Ladies and gentlemen, thank you for standing by. Please continue to hold and the webcast will begin in a few minutes. Thank you. Thank you for watching. and many more. Thank you. Li Wenjie, Li Wenjie Li Wenjie Li Wenjie Li Wenjie, Li Wenjie Li Wenjie Li Wenjie Ladies and gentlemen, thank you for standing by and welcome to PDD Holdings Inc. Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today. Sir, please go ahead.

Thank you, operator, and hello, everyone, and thank you for joining us today. PDD Holdings earnings conference earnings release was distributed earlier and is available on our website at investor.pddholdings.com, as well as through the Gold Newswire services. Before we begin, I'd like to refer you to our safe harbor statement in the earnings press release, which applies to this call, as we'll make certain forward-looking statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measures to GAAP measures. Joining us today on the call are Mr. Chen Lei, our co-chairman and co-chief executive officer, Mr. Zhao Jiazhen, our co-chairman and co-chief executive officer, as well as Mr. Li Jun, our financial director. Lei and Jiazhen will make some general remarks on our performance for the past quarter and our strategic focus. Jun will then walk us through our financial results for the second quarter ended June 30, 2026. On today's call, certain management remarks will be in Chinese and will help translate. Please kindly note that English translation is for reference only, and in case of any discrepancy, statements in the original language should prevail. Now it's my pleasure to introduce our co-chairman and co-chief executive officer, Mr. Zhao Jiazhen. Jiazhen, please go ahead. Hello, everyone. I'm Zhao Jiazhen. Hello everyone, this is Jiazhen Zhao. Thank you for joining our earnings call for the second quarter of 2026. Before we formally begin, We would like to take this opportunity to express our deepest condolences on the passing of our Independent Director, Professor Yvonne Richards, and to pay our highest tribute to her significant contributions and dedicated service during her tenure with us.

Professor Richards has served as the Director-General of the University of Ningen in the Netherlands for a long time. She has an international reputation in the field of private research and pharmaceuticals. Since being the independent chairman in August of 2023, Professor Richards has proposed valuable professional advice for the company's governance and development. At the same time, the University of Holland-Waheningen, as a long-term partner of many agricultural competitions, continues to contribute to the international market and professional guidance for the market, helping the market to become an important platform for global agricultural technology innovation and talent growth. We will continue to support the professor's passion for agricultural business, continue to increase his investment in agricultural and agricultural, and pass on his professional spirit to long-term action. will contribute more to global agricultural development and food security. Next, let's go back to the performance of this quarter.

Professor Richens served a long tenure as chair of the toxicology department at Wageningen University and Research in the Netherlands and earned an international reputation in the fields of food research and drug effects. Since joining the company as an independent director in August 2023, Professor Richens provided invaluable professional advice on the company's governance and development. At the same time, as a long-standing partner of our smart agriculture competition, Washington University and Research has consistently brought international perspectives and expert guidance to the event, helping it become an important global platform for innovation in agricultural technology as well as for talent development. We will carry forward the passion for agricultural research and continue to increase our investment in agriculture and agricultural research. And through these long-term commitments, honor her professional legacy and make greater contributions to agricultural and food safety research worldwide. And now, let us return to the results for the quarter.

The second quarter of this year is a new stage of our new 10-year high-quality development, from the beginning of the opening to the promotion of the company. We have long-term adhered to the 100 billion support of the Huishan strategy, gradually entering the efficiency period from the investment period, accelerating the implementation of platforms and industrial and ecological efficiency, At the same time, we continue to steadily promote the three-year manufacturing of Pingduoduo's major strategy, self-sufficiency in brand business. Although some objective factors have been affected in the past six months, it is slower than expected, but the overall attitude is good. The current money has been fully launched and is being successfully promoted. We will do our best to invest in high-quality manufacturing of supply chain, promote traditional industry upgrade, and continue to release the internal potential of supply chain. In addition, in order to further promote the transformation and upgrade of supply chain, The second quarter this year marked a new phase in the new decade of high-quality development as we moved from initial rollout to deeper execution.

Our $100 billion support program has entered a phase in which our sustained investment is beginning to yield tangible results. The positive effects across our platform and industry are being unlocked at a faster pace, with improvements in both the quality and efficiency across the supply and demand sides. At the same time, we continue to make steady progress on our strategic goal of building another PDD over the next three years. Although the initial rollout of our first-party brand model over the past six months were slower than expected due to certain external factors. The overall momentum remains positive. The operations are now fully underway and progressing smoothly. We will commit fully to transforming the supply chain for higher quality growth, drive the upgrading of traditional industries, and continue to unlock the supply chain's new growth potential from within. Furthermore, to accelerate supply chain transformation and upgrades, we have established a dedicated company in the Xiong'an new area and purchased an office building there to focus on new opportunities created by intelligent technologies. And to support upgrading and high-quality development of traditional manufacturing, we have also established a data processing service center for traditional industries and an integrated service center to help traditional manufacturers move up the value chain and pursue high-quality development.

过去的这个记录,我们的业绩表现保持稳健。 We delivered solid results for the quarter. Group revenue was RMB 112.4 billion, representing a year-over-year increase of 8%. While group net income was RMB 27.2 billion,

are declining 12% year-over-year. This mainly reflected our continued investments in our platform and the broader industry ecosystem, which partly weighed on our performance this quarter.

In the past three hundred years, the competition in the e-commerce industry has been still intense. The market environment is complex and diverse, which has raised higher requirements for platform governance and industrial development. These have brought us new challenges. We continue to take systematic steps through the self-sufficiency of the system,

In the first half of this year, competition in the e-commerce industry remained intense. A complex and rapidly evolving market environment placed greater demands on both platform governance and industry development, presenting us with new challenges. We continue to step up investment in our platform and industry ecosystems through a coordinated set of measures focused on governance,

In terms of platform governance, we greatly increase the investment in research and development, not only to upgrade the technical anti-corruption system, but also to expand the team of specialized governance, and extend the focus of governance to all categories. For vertical and internal characteristics, we are keen to develop target-oriented specialized governance, to promote the industrialization, precision, and production of ecological governance.

We have significantly increased our R&D spending on platform governance. In addition to upgrading our technology-enabled risk prevention and control systems, we significantly expanded our specialist trust and safety teams and strengthened our oversight across all product categories. By taking into account specific characteristics of the different categories and launching targeted governance initiatives, we made ecosystem governance more regular, granular, and rules-based.

As of now, the platform has released a total of 151 comprehensive governance proposals. As of June, we have focused on more than 50 specialized solutions in the field of segmentation, covering product input, food safety, drug safety, knowledge assessment, advertising governance, knowledge and property protection, false marketing policies, live broadcast delivery regulations, technical abuse, and so on. We insist on using the rigidity of the system to block the bottom line of the rule of law, and use systematic thinking to rebuild governance logic.

To date, the platform has introduced more than 150 comprehensive trust and safety measures. In June alone, we launched over 50 targeted initiatives addressing key areas such as product listing controls, food and drug safety, qualification reviews, advertising compliance, intellectual property protection, misleading marketing, live stream e-commerce standards, and provision We are dedicated to upholding high compliance standards through rigorous rules, taking a systematic approach to reshaping our governance framework and fostering a safer, better regulated, and more trustworthy shopping environment.

Food Safety, we launched a dedicated governance initiative that prohibits the sale of freshly prepared food and beverage products.

with further tightened merchant qualification reviews as well as information disclosure requirements to prevent and mitigate food safety risks early on. At the same time, the platform introduced more detailed requirements governing the permitted scope of food products sold via live streaming, live streamer conduct, and how products are described and presented. From product submission to live stream presentation, We guide merchants throughout the food process to operate with integrity and present products truthfully, so that consumers can purchase and consume the food products with ease of mind.

In June, we also published a number of video courses specifically focused on the problems of self-reliance and reading, to encourage the three major schools to avoid violations of the rules related to their own industries, and at the same time maintain their own legal rights.

In early June, we also produced and released a number of video courses addressing common challenges and pain points in platform governance. These courses encourage merchants to familiarize themselves with the rules relevant to their industries, avoid violations, and protect their legitimate rights and interests in accordance with platform rules. Namely, the course frequently asks questions about store business licenses received 340,000 views within 24 hours of launch.

Building on the systematic upgrade of our platform governance, we have continued to step up investment in a 100-billion support program.

Our support now extends beyond our broad merchant base to upstream and downstream participants across agricultural production regions and industrial clusters, helping drive comprehensive upgrades throughout the supply chain. In agricultural production regions, the 2026 Dozo Premium Produce Initiative has reached dozens of specialty agricultural regions, including those for Jiangsu Aquatic Products, Chongqing Plums, Shanxi Chinese Toon Sprouts, Hainan Pineapples, Hainan Lychees, Hunan Preserved Duck and Hubei Crayfish. Through the initiative, we help these regions develop new products raised cultivation standards and improved culture and logistics, thereby unlocking greater value for their agricultural products.

以海南鳳梨產區為例, 當地商家在近年開始引進金磚鳳梨的新品種, 與傳統品種不同。 金磚鳳梨口感甜了不酸且無需挖鹽,不用泡鹽水, 在平台秒殺、萬人團等流量引進的扶持下, 迅速打開局面,成為當季的水果頂流。 此外,電商的確定性訂單, also gave us the confidence to expand the harvest. So far, Jinzuan Pineapple has grown to more than 100,000 mu in the local planting area.

Take Hainan's pineapple growing region as an example. In recent years, local merchants have begun introducing a new variety known as the Golden Diamond Pineapple. Unlike traditional varieties, it has a distinct sweetness and requires neither removing the ice nor soaking in salt water before serving. and supported by high-traffic programs on our platform, including Flash Sale and 10,000 People Group Buy, the variety quickly gained market traction and became one of the season's most popular foods. The greater certainty provided by e-commerce orders has also given growers the confidence to expand production. To date, the local cultivation area for Golden Diamond Pineapples has grown from scattered trial plots to more than 100,000 moves.

Our new supply and supply team first entered Suzhou, Jaffa, Shaoxing, Changpeng, Jinhua, Huwai, Guangzhou, Meizhuang, Jieyang, Nanzhuang, Xinyang, Fangzhi and other industrial areas. From flow exposure, data supply, market weakness, cost reduction, smart manufacturing, and interoperability upgrade, etc., we provide systematic support to the industrial areas. The market cycle of many factories has been compressed by one-tenth, and the language ability has achieved a significant improvement. The demand for high-end orders on the platform that can respond quickly

across the industrial belt, our dedicated new quality supply team has visited manufacturers across different regions and sectors, including home textile in Suzhou, tent manufacturers in Shaoxing, outdoor products in Jinhua, cosmetics in Guangzhou, menswear in Jiayang, and textile in Xinyang. will provide a suite of support measures to these merchants, such as traffic support, data enablement, expansion of market reach, cost reduction, smart manufacturing, and warehousing upgrades. As a result, many factories have cut their production cycles by half and have substantially improved their fulfillment capabilities. They can now rapidly handle large order volumes on a platform while tailoring to consumers' customization needs. This has enabled manufacturers to take a transformative leap from traditional manufacturing to building brands of their own, while accelerating the shift from traditional to new growth drivers across this industrial field.

以信仰纺织产业为例,在信仰故事县,当地城市老屋输出大县,此前仅在江浙一带从事纺织行业的故事人就超过20万人。 最近几年,当地的年轻人开始在本地设厂。 And Xinyang's textile industry is a good example. Gu Shi County in Xinyang was once a major source of migrant labor,

with more than 200,000 local residents previously working in the textile industry in Jiangsu and Zhejiang provinces alone. In recent years, younger generations from the county have begun establishing factories locally and selling textile products nationwide to Pinduoduo. Their annual sales have grown by an average of four to five times and have built leading brands in niche categories such as mosquito nets that are exported to Southeast Asia and Europe during the summer season. Today, the local economy has moved beyond its traditional reliance on labor migration and has established an integrated path to industrial development that brings together capital, technology, talent, and sales channels.

另外,我們的包郵進村服務推出半年來也在持續地收穫成效。 目前,我們已在全國十多個省市建立了縣級中轉餐、村級代手點等末端基地網絡。 have created a wide range of jobs for the county and rural areas. At the same time, they also promote all kinds of consumer goods, home-grown products, farmland and agriculture, etc., to accelerate the entry into the rural market, and continue to develop new products for all kinds of businesses, so that the users of remote rural areas can live a better life. As an example, in Shandong Province, as a agricultural province, Shandong Province is the focus of Pingdong Province's free delivery of goods to the rural areas. The four points of the previous contract and the water level have already achieved significant results. In addition, our Free Shipping to Villages program has continued to deliver positive results since its launch six months ago.

We have now established last mile delivery networks across more than 10 provinces and municipalities nationwide, including county-level transit hubs, and Village Pickup Points. These networks have brought significant job creation to counties and rural communities while accelerating the distribution of consumer goods, home appliances, agricultural supplies, and farming equipment to rural markets. In doing so, we are helping merchants unlock new growth opportunities and enabling consumers in remote villages to improve quality of life. I take Shandong as an example. As one of China's leading agricultural provinces, it is a key region for Pinduoduo's Free Shipping to Villages program. And earlier pilots in Heze Juancheng and Dingyi Yishui have already produced significant results, with order volumes in the villages increasing several fold. And Qingzhou, meanwhile, is a major domestic production hub for water-soluble and innovative fertilizers. And many local agricultural supply companies are building on this momentum to reach more villages across the country.

作為一家公共平台, 我們一直積極承擔一定的社會責任,持續回歸社會。 前不久受颱風及強降雨影響, 晚期多地發生嚴重洪澇災害。 為全力支援一線救災, 拼多多緊急向受災地區捐贈現金一千萬元, 用於採購物資和救災設備, 看治受災群眾,幫助各地災後重建。

As a platform serving the public, we have always sought to fulfill our social responsibilities and give back to the society. Recently, typhoons and heavy rainfall caused severe flooding in several parts of Guangxi. To support frontline disaster relief efforts, Pinduoduo made a cash donation of RMB 10 million to the affected areas. The funds were used to procure relief supplies and equipment, provide assistance and temporary shelter to affected residents and support post-disaster recovery and reconstruction. As we embark on our next decade, we are more convinced than ever that high-quality development calls for both the intensity of a sprint and, more importantly, the perseverance of a marathon. We will stay committed to taking a long-term approach and execute our new decade of high-quality development strategy with patience and resolve to deliver solid and tangible progress at every step. We will continue to invest resolutely in our supply chain, empower merchants and industries, and deliver better products and services to consumers. Through concrete actions, we aim to create greater positive value for our users, merchants, and the society as a whole. With that, I will turn the call over to Chen Lei, who will provide further details.

Hello everyone, I'm Chen Lei. Thank you for joining our Curtis call for the second quarter of 2026. In the first half of the year, we made tangible progress under the new decade of high-quality development strategy and laid a solid foundation for long-term growth. As Jiazhen just mentioned, we focused on two key areas First, through the 100 billion support program, we continue to give back to both consumers and merchants. At the same time, we upgraded our platform governance framework across the board. This initiative has helped foster a healthier environment both on our platform and in a broader industrial ecosystem. And second, we continue to work towards our three-year initiative of building another PDD. We step up supply chain investment and help supply chain partners build and develop their own brands. During the quarter, our long-term investment in a $100 billion support program started to materialize into gains in a healthier platform ecosystem. On the supply side, our merchants benefited from a combination of fee reductions, merchant support initiatives, and a stronger platform governance. These initiatives unlocked greater innovation among merchants, leading to the launch of new products and new brands, which drove incremental demand and new sources of growth. Many manufacturers adopted digital and intelligent technology to enable customized production, and this drove improvements in quality and efficiency across the supply chain and enabled manufacturers to transitioned towards a new development model. On the demand side, we continue to serve consumers' evolving needs for different product categories and diverse consumption occasions. This was particularly evident in rural areas where our free shipping to villages program put a much wider selection of products within the reach of consumers, helping improve their quality of life. Drawing on the supply chain capabilities and brand development experience gained through the $100 billion support program, we took steps in this quarter to further integrate the supply chain. Our teams delved into the industrial balance of different product categories and started early stage collaborations with high-quality suppliers. By setting clear standards for products, production processes, and quality control, We help merchants and manufacturers adapt their operations and develop a range of higher quality products with higher margins. Through these efforts, we continue to unlock the strengths and the potential within the supply chain, driving the manufacturing sectors up the value chain. Since the beginning of the year, global regulatory and compliance landscapes have undergone significant shifts. This change created challenges as well as opportunities, and they also come with greater responsibilities. We find ourselves at a unique intersection of global trade, constantly navigating diverse international regulatory frameworks. At the same time, our position is a unique one. The business touches the daily lives of billions of people around the world. While there is substantial potential for growth, It is accompanied by increased expectations and higher standards of accountability. We will stay true to our mission and continue to do every part of our work with dedication and discipline. But we will keep strengthening our compliance capabilities and fine-tuning platform governance. Through Protect Intellectual Property, we combine screening technologies with expert review to monitor and assess product listings across all categories in real-time. This enables us to address IP risks earlier in the process and has led to systematic improvements of IP protection across the platform. And second, we continue to invest resolutely in the supply chain By thoroughly executing on these structural upgrades, our ultimate goal is to build a highly resilient e-commerce platform that consumers around the world can rely on for competitive price and great quality. As we step into our next decade, we remain laser-focused on our core e-commerce business. By deepening our supply chain investments, will continue to empower our merchants and broader industry delivering a wider range of high-quality products and services. We are confident in our ability to translate our three-year initiative of building another PDD into tangible, verifiable results. and in doing so, we will strive to help the traditional supply chains capture the opportunity in this new intelligent era and empowering them to transform and move out of the value chain and build brands with global reach. And now, let me turn it over to Li Zhou, who will walk you through our results for the second quarter, 2026. Well, thank you Lei.

Hello everyone, this is John. Now, let me walk you through our financial performance for the second quarter, end of June 30, 2026. First, income of income statement. In the second quarter, our total revenues increased 8% year-over-year to RMB $112.4 billion. This was mainly driven by an increase in revenues from transaction services. Revenues from online marketing services and others were RMB $57.6 billion this quarter, compared with RMB 55.7 billion in the same quarter of 2025. Revenues from transaction services were RMB 54.7 billion, up 13% from the same quarter last year. Moving on to costs and expenses. Our total costs of revenues increased 5% from RMB 45.9 billion in Q2 2025 to RMB 48 billion this quarter. On a GAAP basis, total operating expenses this quarter increased 13% to RMB 36.6 billion from RMB 32.3 billion in the same quarter of 2025. On a non-GAAP basis, total operating expenses increased to RMB 35.3 billion this quarter from RMB 30.4 billion in Q2 2025. Our total non-GAAP operating expenses as percentage of total revenue this quarter was 31% versus 29% in the same quarter last year. Looking into specific expense items, our non-GAAP sales and marketing expenses this quarter were around between $9.3 billion, up 10%, versus the same quarter last year. On a non-GAAP basis, our sales and marketing expenses as a percentage of our revenues this quarter was 26%, in line with the same quarter last year. were non-GAAP general administrative expenses for RMB 1.7 billion versus RMB 0.7 billion in the same quarter of 2025. Our research and development expenses were RMB 4.3 billion this quarter on a non-GAAP basis, up 40% year-over-year. On a GAAP basis, operating profit for the quarter was RMB 27.8 billion, versus RMB 25.8 billion in the same quarter last year, up 8% year-over-year. Non-GAAP operating profit was RMB 29.1 billion versus RMB 27.7 billion in the same quarter last year. Non-GAAP operating profit margin was 26% this quarter versus 27% for the same quarter last year. Net income attributable to ordinary shareholders was RMB 27.2 billion for a quarter compared to RMB 30.8 billion in the same quarter last year. Basic earnings per ADS was RMB 19.32 and diluted earnings per ADS was RMB 18.45 versus basic earnings per ADS of RMB 22.01 and diluted earnings per ADS of RMB 20.75 in the same quarter of 2025. Nungap's net income attributable to ordinary shareholders was RMB 28.5 billion versus RMB 32.7 billion in the same quarter last year. Nungap diluted earnings per ADS was RMB 19.33 versus RMB 22.07 in the same quarter of 2025. That completes the income statements. Now, let me move on to cash flow. Our net cash generated from operating activities was RMB 25.7 billion, compared with RMB 21.6 billion in the same quarter last year. As of June 30, 2026, we had RMB 456.4 billion in cash, cash equivalents, and short-term investments. Thank you, and this concludes my prepared remarks.

Thank you, Jun. We'll now move on to the Q&A session. In today's Q&A session, Lei, Jiazhen, and Jun will take questions from analysts on the line. We could take a maximum of two questions from each analyst. Lei and Jiazhen will answer questions in Chinese and will help translate for convenience purpose. Operator, we're open for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. Participants are requested to restrict to two questions at each time. Your first question comes from Thomas Cheung with Jeffrey. Please go ahead.

晚上好,謝謝管理層接受我的提問。 我的第一個問題是關於公司的全球化的業務的。 我們注意到歐盟今年7月起對首爾誇金包裹徵收一個過度性的關稅。 請問管理層解釋關稅的變動以及海外區議員的監管的大環境。 对平台整体的单量预计会产生多大程度的影响 面对这些政策的逆风 公司接下来的全球化的业务的发展战略会是什么 这个是第一个问题 我第二个问题是 关于上一个季度公司也宣布了全新的品牌经营的战略 关于诚可以分享一下最近的一个发展 I will translate myself. My first question is about the company's global business. We noticed that the EU introduced a temporary customs duty on low-value cross-border consignments starting from July this year. Can management help us understand the expected impact of this change on the company's overall order volume? In light of these policy headwinds, what will be the company's growth strategy for the global business going forward? And my second question is on the company's first-party brand business, announced last quarter. Could management provide an update about the rollout and the progress made so far? And more broadly, how should investors frame the potential impact of this initiative on the company? How are you thinking about the mix and the positioning of first-party versus first-party products? And what will guide your pricing strategy for first-party products? Thank you.

Hello, Thomas. My name is Chen Lei. Let me answer your first question, which is about globalized business. In recent years, globalized business has indeed undergone a major change in the regulatory and regulatory environment. It has brought great difficulties and opportunities to our business. We feel that we have a great responsibility.

Hi Thomas, this is Chen Lei. Let me take your first question about our global business. Over this period, the regulatory and compliance landscape facing our global business has changed significantly. These changes have created challenges as well as opportunities for our business. They also come with great responsibilities.

I feel that the company is in a special global economic trade exchange. We believe we stand at a unique intersection in the global economy and global trade. We face pressure from different regulatory policies.

while also occupying a distinctive position. Currently, our business touches the daily lives of billions of people around the world. While there is substantial potential for growth, it is accompanied by increased expectations and higher standards of accountability.

As for the change in EU tariffs policy that you just mentioned, the team has been actively researching and adapting We combine our experiences in the past to adjust the supply chain and optimize the chain. Under the premise of compliance with the bottom line, we must actively monitor the experience of consumers, the long-term development of business and business. From a short-term perspective, cross-border orders affected by the market will face a decrease in the efficiency of the contract and the problem of cost increase. The growth of related business will indeed be greatly affected.

On the changes to the EU customs duties that you mentioned, our team is actively assessing and adapting to them. Drawing on the experience that we have gained over the years, we have adjusted our supply chain and we are optimizing our fulfillment processes. With compliance as our bottom line, we are working to balance consumer experience, merchant operations, and the long-term development of our business. In the short term, cross-border orders in the affected markets will face lower fulfillment efficiency and higher costs, which will have a considerable impact on those parts of our business.

But if we look at it from a medium-long-term perspective, the change in the external environment actually further highlights the importance of supply chain investment. This is also in order to accelerate the construction of relevant capabilities. On the one hand, we will continue to guide and support more local high-quality merchants to enrich the supply of local products. On the other hand, we are also accelerating the layout of localization warehouses and reservation facilities to expand the coverage of local expansion. Through these approaches, we hope to be able to integrate each market we serve in a deeper way. The foundation of Hangshi's supply chain

However, over the medium to long term, changes in the external environment have further underscored the importance in our supply chain and has prompted us to accelerate the development of the relevant capabilities. First, the platform will continue to onboard and support more high-quality local merchants. to broaden the supply of local products. Second, we are accelerating the build-out of local warehousing and fulfillment infrastructure and expanding the coverage of local fulfillment. Through these investments, we hope to integrate more deeply into every market we serve, strengthen the foundation and resilience of our supply chain, and better navigate changes and volatility in the environment.

In addition to supply chain capabilities,

Compliance capabilities and platform governance are also critical foundational capabilities in which we will invest for the long term. We will continue to enhance platform governance, further improve product quality, and strengthen consumer protection with the goal of providing consumers around the world with a platform they can trust.

At the same time, in order to provide a healthy and fair business environment for global customers, We have done a lot of work in terms of intellectual property rights and regulations. At present, the platform is already on the basis of technical monitoring and artificial audit, and has built up systematic intellectual property rights protection capabilities. In recent years, we and our partners have made comprehensive claims in the intellectual property rights claim case, which also proved the effectiveness of our platform's intellectual property protection mechanism, which can firmly protect the legitimate rights of platform eco-partners.

At the same time, we have done extensive work on intellectual property compliance to provide a healthy business environment and level playing field for merchants around the world. Building on technology-enabled monitoring and manual review, the platform has developed systematic IP protection capabilities. Our recent favorable ruling in the IP litigation involving an industry peer has further demonstrated the effectiveness of our IP protection mechanism. We will remain committed to protecting the legitimate rights and interests of our ecosystem partners and to fostering a fair and reliable business environment.

So the changes in monitoring and policies should be the issues that the entire industry must face together. We have full confidence in the team's execution and organizational resilience. We will not change the long-term direction of globalized business due to short-term fluctuations. Next, we will continue to do well in the supply chain, make agreements with regulators and consumer services, and strive to provide a long-term stable, price advantage, quality, and reliable shopping platform for consumers.

Thank you Regulatory and policy changes are issues that the entire industry must address We are confident in our execution capabilities and organizational resilience Short-term volatility will not change the long-term direction of our global business Going forward, we will continue to steadily advance our work across supply chain, fulfillment, compliance, and consumer service We will strive to provide consumers around the world with a shopping platform that remains stable over the long term and offers compelling prices and reliable quality, a platform that they can count on, trust, and enjoy using. Thank you.

Hello, I'm Jiazhen Zhao. About your second question, let me answer it. Brand business is an important extension of our long-term supply chain investment direction. We also hope to create a business that is capable and willing Hi, this is Zhao Jiazhen. Regarding your second question, our first-party brand business is an important extension of our long-term investment in supply chain capabilities.

We aim to work closely with manufacturers that have strong capabilities and willingness to invest in long-term product development. By leveraging the platform's market insights and global reach, we seek to bring greater certainty to brand development and value creation across the industry value chain, and in turn turn that incremental value into tangible benefits for all the participants.

In terms of execution, we will first focus selectively on core product categories where our platform and supply chain capabilities provide some distinctive advantages.

We will work with manufacturers over the long term, from product planning and R&D, to setting quality standards and market testing.

Although this business requires a longer period of cultivation and integration, its initial time required is also longer than the original expectation. However, this is a clear long-term strategic direction of the platform. We will be patient and do everything in place. We are confident in the long-term prospects of our brand.

The business requires an extended period of development and collaboration, and the initial rollout has taken longer than we originally expected. Nevertheless, it remains a clear long-term strategic priority for the platform, and we will remain patient and focused on getting every step right, and we are confident in the long-term prospects of our first-party brand model.

Regarding this operation strategy, the platform's open and fair infrastructure will not change. We always believe that In terms of operating strategy, our commitment to maintaining an open and fair marketplace will not change.

Thank you. Thank you, thank you so much. And operator, we can move on to the next analyst on the line.

Your next question comes from Alicia Yap with Citigroup. Please go ahead.

Hi, thank you. 管理层网上好,谢谢接受我的提问。 两个问题,第一个问题是我们看到 全球其他的头部电商平台 随着他们的业务的规模扩大 也会选择加大物流和旅游 The second question is that in the past, we have seen a lot of global partners, such as Global Peers, making a lot of investments in real-time sales. How do you assess the potential impact of this new consumer habit on the industry competition pattern and the core business of the company? And then in the case of the industry accelerating the layout of half an hour, what is the good strategy for the company to continue to consolidate the scope of user knowledge and the market? Thank you for taking my question. So two questions. First is that we have seen many global e-commerce companies invest in their own warehousing and also delivery capabilities as they scale. For example, by building out their own warehouse networks and also delivery capabilities. How should we think about the company investment priority in this area over the long term? and the second question is on the quick commerce. So many global peers have made significant investment in this area. How does management assess the potential impact of the shift in consumer behavior on the industry competitive landscape and also the company's core business? As the industry ramp up investment in the same day delivery, what strategy is the company pursuing? to strengthen user mindshare and also defend your market share. Thank you.

Hello, I'm Jiazhen Zhao. Regarding this logistics contract investment, this is the same as other investments. We always have the experience of the consumer experience and some pain points encountered when participating in business. We do some things that can create real value and have targeted and efficient investment. Therefore, Hi, this is Jiazhen.

As with our other investments, our investments in logistics and fulfillment are guided by the need to improve consumer experience and address the practical challenges the merchants face in doing business. We make prudent and targeted investments where we believe we can create tangible value. and accordingly, our investment priorities vary across markets and business models.

In the domestic market, most of the e-commerce and logistics networks in the region are relatively mature. However, in the western remote areas and large villages, the end-to-end delivery still has obvious bottlenecks. For this reason, we have invested a large amount of resources to deepen the logistics chain. Under the strategic support of thousands of dollars, we are determined to advance. Song Huo, Jing Chuan, and Dian San, Xi Jin.

In the domestic market, e-commerce logistics networks are already quite well developed across most regions. However, last mile delivery remains a significant bottleneck in remote western regions and many rural communities. To address this problem, we have committed substantial resources to strengthening logistics networks, and under our $100 billion support program, we are firmly advancing the Free Shipping to Villages initiative and our logistics support for remote regions.

Since the end of last year, for example, our free delivery and import business in Yunnan County has been built into a village-level station with a coverage of 177 villages across the whole county. In Shandong's Yishui, we have also increased the package shipping volume of the Japanese army into up to 30,000 units. These facilities not only help the production of fertilizer, fertilizer and other production materials to reach the fields, And since the end of last year, under the Free Shipping to Villages initiative, we have established local service stations covering all 177 villages in Hunan Youqian.

In Shandong Yishui, we have increased the number of parcels delivered to villages to more than 100,000 per day. This infrastructure not only helps agricultural supplies such as fertilizers reach farmers more directly, but also enables a wider range of high-quality products to reach rural consumers more efficiently. And in doing so, we are helping unlocking significant consumer demand in underserved regions and meaningfully improve border conversion for our merchants that serve these communities.

In this part of the overseas market, The point-to-point shipping of the business section is often more difficult to form a comprehensive shipping scale effect. This will lead to higher overall business cost and a part of the consumer demand. For the existing market of these problems, we will also deliberately invest in the construction and operation of medium-sized warehouses to help local businesses optimize business connections, reduce logistics thresholds, and improve the business certainty of local consumers.

In certain overseas markets, fragmented point-to-point shipping by individual merchants oftentimes makes it very difficult to achieve the economies of scale that is made possible through the consolidation of shipments. This results in higher over-fulfillment costs and leaves some consumer demand unmet. In markets facing these challenges, we invest targetedly in development and operations of transit warehouses. These investments help local merchants streamline their fulfillment processes and lower logistics barriers, while providing local consumers with a more reliable delivery experience.

Back to your question, in the future, we will continue to adhere to this kind of investment strategy that solves actual problems as a guide. We solidify the capacity of the supply chain by improving the efficiency and certainty of the contract, improving the consumer experience, and promoting the positive circulation between supply and demand.

We will continue to take a practical and solution-oriented approach to fulfillment-related investments. By building stronger supply chain capabilities and improving the efficiency and reliability of fulfillment services, we aim to enhance the consumer experience, create a virtuous cycle between supply and demand, and strengthen the platform's capacity for sustainable organic growth over the long term.

For your second question, the form of retail and e-commerce is always in a fast pace. We also pay attention to the fact that various innovative business models are constantly emerging in the market. Even if retail and our core e-commerce and grocery business meet the demand of consumers for diversification in different industries, from our current business basics, they still have a big difference in the network and business models at the bottom. And to your second question, retail and e-commerce business models are constantly evolving, and we are seeing a growing range of innovative business models emerge across the market. Quick commerce serves different consumer needs and use cases,

As compared to our core e-commerce and grocery businesses. And given the current stage of our business, these are fairly different in terms of both supply chain requirements and operating model, and with limited scope for synergies. We have therefore chosen to focus our resources and efforts on areas where we have established strength and our best position to create differentiated value.

As the industry grows, the platforms will be able to As the industry matures, platforms will take different approaches to serving consumers based on their respective capabilities and experience. Our path has always been quite clear

We will continue strengthening our supply chain capabilities. Our current supply chain investments have two complementary priorities. Firstly, it's ensuring a strong supply of quality products. And secondly, it's building the infrastructure to deliver them efficiently.

In terms of stockpiling, we continue to use new materials, new products, and other specialties to help capable traditional manufacturers to improve product and brand capabilities. to promote the value of supply and demand of supply and demand, so that consumers can enjoy high-price, high-quality domestic goods. In terms of road repair, through infrastructure projects such as delivery and delivery, we can improve the network, open up the endpoints of logistics in remote areas, so that consumers in more regions can enjoy the convenience and convenience brought by e-commerce.

And on the product supply side, through initiatives such as New Quality Supply and Doduo Premium Produce, we continue to help capable traditional manufacturers strengthen their product development and brand building capabilities, enabling them to move up the value chain and giving consumers greater access to high-quality products at compelling value. And on the infrastructure side, through projects such as free shipping to villages, We are improving our distribution network and addressing last-mile delivery gaps in remote areas, and enabling consumers in more regions to benefit from the convenience and affordability of e-commerce.

The direction of supply chain investment we choose may not be the fastest in the short term, but in the long term, these measures can bring value to the industry, consumers, and commercial ecology.

The supply chain investments we have chosen to make may not yield immediate results, but we believe over the long term, they will create tangible value for the industry, consumers, and our merchant ecosystem. We will remain focused on this foundational, yet very important work, and continue creating differentiated value for consumers and merchants. Thank you. Operator, I think we have time for one more analyst.

Thank you. Your final question comes from Joyce Ji with Bank of America. Please go ahead.

Hi, I'm Leijiazhen Jiong. Thank you for accepting my question. My first question is about the long-term commercialization potential of the platform. The company has launched a billion-dollar service plan for almost a year. After this series of investments, how has the health and vitality of the current business environment of the platform changed? Thank you. Let me translate it for myself. My first question is on long-term commercialization potential. It has been almost a year since the company launched the RMB 100 billion support program. Could management provide an update on the health and activity of the merchant ecosystem following the investments? As the ecosystem improves, are you seeing or would you expect to see a corresponding increase in merchants' willingness to spend on advertising? My second question is on the revenue growth outlook. Based on the trends observed in the first half, how are you thinking about the consumer spending outlook for the full year? Looking ahead, does platform revenue have the potential to outgrow the broader consumer market? Thank you very much.

Hello, this is Jiazhen. As mentioned in the speech, Hi, this is Jiazhen Zhao. As mentioned earlier, the 100 billion support program is starting to show results.

From the $10 billion fee reduction program introduced in 2024 to the $100 billion support program early last year, the resources and the supply chain support that we have provided have reached major agricultural regions and manufacturing clusters.

经过这段时间的努力,我们很欣喜地看到一批产业在来参加, 借此实现了这个自教跃迁,比如说一家广东的某美装品牌。 and many more.

We are encouraged to see that these efforts have enabled many merchants in industrial belts to make meaningful gains in both quality and efficiency. For example, with the support from the platform, a cosmetic company in Guangdong significantly reduced its customer acquisition and operating costs. This company reinvested the profits in a two-year R&D effort, successfully transitioning into patented and national brand, and merchants in Zhongshan's lighting manufacturing belt have also leveraged the platform's fast product taxing capabilities to increase investment in high-quality lighting components and smart product features, which led to the launch of a best-selling product that generated several millions in sales within just a few months.

These solid landing cases show that the measures we have made have worked. Of course, the improvement of commercial ecosystems still needs to be accumulated for a long time. In the future, we will firmly insist on investing.

These tangible results demonstrate that our efforts to reinvest in the supply chain ecosystem are working. Of course, building a healthier merchant ecosystem takes time. We will remain committed to these investments and help more merchants achieve healthier and more sustainable growth.

The development space of the three companies and the experience of high-quality consumers and the health of the platform ecosystem are inseparable. Our dedicated support is primarily based on the quality of the products, the improvement of the supply chain and the ecosystem of the three companies, and the cost saved by the small and medium-sized three companies can be used to upgrade the products. In the long term, the cost of the three companies is declining, the profit space is improving, and the confidence is increasing. These benefits will ultimately bring sustainable growth of the internal value of the platform. Thank you.

E-commerce platforms are two-sided networks. Merchants' growth prospects are closely tied to a high-quality consumer experience and a healthy platform ecosystem. Our $100 billion support program is therefore focused first and foremost on improving product quality, strengthening the supply chain, and supporting the merchant ecosystem, such that small and medium-sized merchants can reinvest their efficiency gains in product upgrades. Over the long term, Lower operating costs, stronger profitability, and greater business confidence among merchants will ultimately drive sustainable organic value creation across the platform. Thank you.

Hi, this is John, and let me take your second question. In the first half of the year, as consumption support policies continue to take effect, China's consumer market expanded steadily, and online retail penetration continued to grow. We remain confident in the long-term potential of China's consumer market and e-commerce industry. As e-commerce enters a new stage of development, platforms need to take a more proactive role in unlocking new growth by addressing fundamental supply chain bottlenecks. Like for example, through our free shipping to village initiative, we're investing in a more comprehensive fast-mile delivery network, including transit warehouses, and Village Pickup Points. These efforts are helping strengthen rural commerce and distribution networks and stimulate consumer demand in these regions. In the first half of this year, retail sales in rural areas grew faster than the overall market, showing significant potential. On monetization, just as Jiazhen mentioned, We remain focused on strengthening the platform ecosystem and helping our merchants grow. Over time, by getting these fundamentals right, we believe the sustainable growth in the platform's intrinsic value will naturally follow. Thank you.

OK. Thank you, Jun. And thank you all for joining us today. It's about time. And we look forward to seeing you next quarter.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.