势呢, The platform will also respond more actively. From a long-term perspective, the trend is to see competition. We turn industry competition into a positive opportunity to promote high-quality ecological development. Therefore, the platform actively chooses to increase investment and sacrifice part of its own profits to create a space for small and medium-sized businesses to develop. This is the responsibility of the platform in terms of management. It is also a long-term investment in the development of the platform ecosystem.

In response to the intensified competition, we will adopt a proactive and long-term approach, taking the competition as an opportunity to strengthen the high-quality development of the platform ecosystem. And then accordingly, we have chosen to increase investment and to forego part of the profits in order to create growth opportunities for the SME merchants. And from management's perspective, we believe this is a responsibility that the platform is best placed to take on, and at the same time, represents a long-term investment in strengthening our ecosystem. We do not believe this quarter's profit level are sustainable, and fluctuations in profitability is likely to continue in the coming quarters.

Currently, the platform has entered a period of high-quality development. As a platform, we fully understand that only active actions and close cooperation with industrial chains and supply chains are possible to promote long-term, long-term health growth and achieve high-quality development. In this early stage of the industry, we choose to put our attention on each specific business and case, and actually support the business.

Curly, the industry is going through a critical stage of high-quality development. We realized that only by taking the initiative and working closely with the supply chain partners can the platform drive sustainable growth for the industry and also achieve high-quality development. Amid the intensifying competition, we choose to turn our focus on individual merchants and specific merchant support cases to deepen our merchant support measures one case at a time.

For example, we see the new participants on the platform join a high-efficiency team to design and develop smart factories and smart production lines. By using automated means to produce high-quality vegetable salad products, the fresh products that can only be seen in the past can only be seen offline. Through the platform express delivery to consumers' homes, the platform pays special attention to this type of technological agricultural products. Under the 100 billion support plan, the focus is on supplementary support,

For example, we are seeing merchants on a platform collaborating with college research teams to design and build smart factories and automated production lines, which are then used to produce high-quality, ready-to-eat, fresh salad products. In the past, these products could only be found offline and now available to consumers through our platform and delivered to their doorsteps. The platform paid special attention to these technology-enabled agricultural products and provided targeted support under the $100 billion support program, which helped merchants increase its online sales, offered tangible savings to consumers, and at the same time broadened the supply of high-quality innovative products on the platform.

There are many more examples of such cases that benefit all parties involved.

And each of these cases is made possible only through the close collaboration between the platform, the merchant, and the supply chain. We understand that to deliver effective support and to ensure that 100 billion support program truly gets to the SME merchants who need it most, we need to go deep into agricultural regions and the industry belts and carefully understand the pain points and difficulties that merchants are dealing with.

As for the changes in the external environment and the continuous increase in industry competition, we will continue to further increase the investment in the business industry. The addition of these factors will inevitably cause the company's short-term financial performance to fluctuate. But in the long term, as long as we can do a specific business business bump case, we are confident that the business will truly achieve high-quality and sustainable growth. This is also our current idea of competition.

And looking ahead, changes in the external environment and intensifying competition will inevitably lead us to step our investments in the merchant ecosystem. And these factors combined will cause the short-term financial results to fluctuate. However, in the long run, if we execute well on each and every one of these merchant support cases, we are confident in achieving sustainable, high-quality growth together with our merchants. This is how we are approaching today's competitive environment.

Hello, this is Chen Lei.

Let me take your questions on our global business.

We have seen that in the past few seasons, countries and regions have made great changes. The global trade structure has also changed a lot. In different regions, there will be some fluctuations in the short term. But overall, we see that the consumer's demand is stable. At the same time, the consumer's trust in our platform is also gradually increasing. As a result, we will actively adapt to the changes in various places and make quick adjustments.

We noted that in the past few quarters, we have seen significant changes across countries and regions, and also shifts in the global economy. We may continue to see some short-term volatility in different markets. However, we observe steady consumer demand and consumer trust in our platform is gradually growing. We will proactively adapt to changes in each region, make timely adjustments, and meet the changing regulatory requirements of each region, as well as the diverse needs of consumers.

当前全球化业务已经经历了一开始的发展阶段。 Now, our global business has gone through an initial phase of growth.

We are encouraged to see that our products and services are well received by consumers around the world. But at the same time, our business is still in its early stages, and there is plenty of room for improvement.

回顾到了我们开始做全球化业务的初心, 我们是希望能够为世界各地的消费者 带去更多的优质好物。 接下来我们还是会围绕着供应链的能力, 服务的能力,以及合规的能力, 去做更多的投入,扎实地练好基本功,

The vision of our global business has always been to bring more high-quality products to consumers worldwide. Looking ahead, we will continue to invest in our supply chain capabilities, surface capabilities, and compliance capabilities to strengthen the fundamentals for the next phase of the global business.

In terms of supply chain capability, we are continuously strengthening the localization of our business. Together with local merchants, we promote the choice of products on the platform, strengthen the stability of the supply chain, and improve efficiency. In terms of service capability, the platform is continuously optimizing the cooperation model with our logistics partners to improve the experience of booking. Our team is working on all aspects to maximize the ability

On the supply chain capabilities, we are continuously strengthening our localized operations, working closely with local merchants to diversify product offerings and improve supply stability and delivery efficiency. On the surface capabilities, we are constantly iterating collaborations with our logistics partners to enhance the fulfillment experience.

We are continuously building our team's capabilities to meet the high expectations of consumers worldwide.

Looking forward, the level of service we currently provide is still in its early stage. Our team will continue to work hard day by day through the continuous improvement in service quality. We hope to win over more and more consumers.

Thank you for your questions.

Thank you. Your next question comes from Thomas Chong with Jefferies.

Good evening, thank you for accepting my question. I have two questions. The first one is, since the company launched the 1000 billion welfare plan, what changes has the management seen in terms of business operations? From the financial performance point of view, what kind of changes will this year's performance be affected by the 1000 billion welfare plan? From the mid-term point of view, what kind of changes will this strategic move bring to the company's conversion rate and cost investment? 我另外一个问题是关于公司如何看多多买菜这个业务的板块。 我们看到公司主要的竞争对手已经从一些市场退出, 公司未来对这个板块有什么样的规划? Thanks, management, for taking my question. My first question is about since the launch of the 100 billion support program last quarter, what are the key changes that management has observed in your business operations? From a financial perspective, how is the impact of these investments shown in your financial performance and on a mid to long-term horizon? What will this affect the company's monetization and spending? My second question is about what's the company's view on the door-to-door grocery business? We noticed that some of the company's main competitors in this business have exceeded certain markets. What are the company's future plans for this business? Thank you.

Hello, Thomas. I'm Zhao Jiazhen. Let me answer your first question.

Hi, thank you, Thomas. This is Zhao Jiazhen. Let me answer your first question.

Since the first half of last year, industry competition has been increasing, and the external environment is also accelerating. We have increased the scale of the overall cost reduction of the platform. We have also launched the platform's Baiyi-Jianmian, Xingzhi-Shangjia-Fushi-Jihua, Dianshan-Xijing, and others.

Since the second half of last year, with escalating competition and accelerating changes in the external environment, we have scaled up commission reductions across the platform. Initiatives such as the $10 billion fee reduction initiative, the new quality merchant support program, and the logistics support initiatives have been rolled out to lower merchant operating costs and help drive efficiencies.

今年以来,经过管理层的一致决定, 平台推出了千亿扶持的会商计划。 作为我们下一个阶段的战略决定, 在接下来的一段时间内, 投入大量的资源扶持加码高质量电商生态建设, 牺牲一部分平台的利润,培养长期健康的平台生态。 Earlier this year, the management unanimously decided to launch the

100 billion support program as our next strategic initiative, dedicating significant resources and sacrificing the platform's profits to cultivate a sustainable and healthy platform ecosystem.

千亿扶持的这个计划的含义非常广泛。 我们是看到三家需要什么样的支持,就在这方面加大投入。 过去一季度,我们看到千亿扶持计划的效用逐渐的释放。 The 100 billion support program is very broad in scope.

We focus on our support measures where merchants need it most. Over the past quarter, we have begun to see some of the early effects. For instance, in the agricultural sector, we launched the 2025 Dodo Premium Produce Initiative, expanding support to merchants across hundreds of high-quality agricultural regions. It helped our merchants explore new ways to bring agricultural products online, increase the added value captured by the merchants, and drives higher production and income.

Beyond agriculture, our dedicated teams for a new quality merchant support program also visited hundreds of manufacturing belts

assisting more SME merchants with their transformation and accelerating the manufacturer's shift towards high-quality development.

又比如說依托電商襲進計畫, 通過偏遠地區物流中短費減免的政策, 商家僅需要支付正常的運費, 就可以把商品銷售到偏遠地區, 大大拓寬了商品的銷路。 在為商家降本增向的同時, 也激活了區域的消費潛力。

And similarly, through our logistics support initiatives, the platform waived shipping fees from transit warehouses to final destination for orders shipping to remote regions, allowing the merchants to sell their products to these regions by paying only the usual shipping fees, which significantly expanded the market reach. This initiative not only brought down costs and improved efficiency for merchants, but also stimulated regional consumption and allows high-quality products to reach more consumers, benefiting the wider consumer base.

接下来我们会持续深入了解商家基因的痛点和难点。 在千亿福祉的计划下,开发出有针对性有诚意的搬福措施, 持续加大投入,把反哺病态生态做扎实。

Going forward, we will continue to do our best to understand the pain points and difficulties faced by our merchants, and through the $100 billion support program, increase our investments to deliver targeted and meaningful support to deepen our support to the merchant ecosystem.

From a financial point of view, in the past quarter, we have made a series of investments around the above mentioned aspects, which inevitably led to a slowdown in income and a decline in profits. From a financial perspective, the investments made over the past quarter have resulted in slower revenue growth and year-on-year profit decline.

This reflects the platform's commitment to investing substantial resources to support merchants. We will continue to ramp up our investments to enable merchants to thrive while building a more sustainable and robust platform ecosystem. And as such, we do not believe this quarter's profits are sustainable. There will be fluctuations in profitability in the coming quarters. 还有关于你第二个关于买菜的问题,那我也来继续回答一下。 And about your second question on total grocery.

首先呢,买菜是一个比较苦的业务。 确实需要长期的大量的投入。 应该对手呢,选择在这个时候退出集中力量去投入新模式业务。 但是呢,对于我们来说,我们不能松懈。 而是要进一步的加大符合我们业务规划的投入。 用钉钉子的精神去应对行业竞争加剧对我们业务上造成的冲击。

And first of all, DoDo Grocery is a hard business requiring significant long-term investments. The competition chose to exit the business at this juncture to concentrate on investing in new business models. But to us, this is not a time to relax. We need to further increase investments based on our own business model and to address the impact from the intensifying competition with relentless execution.

买菜业务来说, Since then, when we evaluate whether we want to do a business, the first thing we ask ourselves is whether we can create our own unique value. The company also mentioned in the beginning of 2020, when we launched the Duoduo Grocery business, we saw Duoduo Grocery as a natural extension of an e-commerce business. When we launched this business, we also saw that platform users have real needs for fresh products, and traditional e-commerce supply chains cannot well meet these needs.

As to the total grocery business itself, when evaluating whether to pursue a new business, the first question that comes to us is always whether we can create our unique value. When we launched the total grocery business in 2020, we viewed it as a natural extension of our e-commerce operations. The initial reason for us to start this business was seeing that traditional e-commerce supply chains struggled to meet that user's demand for fresh produce.

For example, certain fresh products incur significant spoilage during traditional e-commerce fulfillment.

And in response to these pain points, we decided to increase our investments in the supply chain to better match demand and local supply, building a supply chain suited for agricultural and fresh products, and creating value for both users and merchants in terms of product variety and fulfillment efficiency.

经过近五年的投入,目前读者买菜的提货点已经覆盖了超过全国的70%的行政村。 After five years of investment, Dodo Grocery now covers 70% of villages nationwide, addressing last mile delivery challenges in many areas

and meeting consumer demand for high-quality affordable products. At the same time, we have established an efficient agricultural product distribution network, connecting local farmers and SME merchants with local consumers and expanding their market reach.

今年以来,在千亿福祉计划的加持下, 平台向偏远地区加大了补贴和流量的倾斜力度。 一些地区近期开通多的买菜业务之后, quickly enriched the local product supply, and the context of the general consumer circle continued to grow, satisfying the needs of local consumers for consumer development. At the same time, the grocery business also created more sustainable employment opportunities in the local area, promoting the cultural development of community employment.

Since the beginning of this year, with a 100 billion support program, the platform has increased support and traffic allocation to remote regions. In regions where dodo grocery services were recently launched, local product offerings have greatly improved and expanding the reach of an inclusive consumption network to meet local consumers' growing demand for better products. And meanwhile, the grocery business has created competitive local employment opportunities, contributing to the economic growth in these communities.

Just like what I just said, this is a business that needs to continue to invest a lot of money, but we think it's very meaningful. We will continue to invest more. As I just mentioned, while dodo grocery business requires substantial investment, we believe it is quite meaningful and we will continue to increase our investments.

Going forward, we will deepen our long-term commitments across product, supplies, service quality, and delivery efficiency for the dodo grocery business, creating tangible benefits for consumers and supply chain participants.

Thank you for your question. Thank you. Okay.

Thank you, Thomas. I think we have time for one more analyst. Thank you.

Thank you. Joyce Chu with Bank of America.

Hey, Lei, Jiazhen Jun, Carrie, good evening. Thank you for accepting my question. My first question is actually a follow-up to Thomas' question. Because in fact, in the last quarter, the management has also mentioned many times the problem of mismatch between our investment and return cycle. It also points out that this is one of the main reasons for the loss of profits in the first quarter. So from the performance of the second quarter, in fact, our company's fee rate and profit rate seem to have a steady trend. 就是想聊但刚刚公司也提到嘛我们可能整个投入还是一个比较长的周期就想问一下公司的投入规模或者说是整个周期是不是现在已经趋于稳定我们应该怎么去思考公司在短期和长期的利润率的趋势 Let me translate my questions. First, in last quarter's earnings call management mentioned the mismatch between investment cycles and the return cycle. was a primary cause of the profit decline in the first quarter. Looking at the second quarter results, it seems companies' expense ratio and profit margin levels show signs of stabilization. Just wonder, does it indicate the company's investment cycle has already stabilized significantly? And how should we actually expect a profit margin trend going forward, both long-term and short-term? My second question is, recently we have seen some signs of improving consumer demand from some industry data. Has management observed a similar trend lately? Any updates on consumer sentiment or behaviors will be appreciated. And how does management view macro trends in the third and fourth quarter this year? Thank you very much.

Hello, Joyce. This is Jane. I would take your first questions. First of all, our profits in Q2 benefited from e-commerce seasonality, and so this quarter may not represent future earnings. And if we're looking at the numbers, our Q2 revenue growth further slowed to 7%, and operating profits dropped 21%. We believe there are several reasons for this. First, the platform has increased its investment to support merchants, which naturally impacts profitability. And for second, intensified industry competition continues to create challenges for our merchants and the platform. So to help merchants navigate market cycles, the platform will continue to scale up investments. So Q2 profit levels should not be seen as a reference for future performance. We do not believe this quarter's profit level is sustainable. in profitability in the coming quarters. As we have communicated in the past, in a carbon market environment, increasing platform investment to help merchants through the cycles As a responsibility, the platform can and must take home. We believe that these investments will create a healthier merchant ecosystem in the long run. Our focus remains on long-term value creation rather than short-term financial performance. As Leigh and Jasmine just mentioned, we will continue to increase our investment.

Thank you.

Hi, this is Zhao Jiazhen. Let me answer your second question.

China's consumer market is very competitive and resilient. With the continued growth of consumer market, we can see that the overall retail market is steadily rising. The online retail profitability is also constantly increasing. We are still confident in the potential of the overall Chinese consumer market.

China's consumer market demonstrates remarkable potential and resilience. And driven by sustained pro-consumption policies, we have observed steady growth in overall retail sales, alongside a continuous rise in online retail penetration. We remain very confident in the overall potential of China's consumer market.

And then from the industry structure, the competition is constantly increasing. It is also more convenient for consumers to switch between different platforms.

However, from an industry structure perspective, we are seeing escalating competition, and it is increasingly convenient for consumers to switch between different platforms. And the competitive landscape is at risk of being reshaped. And in this environment, the platform must take on a more proactive goal by increasing investments.

In the second quarter of 2018, the platform has invested a large amount of money into the supply of high-quality agricultural products and domestic products. On the other hand, it has also issued surplus consumer vouchers to the consumer to help the consumer achieve the needs of annual stockpile with a greater advantage. During the second quarter, agricultural products and new products participating in the 100-billion supply of agricultural products and new products have achieved double growth.

And during the June 18th shopping festival in Q2, we not only provided substantial support to high-quality agriculture and national brands, but also offered extra coupons to consumers to provide consumers more savings for their mid-year shopping needs, And during the promotion, the number of agricultural and new quality merchants participating in the 10 billion program doubled, enabling many SME merchants across multiple categories to reach new milestones. And moreover, categories such as beauty, skin care, maternity and baby, and pet supplies also experienced good growth through the promotion.

此外,我们的千亿扶持所推出的2025多多好特产项目 and into hundreds of high-quality agricultural areas to help with high-quality agricultural products. For example, Guangdong's Guiwei Liji, which is famous for its high-quality products, sold more than 1 billion pieces during the 618 period. The sales quickly broke through 100,000 jin. The professional team of the New Three-Compost Plan also continued to enter, for example, 300 new industrial areas such as Xiefu in Jingjiang and Guangdong Xiangji in Guangdong. The access to large-scale consumer engines helped a large number of new products to quickly open up.

The 2025 Doduo Premium Produce Program has reached hundreds of high-quality agricultural regions, helping high-quality agricultural products reach urban consumers. For example, lychees from Guangdong, Maoming quickly sold over 50,000 kilograms after being featured in the $10 billion program. Our dedicated team for a new quality merchant support program also continues to engage with hundreds of manufacturing regions such as footwear and apparel in Xinjiang and cameras in Guangdong. Leveraging the momentum of the shopping festival, we helped a large number of quality products quickly reach the market.

Our platform's active investment has received good feedback from consumers and buyers. In the future, in the face of intense industry competition, the platform will continue to increase its investment in supply and demand, sacrificing part of the platform's profits to create a healthier and more active platform environment.

And then the platform's proactive investments have created positive feedback from both consumers and merchants. And going forward, in this intensifying competitive environment, we will continue to increase our support on both the supply and demand sides, sacrificing part of the platform's profits to foster a healthier and more vibrant ecosystem. And by doing so, we hope to help more SMEs reduce costs and drive sales and offer consumers more tangible benefits. Thank you. Thank you. Thank you, Joyce. And I think it's about time. And thank you again for joining our call today. And we look forward to speaking to you again next quarter.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect.