"Rebuilding PDD in three years" – this strategic goal announced late last year is accelerating its implementation, with the supply chain as the core focus. A 100 billion yuan investment will be heavily allocated to the supply chain.
During the Q1 earnings call on May 27th, in response to analysts' questions about "where the 100 billion yuan will be directed and when results will be seen," PDD Holdings' Co-CEO Zhao Jiazhen provided a clear "blueprint." He stated, "Continuing to heavily invest in the supply chain will be the company's core strategy for the next decade. Compared to short-term performance, we prefer to focus on the long-term value brought by nurturing the ecosystem and investing heavily in the supply chain."
Zhao Jiazhen pointed out that brand building is not simply about traffic support; it is a long-term project covering the entire chain from product design, standard setting, and collaborative manufacturing to quality control, warehousing, fulfillment, and after-sales service. In the past, many small and medium-sized manufacturers were trapped in low-cost mass production and homogenized competition, struggling to achieve value chain upgrades. Now, the platform, through brand self-operation and collaborative supply chain building, directly channels sales certainty into the industrial chain – "the platform assumes more risk, allowing the manufacturing side to focus on high-quality production."
In the 2025 annual report released at the end of March this year, the company officially disclosed a core piece of its "three-year rebuilding" strategy – "New Pinmu." This dedicated company has been established in Shanghai, with an initial cash injection of 15 billion yuan and a plan to invest a cumulative total of 100 billion yuan over the next three years. It aims to integrate the supply chain resources of "PDD + Temu," launch a self-operated brand model, and systematically incubate brands for the global market.
Co-CEO Chen Lei also added during this earnings call that there remains a large amount of unmet consumer demand in the global market, and branding is a key opportunity for the next stage of upgrading China's supply chain. "Our goal is to systematically incubate a portfolio of globally recognized brands, driving the entire supply chain to achieve a value leap."
**Brand Self-Operation: Platform Assumes Risk, Manufacturers Focus on Quality**
The brand self-operation business is the most market-watched strategic variable of this earnings season. Zhao Jiazhen positioned it as an extension of the "rebuilding PDD in three years" strategy, not a disruptive transformation. He noted that years of deep cultivation in industrial clusters have shown that many small and medium-sized manufacturers, constrained by talent, information, and scale, have long been stuck in homogenized competition and have yet to complete the branding transition.
Under this model, the platform no longer plays a simple traffic-matching role but proactively assumes more risk and responsibility. By providing sales certainty to manufacturers, the platform enables them to confidently invest in R&D and process innovation, significantly reducing trial-and-error costs during the branding process. Zhao Jiazhen stated that this certainty will significantly improve supply chain operational efficiency, promoting a positive cycle between the platform and the manufacturing side.
Currently, the dedicated team has deeply engaged with major industrial clusters across the country, integrating high-quality supply chain resources and collaborating deeply with globally renowned IPs to incubate brands for different markets and product categories. Chen Lei added that the goal of this model is to systematically build a group of brands with global influence, driving supply chain transformation and upgrading while strengthening the platform's consumer mindshare and compliance capabilities in the global market.
**100 Billion Yuan Support Plan Deepens, Agriculture and Rural Markets Become Key Focus**
The 100 billion yuan support plan continued to intensify in Q1, with several special initiatives undergoing iterative upgrades. In the agricultural sector, the company launched the 2026 "Duoduo Good Specialty" project, extending support from products and merchants to the entire chain including planting, cultivation, logistics, and deep processing. The first batch of projects has been implemented in agricultural specialty regions such as Nanning's Wogan oranges, Hainan pineapples, Ningxia goji berries, and Lianyungang aquatic products.
Regarding logistics, the "E-commerce Westward Expansion" initiative includes remote area consumers in free shipping zones by building transfer warehouses in central and western regions, with the platform covering secondary logistics costs. Management disclosed that this has reduced logistics costs in some regions by nearly 80%, with individual merchants saving millions of yuan on fulfillment alone.
Rural express delivery is also advancing simultaneously. The company is upgrading rural express stations into "digital rural micro-complexes," combining package collection/delivery with the "first mile" hub function for agricultural product distribution. Taking some counties in Hainan as an example, as of the end of March, direct village coverage has exceeded 70% of local administrative villages, with daily order volume at transfer warehouses approaching ten thousand.
**Platform Governance Accelerates, Food Safety Compliance Investment Upgraded**
Parallel to supply chain investment, platform governance was also intensified in Q1. Zhao Jiazhen stated that this year is a crucial year for promoting organizational and cultural reshaping after he assumed the role of Chairman, with safety, compliance, and social responsibility being the premise for all actions.
In Q1, the platform intensively launched over 20 food safety governance measures, covering merchant qualification reviews, food advertisement governance, live-streaming compliance inspections, food database construction, and dual technical and manual inspection mechanisms. The processing time for non-compliant stores has been compressed to the hour level.
Chen Lei added that brand-oriented development itself is also an important path to enhance compliance capabilities – by implementing stricter quality standards and brand management systems, the platform's overall compliance capabilities are strengthened, winning consumer trust in the global market.
**Co-CEO Zhao Jiazhen:** Dear investor friends, welcome to the PDD Holdings 2026 first quarter earnings call. This year marks the beginning of PDD's second decade and is a crucial year for me to initiate a comprehensive reshaping of the company's organization and culture around high-quality development for the new decade, following my appointment as Chairman. This quarter, the group's revenue was 106.2 billion yuan, an 11% year-over-year increase. Compared to short-term performance, we are more focused on the long-term value brought by nurturing the ecosystem and investing heavily in the supply chain.
Next, I will elaborate in detail from four aspects: the three-year rebuilding strategy, the brand self-operation business, the 100 billion yuan support plan, and platform governance. First, the major strategy of rebuilding PDD in three years has entered a new stage of deepening development. In March this year, we established a dedicated company in Shanghai, officially launching the brand self-operation business with an initial cash injection of 15 billion yuan and a plan to invest 100 billion yuan over the next three years. The team is deeply engaged on the industrial front lines, accelerating the integration of supply chain resources, collaborating deeply with globally renowned IPs to incubate brands for different markets and product categories, comprehensively empowering the supply chain towards branding, and driving the supply chain system to achieve a value leap.
Second, under the brand self-operation model, the platform directly brings sales certainty to the industrial chain, giving the manufacturing side the confidence to invest in product R&D and process innovation, significantly reducing trial-and-error costs and uncertainty during the branding process. By internalizing the risks of the manufacturing side as the platform's responsibility, we empower the supply chain with certainty, creating a win-win situation for all parties: the manufacturing side escapes homogenized competition to focus on quality upgrades, consumers enjoy quality goods at reasonable prices, and the platform further deepens its supply chain foundation, ultimately achieving platform rebuilding.
Third, the 100 billion yuan merchant-friendly support policy continues to nurture merchants and industries. In the agricultural field, we launched the 2026 Duoduo Good Specialty project, deeply cultivating upstream and downstream links such as agricultural product planting, cultivation, cold chain logistics, and deep processing. The first batch of projects has been launched in agricultural specialty regions including Nanning's Wogan oranges, Hainan pineapples, Tongren matcha, Ningxia goji berries, and Lianyungang aquatic products. The "New Quality Supply" special initiative continues to engage with industrial clusters like Zhangzhou snacks, Zhengzhou skincare, Yiwu jewelry, and Zhongshan lighting. Merchants are shifting from homogenized competition to user-centric independent R&D models. Under the "E-commerce Westward Expansion" policy, the platform covers secondary logistics transfer fees, reducing logistics costs in remote areas by nearly 80%. Many merchants have saved millions of yuan on logistics fulfillment alone.
Fourth, regarding platform governance, over 20 food safety governance measures were intensively launched in Q1, including operational qualification compliance reviews, food advertisement governance, food live-streaming control, and food database construction. The processing time for non-compliant stores has been improved to the hour level.
Challenges at the beginning are inevitable, but difficulties are precisely the driving force for the team's self-revolution. Our current team will face difficulties head-on, responding to external concerns and expectations with solid actions and verifiable results.
**Co-CEO Chen Lei:** At last year's annual strategic meeting, we formally proposed the strategy of rebuilding PDD in three years, focusing the company's strategic focus on supply chain investment. In Q1 of this year, the establishment of the dedicated company officially launched the brand self-operation business, marking the first full quarter under the three-year strategy.
The team has deeply engaged with industrial clusters across different product categories, integrating high-quality supply chain resources, and collaborating deeply with merchants and manufacturers to design and develop self-operated brand products for different global markets. Global business continued steady growth this quarter. The valuable experience accumulated from the 100 billion yuan support plan will guide future supply chain investment.
In industrial clusters, many merchants are leveraging platform support to establish their own brands, shifting from standardized mass production to demand-driven customization models. Traditional OEM factories are also moving beyond basic production to invest in product R&D, technology, brands, and channels, transitioning from scale-driven to quality-driven. The results of the 100 billion yuan support plan indicate that branding is the next major opportunity for supply chain upgrade, reinforcing our confidence in the first-party brand model.
There remains a large amount of unmet consumer demand in different markets, indicating significant potential for launching branded products. Our goal is to systematically incubate a portfolio of globally recognized brands through the brand self-operation model, thereby driving a value leap across the entire supply chain.
In the field of agricultural technology, the fifth Smart Agriculture Planting Competition has concluded. The event has evolved from an industry competition into a testing ground for the transformation of agricultural technology achievements, becoming an incubator for the next generation of agricultural research talent.
2026 marks a new starting point for PDD's next decade. We will move forward with gratitude and a sense of mission, firmly advancing the brand self-operation business, increasing supply chain investment, with the goal of rebuilding a PDD in the next three years.
**CFO Liu Jun:** Now, let's look at the Q1 financial performance. On a consolidated basis, total revenue was 106.2 billion yuan, an 11% year-over-year increase, primarily driven by growth in transaction services revenue.
Regarding revenue composition, online marketing services and other revenues were 49.9 billion yuan, compared to 48.7 billion yuan in the same period last year. Transaction services revenue was 56.3 billion yuan, a 20% year-over-year increase.
Regarding costs and expenses, total operating costs were 46.9 billion yuan, a 15% year-over-year increase, mainly due to increases in fulfillment expenses, bandwidth and server costs, and payment processing fees. On a GAAP basis, total operating expenses were 39.8 billion yuan, compared to 38.6 billion yuan in the same period last year. On a non-GAAP basis, total operating expenses were 38.3 billion yuan, compared to 36.5 billion yuan in the same period last year. Non-GAAP operating expenses as a percentage of revenue were 36%, compared to 38% in the same period last year.
Breaking it down, non-GAAP sales and marketing expenses were 33.4 billion yuan, compared to 32.8 billion yuan in the same period last year, representing 31% of revenue, compared to 34% last year. Non-GAAP R&D expenses were 4.0 billion yuan, a 32% year-over-year increase.
GAAP operating profit for the quarter was 19.6 billion yuan, compared to 16.1 billion yuan in the same period last year, a 22% year-over-year increase. Non-GAAP operating profit was 21.1 billion yuan, compared to 18.3 billion yuan in the same period last year. The non-GAAP operating profit margin was 20%, compared to 19% in the same period last year.
Net income attributable to ordinary shareholders was 12.5 billion yuan, compared to 14.7 billion yuan in the same period last year. Basic earnings per ADS were 8.94 yuan, and diluted earnings per ADS were 8.48 yuan, compared to 10.59 yuan and 9.94 yuan, respectively, in the same period last year. Non-GAAP net income attributable to ordinary shareholders was 14.1 billion yuan, compared to 16.9 billion yuan in the same period last year. Non-GAAP diluted earnings per ADS were 9.51 yuan, compared to 11.41 yuan in the same period last year.
Regarding cash flow, net cash provided by operating activities was 16.4 billion yuan, compared to 15.5 billion yuan in the same period last year. As of March 31, 2026, the total cash, cash equivalents, and short-term investments held were 436.1 billion yuan.
This balance sheet strength gives us confidence for long-term strategic investment.
**Q&A Session**
**Question:** Thank you for taking my questions. Two questions. First, the company has always been positioned as an e-commerce platform. We saw the brand self-operation project released last quarter. Could the company introduce the main considerations for launching brand self-operation at this point in time? Should we understand this as a strategic transformation for the entire company? Second, through third-party data, we see the company has achieved good user growth in its global business. Where will the development focus of this business be next? Has user growth met expectations from that perspective? How does the company plan to retain and serve these consumers well?
**Answer (Zhao Jiazhen):** Regarding your first question. Since the beginning of this year, we have been promoting a profound internal organizational and management reconstruction around safety, compliance, and social responsibility, actively assuming the social responsibilities of a platform enterprise. The establishment of the dedicated company and the implementation of the brand self-operation model in Q1 are extensions in this direction.
During years of deep cultivation in industrial clusters, we have increasingly clearly recognized the challenges facing the supply chain. Many excellent manufacturing enterprises, constrained by factors such as talent, information, and scale, have not yet completed the branding transformation and face homogenized competition. As a platform, we have the responsibility and the ability to deepen supply chain investment. Establishing the dedicated company aims to integrate platform resources, more actively participate in product R&D and standard setting, and advance the new brand self-operation model.
Through brand self-operation, the platform assumes more responsibility and risk, allowing industrial cluster partners to focus on high-quality production and manufacturing. This is a necessary path to drive the platform and the e-commerce ecosystem towards the next stage of high-quality development. Leveraging the platform's scale, we hope to share risks and rewards with supply chain manufacturers, providing certainty for participants. This certainty can significantly improve the operational efficiency of the entire chain, giving factories the confidence to invest in product R&D and technological innovation, forming a positive cycle.
This year is the beginning of the platform's new decade of high-quality development. Brand self-operation is the first strategic initiative launched after we announced the strategy of heavily investing in the supply chain. With the advancement of multiple supply chain projects, I believe we will have the opportunity to rebuild a PDD in the next three years.
**Answer (Chen Lei):** I'll answer the second question. After nearly three years of development, our global business has gained the support of many consumers worldwide. As the business grows, management has also been constantly thinking: in the highly competitive global market, how can we create more sustainable and differentiated long-term value for consumers? We believe the key is still to return to the essence of e-commerce and return to building supply chain capabilities.
Centered on this key point, we will focus efforts from two aspects. First, continue to advance the integration and optimization of supply chain resources, breaking through bottlenecks in various links. This will not only enrich the platform's product categories but also substantially enhance the consumer shopping experience. We will actively attract high-quality merchants and ecosystem partners to join the platform, integrating into the commercial ecosystems of various markets.
Second, deepen the development of the brand self-operation model, especially in the global market. Brand building is key to strengthening consumers' perception of the platform as offering "good quality at good prices." At the same time, branding is also an important way to improve product quality standards, allowing us to further enhance the platform's compliance capabilities in an increasingly complex regulatory environment.
The e-commerce industry is highly competitive, and consumers' switching costs between different platforms are low. Platforms compete for consumers through marketing tactics, but longer-term, more sustainable competitive advantages come from those unseen underlying supply chain capabilities. Supply chain investment is a long-term systematic project. Regardless of short-term fluctuations or challenges, we will not forget our original intent, continuously promoting profound self-transformation in teams, business processes, and organizational management, using tangible supply chain investment to drive the next stage of growth for the global business.
**Question:** I have two questions. First, we saw the company announced a three-year 100 billion yuan brand self-operation investment plan. My question is, in which directions does the company plan to focus these investments? When is it expected to start reflecting in the company's financial statements? How should the market think about the potential incremental space this strategy might bring? Second, we saw overall consumer spending performed well in Q1, with online penetration still increasing. However, against this backdrop, the growth rate of our advertising revenue has slowed. Could management introduce where the incremental drivers for platform GMV and advertising revenue might come from next?
**Answer (Zhao Jiazhen):** Addressing your first question. Brand building involves multifaceted capabilities, from product design, standard setting, and collaborative manufacturing to quality control, warehousing, fulfillment, legal compliance, after-sales, and the entire chain. Each link requires long-term, patient investment. Many small and medium-sized manufacturers in industrial clusters excel in mass production delivery and cost control but, due to a lack of branding capabilities, have yet to complete the leap in the value chain.
By establishing the dedicated company, we are deeply integrating the platform's technology, scale, and organizational capabilities, addressing the shortcomings in industrial chain branding by strengthening underlying capability building. Under the brand self-operation model, the platform directly brings sales certainty to the industrial chain, giving the manufacturing side the confidence to invest in product R&D and process innovation, significantly reducing trial-and-error costs and uncertainty during the branding process.
We believe it is the right strategic direction for the platform to undertake this. The platform's advantages in technology, scale, and market trends give us the ability to assume and digest these uncertainties. By internalizing the risks of the manufacturing side as the platform's responsibility, we empower the supply chain with certainty, creating a win-win situation for all parties: the manufacturing side escapes homogenized competition to focus on quality upgrades, consumers enjoy quality goods at reasonable prices, and the platform further deepens its supply chain foundation, ultimately achieving platform rebuilding.
Reviewing our development trajectory, from the earliest agricultural product distribution to later Duoduo Grocery, global business, and the 100 billion yuan support plan, the platform has continuously deepened its participation in the supply chain through the process of "seeing problems and solving them." To fundamentally address the challenge of homogenized competition among platform merchants, we must assume more responsibility and promote deeper supply chain integration. This is a necessary path for platform ecosystem evolution.
This year is the beginning of the new decade of high-quality development. Brand self-operation is the first strategic initiative launched after we announced the strategy of heavily investing in the supply chain. With the advancement of multiple supply chain projects, I believe we will have the opportunity to rebuild a PDD in the next three years.
Addressing your second question. The online retail market is still full of potential; there is much we can do. But at the same time, the industry has fully entered a critical period of high-quality development. Only by taking proactive action and deeply empowering the supply chain can the platform possibly drive the industry's long-term healthy growth.
Based on this assessment, after launching the 100 billion yuan support plan last April, we immediately initiated a series of supply chain support initiatives. The team deeply engaged with major agricultural production areas and industrial clusters across the country, driving further industry and platform growth by solving practical supply chain problems.
For example, our team is upgrading village-level express stations under the "Express Delivery to Villages" initiative into multifunctional integrated digital rural micro-complexes. This new format serves both as a self-pickup point for villagers to send and receive packages and as a "first mile" hub for distributing local specialty agricultural products, helping farmers solve needs like packaging and consolidation in one stop, allowing more high-quality agricultural products to reach the market. Through these micro-complexes, we bring income and benefits to local residents.
Another example is the "E-commerce Westward Expansion" team, which includes remote area consumers in free shipping zones by setting up transfer warehouses, with the platform covering logistics transfer fees. Through tangible supply chain transformation, logistics costs in some remote areas have been reduced by nearly 80%, equalizing operating costs across different regions. Many merchants have saved millions of yuan on logistics fulfillment alone. Through these real financial investments, the platform has shortened the distance between supply and demand, also creating more effective demand.
There are many more examples like these. Next, we will continue to create more positive value for users, industries, and society through one solidly implemented supply chain project after another.
**Question:** I have two questions. First, new business models are constantly emerging in the e-commerce industry, including live-streaming e-commerce, instant retail, etc. I wonder how the company views the impact of these new models on the entire industry? Does the company have any considerations for layout in these areas? Second, in Q1, we saw some fluctuations in Duoduo's marketing expense ratio, and the overall profit margin also slightly declined. From a long-term perspective, how should we understand these profit margin fluctuations? How should we anticipate the company's steady-state profit margin level?
**Answer (Zhao Jiazhen):** Regarding your first question. Compared to traditional retail, the e-commerce industry has lower consumer switching costs, so the pace of evolution is faster, and competition is more intense. Management is also closely monitoring the development trends of new technologies.
But regardless of how the front-end models innovate, returning to the essence of e-commerce, consumers' core demands are always richer choices, more competitive prices, and better service. As we just mentioned, competition between different e-commerce platforms or business models ultimately boils down to competition in underlying supply chain capabilities.
This is also why we clarified at the end of last year the group's strategic direction of focusing on heavily investing in supply chain upgrades. Guided by this strategy, we are steadily advancing various supply chain investments, which include the brand self-operation business. Currently, the dedicated team has deeply engaged with major industrial clusters, accelerating the integration of high-quality supply chain resources and building the brand self-operation business system. We are deeply cooperating with the manufacturing side to design and develop self-operated brand products for different global markets, comprehensively upgrading and transforming the supply chain.
The coming period is a critical window for our supply chain investment. We will fully advance brand self-operation, maintain the intensity of investment in foundational supply chain capabilities, and respond to possible future changes in the industry by continuously creating unique value for the supply chain ecosystem.
**Answer (Liu Jun):** I'll answer your second question. As we have communicated many times in the past, our goal is the long-term sustainable growth of the platform's intrinsic value. In this process, due to seasonality and our own investment cycles, some fluctuations in financial performance between quarters are normal.
The platform's long-term value fundamentally depends on the value we create for consumers and the entire ecosystem. This is why we are unwavering in our commitment to long-term supply chain investment. Whether it's the brand self-operation strategy, express delivery to villages, or supply chain projects like "New Quality Supply," these are all high-impact projects that can release long-term value and new growth for the industry. We will continue to firmly invest in these areas.
Therefore, rather than focusing on short-term financial performance, we prioritize the healthy development of the platform ecosystem and the accumulation of foundational supply chain capabilities. These more enduring sources of competitive advantage will determine the long-term direction of the platform's intrinsic value. Thank you.
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