How PDD (PDD Holdings) Makes Money in 2025: A Deep-Dive With Income Statement

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Understanding how a leading Chinese e-commerce platform like PDD Income Statement Overview makes money is essential for investors and anyone interested in the business of digital commerce. In this post, we break down PDD's quarterly income statement (Q2 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick PDD Overview

PDD operates a large-scale, mobile-first e-commerce marketplace connecting millions of buyers and sellers, primarily in China. Revenue comes mainly from online marketing services (advertising and merchant promotion fees) and transaction services (commissions and payment processing). The business is structured around two main segments: Total Online Marketing Services and Transaction Services Revenue, reflecting its dual focus on advertising-driven and transaction-based income streams.

Revenue Breakdown

• Total Revenue (Q2 2025): $23.5B (+7.1% YoY)
  • Total Online Marketing Services: $12.6B (53.6% of total, +13.4% YoY)
  • Transaction Services Revenue: $10.9B (46.4% of total, +0.7% YoY)
  • Growth is powered by increased merchant advertising spend and continued expansion of the transaction platform.

Gross Profit and Margins

• Gross Profit: $13.2B (55.9% gross margin)
  • Cost of Revenue: $10.4B (+36.1% YoY)
  • PDD maintains robust margins due to its scalable digital business model and efficient platform operations.
• Most costs come from infrastructure, payment processing, and logistics support.

Operating Income and Expenses

• Operating Income: $5.84B (–20.8% YoY, 24.8% margin)
• Operating Expenses: $7.32B (+5.0% YoY)
  • R&D: $813.3M (+23.4% YoY, 3.5% of revenue) — Focused on AI, platform security, and user experience enhancements.
  • SG&A: $6.51B (+3.1% YoY, 27.6% of revenue) — Includes marketing, sales, and administrative costs to drive user growth and engagement.
  • PDD continues to prioritize innovation and invest in growth while maintaining operational efficiency.

Net Income

• Pre-Tax Income: $8.05B (–6.3% YoY, 34.2% margin)
• Income Tax: $1.08B (13.5% effective tax rate)
• Net Income: $6.96B (–3.9% YoY, 29.6% net margin)
• PDD converts a significant portion of sales into profit due to its platform scalability and strong cost controls.

What Drives PDD's Money Machine?

• Online Marketing Services: 53.6% of revenue, driven by merchant demand for advertising and promotional tools.
• Active User Growth: Continued expansion of the buyer base and higher merchant engagement.
• Strategic R&D Investment: $813.3M in Q2 2025, targeting AI-driven recommendations and platform security.
• International Expansion: Investments in cross-border e-commerce and new markets, though not yet profitable.

Visualizing PDD's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant investments in R&D and user acquisition, 29.6% of revenue drops to the bottom line.

Key Takeaways

• PDD's money comes overwhelmingly from online marketing services and transaction fees on its e-commerce platform.
• High gross and net margins illustrate the power of PDD's scalable, asset-light business model.
• Heavy investment in R&D and platform innovation, balanced by efficiency in operating costs.
• Ongoing growth is driven by user expansion, merchant engagement, and international initiatives.

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FAQ About PDD's Income Statement

1. What is the main source of PDD's revenue in 2025?

PDD generates over 53% of its revenue from online marketing services, which include advertising and promotional fees paid by merchants. Transaction services, such as commissions and payment processing, make up the remainder.

2. How profitable is PDD in Q2 2025?

PDD reported net income of $6.96B in Q2 2025, with a net margin of approximately 29.6%, reflecting strong profitability driven by platform scalability and cost efficiency.

3. What are the largest expense categories for PDD?

The biggest expenses on PDD's income statement are operating expenses, particularly Sales, General & Administrative (SG&A) costs at $6.51B (27.6% of revenue), and Research & Development (R&D) at $813.3M (3.5% of revenue) in Q2 2025, as PDD prioritizes technology and platform innovation.

4. Why does international expansion operate at a loss?

International expansion, despite generating new revenue streams, posted an operating loss in Q2 2025. This is because PDD aggressively invests in cross-border logistics, local partnerships, and user acquisition, believing these will drive long-term growth—even if the division is unprofitable today.

5. How does PDD's effective tax rate compare to previous years?

PDD's effective tax rate in Q2 2025 was 13.5%, consistent with previous years. This moderate rate is primarily due to tax benefits from share-based compensation and international structuring.