Wall Street interprets Pinduoduo's financial report: Short-term profits under pressure, but investments in self-operated business and supply chain target long-term moat.

Wall Street's consensus on Pinduoduo's latest financial report is out: it's a mixed bag. Facing a constantly evolving global regulatory environment and intense domestic competition, Pinduoduo is proactively choosing the difficult path of "sacrificing short-term profit for long-term competitive barriers." A WallstreetCN article previously noted that Pinduoduo’s Q2 2026 revenue increased 8% year-on-year, about 2.5% below market expectations. Online marketing service income grew around 3.5% year-on-year, exceeding expectations; but transaction service income grew only 13.3% year-on-year, far below market consensus of around 21%-22%, with the key drag coming from Temu. Net profit attributable to shareholders declined 12% year-on-year to 27.2 billion RMB. According to Chase Trading Desk, Wall Street investment banks Goldman Sachs, Jefferies, and Morgan Stanley released their latest reports on August 25th, sending a clear signal: investors must be prepared for volatility in Pinduoduo’s near-term earnings and margin compression. The reports believe that new regulations such as the EU’s cancellation of tax exemptions have significantly impacted Temu’s short-term growth and fulfillment efficiency. Europe accounts for about one-third of Temu’s GMV (per Goldman Sachs estimates), leading to a sharp drop in European GMV, decreased overall Temu fulfillment efficiency, and increased operating costs. At the same time, Pinduoduo is investing 100 billion RMB domestically to support merchants and is also heavily investing globally in local supply chain, warehousing, and self-operated (1P) business. Wall Street universally lowered short-term earnings expectations and target prices for Pinduoduo (Goldman Sachs lowered to $134, Jefferies to $118), but maintained their “Buy/Overweight” ratings across the board. The underlying logic: Pinduoduo’s ultra-low valuation (Goldman Sachs expects a 9x PE for 2026) already reflects current regulatory and investment pressures. Management refuses blind expansion into quick commerce, instead doubling down on core e-commerce and supply chain. This “actions speak louder than words” strategic discipline is building a formidable long-term moat. Financial Data Interpretation: Marketing Revenue Exceeds Expectations, Transaction Revenue Falls Short The core contradiction in the Q2 financial report lies in the severe divergence between two main revenue sources. Online marketing service revenue performed well, up about 3.5% year-on-year to 57.6 billion RMB, surpassing market consensus (+1.6%) and Jefferies’ forecast (+1%). Goldman Sachs points out this growth rate outperformed same-period Taobao-Tmall’s about +1% (under Alibaba’s new merchant rebate accounting rules it would be -7%), and exceeded Kuaishou e-commerce ads (+1%), showing Pinduoduo’s domestic GMV and merchant ad demand remain resilient. Goldman Sachs estimates Pinduoduo’s 2Q26 domestic GMV grew about 5% year-on-year, higher than the industry average of about 2%. Transaction service revenue was the biggest "danger zone" this quarter. This revenue grew only 13.3% year-on-year to 54.7 billion RMB, noticeably slower than 1Q26’s +20%, far below Goldman Sachs’s forecast of +21% and market consensus of +22%. All three institutions attribute this large gap to regulatory shocks Temu faced in the European market. Gross profit for 2Q26 was 64.3 billion RMB, with a gross margin of about 57.3%, higher than the market consensus of 55.5%, up about 11% year-on-year, exceeding Goldman Sachs’s expectations and demonstrating effective cost control. Adjusted net profit (non-GAAP) for 2Q26 was about 28.5 billion RMB, slightly above market consensus (about 28 billion RMB), but lower than Goldman Sachs’s forecast (about 26.3 billion RMB). Under GAAP, net profit attributable to ordinary shareholders was about 27.2 billion RMB, down about 12% year-on-year. Notably, there was about 7.4 billion RMB in other losses this quarter, which Goldman Sachs attributes mainly to domestic and Temu-related regulatory fines; additionally, administrative expenses rose sharply due to the establishment of the new Xiong’an subsidiary. EU Regulations: Temu’s Most Direct Pressure The tightening of EU regulatory policy is the most critical external variable this quarter and the main driver behind the Wall Street downward forecasts. From July 2026, the EU officially cancels the de-minimis system and imposes a tariff processing fee of 3 euros per cross-border parcel. Since Europe accounts for about one-third of Temu’s GMV (Goldman Sachs estimates), this policy’s impact on Temu is direct and profound. Morgan Stanley and Jefferies both emphasize in call transcripts that management admitted this regulatory overhang: the new tax rules for cross-border parcels have already affected order volume, causing fulfillment efficiency to drop and operating costs to rise. Additionally, media reports show Temu’s European GMV saw a significant drop in 2Q26. Goldman Sachs accordingly sharply lowered their Temu forecasts: - Lowered Temu’s GMV growth forecast for FY2026 and FY2027 from 33%/25% to 15%/25%; - Lowered transaction commission income growth estimates for Q3 and FY2026 from +21% and +20% to +6% and +10%; - Expect Temu EBIT at -11.8 billion RMB/-2.8 billion RMB for FY2026/FY2027 (previous forecast: -9.4 billion RMB/+2.7 billion RMB), indicating a slower profitability ramp-up. Morgan Stanley expects Q3 2026 transaction service revenue to grow about 9% year-on-year (further slowing from 2Q26’s 13.3%), and 2026 full-year transaction service revenue to grow about 13% year-on-year. Temu Localization Strategy: Long-term Solution to Regulation Facing evolving EU regulations and global tariff environments, Temu is accelerating its localization strategy transition, which is also a key reason the three institutions maintain positive ratings. Management clarified Temu’s response path on the call: - First, attract more local merchants, broadening the supply of local goods and increasing product diversity; - Second, accelerate the construction of local warehousing and fulfillment infrastructure, improve local-to-local fulfillment, and reduce reliance on cross-border direct shipping; - Third, increase penetration of local procurement and fulfillment to enhance business resilience and regulatory compliance, while further expanding the globally addressable market. Goldman Sachs notes the company is gradually shifting to a "semi-trusted" and "local-to-local" business model. While this transition will slow the profitability ramp-up in the short term, it will help strengthen Temu’s long-term competitiveness and compliance. It is worth noting that despite pressure on European business, Temu’s U.S. business is showing some signs of recovery, benefiting from a more favorable tariff environment. "Xin Pin Mu" Self-operated Brand Strategy: Strategic Extension of Supply Chain Deepening Pinduoduo's self-operated brand (1P) strategy is another major focus this quarter and a core measure for building long-term competitive moats. Management positions "Xin Pin Mu" as a natural extension of supply chain capability deepening, rather than simply brand expansion. The company’s first self-operated brand "Bemuvo" officially launched in some markets in June 2026, but management admits the initial rollout has been slower than planned. The strategy is to focus on core categories where Pinduoduo possesses differentiated supply chain and global channel advantages, selectively introducing self-operated brands, and stressing that 1P (self-operated) and 3P (third-party) products will complement each other. Jefferies points out in its report that the company works closely with factories in product planning and R&D to meet high quality standards, and this approach helps build deeper competitive barriers on the supply chain side. Goldman Sachs accordingly lowered its EBIT forecasts for Q3 and FY2026 to 22 billion RMB/102 billion RMB (previously 25 billion RMB/106 billion RMB), reflecting the company’s continued commitment to reinvesting in its ecosystem and supply chain. Domestic Business: GMV Resilience Shows, Refuse Expansion into Quick Commerce In the domestic market, Pinduoduo demonstrates a relatively stable foundation and clear strategic focus. Goldman Sachs estimates Pinduoduo’s 2Q26 domestic GMV grew about 5% year-on-year, higher than the industry average growth rate of about 2%, achieving relative leadership amidst stricter merchant tax, increased competition, and weak overall consumption. Management stated future growth will increasingly come from resolving supply chain bottlenecks (covering product development, manufacturing, and fulfillment) and continued investment in logistics infrastructure to unlock consumption potential in lower-tier cities and rural areas. Goldman Sachs maintains its forecast for domestic GMV growth at +5% year-on-year for Q3 and FY2026 (unchanged), and slightly raises online marketing service revenue growth forecast for Q3/FY2026 to +2%/+3% (previously +2%/+1%). Additionally, the continued strong performance of Duo Duo Grocery business receives positive evaluation from Goldman Sachs. On the quick commerce issue, Morgan Stanley noted management explicitly stated that quick commerce and traditional e-commerce differ in business model and supply chain requirements, with limited synergies. Therefore, Pinduoduo will not divert attention, instead concentrating resources on its established strengths in core e-commerce and supply chain development. Three Institutions Remain Bullish, Slightly Lower Target Prices Despite short-term pressure on results, all three top investment banks maintain positive ratings for Pinduoduo, and predict considerable upside relative to the current share price ($88.38). Goldman Sachs: Maintains buy rating, lowers 12-month SOTP target price from $145 to $134, mainly reflecting lower valuation multiples for the domestic platform (due to slower profit growth) and lowered Temu GMV growth forecasts. Valuation method: 9x 2026E PE for the main domestic platform, 25x PE for Temu (ex US full-managed business), with a 15% holding company discount. Current price corresponds to about 9.2x 2026E PE (or about 4x PE excluding cash). Jefferies: Maintains buy rating, lowers target price from $121 to $118, uses SOTP valuation method, lowers FY26E/FY27E revenue forecasts by about 6%/5%. Morgan Stanley: Maintains overweight rating, keeps target price unchanged at $129, based on DCF model (WACC 14%, perpetual growth rate 3%), corresponding to about 13.8x 2026E non-GAAP PE, believing this valuation matches approximately 6% compound earnings growth from 2026-2029. Morgan Stanley expects FY2026 non-GAAP net profit to decline about 11% year-on-year to approximately 110 billion RMB, and non-GAAP net profit to decline about 12% year-on-year to approximately 95 billion RMB. ~~~~~~~~~~~~~~~~~~~~~~~~ The above content is from Chase Trading Desk. For more detailed analysis, including real-time interpretations and frontline research, please join [Chase Trading Desk Annual Membership]. 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