Chinese e-commerce company Pinduoduo reported RMB 31.44 billion ($4.69 billion) in revenue in second-quarter earnings, a 36% growth from last year, and far exceeded the expected average of $4.1 billion, compiled by Yahoo Finance. 

The Nasdaq-listed company also saw an impressive 268% growth in its quarterly net income, bringing in RMB 8.9 billion.

Why it matters: The company attributed its good performance to “consumption recovery” in recent months as China refrained from extended and widespread lockdowns. During the earnings call, Pinduoduo said revenue growth came from increases in online marketing services and transaction services and that the growth in profitability is due to a few “short-term” and “one-off” external factors that may not repeat in the future. 

  • Known for offering bargaining prices, Pinduoduo has managed to report better-than-expected earnings this quarter compared to its rivals, reflecting a more careful consumer spending sentiment in the current economic environment.

Details: Pinduoduo’s almost three-fold increase in net income in the second quarter is mainly due to the improvement of gross margin and some short-term factors. “So, for the past quarter alone, our profitability was mainly attributable to several external factors, mostly short-term or one-off in nature,” said Vice President Liu Jun.

  • Meanwhile, Pinduoduo’s total operating expenses as a percentage of revenue decreased to 47% this quarter, down from 57% in the same period last year. Liu Jun pointed out that many short-term factors, such as project delays and lower business activities, caused such a decrease. “So it is unlikely to continue,” he said.
  • It was reported previously that Pinduoduo plans to launch a cross-border e-commerce platform in September, which will first target the United States. “Overseas business is one of the opportunities that we see, we believe that it is a direction that is worth trying out for us,” Lei Chen, chairman and CEO of Pinduoduo, said in the earnings call, adding that the company will not simply repeat what others have done in this field.
  • The company’s merchandise sales continued to contract, decreasing 97% from RMB 1.96 billion to RMB 50.7 million. The contraction of the merchandise business, which requires the company to shoulder most of the cost, has improved its gross margin.
  • Shares of Pinduoduo surged after the company posted strong results, rising nearly 15% by the stock’s close.

Context: Compared to the two leading Chinese e-commerce giants, Pinduoduo handled the pandemic resurgence relatively well. Alibaba and JD recorded flat revenue and 5.4% growth year-on-year, respectively, in the second quarter, and both had their slowest growth rates in history.

  • The Shanghai-based Pinduoduo was one of the few e-commerce companies that managed to continue offering its services during Shanghai’s Covid lockdown from March to June. Its community group-buy service Kuaituantuan played a vital role for Shanghai residents in solving lockdown food shortages. 

Cheyenne Dong

Cheyenne Dong is a tech reporter now based in Beijing. She covers e-commerce and retail, blockchain, and Web3. Connect with her via e-mail: cheyenne.dong@technode.com.