Pinduoduo aims to become the "Costco + Disney": launching a new round of "investment cycle" by trading "short-term profits" for "long-term growth"

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Pinduoduo is trading short-term profits for a heavier long-term growth curve. The latest financial report for the quarter fell short of market expectations, but the signals released by management are even more critical. The company is prepared to invest on a larger scale in proprietary brands, co-building the supply chain, and the merchant ecosystem to secure long-term growth over the coming years.

In Q1 2026, Pinduoduo reported total revenue of 106.2 billion yuan, up 11% year-on-year, below the market expectation of 108.6 billion yuan. Non-GAAP net profit was 14.1 billion yuan, down 17% year-on-year, significantly lower than the expected 24.6 billion yuan. After the earnings release, Pinduoduo’s US shares dropped nearly 4% in pre-market trading, as investors initially reacted to the profit gap and the near-stagnation in online marketing services.

On the earnings call, co-CEO Zhao Jiazheng stated that continuing heavy investment in the supply chain will be the core strategy for the next decade, and compared with short-term performance, the company prefers to focus on feeding back into the ecosystem and long-term value. Co-CEO Chen Lei said branding is the key opportunity for the next stage upgrade of China's supply chain.

According to WindChase Trading Desk, all three investment banks interpreted the same tension: short-term pressure on the profit statement, strategic narrative reopening. Morgan Stanley and JP Morgan focused on the downgrade in profit expectations, while Goldman Sachs believes "Xin Pinmu" and proprietary brand investments make Pinduoduo closer to “Costco+Disney”—that is, the long-term vision of “Costco + Disney.” For investors, the core question has shifted from “Why are profits below expectations?” to “Can Pinduoduo trade short-term profit fluctuations for stronger long-term moats?”

Financial Report Signals: Profit Under Pressure, but Core Operations Have Not Stalled

Pinduoduo’s Q1 performance showed clear divergence.

On the revenue side, total revenue was 106.2 billion yuan, up 11% year-on-year but below market expectations. On the profit side, Non-GAAP net profit was 14.1 billion yuan, down 17% year-on-year, far below market expectations. Net profit attributable to shareholders fell 15% year-on-year to 12.5 billion yuan, mainly dragged by negative investment returns, exchange losses, and other non-operating items.

Meanwhile, operating efficiency in the main business remains supported. Operating profit soared 22% year-on-year to 19.6 billion yuan. JP Morgan also noted, Adjusted operating profit was up 16% year-on-year, adjusted operating margin was 20%, up 1 percentage point, showing strong core operational efficiency.

The real pressure comes from two fronts.

One is the slowdown in online marketing service revenue. This segment grew only 2.5% year-on-year to 49.9 billion yuan in Q1, clearly below the growth rate of transaction services. Advertising growth nearly stalled, meaning the platform's traditional monetization engine is slowing. The other is non-operating items dragging down net profit. JP Morgan said adjusted net profit was 43% below its prediction and consensus, mainly due to greater-than-expected losses on non-recurring items, including 632 million yuan in interest and investment losses plus 2 billion yuan in other losses.

This makes Pinduoduo’s Q1 earnings not simply a “slowdown” growth story, but a structural shift starting point: advertising slows, transaction services pick up, profit volatility increases, and supply chain investment heats up.

Earnings Call Sets Tone: 100 Billion Yuan Heavy Bet on Supply Chain

During the Q1 earnings call, Pinduoduo’s management gave a clearer strategic path.

Facing analyst questions like “where will the hundred billion be invested, and when will it have effect?”, co-CEO Zhao Jiazheng said, Continuing heavy investment in the supply chain will be the company’s core strategy for the next decade, “Compared with short-term performance, we are willing to focus on feeding back into the ecosystem and the long-term value brought by heavy supply chain investment.”

This echoes the company’s “reinvent Pinduoduo in three years” goal proposed last year. According to previous disclosures, The “Xin Pinmu” special company has already landed in Shanghai, with an initial cash injection of 15 billion yuan, and plans to invest a cumulative 100 billion yuan in the next three years to integrate “Pinduoduo + Temu” supply chain resources, launch a proprietary brand model, and systematically incubate brands for the global market.

Zhao Jiazheng further explained on the call that brand building isn't just about supporting traffic, but is a long-term project covering product design, standard-setting, collaborative manufacturing, quality control, warehousing, fulfillment, and after-sales. The platform hopes to channel sales certainty into the industry chain, with the platform taking more risk and manufacturers focusing on quality production.

Co-CEO Chen Lei also said there remains unmet consumer demand in global markets, and branding is the key opportunity for the next upgrade of China’s supply chain. The goal is systematic incubation of globally recognized brands, driving supply chain value leaps.

This means Pinduoduo’s investment direction has surpassed traditional subsidies and traffic distribution, entering deeper industry chain involvement. Proprietary brands, supply chain co-building, and manufacturing collaboration will be the new focus for capital and resource allocation.

Goldman Sachs: Closer to “Costco+Disney,” but Profits Will Be Volatile

Goldman Sachs’ interpretation of Pinduoduo is closest to the “Costco + Disney” logic in the headline.

Goldman said that though Q1 performance was weak and online marketing service revenue grew slowly, EPS fell 17% year-on-year, but transaction service revenue grew 20% year-on-year, showing Temu’s GMV growth is accelerating, and group operating profit also rose 16%, reflecting an obvious improvement in Temu’s GMV profitability.

More importantly, Goldman believes Pinduoduo’s three-year proprietary brand “Xin Pinmu” investment cycle will be a multi-year growth driver for Temu and Pinduoduo, making the company closer to its 2018 IPO vision of “Costco + Disney.”

This logic means Pinduoduo is no longer just a platform matching buyers and sellers but is more deeply involved in the supply chain, incubating global proprietary brands, and promoting Chinese manufacturing’s shift from low-cost mass production to high-value production. If executed smoothly, the company could achieve stronger product differentiation and supply chain barriers.

However, Goldman also lowered profit expectations. It cut 2026–2028 revenue estimates by 2–5%, and adjusted net profit by 11–12%. Currently, Goldman predicts Pinduoduo’s adjusted net profit in 2026 and 2027 will be 105 billion yuan and 126 billion yuan, respectively, with year-on-year growth of 0% and 20%.

Goldman also lowered its 12-month price target from $158 to $145, but maintains a Buy rating. The rationale: the current valuation equates to an 8x PE for 2026; stripped of cash, about 4x, so risk/reward remains attractive.

In other words, Goldman admits short-term profits will be dragged by reinvestment, but thinks the market’s negative reaction to marketing services and weak EPS is excessive. For them, Pinduoduo’s investment focus is shifting from short-term profit margins to long-term GMV, brand assets, and supply chain capability.

Morgan Stanley: Entering a New Investment Cycle, Downgrading Target Price

Morgan Stanley’s tone is more cautious.

The firm said, although Pinduoduo’s operating profit rose 15% year-on-year in Q1, online marketing service revenue grew only 2.5%, and net profit was 41% below expectations, causing concerns. As the company launches a deep business transformation, Morgan Stanley expects the new investment cycle in supply chain and proprietary brand business to continue dragging financial performance in Q2 and the rest of the year.

Morgan Stanley expects Q2 total revenue to grow 10% year-on-year, with online marketing service revenue flat and transaction service revenue up 20%. They forecast 2026 total revenue to grow 10% year-on-year, online marketing service revenue up 5%, transaction service revenue up 16%, Non-GAAP operating profit up 17% to 119 billion yuan, and Non-GAAP net profit down 6% to 100.6 billion yuan.

Morgan Stanley lowered its price target for Pinduoduo from $148 to $129 but maintains an overweight rating. The downgrade mainly reflects Q1 profits below expectations; 2026, 2027, and 2028 EPS estimates were cut by 14%, 13%, and 14% respectively.

Morgan Stanley also highlighted that Pinduoduo has established a special entity in Shanghai with an initial cash injection of 15 billion yuan, and promises 100 billion yuan over three years. The company is now deep into industrial belts, accelerating supply chain resource integration, and jointly incubating new brands for different markets and categories.

In Morgan Stanley’s framework, Pinduoduo’s story becomes heavier and longer. In the short term, investment suppresses profit and forecasts; in the long term, proprietary brands and supply chain integration may bring new growth curves.

JP Morgan: Core Operational Efficiency Is Fine, But Consensus May Be Downgraded

JP Morgan’s focus is the gap between financial performance and market expectations.

They report Pinduoduo’s Q1 performance as “mixed,” with revenue and net profit both below consensus. Revenue was 106 billion yuan, up 11% year-on-year, 3% and 2% below JP Morgan’s own and market consensus forecasts. Online marketing service revenue growth slowed further to 2%, below forecasts.

However, JP Morgan also noted that adjusted operating profit rose 16% year-on-year, adjusted operating margin was 20%, up 1 percentage point, showing core operational efficiency remains good.

The real issue is net profit. Q1 adjusted net profit was 14 billion yuan, 43% below JP Morgan and consensus forecasts, with an adjusted net margin of 13.2%, down 4 percentage points year-on-year, 9 percentage points below expectations, mainly due to larger-than-expected losses on non-recurring items. They expect, after the release, market consensus for Pinduoduo’s revenue and net profit will be revised lower, and the stock price will react negatively.

Compared to Goldman emphasizing long-term vision and Morgan Stanley emphasizing investment cycle, JP Morgan’s conclusion leans toward short-term financial impact: a large profit gap and market expectations need recalibration.

Core Divergence: Short-Term Profits or Long-Term Moat

Pinduoduo is making a typical reinvestment choice.

If you only look at the Q1 earnings, investors see revenue below expectations, net profit well below expectations, and near-stalled growth in online marketing services. For a platform known for high efficiency and high profit elasticity, these signals are enough to create valuation pressure.

But taken together with the call and broker reports, another thread is clear: Pinduoduo is proactively channeling resources into supply chain, proprietary brands, and the merchant ecosystem. Transaction service revenue is now the largest revenue source, surpassing ads, and the company has stated its commitment to major investment in First-party Brand Business.

This signals that Pinduoduo's business model is shifting from a light platform to deeper supply chain involvement. It hopes to extend platform capabilities into product design, manufacturing, quality control, fulfillment, and after-sales through certainty in sales, brand incubation, and manufacturing collaboration.

This path may yield two results.

In the short term, costs, R&D, sales and marketing, and supply chain investments may increase, leading to greater quarterly profit volatility. In the long term, if proprietary brands and supply chain integration succeed, the company could gain higher differentiation, stronger merchant and user stickiness, and a more solid foundation for global growth.

Goldman’s “Closer to Costco + Disney” essentially points to the same logic: both the supply chain efficiency and pricing power of Costco, and product combinations with brand recognition and long-term consumer stickiness like Disney. Pinduoduo is trading short-term pressure on the profit statement for long-term capabilities beyond the balance sheet.

For the market, the next key is not only when net profits recover, but whether the three-year, 100 billion yuan investment can lead to verifiable growth, whether Temu and Pinduoduo’s supply chain synergy materializes, and whether after marketing slows, transaction services and proprietary brands can become new growth pillars.

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