The Operating Business Got Better. The Headline Number Got Worse.
PDD Holdings' first-quarter 2026 results, covering the three months ended March 31, 2026, are unaudited - furnished to the SEC as an exhibit to a Form 6-K rather than filed as part of an annual 20-F, since PDD is a foreign private issuer that doesn't file quarterly reports the way a U.S. domestic company would. That distinction matters for what this post can and can't do: there are no footnotes to mine here, no auditor's report, no related-party transaction note - just a press release with a genuine set of condensed financial statements attached. More on what that means for the standing threads from the FY2025 post below.
The numbers themselves tell two different stories depending on where you stop reading. Revenue grew 11.0% year-over-year to RMB106,229 million (US$15,400 million), up from the FY2025 annual report's 9.6% full-year growth rate - a genuine, if modest, re-acceleration rather than a continuation of last year's decelerating trend. Operating profit grew even faster, 21.6%, to RMB19,566 million, with operating margin expanding from 16.8% to 18.4%. On the operating line alone, this reads like a company stabilizing after the growth-versus-cost collapse flagged in the FY2025 post.
Then the story reverses below the operating line. "Interest and investment income/(loss), net" swung from a RMB223 million gain in Q1 2025 to a RMB632 million loss this quarter - an RMB855 million swing. "Other income/(loss), net" swung far more sharply, from a RMB3,261 million gain to a RMB2,031 million loss - a RMB5,292 million reversal. Combined, these two lines alone erased more than the entire operating-profit improvement: profit before tax actually fell 13.3% to RMB16,758 million even as operating profit rose 21.6%, and net income attributable to ordinary shareholders fell 14.9% to RMB12,547 million (US$1,819 million). This is the first quarter in this coverage where the operating business and the headline profit number move in opposite directions this sharply - and the press release offers no line-item explanation for either swing, since an unaudited interim exhibit doesn't carry the notes to the financial statements that would normally break out what's inside "other income/(loss)."
The Prescription
What PDD should keep doing: letting operating discipline show through the P&L the way it did this quarter. An 11% revenue quarter that still delivers 22% operating-profit growth and 160 basis points of margin expansion is the kind of quarter a company recovering from FY2025's cost-outrunning-revenue problem needs to keep stringing together - the core marketplace-and-logistics business, not the investment portfolio, is what a shareholder is actually underwriting here.
What it should stop doing: leaving a combined RMB5.9 billion swing in "interest and investment income/(loss)" and "other income/(loss)" completely unexplained. Two catch-all lines moving by roughly a third of the quarter's entire operating profit, with zero disclosed driver, is not a footnote-mining nitpick - it's the difference between a reader concluding this was a genuinely weaker quarter and a reader concluding the core business just had its best relative quarter in over a year. A company that wants credit for the operating story it's actually delivering needs to say more about what's moving the number that's currently overriding it.
Key Financial Metrics
Three months ended March 31, 2026 vs. three months ended March 31, 2025 (unaudited)
FX: RMB 6.8980 = USD 1.00 (the noon buying rate as of March 31, 2026, per the company's own filing). Only the current quarter (Q1 2026) is translated to USD in the source document; Q1 2025 is shown in RMB only, as the filing itself presents it - year-over-year change is computed on the RMB figures, so it isn't affected by the FX conversion either way.
| Metric | Q1 2026 (RMB) | Q1 2026 (USD) | Q1 2025 (RMB) | YoY |
|---|---|---|---|---|
| Revenue | 106,229M | $15,400M | 95,672M | ✅ +11.0% |
| Costs of revenues | (46,893M) | ($6,798M) | (40,946M) | ⚠️ +14.5% |
| Sales and marketing expenses | (33,773M) | ($4,896M) | (33,403M) | +1.1% |
| General and administrative expenses | (1,579M) | ($229M) | (1,659M) | -4.8% |
| Research and development expenses | (4,418M) | ($640M) | (3,578M) | ⚠️ +23.5% |
| Operating profit | 19,566M (18.4% margin) | $2,837M | 16,086M (16.8% margin) | ✅ +21.6%, margin +1.6pp |
| Interest and investment income/(loss), net | (632M) | ($92M) | 223M | ⚠️ swung to a loss |
| Other income/(loss), net | (2,031M) | ($294M) | 3,261M | ⚠️ swung to a loss |
| Profit before income tax | 16,758M | $2,430M | 19,328M | ⚠️ -13.3% |
| Net income (attributable to ordinary shareholders) | 12,547M (11.8% margin) | $1,819M | 14,742M (15.4% margin) | ⚠️ -14.9%, margin -3.6pp |
| Non-GAAP net income | 14,071M | $2,040M | 16,916M | ⚠️ -16.8% |
| Diluted EPS (per ADS) | RMB8.48 | $1.23 | RMB9.94 | ⚠️ -14.7% |
| Net cash from operating activities | 16,445M | $2,384M | 15,517M | ✅ +6.0% |
| Cash and cash equivalents (period-end) | 123,041M | $17,837M | n/a (Dec 2025: 108,901M) | ✅ +13.0% vs. Dec 2025 |
PDD does not disclose Adjusted EBITDA» in this filing, consistent with every prior period. Free cash flow can't be computed either: the condensed cash flow statement in this unaudited interim exhibit collapses to three summary lines (operating, investing, financing) with no separate capex disclosure, unlike the full 20-F's cash flow statement used in the FY2025 post - stated here explicitly rather than silently omitted.
| Balance sheet | Mar 2026 (RMB) | Mar 2026 (USD) | Dec 2025 (RMB) | QoQ |
|---|---|---|---|---|
| Total assets | 637,704M | $92,448M | 630,045M | +1.2% |
| Total liabilities | 214,277M | $31,064M | 216,660M | -1.1% |
| Total shareholders' equity | 423,427M | $61,384M | 413,385M | ✅ +2.4% |
The operating P&L improved on every line that matters - revenue, operating margin, cash from operations - but a nearly RMB6 billion unexplained swing in non-operating income wiped out most of that gain and dragged net income down 14.9%.
Key Operational Metrics
PDD does not disclose Gross Merchandise Value, active buyers, active merchants, or monthly active users in this filing - not available, continuing the pattern first noted in the FY2025 post. The only revenue-composition detail retained is the two-line split between online marketing services and transaction services, and it moved meaningfully this quarter:
- Online marketing services and others: RMB49,936 million ($7,239 million), up 2.5% YoY - now 47.0% of revenue, down from 50.9% a year ago.
- Transaction services: RMB56,293 million ($8,161 million), up 19.9% YoY - now 53.0% of revenue, up from 49.1% a year ago.
Transaction services overtook online marketing services as PDD's larger revenue line this quarter - a reversal from a year ago, when online marketing was still the bigger of the two (see Beyond the Usual). PDD continues to report a single operating segment, so there's no company-disclosed split between the domestic Pinduoduo marketplace and the international Temu platform behind this shift - the same reporting gap flagged in the FY2025 post remains in place.
Seasonality note: Q1 spans Chinese New Year, typically a lower-activity stretch for Chinese e-commerce logistics and merchant operations as much of the country's supply chain pauses for the holiday. Both Q1 2025 and Q1 2026 carry this same seasonal pattern, so the year-over-year comparison above isn't distorted by it - but a reader comparing this quarter sequentially against Q4 2025 (not shown here, since PDD doesn't publish quarterly figures for Q4 2025 as a standalone period) should account for it.
Beyond the Usual
The FY2025 post's related-party loan, auditor, and VIE threads have no update this quarter - the filing simply doesn't disclose at that level
The FY2025 post flagged three standing items: the Ningbo Hexin related-party loan (RMB910.6 million, funding two executives' ownership of a payment-processing vendor PDD depends on), the auditor's move from a mainland-China EY affiliate to a Hong Kong one, and the VIE's» shrinking share of consolidated revenue. None of these can be checked this quarter. An unaudited 6-K press release exhibit carries no notes to the financial statements, no related-party transaction schedule, and no auditor's report - the balance sheet shows only aggregate "amounts due from related parties" (RMB9,768 million, down 4.3% from RMB10,205 million at year-end 2025) and "amounts due to related parties" (RMB1,254 million, up 15.4% from RMB1,087 million), with no breakdown of what makes up either figure. This is a genuine, structural limitation of interim disclosure for a foreign private issuer, not a red flag on its own - but it means all three threads simply go dark until PDD's FY2026 20-F, rather than being confirmed as resolved, worsened, or unchanged.
Transaction services became PDD's larger revenue line for the first time in this coverage
Transaction services revenue (RMB56,293 million) overtook online marketing services (RMB49,936 million) this quarter, a reversal from Q1 2025 when online marketing was still narrowly ahead (RMB48,722 million vs. RMB46,950 million). Transaction services grew almost eight times faster than online marketing (19.9% vs. 2.5%) - a real shift in where PDD's revenue is actually coming from, even though the single-segment presentation means there's no way to attribute how much of that growth is Temu's international logistics/fulfillment fees versus domestic Pinduoduo transaction commissions.
R&D keeps growing faster than every other expense line
Research and development expenses grew 23.5% year-over-year to RMB4,418 million, the fastest-growing line on the income statement in either direction - continuing the pattern from FY2025, where R&D grew 30.3% for the full year, also the fastest-growing expense line that year. Two consecutive periods of R&D outpacing every other cost line, including revenue itself, is a genuine and continuing investment pattern rather than a one-quarter blip.
The cash pile grew again, still against a nearly debt-free balance sheet
Cash and cash equivalents, restricted cash, and short-term investments together totaled roughly RMB512,284 million ($74,268 million) at quarter-end, up 3.3% from roughly RMB496,140 million at the end of FY2025 (the figure highlighted in the FY2025 post) - more than double the company's RMB214,277 million of total liabilities, none of which is interest-bearing debt. The buffer referenced in The Prescription above continues to grow even in a quarter net income fell.
Target Valuation Range
On a trailing-twelve-month basis, PDD's EV/Revenue multiple compressed from FY2025's ~2.86x to roughly 2.56x while the price fell from $113.39 to $102.18 - the market priced in this quarter's net-income miss more than the underlying TTM earnings actually justify, since TTM net income fell only about 2% while the stock fell almost 10%. On that read, PDD looks modestly undervalued relative to its own trailing multiple history, assuming the non-operating swing flagged above doesn't recur.
PDD's ADS closed at $102.18 on March 31, 2026, the quarter's period-end price. PDD has not split its Nasdaq-listed stock since its 2018 IPO, so this is the actual nominal price quoted at the time. Over the trailing two years (April 2024 through March 2026), the ADS ranged from a low of $96.11 (August 2024) to a high of $149.78 (May 2024) - a roughly 36% peak-to-trough swing, most of it concentrated in 2024 before the FY2025 post's de minimis-exemption thesis had even played out. The price has drifted lower and traded in a tighter band since: $118.35 at the end of Q1 2025, down to $102.18 a year later - a 13.7% year-over-year decline even as TTM revenue and operating profit both grew.
| Market cap → enterprise value | Q1 2026 (period-end) |
|---|---|
| Share price (period-end, per ADS) | $102.18 |
| ADS outstanding (diluted weighted-avg ordinary shares ÷ 4) | ~1,480.0 million |
| Market capitalization | ~$151.2 billion (~RMB1,042.9 billion) |
| Plus: total liabilities | ~$31.1 billion (RMB214.3 billion) |
| Less: cash and cash equivalents | ~$17.8 billion (RMB123.0 billion) |
| Enterprise value | ~$164.5 billion (~RMB1,134.1 billion) |
ADS count divides the income statement's diluted weighted-average ordinary share count (5,920 million) by four, per the filing's own ADS-to-ordinary-share ratio. "Less: cash and cash equivalents" uses the narrowest cash line only; PDD separately holds RMB76.2 billion of restricted cash and RMB313.0 billion of short-term investments not netted into this EV (see Beyond the Usual).
| Peer-multiple sanity check | FY2025 (year-end) | Q1 2026 (TTM) | Change |
|---|---|---|---|
| Revenue | RMB431,846M ($61,753M) | RMB442,403M ($64,135M, TTM) | +2.4% (TTM) |
| Enterprise value | ~RMB1,236.4B | ~RMB1,134.1B | -8.3% |
| EV/Revenue» | ~2.86x | ~2.56x | compressed |
| Net income | RMB97,843M | RMB95,648M (TTM) | -2.2% (TTM) |
| P/E» (market cap ÷ TTM net income) | ~11.54x | ~10.91x | compressed |
TTM figures use the last four disclosed quarters available in this coverage (FY2025 total, less Q1 2025, plus Q1 2026) - the only trailing-quarter comparison possible given PDD reports full fiscal years, not standalone quarters, for every period except this one. Both multiples compressed even though TTM revenue actually grew and TTM net income fell only modestly - the market moved the price down by more than the trailing fundamentals did, which is the basis for the modestly-undervalued read in this section's opening verdict.
DCF (illustrative only): A full multi-year DCF still isn't warranted for the same reason as the FY2025 post - one quarter of an 11% non-operating-driven net income miss isn't enough new information to project multi-year cash flows against. Each scenario instead applies a stated EV/Revenue multiple to TTM revenue ($64,135 million) and backs out implied market cap and price using the same liabilities/cash figures as the buildup table above:
| Scenario | Key assumption | Multiple | Implied EV | Implied price |
|---|---|---|---|---|
| Current (Q1 2026 close) | actual market price, for reference | ~2.56x TTM revenue | ~$164.5 billion | $102.18 |
| Bear | The non-operating swing flagged above recurs or worsens, the transaction-services growth this quarter proves partly promotional/one-off, and the multiple compresses further toward Meituan's more distressed pricing | 2.0x TTM revenue | ~$128.3 billion | ~$77.73 |
| Base | Non-operating items normalize back toward a small net gain (roughly where Q1 2025 sat), transaction-services growth continues at a more moderate pace, and the multiple holds near its current level | ~2.56x (unchanged) | ~$164.4 billion | ~$102.17 |
| Bull | The FY2025 post's de minimis-driven cost pressure keeps easing as this quarter's operating-margin expansion suggests, non-operating items stop being a drag, and the market re-rates back toward FY2025's ~2.86x multiple or higher | 3.2x TTM revenue | ~$205.2 billion | ~$129.73 |
Reverse DCF: At the current $164.5 billion enterprise value and 2.56x TTM revenue, the market is pricing PDD meaningfully below where it sat at the end of FY2025 (2.86x) despite TTM revenue growth actually turning positive again this quarter (+2.4%, versus FY2025's own +9.6% full-year growth already representing deceleration). The gap between the multiple and the fundamentals implies the market is treating this quarter's net-income miss as a signal about earnings quality or recurrence risk - not as a one-off catch-all-line swing - which is a testable question the next quarter's disclosure (whether "other income/(loss)" reverses or continues) will actually answer.
PDD Holdings Inc.'s unaudited financial results for the first quarter ended March 31, 2026, furnished to the U.S. Securities and Exchange Commission as an exhibit to a Form 6-K on May 27, 2026. Share-price figures are sourced from this project's standard market-data pipeline, not the company's own filing.