On Tuesday (29 Aug), PDD Holdings, parent company of Pinduoduo and Temu, released its Q2 2023 results.

Investors responded positively, sending the share prices up by almost 20% in the two trading days after the release.

Looks like a short squeeze – as we knew many hedge funds were shorting PDD because of the current economic situation in China as well as its aggressive cash burn with Temu.
Of course, with Temu’s entry into Southeast Asia starting with the Philippines, the financial and operational performance of PDD becomes more relevant for everyone in the ecosystem in the region.

Our community has posted many questions, including “why is Pinduoduo entering Southeast Asia” “Is Temu sustainable” “Are they burning too much money” “Will they be able to challenge Shopee, Lazada, and now TikTok Shop?”

We have covered extensively not only Temu, but also Pinduoduo in Momentum Works’ “Who is Temu” report earlier this year. But here are some of our thoughts on the latest earnings:

1. The growth of PDD Holding remains positive, and surprisingly so. The group reported a revenue of US$7.2098 billion, a 66% increase YoY and a 39% increase QoQ. For comparison, in Q2 2022 its revenue grew 32% QoQ.

Government statistics show that online retail in China grew about 12.5% YoY during the first 7 months of the year. Even if we remove the few billion dollars from Temu, Pinduoduo is probably still growing its China GMV faster than industry average.

2. As for the investor concerns on the aggressive marketing expenses to fuel Temu’s expansion – in PDD’s earnings the sales and marketing cost in Q2 grew by 42.85% YoY, or a US$850 million increase –  a large portion of this probably went into Temu, which did not exist a year ago.

However, this does not seem to be excessive or inefficient. In Q2 2023, the sales and marketing cost as a percentage of revenue was only 33.6%, lower than 36.1% in Q2 2022. Besides, with quarterly net income of US$ 1,807.7 million, the group is perfectly able to fund all these expenses.

3. PDD, which already has a reputation of being very efficient, seems to be operating even more efficiently. Despite substantial revenue growth and global expansion, the group’s general & administrative costs actually reduced by 27.0% QoQ, and R&D costs have remained stable ( a slight 3.29% increase QoQ).

4. The latest earnings suggests that PDD’s global expansion through Temu is rather affordable – the company is not over stretching its resources or burning too much cash (relative to its profits).

But of course whether this undertaking will eventually succeed, and become sustainably profitable, remains to be seen. We have to watch the execution, competitive landscape and some political factors very closely. Money is not everything to determine a complex undertaking’s prospects of success.


On the evening of the release, a friend, who is based in Shanghai (which houses PDD’s HQ) but lives in Hangzhou (where Alibba is) texted us “I saw the signs of PDD’s good quarterly performance back in May”

How so? It turned out that on Labour Day holidays he drove past the Alibaba Campus and found it empty – everyone was given a 5 days holiday according to regulations. While Pinduoduo made headlines during that week by only allowing its employees to take two days off.

Why would Pinduoduo employees put up for this? For more insights about Temu and the team behind it, you can refer to Momentum Works’ “Who is Temu” report.

Also, stay tuned to our Apples to Apples 3.0 report (to be released in September), where we benchmark the performance of major tech platforms! 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].