(Yicai) Aug. 26 -- PDD Holdings reported better-than-expected earnings in the second quarter of the year. However, the co-chief executive officer of the Chinese owner of discount shopping sites Temu and Pinduoduo warned about unsustainable performance.

Net profit shrank 4 percent to CNY30.8 billion (USD4.3 billion) in the three months ended June 30 from a year earlier, the Shanghai-based company said in its latest earnings report released yesterday. Based on non-generally accepted accounting principles, net profit slid 5 percent to CNY32.7 billion.

PDD’s revenue rose 7 percent to CNY104 billion (USD14.5 billion) in the period.

Analysts had predicted that PDD’s non-GAAP net profit and total revenue would have reached CNY22.4 billion and CNY103.9 billion, respectively, in the second quarter, according to Bloomberg.

“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 of PDD. “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 net profit shrank 24 percent to CNY45.5 billion (USD6.4 billion), while its non-GAAP net profit dropped 17 percent to CNY49.6 billion from the same period last year. Revenue climbed 8.6 percent to CNY199.7 billion (USD27.9 billion).

PDD will hike investment and sacrifice some of its own profits to create more development space for small- and medium-sized merchants, Executive Director and co-CEO Zhao Jiazhen said during the earnings conference call.

Moreover, Zhao warned that the management does not believe that the second quarter’s strong earnings performance can be sustained, with significant fluctuations expected in the future.

While competitors like Alibaba Group Holding and Meituan are investing heavily in the food delivery industry, Pinduoduo 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.

PDD’s shares [NASDAQ: PDD] closed 0.8 percent up at USD128.21 in New York yesterday, after greatly fluctuating in morning trading. In after-hours, they fell 0.4 percent.

Editor: Futura Costaglione