(Yicai) Aug. 26 -- PDD Holdings warned that profit levels are unsustainable after the Chinese owner of discount shopping sites Temu and Pinduoduo reported better-than-expected earnings for the second quarter.

Net profit fell 4 percent to CNY30.8 billion (USD4.3 billion) in the three months ended June 30 from a year earlier, the Shanghai-based company’s trading report showed yesterday. Based on non-generally accepted accounting principles, profit slid 5 percent to CNY32.7 billion. Revenue rose 7 percent to CNY104 billion (USD14.5 billion).

Analysts expected PDD’s non-GAAP net profit and revenue to have reached CNY22.4 billion and CNY103.9 billion, respectively, according to Bloomberg.

“We do not believe this quarter’s profit levels are sustainable, and fluctuations in profitability are likely to continue in the coming quarters,” co-Chief Executive Officer Zhao Jiazhen said on PDD’s earnings conference call. “We prioritize long-term value creation over short-term financial results.”

PDD’s shares [NASDAQ: PDD] closed 0.8 percent up at USD128.21 in New York yesterday, after big swings in morning trading. In pre-market trading today, the stock was down nearly 1 percent as of 8.46 a.m. local time. The shares are up by more than 30 percent so far this year.

PDD will hike investment and sacrifice some of its own profits to create more development space for small- and medium-sized merchants, Zhao said.

“In the past quarter, we continued to invest in merchant support initiatives, and are encouraged by the progress made towards a healthier and more sustainable platform ecosystem,” said Lei Chen, chairman and co-CEO. “We remain steadfast in our commitment to supporting the vitality of the ecosystem, prioritizing long-term impact over short-term results.”

In the first half of the year, PDD’s profit shrank 24 percent to CNY45.5 billion (USD6.4 billion), while its non-GAAP profit dropped 17 percent to CNY49.6 billion. Revenue rose 8.6 percent to CNY199.7 billion (USD27.9 billion).

While competitors such as Alibaba Group Holding and Meituan are investing heavily in the food delivery industry, PDD has maintained a measured approach to instant retail, doubling down on its community group buying business ‌Duoduo Maicai.

‌Duoduo Maicai is a relatively complex business that requires long-term and large investment, PDD’s management team noted. Even though PDD’s competitors are withdrawing from this business to focus on new ones, ‌Duoduo Maicai still cannot relax, they added.

‌Duoduo Maicai’s pickup points cover over 70 percent of Chinese administrative villages.

Editor: Futura Costaglione