Our Company PDD Holdings is a multinational commerce group that owns and operates a portfolio of businesses. We aim to bring more businesses and people into the digital economy so that local communities and small businesses can benefit from increased productivity and new opportunities. Our Pinduoduo platform provides buyers with a comprehensive selection of value-for-money merchandise and fun and interactive shopping experiences. The platform pioneered an innovative “team purchase” model. Buyers are encouraged to share product information on social networks, and invite their friends, family and social contacts to form shopping teams to enjoy the more attractive prices available under the “team purchase” option. Pinduoduo’s buyer base helps attract merchants to the platform, while the scale of the platform’s sales volume encourages merchants to offer more competitive prices and customized products and services to buyers, thus forming a virtuous cycle. We have always seen business opportunities in agriculture, and we seize these opportunities by leveraging the Pinduoduo platform to promote digital inclusion of smallholder farmers. The ability to aggregate demand and generate large volumes of orders helps create economies of scale for farmer merchants. Farmers can sell directly to consumers through the platform and become less dependent on wholesale distributors. Dedicated training programs are offered to enable farmers to become better business operators. We collaborate with reputable agricultural institutions to invest in technology and fund research with the objective of improving food production, quality control, food safety and sustainability, so that a greater volume of better, fresher and safer agricultural products can go directly from farm to table. Temu was founded in September 2022 in Boston, Massachusetts, the United States. Following its initial launch in North America in September 2022, Temu expanded to Oceania in March 2023 and Europe in April 2023 and then to other countries and regions worldwide. As of the end of 2025, Temu was serving consumers in various countries and regions, including the United States, Japan, Germany, the United Kingdom, France, Canada and Italy, which are among the world’s largest economies. Although at an early stage of development, Temu aspires to become a global online platform dedicated to providing quality products to consumers at attractive prices. In partnership with a global network of logistics vendors and fulfillment partners, Temu empowers merchants with value-added services that enable a broader market reach. Both Pinduoduo and Temu enable merchants to provide product listings for buyers to conveniently browse and order on the platforms. We help merchants streamline their manufacturing and operations, leading to more competitive prices and reduced waste, and use fun, interactive shopping experiences and competitive pricing to attract, engage and retain buyers and merchants. Despite their differentiated geographical coverage, Pinduoduo and Temu have the same value propositions and operational model. Currently, both platforms primarily serve merchants in China, assisting them in reaching consumers and growing their sales. Our revenues primarily consist of (i) transaction services and (ii) online marketing services and others provided to third-party merchants who sell their products on our platforms. For the fiscal year ended December 31, 2025, substantially all of our revenues were derived from third-party merchants in China. 3 Table of Contents Our Holding Company Structure and Contractual Arrangements with the VIE We conduct our businesses through a number of operating entities incorporated in jurisdictions across the globe. The following diagram illustrates our corporate structure, including our principal subsidiaries and the VIE and its principal subsidiary, as of the date of this annual report: (1) Mr. Lei Chen and Mr. Jiazhen Zhao hold 86.6% and 13.4% equity interests in Hangzhou Aimi, respectively. They are employees of our company and have entered into a series of contractual arrangements with Hangzhou Weimi, pursuant to which the Company is able to (i) direct the activities of Hangzhou Aimi and its subsidiaries; (ii) receive substantially all of the economic benefits of Hangzhou Aimi and its subsidiaries; and (iii) have an exclusive option to purchase all or part of the equity interests in and assets of Hangzhou Aimi when and to the extent permitted by PRC law. As a result, the Company is considered the primary beneficiary of Hangzhou Aimi and its subsidiaries for accounting purposes and has consolidated their financial results according to U.S. GAAP. (2) Through intermediary holding entities. (3) These entities provide services to users of Pinduoduo. (4) These entities provide services to users of Temu. 4 Table of Contents Holders of our ADSs hold equity interests in PDD Holdings Inc., a Cayman Islands holding company that does not conduct operations directly. Instead, we conduct our operations through (i) our subsidiaries, (ii) the VIE, and (iii) the subsidiaries of the VIE. We do not have any equity ownership in the VIE or its subsidiaries, through which we conduct certain of our operations in the Chinese mainland. We only maintain contractual arrangements with the VIE which allows us to consolidate the financial results of the VIE and its subsidiaries into our consolidated financial statements in accordance with U.S. GAAP. Holders of our ADSs therefore do not have direct or indirect equity interests in the VIE and its subsidiaries. The VIE structure allows foreign investors to have exposure to China-based operating companies that are subject to restrictions on direct foreign investment under Chinese law. In particular, certain PRC laws and regulations restrict and impose conditions on foreign investment in value-added telecommunications services businesses in the Chinese mainland, such as those providing internet content-related services and online data processing and transaction processing services. Accordingly, we operate these businesses in the Chinese mainland through the VIE and its subsidiaries, and rely on contractual arrangements among Hangzhou Weimi, the VIE and its shareholders to direct the business operations of the VIE and its subsidiaries. Shanghai Xunmeng was established in January 2014 and holds the VATS Licenses covering (i) internet data center services (limited to internet resources cooperation services), (ii) online data processing and transaction processing business (operating e-commerce), (iii) internet content-related services, (iv) call center business within the Chinese mainland, and (v) information services. The VIE structure consists of a series of contractual arrangements, including a shareholders’ voting rights proxy agreement, equity pledge agreement, spousal consent letters, exclusive consulting and services agreement and exclusive option agreement, that have been entered into by and among Hangzhou Weimi, the VIE, the VIE’s shareholders and, as applicable, their spouses. As a result of the contractual arrangements, we are able to direct the activities of and derive economic benefits from the VIE. We are considered the primary beneficiary of the VIE and its subsidiaries for accounting purposes, and we have consolidated their financial results in our consolidated financial statements. Revenues contributed by the VIE and its subsidiaries accounted for 45.7%, 22.5% and 13.1% of our total revenues for 2023, 2024 and 2025, respectively. Cash held by the VIE and its subsidiaries, as well as our Chinese mainland subsidiaries, may not be available to fund operations or for other use outside of the Chinese mainland due to regulatory restrictions and limitations on currency conversion, cross-border transactions and cross-border capital flows. Shortages in the availability of foreign currency may temporarily delay the ability of the VIE and its subsidiaries, as well as our Chinese mainland subsidiaries, to pay us or satisfy their foreign currency denominated obligations. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on distributions and advances paid by our Chinese mainland subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our Chinese mainland subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business” and “—Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.” The following is a summary of the currently effective contractual arrangements by and among our wholly owned subsidiary, Hangzhou Weimi, the VIE and its shareholders. Arrangements that enable us to direct the activities of the VIE and its subsidiaries Shareholders’ Voting Rights Proxy Agreement. Pursuant to the amended and restated shareholders’ voting rights proxy agreement dated January 3, 2025, by and among Hangzhou Weimi, Hangzhou Aimi and the shareholders of Hangzhou Aimi, each shareholder of Hangzhou Aimi irrevocably authorized Hangzhou Weimi or any person(s) designated by Hangzhou Weimi to exercise such shareholder’s rights in Hangzhou Aimi, including without limitation, the power to participate in and vote at shareholder’s meetings, the power to nominate and appoint the directors, senior management, the power to sell or transfer such shareholder’s equity interest in Hangzhou Aimi, the power to propose to convene an extraordinary shareholders meeting, and other shareholders’ voting rights permitted by the Articles of Association of Hangzhou Aimi. The shareholders’ voting rights proxy agreement remains irrevocable and continuously valid from the date of execution so long as each shareholder remains as a shareholder of Hangzhou Aimi. 5 Table of Contents Equity Pledge Agreement. Pursuant to the amended and restated equity pledge agreement dated January 3, 2025, by and among Hangzhou Weimi, Hangzhou Aimi and the shareholders of Hangzhou Aimi, the shareholders of Hangzhou Aimi pledged all of their equity interests in Hangzhou Aimi to Hangzhou Weimi to guarantee their and Hangzhou Aimi’s obligations under the contractual arrangements including the exclusive consulting and services agreement, the exclusive option agreement and the shareholders’ voting rights proxy agreement and this equity pledge agreement, as well as any loss incurred due to events of default defined therein and all expenses incurred by Hangzhou Weimi in enforcing such obligations of Hangzhou Aimi or its shareholders. In the event of default defined therein, upon written notice to the shareholders of Hangzhou Aimi, Hangzhou Weimi, as pledgee, will have the right to dispose of the pledged equity interests in Hangzhou Aimi and priority in receiving the proceeds from such disposition. The shareholders of Hangzhou Aimi agree that, without Hangzhou Weimi’s prior written approval, during the term of the equity pledge agreement, they will not dispose of the pledged equity interests or create or allow any other encumbrance on the pledged equity interests. We have completed the registration of the equity pledges with the relevant office of the State Administration for Market Regulation of the PRC, or the SAMR, in accordance with the PRC Civil Code. Spousal Consent Letters. Pursuant to each spousal consent letter, the spouse of the signing shareholder of the VIE unconditionally and irrevocably agreed that the equity interest in Hangzhou Aimi held by such shareholder and registered in his name will be disposed of pursuant to the equity interest pledge agreement, the exclusive option agreement and the shareholders’ voting rights proxy agreement. The spouse of the signing shareholder of the VIE agreed not to assert any rights over the equity interest in Hangzhou Aimi held by the signing shareholder. In addition, in the event that the spouse of the signing shareholder of the VIE obtains any equity interest in Hangzhou Aimi held by the signing shareholder for any reason, the spouse agreed to be bound by the contractual arrangements. Agreements that allow us to receive economic benefits from the VIE Exclusive Consulting and Services Agreement. Under the exclusive consulting and services agreement between Hangzhou Weimi and Hangzhou Aimi, dated June 5, 2015, Hangzhou Weimi has the exclusive right to provide to Hangzhou Aimi consulting and services related to, among other things, design and development, operation maintenance, product consulting, and management and marketing consulting. Hangzhou Weimi has the exclusive ownership of intellectual property rights created as a result of the performance of this agreement. Hangzhou Aimi agrees to pay Hangzhou Weimi service fees at an amount as determined by Hangzhou Weimi. This agreement will remain effective for a ten-year term and then be automatically renewed for another ten years, unless Hangzhou Weimi gives Hangzhou Aimi a termination notice 90 days before the term ends. Agreements that provide us with the option to purchase the equity interests in the VIE Exclusive Option Agreement. Pursuant to the amended and restated exclusive option agreement dated January 3, 2025, by and among Hangzhou Weimi, Hangzhou Aimi and the shareholders of Hangzhou Aimi, the shareholders of Hangzhou Aimi irrevocably granted Hangzhou Weimi an exclusive call option to purchase, or have its designated person(s) to purchase, at its discretion, all or part of their equity interests in Hangzhou Aimi, and the purchase price shall be the lowest price permitted by applicable PRC law. In addition, Hangzhou Aimi has granted Hangzhou Weimi an exclusive call option to purchase, or have its designated person(s) to purchase, at its discretion, to the extent permitted under PRC law, all or part of Hangzhou Aimi’s assets at the book value of such assets, or at the lowest price permitted by applicable PRC law, whichever is higher. The shareholders of Hangzhou Aimi undertake that, without the prior written consent of Hangzhou Weimi or us, they may not increase or decrease the registered capital, dispose of its assets, incur any debts or guarantee liabilities, enter into any material purchase agreements, enter into any merger, acquisition or investments, amend its articles of association or provide any loans to third parties. Unless terminated by Hangzhou Weimi at its sole discretion, the exclusive option agreement will remain effective until all equity interests in Hangzhou Aimi held by the shareholders of Hangzhou Aimi and all assets of Hangzhou Aimi are transferred or assigned to Hangzhou Weimi or its designated representatives. However, the use of these contractual arrangements involves unique risks to investors. The contractual arrangements do not, and may never, provide holders of our ADSs with direct or indirect equity ownership in the VIE and its subsidiaries. Although the contractual arrangements enable us to direct the activities of and derive economic benefits from the VIE, our ability to direct the activities of, as well as any economic benefits that we may derive from, the VIE depend on the enforceability of the contractual arrangements that we have entered into with the VIE and its shareholders. Although King & Wood, our PRC legal counsel, has advised us that these contractual arrangements are legal, valid, binding and enforceable in accordance with their terms and applicable PRC laws and regulations, they have also advised us that there are uncertainties regarding the interpretation and application of the current and future PRC laws and regulations over the validity of our contractual arrangements with the VIE. As of the date of this annual report, the legality and enforceability of these contractual arrangements, as a whole, have not been tested in any PRC court. There is no guarantee that these contractual arrangements, as a whole, would be enforceable if they were tested in a PRC court, and we may incur substantial costs to enforce the terms of the arrangements. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with the VIE and its shareholders for a large portion of our business operations, which may not be as effective as direct ownership in providing operational control” and “—The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.” 6 Table of Contents In addition, the PRC authorities may also disallow the use of VIE structures. If the whole or any part of our contractual arrangements with the VIE is found to be unenforceable, or if the PRC authorities disallow the use of VIE structures, we may not be able to consolidate, derive economic interests from, or direct the activities of the VIE and its subsidiaries, which could result in a material adverse change in the financial performance of our company and cause our ADSs to decline in value or become worthless. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government determines that the contractual arrangements that establish part of the VIE structure do not comply with the PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in our operations in China, and our ADSs may decline in value or become worthless.” Our Operations in China Are Subject to PRC Laws and Regulations The operations of the businesses that we own and operate in China are subject to PRC laws and regulations. The laws and regulations governing the internet industry in China, as well as the application and interpretation of some of them, are relatively new and quickly evolving. For example, our operations in China are subject to regulatory approvals and permit requirements, oversight on cybersecurity and data privacy, and anti-monopoly and anti-unfair competition laws, with respect to which the applicable laws and regulations have evolved substantially in recent years. For more information see “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC” in this annual report. As of the date of this annual report, our PRC subsidiaries, the VIE and its subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for our business operations in China, including, among others, VATS Licenses. New laws and regulations may be adopted from time to time, which may require us to obtain additional licenses and permits for our operations and services. If, in the future, we offer new functions and services in China, we may be required to obtain additional licenses, permits, filings or approvals for such functions or services. If we fail to obtain such additional licenses, permits, filings or approvals, our business and results of operations, as well as the value of our ADSs, may be materially and adversely affected. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Any lack of additional requisite approvals, licenses or permits or failure to comply with any requirements of the applicable laws, regulations and policies may materially and adversely affect our daily operations and hinder our growth.” The PRC governmental authorities have promulgated PRC laws and regulations relating to listings outside of the Chinese mainland. Pursuant to the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, effective as of the date of this annual report, a special purpose vehicle incorporated outside of the Chinese mainland that (i) was formed for listing purposes through the acquisition of Chinese mainland companies and (ii) is controlled by Chinese mainland persons or entities must obtain the approval of the China Securities Regulatory Commission, or the CSRC, before it can list its securities on a stock exchange outside of the Chinese mainland. Based on the advice of King & Wood, our PRC legal counsel, we are of the view that none of us, our Chinese mainland subsidiaries, the VIE or its subsidiaries is required under the M&A Rules to obtain any permission from the CSRC for our previous securities offerings because (a) our Chinese mainland subsidiaries were incorporated through direct investment, rather than by the acquisition, through merger or otherwise, of the equity interests or assets of a Chinese mainland company owned by Chinese mainland entities or individuals that are the Company’s beneficial owners, and (b) the Company does not constitute a “special purpose vehicle” to which the relevant provisions of the M&A Rules would apply. In addition, on February 17, 2023, the CSRC released a set of regulations, including the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines, or, collectively, the Filing Measures, which took effect on March 31, 2023. According to the Filing Measures, an issuer that is a Chinese mainland company, or whose main operating entities are located in the Chinese mainland, must make a filing with the CSRC in connection with any indirect initial public offering and listing conducted in jurisdictions outside of the Chinese mainland. This filing with the CSRC must be made by the issuer within three working days of the date on which the issuer submits the application documents for the offering and listing outside of the Chinese mainland. Companies that completed listings or offerings before March 31, 2023, the date on which the Filing Measures took effect, are not required to immediately complete the filing procedures. However, they are required to file with the CSRC within three business days following the completion of any follow-on offering in the same market where their securities are listed. For more details, see “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Listings and M&A Outside of the Chinese Mainland.” Based on the advice of King & Wood, our PRC legal counsel, we believe that we will be required to file with the CSRC for any follow-on offering on Nasdaq within three business days following its completion, in accordance with the Filing Measures. However, as the interpretation and application of these regulations may change, we will reassess the need for CSRC approval or CSRC filing at the time of any future offering. 7 Table of Contents The PRC governmental authorities have also promulgated laws and regulations relating to cybersecurity and data security. The Cybersecurity Law, which was published in 2016 and amended in 2025, provides that network operators must fulfill their obligations to safeguard network security during the course of conducting business and providing services. Network operators must take technical and other necessary measures as required by laws, regulations and mandatory requirements to safeguard the operation of networks, respond to threats to network security effectively, prevent illegal and criminal activities and maintain the integrity, confidentiality and usability of network data. In July 2021, the PRC authorities promulgated the Regulations on the Protection of Critical Information Infrastructure, which became effective in September 2021. Under these regulations, the term “critical information infrastructure” is defined to mean any important network facilities or information systems used in an important industry or field that may endanger national security, people’s livelihoods and the public interest if such facilities or systems are damaged, experience loss of function or suffer from data leakage. If a company is designated as a critical information infrastructure operator, it must comply with specific obligations mandated by applicable cybersecurity laws and regulations, which include, among others, that any personal information and important data collected and generated in operations within the Chinese mainland must be stored within the territory of the Chinese mainland. However, these laws and regulations relating to cybersecurity are relatively new, and the applicable scope of these laws and regulations, including the applicable scope of “critical information infrastructure operators” under the current regulatory regime, remains unclear and subject to further interpretation from the competent government authorities. Since 2021, a series of laws and regulations have been published by the PRC authorities to build a system for cybersecurity review. The Data Security Law, which took effect in September 2021, provides for a security review procedure for data activities that may affect national security. Pursuant to the Cybersecurity Review Measures, which was published by the CAC and became effective in February 2022, critical information infrastructure operators that procure internet products and services, as well as network platform operators engaging in data processing activities, must be subjected to a cybersecurity review if their activities affect or may affect national security. A cybersecurity review could result in significant costs and expose such critical information infrastructure operators to various challenges, both throughout the review process and in the course of implementing the required improvements to their cybersecurity protocols. Since the Cybersecurity Review Measures provide no further explanation or interpretation on the determination whether an activity is “affecting national security,” there remain uncertainties as to whether our data processing activities may be deemed to affect national security. In addition, network platform operators holding over one million users’ personal information must apply for a cybersecurity review with the Cybersecurity Review Office before any public offering in a foreign country. Moreover, the State Council also issued the Regulations on the Network Data Security Management on September 24, 2024, which became effective on January 1, 2025. According to the Regulations on the Network Data Security Management, if network data processors carry out network data processing activities that have affected or may affect national security, they must undergo a national security review in accordance with the relevant laws and regulations. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Internet Information Security and Privacy Protection” for more details. To the extent these requirements are or become applicable, we cannot assure you that we would be able to comply with them. Any failure to obtain or delay in obtaining such permission, clearing such review process or meeting such requirements would subject us to restrictions and penalties imposed by the CSRC, the CAC or other PRC regulatory authorities, which could include fines and penalties on our operations in the Chinese mainland, delays of or restrictions on the repatriation of the proceeds from our offerings into the Chinese mainland, restrictions on our ability to remain listed on a U.S. exchange, or other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as significantly limit or completely hinder our ability to offer or continue to offer our securities to investors and cause the value of such securities to significantly decline or be worthless. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business generates and processes a large amount of data, and we are required to comply with laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Under PRC laws, the approval of or filing with the CSRC or other PRC government authorities may be required in connection with our previous or future offerings, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.” 8 Table of Contents In February 2021, the Anti-monopoly Committee of the State Council of the PRC published the Anti-monopoly Guidelines for the Platform Economy Sector, aiming to enhance anti-monopoly administration of businesses that operate under the platform model and the overall platform economy in China. According to these guidelines, business practices such as deploying big data analytics to set discriminatory terms for merchandise prices or other transaction terms, coercive exclusivity arrangements with transaction counterparties, blocking of competitor interface through technological means and unlawful collection of user data without consent, are prohibited. The heightened regulatory scrutiny of business operators under the Anti-monopoly Law may increase our compliance costs and subject us to heightened risks and challenges that may materially and adversely affect our business, results of operations and financial condition. For more information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We may be subject to claims under consumer protection laws, including health and safety claims and product liability claims, if property or people are harmed by the products and services sold on our platforms. Meanwhile, we are subject to existing and new laws and regulations imposing various requirements on our business operations.” The Holding Foreign Companies Accountable Act Pursuant to the Holding Foreign Companies Accountable Act, or the HFCA Act, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in the Chinese mainland or Hong Kong, including our auditor, which is headquartered in Hong Kong. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCA Act following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed the Chinese mainland and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect or investigate completely registered public accounting firms headquartered in any jurisdiction. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCA Act after we file this annual report on Form 20-F. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in the Chinese mainland and Hong Kong, among other jurisdictions. If PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in the Chinese mainland and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements to be filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become subject to the prohibition on trading under the HFCA Act. See “Item 3. Key Information—D. Risk Factors— Risks Related to Doing Business in China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors of the benefits of such inspections” and “—Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely auditors located in the Chinese mainland or Hong Kong. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.” Summary of Risk Factors Investing in our ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our ADSs. Below please find a summary of the principal risks we face, organized under relevant headings. These risks are discussed more fully in the section titled “Item 3. Key Information—D. Risk Factors.” While businesses in Hong Kong and Macau operate under a different set of laws from the Chinese mainland, in the event and to the extent that PRC regulations become fully and directly applicable to companies in Hong Kong and Macau, the legal risks associated with operating in the Chinese mainland, as discussed in “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry,” may also apply to operating in Hong Kong and Macau. 9 Table of Contents Risks Related to Our Business and Industry Risks and uncertainties related to our business and industry include, but are not limited to, the following: ● Our historical performance may not be indicative of our future growth or financial results. We cannot guarantee that we will be able to maintain the growth rate that we have experienced to date. ● If we fail to anticipate buyer needs and provide products and services to attract and retain buyers, or fail to adapt our services or business model to changing buyer needs or emerging industry standards, our business may be materially and adversely affected. ● Any harm to our brands or reputation may materially and adversely affect our business and results of operations. ● Products sold on our platforms are delivered to buyers through a variety of third-party logistics service providers, third-party warehouse operators, third-party pick-up point operators and/or e-waybill systems. Service interruptions, failures, or constraints of these third parties or any disruptions or malfunctions of the e-waybill systems could severely harm our business and prospects. ● We face intense competition, and if we fail to compete effectively, we may lose market share, buyers and merchants. ● Our business is subject to complex and evolving laws and regulations regarding privacy and data protection in the countries and regions where we have operations. These laws and regulations can be complex and stringent, and many are subject to change and evolving interpretation, which may result in claims, changes to our data and other business practices, regulatory investigations, penalties, or otherwise affect our business. ● We may incur liability for counterfeit, unauthorized, illegal, or infringing products sold or misleading information available on our platforms. ● We may be subject to claims under consumer protection laws, including health and safety claims and product liability claims, if property or people are harmed by the products and services sold on our platforms. Meanwhile, we are subject to existing and new laws and regulations imposing various requirements on our business operations. ● Marketing, advertising, trade and commercial practices on our platforms may subject us to regulatory scrutiny, which may affect our business and results of operations. Risks Related to Our Corporate Structure Risks and uncertainties related to our corporate structure include, but are not limited to, the following: ● Holders of our ADSs hold equity interests in PDD Holdings Inc., a Cayman Islands holding company that does not conduct operations directly. Instead, we conduct our operations through (i) our subsidiaries, (ii) the VIE, and (iii) the subsidiaries of the VIE. We do not have any equity ownership in the VIE or its subsidiaries, through which we conduct certain of our operations in the Chinese mainland. We only maintain contractual arrangements with the VIE which allows us to consolidate the financial results of the VIE and its subsidiaries into our consolidated financial statements in accordance with U.S. GAAP. Holders of our ADSs therefore do not have direct or indirect equity interests in the VIE and its subsidiaries. In addition, the PRC authorities may also disallow the use of VIE structures. If the whole or any part of our contractual arrangements with the VIE and its shareholders is found to be unenforceable, or if the PRC authorities disallow the use of VIE structures, we may not be able to consolidate the financial statements of, derive economic interests from, or direct the activities of the VIE and its subsidiaries, which could result in a material adverse change in the financial performance of our company and cause our ADSs to decline in value or become worthless. ● The rights and functions of the PDD Partnership, once effective, may impact your ability to appoint executive directors and nominate the chief executive officer of our company, and the interests of the PDD Partnership may conflict with your interests. 10 Table of Contents ● Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business. ● The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition. Risks Related to Our Multi-jurisdictional Operations We are subject to risks and uncertainties associated with having a business presence in multiple jurisdictions. These risks and uncertainties include, but are not limited to, the following: ● As we continue to expand our global operations, we face risks associated with expanding into markets where we have limited or no experience and where we may be less well-known or have fewer local resources. We are subject to risks inherent in doing business on a global scale, including, without limitation, international geopolitical tensions and events; local political, social, economic and regulatory conditions; compliance with local laws, regulations, tax regimes and policies; local and/or regional competition; limitations on global, regional and local fulfillment and technology infrastructure; funds transfer; currency exchange controls; fluctuations in currency exchange rates; and difficulties in staffing and managing global operations. Despite our global footprint, we are still in the early stages of operating on a global scale. If we fail to generate revenue globally in an effective and efficient manner, our business, financial condition and results of operations may be materially and adversely affected. ● Our business is subject to a large number of laws across the many jurisdictions where we operate, including, without limitation, those relating to international trade, investment restrictions, product liability, employment and labor, taxation, consumer protection, marketing and advertising, online payments and money transmission, data privacy and protection, intellectual property protection, trust and safety, and supply chain compliance. These laws and regulations can be significantly different across different jurisdictions, and are continually evolving. Compliance with these laws and regulations is costly, requires significant management time and effort, and may require changes to our business practices for local adaptation. Despite our compliance efforts, we may not have fully complied in the past, and may not fully comply in the future, with all applicable laws and regulations. We may also be subject to inconsistent compliance obligations across jurisdictions. If we violate laws or regulations applicable to us, we may be subject to investigations, enforcement actions, fines, sanctions or penalties that could include civil and criminal liability, and our business, financial condition and results of operations may be materially and adversely affected. Meanwhile, if the third-party merchants or vendors whom we work with violate applicable laws and regulations, those violations could also result in liabilities for us and harm our brands, reputation and business. ● Changes in international trade and investment policies, escalations of tensions in international relations, and increased scrutiny from customs and other authorities—particularly with regard to China—could materially and adversely impact our business and operating results. Risks Related to Doing Business in China We are also subject to risks and uncertainties relating to doing business in the PRC in general, including, but not limited to, the following: ● A significant portion of our assets and operations is located in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.” 11 Table of Contents ● There are uncertainties regarding the interpretation and enforcement of PRC laws, rules, and regulations, and rules and regulations in China may evolve quickly with little advance notice. In particular, the laws and regulations governing the internet industry in China, as well as the application and interpretation of some of them, are relatively new and quickly evolving, and they have been applied and interpreted for only a short period of time. If we fail to meet or comply with requirements under the applicable laws and regulations, it could result in a material change in our operations and the value of our ADSs. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The regulatory environment in China is complex and evolving, which could adversely affect us” and “—We may be adversely affected by the complexity, uncertainties and changes in the PRC’s regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations.” ● The PRC government’s authority in regulating our operations, our offerings of securities and investment in us could limit our ability or prevent us from conducting future offerings of securities to investors. If we fail to comply with these regulations, policies or requirements, enforcement actions taken by the PRC government may intervene or influence our operations at any time and could result in a material change in our operations and/or cause the value of our ADSs to significantly decline or become worthless. The PRC government may exert more oversight and control over offerings conducted outside of the Chinese mainland and foreign investment in Chinese mainland-based companies, which could significantly limit or hinder our ability to offer or continue to offer our ADSs to conduct future offerings of securities to investors and cause the value of our ADSs to significantly decline or become worthless. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight and discretion over our business operations could result in a material change in our operations and the value of our ADSs.” ● Cash transfers from our Chinese mainland subsidiaries to entities outside of the Chinese mainland are subject to PRC laws and regulations related to currency conversion. Cash held by our Chinese mainland subsidiaries and the VIE and its subsidiaries, such as the paid-in capital and the statutory reserve funds of our Chinese mainland subsidiaries and the net assets of the VIE, may not be available to fund operations or for other use outside of the Chinese mainland due to regulatory restrictions and limitations on currency conversion, cross-border transactions and cross-border capital flows. Shortages in the availability of foreign currency may temporarily delay the ability of our Chinese mainland subsidiaries, the VIE and its subsidiaries to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on distributions and advances paid by our Chinese mainland subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our Chinese mainland subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business” and “—Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.” ● Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or fully investigate auditors located in the Chinese mainland or Hong Kong. The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors of the benefits of such inspections. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors of the benefits of such inspections” and “—Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely auditors located in the Chinese mainland or Hong Kong. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.” Risks Related to Our ADSs In addition to the risks described above, we are subject to general risks relating to our ADSs, including, but not limited to, the following: ● The trading price of our ADSs may be volatile, which could result in substantial losses to investors. ● The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price. 12 Table of Contents Cash and Asset Flows Through Our Organization PDD Holdings Inc. is a holding company incorporated in the Cayman Islands with no operations of its own. While we carry out our business in the rest of the world primarily through our subsidiaries, we conduct our operations in the Chinese mainland primarily through our Chinese mainland subsidiaries, the VIE and its subsidiaries. Revenues contributed by the VIE and its subsidiaries accounted for 45.7%, 22.5% and 13.1% of our total revenues for 2023, 2024 and 2025, respectively. As a result, although other means are available for us to obtain financing at the holding company level, PDD Holdings Inc.’s ability to pay dividends to the shareholders and to service any debt it may incur may depend partially upon dividends paid by our Chinese mainland subsidiaries and license and service fees paid by the VIE. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to our Cayman Islands holding company. In addition, our Chinese mainland subsidiaries are permitted to pay dividends only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Further, our Chinese mainland subsidiaries, the VIE and its subsidiaries are required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.” Under PRC laws and regulations, our Chinese mainland subsidiaries, the VIE and its subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a Chinese mainland company out of the Chinese mainland is also subject to examination by the banks designated by the State Administration of Foreign Exchange, or SAFE. The amounts restricted include the paid-in capital and the statutory reserve funds of our Chinese mainland subsidiaries and the net assets of the VIE in which we have no legal ownership, totaling RMB80,755.5 million, RMB104,359.4 million and RMB125,917.4 million (US$18,005.9 million) as of December 31, 2023, 2024 and 2025, respectively. Furthermore, cash transfers from our Chinese mainland subsidiaries, the VIE and its subsidiaries to entities outside of the Chinese mainland are subject to PRC government controls on currency conversion. To the extent cash in our business is in the Chinese mainland, such cash may not be available to fund operations or for other use outside of the Chinese mainland due to restrictions and limitations imposed by the governmental authorities on currency conversion, cross-border transactions and cross-border capital flows. Shortages in the availability of foreign currency may temporarily delay the ability of our Chinese mainland subsidiaries, the VIE and its subsidiaries to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. In view of the foregoing, to the extent cash in our business is held in the Chinese mainland, such cash may not be available to fund operations or for other use outside of the Chinese mainland. For risks relating to the fund flows through our operations in the Chinese mainland, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on distributions and advances paid by our Chinese mainland subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our Chinese mainland subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business” and “—Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.” Under PRC law, PDD Holdings Inc. may provide funding to our Chinese mainland subsidiaries only through capital contributions or loans, and to the VIE only through loans, subject to satisfaction of applicable government registration and approval requirements. For the years ended December 31, 2023, 2024 and 2025, (i) PDD Holdings Inc. provided loans to our subsidiaries in an aggregate principal amount of RMB1,754.5 million, RMB422.9 million and RMB28,484.8 million (US$4,073.3 million), respectively, (ii) our subsidiaries repaid loans to PDD Holdings Inc. in an aggregate principal amount of RMB10,570.6 million, RMB474.8 million and RMB33,660.7 million (US$4,813.4 million), respectively, and none of our subsidiaries paid dividends or made other distributions to PDD Holdings Inc., (iii) the VIE and its subsidiaries provided loans to our subsidiaries in an aggregate principal amount of RMB206,353.0 million, RMB316,098.7 million and RMB75,551.0 million (US$10,803.6 million), respectively, (iv) our subsidiaries repaid loans to the VIE and its subsidiaries in an aggregate principal amount of RMB171,391.6 million, RMB313,403.4 million and RMB70,647.9 million (US$10,102.5 million), respectively, (v) our subsidiaries provided loans to the VIE and its subsidiaries in an aggregate principal amount of RMB5,193.0 million, RMB113,989.7 million and RMB251,845.6 million (US$36,013.4 million), respectively, and (vi) the VIE and its subsidiaries repaid loans to our subsidiaries in an aggregate principal amount of RMB1,802.6 million, RMB93,968.9 million and RMB206,710.3 million (US$29,559.2 million), respectively. We have settled and will continue to settle fees under the contractual arrangements with the VIE. As of the date of this annual report, we do not have any cash management policies that dictate how funds are transferred among PDD Holdings Inc., our subsidiaries, the VIE and its subsidiaries and investors. However, we have implemented procedures and control mechanisms to manage the transfer of funds within our organization to support our business needs and in compliance with applicable laws and regulations. 13 Table of Contents PDD Holdings Inc. has not declared or paid any cash dividends, nor does it have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. The primary use of our capital continues to be to invest for the long-term growth of our business. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For PRC and United States federal income tax considerations of an investment in our ADSs, see “Item 10. Additional Information—E. Taxation.” Financial Information Related to the VIE The following table presents the condensed consolidating schedule of financial position and results for (i) PDD Holdings Inc., (ii) Hangzhou Weimi, a PRC subsidiary of the Company that has entered into contractual arrangements with the VIE, the VIE’s shareholders and, as applicable, their spouses, (iii) the VIE and its subsidiaries, and (iv) the Company’s subsidiaries other than Hangzhou Weimi as of the dates or for the periods presented. Selected Condensed Consolidated Statements of Income Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2025 ​ ​ PDD Holdings ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ Inc. (Primary ​ ​ ​ ​ ​ Subsidiaries ​ ​ ​ ​ ​ ​ beneficiary ​ Hangzhou ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ ​ ​ ​ of the VIE) ​ ​ ​ Weimi* ​ ​ ​ Subsidiaries ​ ​ ​ Holdings Inc.** ​ ​ ​ Eliminations ​ ​ ​ Total ​ (RMB in thousands) Revenues ​ — 627,344 113,748,348 411,097,558 (93,627,537) ​ 431,845,713 Total costs and operating expenses ​ (154,054) (529,119) (94,052,721) (337,635,225) 93,627,537 ​ (338,743,582) Share of profit from subsidiaries, the VIE and subsidiaries of the VIE ​ 97,843,203 ​ — ​ — ​ — ​ (97,843,203) ​ — Net income ​ 97,842,539 ​ 106,864 ​ 20,687,326 ​ 77,049,013 ​ (97,843,203) ​ 97,842,539 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2024 ​ ​ PDD Holdings ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ Inc. (Primary ​ ​ ​ ​ ​ Subsidiaries ​ ​ ​ ​ ​ ​ beneficiary ​ Hangzhou ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ ​ ​ ​ of the VIE) ​ ​ ​ Weimi* ​ ​ ​ Subsidiaries ​ ​ ​ Holdings Inc.** ​ ​ ​ Eliminations ​ ​ ​ Total ​ (RMB in thousands) Revenues ​ — 744,852 121,108,780 343,110,569 (71,128,104) ​ 393,836,097 Total costs and operating expenses ​ (47,546) (638,421) (100,393,074) (255,462,298) 71,128,104 ​ (285,413,235) Share of profit from subsidiaries, the VIE and subsidiaries of the VIE ​ 112,481,702 ​ — ​ — ​ — ​ (112,481,702) ​ — Net income ​ 112,434,512 ​ 154,636 ​ 22,921,391 ​ 89,405,675 ​ (112,481,702) ​ 112,434,512 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2023 ​ ​ PDD Holdings ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ Inc. (Primary ​ ​ ​ ​ ​ Subsidiaries ​ ​ ​ ​ ​ ​ beneficiary ​ Hangzhou ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ of the VIE) ​ ​ ​ Weimi* ​ ​ ​ Subsidiaries ​ ​ ​ Holdings Inc.** ​ ​ ​ Eliminations ​ ​ ​ Total ​ ​ ​ ​ (RMB in thousands) Revenues ​ — 892,863 131,868,973 194,028,064 (79,150,695) ​ 247,639,205 Total costs and operating expenses ​ (156,391) (835,691) (110,080,065) (157,018,991) 79,150,695 ​ (188,940,443) Share of profit from subsidiaries, the VIE and subsidiaries of the VIE ​ 60,112,989 ​ — ​ — ​ — ​ (60,112,989) ​ — Net income ​ 60,026,544 ​ 64,191 ​ 23,398,906 ​ 36,649,892 ​ (60,112,989) ​ 60,026,544 ​ 14 Table of Contents Selected Condensed Consolidated Balance Sheets Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2025 ​ ​ PDD Holdings ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ Inc. (Primary ​ ​ ​ ​ ​ Subsidiaries ​ ​ ​ ​ ​ ​ beneficiary ​ Hangzhou ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ ​ ​ ​ of the VIE) ​ ​ ​ Weimi* ​ ​ ​ Subsidiaries ​ ​ ​ Holdings Inc.** ​ ​ ​ Eliminations ​ ​ ​ Total ​ ​ (RMB in thousands) Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, cash equivalents, restricted cash and short-term investments ​ 45,987 73 ​ 171,199,494 324,893,539 ​ — ​ 496,139,093 Amounts due from Group companies(1) ​ — ​ 279,290 ​ 51,025,070 ​ 90,166,434 ​ (141,470,794) ​ — Others ​ 93 ​ 496 ​ 8,221,516 ​ 14,618,694 ​ — ​ 22,840,799 Total current assets ​ 46,080 ​ 279,859 ​ 230,446,080 ​ 429,678,667 ​ (141,470,794) ​ 518,979,892 Non-current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other non-current assets ​ — 5,001 ​ 61,366,819 43,335,893 ​ — ​ 104,707,713 Investments in subsidiaries, the VIE and its subsidiaries(2) ​ 413,387,814 ​ 2,000 ​ — ​ 1,741,085 ​ (415,130,899) ​ — Others ​ — ​ 37,941 ​ 1,666,268 ​ 4,652,513 ​ — ​ 6,356,722 Total non-current assets ​ 413,387,814 ​ 44,942 ​ 63,033,087 ​ 49,729,491 ​ (415,130,899) ​ 111,064,435 Total assets ​ 413,433,894 324,801 ​ 293,479,167 479,408,158 ​ (556,601,693) ​ 630,044,327 Current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payable to merchants ​ — — ​ 76,026,565 31,380,595 ​ — ​ 107,407,160 Amounts due to Group companies(1) ​ — ​ 45,572 ​ 71,138,366 ​ 145,996,165 ​ (217,180,103) ​ — Others ​ 48,738 ​ 128,577 ​ 32,466,643 ​ 73,686,050 ​ — ​ 106,330,008 Total current liabilities ​ 48,738 174,149 ​ 179,631,574 251,062,810 ​ (217,180,103) ​ 213,737,168 Non-current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Others ​ — ​ 23,069 ​ 520,081 ​ 2,378,853 ​ — ​ 2,922,003 Total non-current liabilities ​ — ​ 23,069 ​ 520,081 ​ 2,378,853 ​ — ​ 2,922,003 Total liabilities ​ 48,738 ​ 197,218 ​ 180,151,655 ​ 253,441,663 ​ (217,180,103) ​ 216,659,171 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2024 ​ ​ PDD Holdings ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ Inc. (Primary ​ ​ ​ ​ ​ Subsidiaries ​ ​ ​ ​ ​ ​ beneficiary ​ Hangzhou ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ ​ ​ ​ ​ of the VIE) ​ ​ ​ ​ Weimi* ​ ​ ​ ​ Subsidiaries ​ ​ ​ ​ Holdings Inc.** ​ ​ ​ ​ Eliminations ​ ​ ​ ​ Total ​ ​ (RMB in thousands) Current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash, cash equivalents, restricted cash and short-term investments ​ 10,242 73 ​ 120,127,393 279,848,569 ​ — ​ 399,986,277 Amounts due from Group companies(1) ​ — ​ 279,573 ​ 39,634,568 ​ 43,276,162 ​ (83,190,303) ​ — Others ​ 73 ​ 1,277 ​ 8,163,753 ​ 7,496,852 ​ — ​ 15,661,955 Total current assets ​ 10,315 ​ 280,923 ​ 167,925,714 ​ 330,621,583 ​ (83,190,303) ​ 415,648,232 Non-current assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other non-current assets ​ — 5,001 ​ 48,058,021 35,344,216 ​ — ​ 83,407,238 Investments in subsidiaries, the VIE and its subsidiaries(2) ​ 318,641,783 ​ 2,000 ​ — ​ 1,780,617 ​ (320,424,400) ​ — Others ​ — ​ 51,260 ​ 1,025,726 ​ 4,901,860 ​ — ​ 5,978,846 Total non-current assets ​ 318,641,783 ​ 58,261 ​ 49,083,747 ​ 42,026,693 ​ (320,424,400) ​ 89,386,084 Total assets ​ 318,652,098 339,184 ​ 217,009,461 372,648,276 ​ (403,614,703) ​ 505,034,316 Current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payable to merchants ​ — — ​ 70,935,696 20,720,251 ​ — ​ 91,655,947 Amounts due to Group companies(1) ​ — ​ 133,980 ​ 24,697,826 ​ 141,150,718 ​ (165,982,524) ​ — Convertible bonds, current portion ​ 5,309,597 ​ — ​ — ​ — ​ — ​ 5,309,597 Others ​ 29,377 ​ 147,672 ​ 28,066,192 ​ 63,214,068 ​ — ​ 91,457,309 Total current liabilities ​ 5,338,974 281,652 ​ 123,699,714 225,085,037 ​ (165,982,524) ​ 188,422,853 Non-current liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Others ​ — ​ 36,813 ​ 443,132 ​ 2,818,394 ​ — ​ 3,298,339 Total non-current liabilities ​ — ​ 36,813 ​ 443,132 ​ 2,818,394 ​ — ​ 3,298,339 Total liabilities ​ 5,338,974 ​ 318,465 ​ 124,142,846 ​ 227,903,431 ​ (165,982,524) ​ 191,721,192 ​ ​ 15 Table of Contents Selected Condensed Consolidated Cash Flows Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2025 ​ ​ PDD Holdings Inc. ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ (Primary ​ ​ ​ ​ ​ Subsidiaries ​ ​ ​ ​ ​ ​ beneficiary ​ Hangzhou ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ ​ ​ ​ of the VIE) ​ ​ ​ Weimi* ​ ​ ​ Subsidiaries ​ ​ ​ Holdings Inc.** ​ ​ ​ Eliminations ​ ​ ​ Total ​ ​ (RMB in thousands) Net cash generated from/(used in) operating activities(3) ​ 99,966 (9,957) ​ 24,682,511 82,166,170 ​ — ​ 106,938,690 Net cash generated from/(used in) investing activities ​ 5,183,163 ​ (122,766) ​ (62,690,562) ​ (30,846,053) ​ 45,052,982 ​ (43,423,236) Net cash (used in)/generated from financing activities ​ (5,227,353) 132,723 ​ 45,135,333 (215,074) ​ (45,052,982) ​ (5,227,353) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2024 ​ ​ ​ ​ PDD Holdings Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ (Primary ​ ​ ​ Subsidiaries ​ ​ ​ ​ beneficiary ​ Hangzhou ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ ​ ​ ​ of the VIE) ​ ​ ​ Weimi* ​ ​ ​ Subsidiaries ​ ​ ​ Holdings Inc.** ​ ​ ​ Eliminations ​ ​ ​ Total ​ (RMB in thousands) Net cash (used in)/generated from operating activities(3) ​ (46,208) 212,793 ​ 15,819,139 105,943,568 ​ — ​ 121,929,292 Net cash generated from/(used in) investing activities ​ 44,546 ​ (925,796) ​ (36,090,803) ​ (105,414,779) ​ 24,030,796 ​ (118,356,036) Net cash generated from financing activities ​ 1,164 713,003 ​ 20,020,807 3,296,986 ​ (24,030,796) ​ 1,164 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, 2023 ​ ​ ​ ​ PDD Holdings Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ ​ ​ ​ (Primary ​ ​ ​ Subsidiaries ​ ​ ​ ​ beneficiary ​ Hangzhou ​ VIE and Its ​ of PDD ​ ​ ​ Consolidated ​ ​ ​ ​ of the VIE) ​ ​ ​ Weimi* ​ ​ ​ Subsidiaries ​ ​ ​ Holdings Inc.** ​ ​ ​ Eliminations ​ ​ ​ Total ​ (RMB in thousands) Net cash generated from/(used in) operating activities(3) ​ 71,615 (206,025) ​ 49,705,625 44,591,316 ​ — ​ 94,162,531 Net cash generated from/(used in) investing activities ​ 8,816,124 ​ (254,396) ​ (43,637,362) ​ (50,505,975) ​ 30,150,331 ​ (55,431,278) Net cash (used in)/generated from financing activities ​ (8,960,626) 460,421 ​ 3,390,438 26,299,472 ​ (30,150,331) ​ (8,960,626) Notes: * Represents Hangzhou Weimi, a PRC subsidiary of the Company that has entered into contractual arrangements with the VIE, the VIE’s shareholders and, as applicable, their spouses. These contractual arrangements enable us to direct the activities of and derive economic benefits from the VIE and its subsidiaries. For more information, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the VIE and Its Shareholders.” ** Represents all of the Company’s subsidiaries other than Hangzhou Weimi. (1) Represents the elimination of the intercompany balances among PDD Holdings Inc., Hangzhou Weimi, the Company’s subsidiaries other than Hangzhou Weimi, and the VIE and its subsidiaries. (2) Represents the elimination of the investments in Hangzhou Weimi, the Company’s subsidiaries other than Hangzhou Weimi, and the VIE and its subsidiaries. (3) For the years ended December 31, 2023, 2024 and 2025, cash paid by the VIE and its subsidiaries to Hangzhou Weimi, primarily for service fees, was RMB938.2 million, RMB856.3 million and RMB564.0 million (US$80.7 million), respectively. A.[Reserved] B.Capitalization and Indebtedness Not applicable. C.Reasons for the Offer and Use of Proceeds Not applicable. D.Risk Factors Investing in our ADSs involves significant risks. You should carefully consider all of the information in this annual report before making an investment in our ADSs. Below please find the principal risks we face, organized under relevant headings. While businesses in Hong Kong and Macau operate under a different set of laws from the Chinese mainland, in the event and to the extent that PRC regulations become fully and directly applicable to companies in Hong Kong and Macau, the legal risks associated with operating in the Chinese mainland, as discussed in “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry,” may also apply to operating in Hong Kong and Macau. 16 Table of Contents Risks Related to Our Business and Industry Our historical performance may not be indicative of our future growth or financial results. We cannot guarantee that we will be able to maintain the growth rate that we have experienced to date. The Pinduoduo platform commenced its commercial operations in 2015. The Temu platform commenced its commercial operations in 2022 and has a limited operating history. Our revenues grew from RMB247,639.2 million in 2023 to RMB393,836.1 million in 2024 and RMB431,845.7 million (US$61,753.1 million) in 2025. However, our historical performance may not be indicative of our future growth or financial results. We cannot assure you that we will be able to grow at the same rate as we did in the past, or avoid any decline in the future. Our growth may slow down or become negative, and revenues may decline for a number of possible reasons, some of which are beyond our control, including decreasing consumer spending, increasing competition, declining growth of our overall market or industry, the emergence of alternative business models, changes in rules, regulations, government policies or changes in general economic conditions. It is also difficult to evaluate our prospects as we operate in rapidly evolving markets. If our growth rate declines, investors’ perceptions of our business, operating results and prospects may be materially and adversely affected and the market price of our ADSs could decline. You should consider our prospects in light of the risks and uncertainties that companies with a relatively limited operating history may encounter. If we fail to anticipate buyer needs and provide products and services to attract and retain buyers, or fail to adapt our services or business model to changing buyer needs or emerging industry standards, our business may be materially and adversely affected. The e-commerce market in which we operate as well as buyer needs and preferences are constantly evolving. As a result, we must continuously respond to changes in the market and buyer demand and preferences to remain competitive, grow our business and maintain our market position. We intend to further diversify our product and service offerings to add to our revenue sources in the future. New products and services, new types of buyers or new business models may involve risks and challenges we do not currently face. Any new initiatives may require us to devote significant financial and management resources and may not perform as well as expected. For example, Duo Duo Grocery, a next-day grocery pick-up service that we started in August 2020 as an extension of the Pinduoduo platform, and Temu, a global e-commerce platform that we launched in September 2022, have each in the past demanded the commitment of substantial financial, personnel and other resources, may continue to do so over a prolonged period of time and may not attract or retain enough users or otherwise perform in accordance with our expectations. Furthermore, we may have difficulty in anticipating buyer demand and preferences, and the products offered on our platforms may not be accepted by the market or be rendered obsolete or uneconomical. Therefore, any inability to adapt to these changes may result in a failure to capture new buyers or retain existing buyers, the occurrence of which would materially and adversely affect our business, financial condition and results of operations. In addition, to remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our platforms. The internet and e-commerce markets are characterized by rapid technological evolution, changes in buyer requirements and preferences, frequent introductions of new products, features and services embodying new technologies and the emergence of new industry standards and practices, any of which could render our existing technologies and systems obsolete. Our success will depend, in part, on our ability to identify, develop and adapt to new technologies useful in our business, and respond to technological advances and emerging industry standards and practices, in a cost-effective and timely way. We cannot assure you that we will be successful in these efforts. Any harm to our brands or reputation may materially and adversely affect our business and results of operations. We believe that the recognition and reputation of our brands, including Pinduoduo and Temu, among our buyers, merchants and third-party service providers have contributed significantly to the growth and success of our business. Maintaining and enhancing the recognition and reputation of our brands are critical to our business and competitiveness. Many factors, some of which are beyond our control, are important to maintaining and enhancing our brands. These factors include our ability to: ● provide a superior shopping experience to buyers; ● maintain the popularity, attractiveness, diversity, quality and authenticity of the product offerings on our platforms; ● maintain the efficiency, reliability and quality of the fulfillment and delivery services to our buyers; ● maintain or improve buyers’ satisfaction with our after-sale services; 17 Table of Contents ● increase brand awareness through marketing and brand promotion activities; and ● preserve our reputation and goodwill in the event of any negative publicity about the consumer experience or merchant services we offer, internet and data security, product quality, price or authenticity, performance measures, or other issues affecting us or other e-commerce businesses in the countries or regions where we have operations. Public perception that counterfeit, unauthorized, illegal, or infringing products are sold on our platforms or that we or merchants on our platforms do not provide satisfactory consumer services, even if factually incorrect or based on isolated incidents, could damage our reputation, diminish the value of our brands, undermine the trust and credibility we have established and have a negative impact on our ability to attract new buyers or retain our current buyers. In particular, we have been and may continue to be subject to negative publicity based on claims and allegations related to intellectual property and consumer protection, among others. For example, the Office of the U.S. Trade Representative, or USTR, has identified the Pinduoduo platform as a “notorious market” since 2019. The USTR may continue to identify the Pinduoduo platform as a notorious market in the future. The negative public perception resulting therefrom could damage our reputation, harm our business, diminish the value of our brand name and negatively affect trading price of our ADSs. If we are unable to maintain our reputation, enhance our brand recognition or increase positive awareness of our platforms, products and services, it may be difficult to maintain and grow our buyer base, and our business and growth prospects may be materially and adversely affected. Products sold on our platforms are delivered to buyers through a variety of third-party logistics service providers, third-party warehouse operators, third-party pick-up point operators and/or e-waybill systems. Service interruptions, failures, or constraints of these third parties or any disruptions or malfunctions of the e-waybill systems could severely harm our business and prospects. Orders placed on our platforms typically rely on third parties to be fulfilled and delivered. These third parties include third-party logistics service providers, warehouse operators and/or pick-up point operators. Interruptions to or failures in services provided by these third parties could affect the timely and successful delivery of products to our buyers. As we do not directly control or manage the operations of these third parties, we may not be able to guarantee their performance. If orders are delayed, damaged or lost during transit, or if order pick-up points are shut down, our buyers may be unsatisfied with their experience on our platforms, which may damage our reputation, cause us to lose buyers, or ultimately adversely affect our results of operations. In addition, certain of these third parties may be influenced by our competitors when providing services to us or our merchants. For example, if third-party logistics service providers raise the shipping rates for delivering merchants’ products on our platforms, those products may no longer be offered at competitive prices on our platforms. As a result, our business and prospects, as well as our financial condition and results of operations could be materially and adversely affected. If these third parties fail to deliver products to our buyers on time or in good condition, our buyers may refuse to accept merchandise purchased on our platforms and have less confidence in our platforms. In such event, we cannot assure you that our merchants or we will be able to find alternative cost-efficient service providers or operators to offer satisfactory services or pick-up points in a timely manner, or at all, which could cause our business and reputation to suffer or cause merchants and buyers to move to other platforms and have a negative impact on our financial condition and results of operations. Most merchants on our Pinduoduo platform use e-waybill systems to arrange and track shipments. While we launched our e-waybill system during the first quarter of 2019, merchants on our Pinduoduo platform are allowed to choose different e-waybill systems developed and operated by third-party service providers. Any disruptions to or malfunctions of the e-waybill systems used by our merchants could prevent the timely or proper delivery of products to consumers, which would damage our reputation, harm our business, and diminish the value of our brand name. Our commercial relationships with business partners are complex and may involve differing contractual terms, service standards, and payment terms across jurisdictions. Disagreements or disputes may arise from issues such as pricing, performance obligations, data handling, service interruptions or contractual interpretation. Disagreements or disputes with business partners could lead to litigation, service suspension or temporary interruption of delivery networks. Any such dispute, whether resolved through negotiation, mediation, arbitration or litigation, could consume significant management time and financial resources, disrupt our business operations or result in adverse publicity. In addition, unfavorable outcomes in such disputes could expose us to damages, penalties, or the loss of key partnerships. If we are unable to effectively manage or resolve disputes with business partners, our brand, customer experience, and financial performance could be materially and adversely affected. 18 Table of Contents We face intense competition, and if we fail to compete effectively, we may lose market share, buyers and merchants. The e-commerce industry is intensely competitive. We compete to attract, engage and retain buyers, merchants, and other participants on our platforms. Our current or potential competitors include (i) major e-commerce operators, (ii) major traditional and brick-and-mortar retailers, (iii) retail companies focused on specific product categories, and (iv) major internet companies that do not operate e-commerce businesses now but are in the process of initiating their e-commerce businesses or may launch e-commerce businesses in the future. These current or future competitors may have longer operating histories, greater brand recognition, better supplier or merchant relationships, stronger infrastructure, larger buyer bases or greater financial, technical or marketing resources than we do. Competitors may leverage their brand recognition, experience and resources to compete with us in a variety of ways, including making investments and acquisitions for the expansion of their product and service offerings. Some of our competitors may be able to secure more favorable terms from merchants, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing or inventory policies and devote substantially more resources to develop their IT systems and technology. Some of these competitors may offer innovative purchase models that may turn out to be highly popular among buyers, and buyers may prefer them over our business model. In addition, new and enhanced technologies may increase the competition in the market we operate in. Increased competition may reduce our profitability, market share, user base and brand recognition. There can be no assurance that we will be able to compete successfully against current or future competitors, and such competitive pressures may have a material and adverse effect on our business, financial condition and results of operations. Our competitors or other third parties have integrated, and may continue to integrate, artificial intelligence solutions into their products and services. If our competitors successfully leverage AI to provide superior user experiences or operate with lower cost structures, our ability to compete could be impaired, which may materially and adversely affect our business and results of operations. In addition, the use of AI solutions in our platforms, services, and internal operations may subject us to competitive, operational, regulatory, legal and reputational risks. The use of AI presents significant operational, legal and ethical challenges. AI models may produce content or analyses that are deficient, inaccurate, biased or otherwise inappropriate. If our services rely on such outputs, or if they are alleged to infringe upon the intellectual property rights of third parties, we may face significant legal claims, liability or damage to our reputation. The regulatory environment surrounding AI is rapidly evolving and varies significantly across jurisdictions. For example, the EU Artificial Intelligence Act, which entered into force on August 1, 2024, imposes rigorous and tiered compliance requirements based on the risk classification of the AI system. Failure to comply with these regulations—or similar emerging frameworks in other regions—could result in substantial fines (up to the higher of €35 million or 7% of global annual turnover), mandatory modification of our technologies, or the total prohibition of certain AI-enabled features. The costs of compliance, along with the investments required to develop proprietary datasets and “responsible use” frameworks, may be substantial. If we are unable to navigate these technical and regulatory complexities, our brand, financial condition, and long-term growth prospects could be materially and adversely affected. Any failure in our AI systems could also exacerbate the risks described in the risk factor titled “Our business generates and processes a large amount of data, and we are required to comply with laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects.” Our business is subject to complex and evolving laws and regulations regarding privacy and data protection in the countries and regions where we have operations. These laws and regulations can be complex and stringent, and many are subject to change and evolving interpretation, which may result in claims, changes to our data and other business practices, regulatory investigations, penalties, or otherwise affect our business. Regulatory authorities around the world have adopted laws and regulations or are considering legislative and regulatory proposals concerning privacy and data protection, including in Asia, the U.S. and the European Union. These laws and regulations regulate the way we collect, use, store, transfer, disclose and secure data and protect the privacy of our users. Global developments in these laws may also create additional compliance obligations for us in the jurisdictions in which we operate. In the PRC, the regulatory and enforcement regime relating to data security and data protection is evolving and may be subject to different interpretations or further legislation. Moreover, different PRC regulatory bodies, including the Standing Committee of the National People’s Congress, the Ministry of Industry and Information Technology of the PRC, or the MIIT, the CAC, the Ministry of Public Security of the PRC, and the SAMR, have enforced data privacy and protections laws and regulations with varying standards and applications. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Internet Information Security and Privacy Protection.” The following are examples of certain recent PRC regulatory activities in this area: 19 Table of Contents Cybersecurity and Data Security ● The Cybersecurity Law, which was originally promulgated in November 2016 and amended on October 28, 2025, took effect on January 1, 2026. It serves as the primary framework for regulating network security in China and provides that network operators must fulfill their obligations to safeguard network security during the course of conducting business and providing services. Network operators must take technical and other necessary measures as required by laws, regulations and mandatory requirements to safeguard the operation of networks, respond to threats to network security effectively, prevent illegal and criminal activities and maintain the integrity, confidentiality and usability of network data. Pursuant to the Regulations on Protection of Critical Information Infrastructure, which became effective in September 2021, the term “critical information infrastructure” is defined to mean any important network facilities or information systems used in an important industry or field that may endanger national security, people’s livelihoods and the public interest if such facilities or systems are damaged, experience loss of function or suffer from data leakage. If a company is designated as a critical information infrastructure operator, it must comply with specific obligations mandated by applicable cybersecurity laws and regulations, which include, among others, that any personal information and important data collected and generated in operations within the Chinese mainland must be stored within the territory of the Chinese mainland. However, these PRC laws and regulations relating to cybersecurity are relatively new, and the applicable scope of these laws and regulations, including the applicable scope of “critical information infrastructure” under the current regulatory regime, remains unclear and subject to further interpretation from the competent government authorities. ● On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which took effect in September 2021. The Data Security Law, among other things, provides for a security review procedure for the data activities that may affect national security. The Cybersecurity Review Measures, which took effect on February 15, 2022, set forth the cybersecurity review mechanism for critical information infrastructure operators. These measures also provide that critical information infrastructure operators who intend to purchase internet products and services that affect or may affect national security shall be subject to a cybersecurity review. A cybersecurity review could result in significant costs and expose such critical information infrastructure operators to various challenges, both throughout the review process and in the course of implementing the required improvements to their cybersecurity protocols. Since the Cybersecurity Review Measures provide no further explanation or interpretation on the determination whether an activity is “affecting national security,” there remain uncertainties as to whether our data processing activities may be deemed to affect national security. In addition, network platform operators holding over one million users’ personal information must apply for a cybersecurity review with the Cybersecurity Review Office before any public offering in a foreign country. Furthermore, the State Council also issued the Regulations on the Network Data Security Management on September 24, 2024, which became effective on January 1, 2025. According to the Regulations on the Network Data Security Management, if network data processors carry out network data processing activities that have affected or may affect national security, they must undergo a national security review in accordance with the relevant laws and regulations. Personal Data and Privacy ● The Anti-monopoly Guidelines for the Platform Economy Sector published by the Anti-monopoly Committee of the State Council, effective February 7, 2021, prohibit collection of user information through coercive means by online platform operators. ● In August 2021, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law, which unified a number of separate rules with respect to personal information rights and privacy protection, effective November 1, 2021. The Personal Information Protection Law strengthened the protection of personal information. As a general principle, the processing of personal data must be directly related to a specific and reasonable purpose and the related collection of personal information must be tailored to what is necessary to meet that purpose. The Personal Information Protection Law also created a number of specific requirements for the processing of personal data. For example, the law prohibits any person that processes personal data from engaging in price discrimination or otherwise applying unreasonable differential treatment to individuals based on automated analysis of collected personal information. To meet the latest regulatory requirements of the PRC authorities, we update our privacy policies from time to time and adopt technical measures to protect data and ensure that we systematically protect personal information rights. However, in practice, many of the specific requirements of the Personal Information Protection Law remain to be clarified by the CAC, other regulatory authorities, and courts. We may be required to make further adjustments to our business practices to comply with personal information protection laws and regulations. 20 Table of Contents These PRC laws and regulations are relatively new and certain concepts thereunder remain subject to interpretation by the PRC regulators. The Pinduoduo platform is subject to heightened scrutiny and required to adopt stricter measures to protect and manage certain categories of data. However, some of the provisions under the Cybersecurity Review Measures remain unclear on whether they are, or will be, applicable to companies that are already listed on securities exchanges in the United States, such as us. If the Cybersecurity Review Measures mandate that issuers like us must clear cybersecurity review or obtain other regulatory approvals for their previous issuances of securities in the United States or future offerings, it is unclear whether we would be able to complete such regulatory procedures in a timely fashion, or at all. Failure to do so may subject us to government actions, investigations, fines, penalties, suspension of our operations or removal of our apps from application stores, which could have a material and adverse effect on our business and results of operations. Notwithstanding the regulatory uncertainties described above, we believe, to the best of our knowledge, that our business operations are compliant with the currently effective PRC laws relating to cybersecurity, data security, and personal data and privacy laws in all material respects. In other jurisdictions in Asia, there are various regulations relating to privacy, including, among others, Japan’s Act on the Protection of Personal Information, Malaysia’s Personal Data Protection Act, Philippines’ Data Privacy Act, Republic of Korea’s Personal Information Protection Act, Singapore’s Personal Data Protection Act and Thailand’s Personal Data Protection Act. Any failure, or perceived failure, by us to comply with such policies, laws, regulations, and other legal obligations and regulatory guidance could adversely affect our reputation, brand, and business, and may result in claims, proceedings, or actions, including criminal proceedings, against us and certain of our executive officers by governmental entities or others or other liabilities. Any such claim, proceeding, or action, could hurt our reputation, brand, and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and merchants, and could have an adverse effect on our business, financial condition, and results of operations. In the United States, we are subject to a complex and evolving framework of federal and state laws and regulations governing data privacy and security. For example, California’s California Consumer Privacy Act of 2018 (“CCPA”) and California Privacy Rights Act of 2020 (“CPRA”) impose significant obligations on businesses regarding the handling of personal information of California consumers and households, including compliance and record keeping obligations, the right of individuals to request access to, correction of, and deletion of their personal information, and the right to opt out of the sale and other uses of their personal information, and provide a private right of action and statutory damages for data breaches. Other U.S. states have enacted, or are in the process of enacting, similar new laws or regulations (for example, the Virginia Consumer Data Protection Act (“VCDPA”), which took effect on January 1, 2023, the Colorado Privacy Act (“CPA”), which took effect on July 1, 2023, the Connecticut Data Privacy Act (“CDPA”), which took effect on July 1, 2023, the Utah Consumer Privacy Act (“UCPA”), which took effect on December 31, 2023, the Texas Data Privacy and Security Act (“TDPSA”) which took effect on July 1, 2024, the Oregon Consumer Privacy Act (“OCPA”), which took effect on July 1, 2024, the Montana Consumer Data Privacy Act (“MTCDPA”), which took effect on October 1, 2024, the Delaware Personal Data Privacy Act (“DPDPA”), which took effect on January 1, 2025, the Iowa Consumer Data Protection Act (“ICDPA”), which took effect on January 1, 2025, the New Hampshire Data Privacy Act (“NHDPA”), which took effect on January 1, 2025, the Nebraska Data Privacy Act (“NDPA”), which took effect on January 1, 2025, the New Jersey Data Privacy Act (“NJDPA”), which took effect on January 15, 2025, the Tennessee Information Protection Act (“TIPA”), which took effect on July 1, 2025, the Minnesota Consumer Data Privacy Act (“MNCDPA”), which took effect on July 31, 2025, and the Maryland Online Data Privacy Act (“MODPA”), which took effect on October 1, 2025), the Indiana Consumer Data Protection Act (INCDPA), which took effect on January 1, 2026, Kentucky Consumer Data Protection (KCDPA), which took effect on January 1, 2026, Rhode Island Data Transparency and Privacy Protection Act (RIDTPPA), which took effect on January 1, 2026, and Oklahoma Consumer Data Privacy Act (OKCDPA), which will take effect on January 1, 2027) that impose new privacy rights and obligations that are comparable to those under the CCPA and CPRA. More generally, some observers have noted that the enactment by U.S. states of the foregoing and other similar laws and regulations could mark the beginning of a trend toward more stringent United States privacy legislation, which could increase our potential liability and adversely affect our business. Aspects of certain newly enacted privacy statutes remain unclear, resulting in further legal uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses to comply. If more stringent privacy legislation arises in the United States, it could increase our potential liability and adversely affect our business, results of operations, and financial condition. 21 Table of Contents In addition, on January 8, 2025, the Department of Justice issued a final rule (the “Final Rule”) to implement the Executive Order 14117, “Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern.” The Final Rule came into effect on April 8, 2025, with certain affirmative due diligence, reporting and auditing requirements taking effect on October 6, 2025. The Final Rule establishes a new regulatory program designed to address national security risks associated with the transfer or access to bulk sensitive personal data of U.S. persons and certain U.S. government-related data by designated countries of concern and defined covered persons. The scope, interpretation and enforcement of these requirements are evolving and may require us to implement additional compliance controls, contractual safeguards, data localization measures or operational changes. Compliance with the Final Rule may increase our legal, compliance and operational costs, restrict certain cross-border data flows, affect our relationships with vendors or business partners, and expose us to potential civil or criminal penalties for non-compliance. If we fail to comply, or if regulators interpret the rule in a manner adverse to our operations, our business, financial condition and results of operations could be materially and adversely affected. In the European Union and the United Kingdom, we are also subject to laws and regulations regarding data privacy and protection. These include the European Union’s General Data Protection Regulation (2016/679), known as the EU GDPR. The EU GDPR, supplemented by national laws and further implemented through binding guidance from the European Data Protection Board, imposes stringent European Union data protection requirements and provides for significant penalties for non-compliance. In the United Kingdom, we are subject to the United Kingdom General Data Protection Regulation and Data Protection Act 2018, known as the UK GDPR, which is substantially similar to the EU GDPR. These laws establish requirements applicable to the processing of personal data, create data protection rights for individuals and impose penalties for serious infringements and data breaches. Individuals also have a right to compensation under these laws for financial or non-financial losses. Failure to comply with the EU GDPR or the UK GDPR can result in significant monetary penalties, regulatory investigations, reputational damage, orders to cease or change our data processing activities that are subject to the EU/UK GDPR, enforcement notices, assessment notices (for a compulsory audit), or civil claims (including class actions). Future changes to or interpretations and enforcement of the laws and regulations regarding privacy and data protection may continue to change the data protection landscape globally and could result in potentially significant operational costs for internal compliance and risk to our business. Complying with these laws and contractual or other obligations relating to privacy, data protection, data transfers, data localization, or information security may require us to make changes to our services to enable us to meet new legal requirements, incur substantial operational costs, modify our data practices and policies, and restrict our business operations. Any actual or perceived failure by us to comply with the laws and regulations regarding privacy and data protection, or other privacy or cybersecurity obligations may lead to significant fines, penalties, regulatory investigations, lawsuits, significant costs for remediation, damage to our reputation, or other liabilities. Regardless of the outcome, such investigations and proceedings can have a material adverse impact on us because of legal costs, diversion of management resources, and other factors. Any adverse outcome of these matters could result in payments of substantial monetary damages or fines, reputational harm, harm to our relations with various government agencies and regulators, orders preventing us from offering certain products or services or requiring us to make changes to our business practices in costly ways, and would thus have a material adverse effect on our business, financial condition, results of operation, cash flows and reputation. In recent years, U.S. and European lawmakers and regulators have expressed concern over the use of third-party cookies and similar technologies for online behavioral advertising, and laws in this area are also under reform. Changes to the regulations on cookies and similar technologies may increase regulatory scrutiny and expose us to increased potential liability under data protection or consumer protection laws. We may incur liabilities, expenses, costs, and other operational losses under applicable laws in connection with any measures we take to comply with them. Recent enforcement by data protection authorities on companies in the technology sector signals a trend toward more active enforcement and higher potential fines across the sector, particularly in the area of cookies and similar tracking technologies. Complying with these laws and contractual or other obligations relating to privacy, data protection, data transfers, data localization, or information security may require us to incur substantial operational costs or modify our data practices and policies. There are uncertainties with respect to how such laws and regulations will be implemented and interpreted in practice. Complying with applicable laws and regulations relating to data security and personal information protection may be costly and result in additional expenses to us, and any actual or perceived failure to do so may subject us to potential liability, regulatory investigations, costly litigation or negative publicity, harm our reputation and business operations, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline. 22 Table of Contents We may incur liability for counterfeit, unauthorized, illegal, or infringing products sold or misleading information available on our platforms. Under the business model of our platforms, substantially all of the products offered on our platforms are supplied by merchants, who are separately responsible for sourcing the products sold to buyers. We have been, are currently, and may in the future be subject to allegations and lawsuits claiming that products listed or sold through our platforms by third-party merchants are counterfeit, unauthorized, illegal, or otherwise infringe upon third-party copyrights, trademarks, patents or other intellectual property rights, or that content posted on our user interface contains misleading or deceptive information on description of products and comparable prices. Laws and regulations around the world also regulate consumer protection and unfair or deceptive trade practices. To mitigate potential liabilities and maintain compliance with applicable laws and regulations, we have implemented a range of measures. These include efforts to verify the authenticity and authorization of products sold on our platforms through collaboration with brands and offline investigations, block noncompliant products prior to their launch or remove counterfeit or illegal products and misleading information upon discovery, close higher-risk online stores, and freeze the accounts of merchants found to be in violation of platform policies. However, these measures may not always be effective or timely. We may implement further measures in an effort to eliminate infringing products on our platforms, including taking legal actions against merchants of counterfeit or infringing products, which may cause us to spend substantial additional resources or result in reduced revenues. These measures may not appeal to consumers, merchants or other participants on our platforms. A merchant whose account we suspend or terminate, regardless of our compliance with the applicable laws and regulations, may have disputes with us and commence action against us for damages, make public complaints or engage in publicity campaigns against us. We may incur significant costs to defend against these activities, which could harm our business and reputation. In the event that counterfeit, illegal, unauthorized or infringing products are sold on our platforms or infringing, misleading or deceptive content is posted on our user interface, we could face claims or incur penalties. Counterfeit, illegal, unauthorized or infringing products sold on our platforms may result in significant negative publicity and damage our reputation and cause buyers to refrain from making future purchases from us, which would materially and adversely affect our business operations and financial results. We have in the past received claims alleging the sales of defective, counterfeit, illegal or unauthorized items on our platforms. Irrespective of the validity of such claims, we could incur significant costs and efforts in either defending against or settling such claims. If there is a successful claim against us, we might be required to pay substantial damages, prohibit the further sale of those products, or limit the activities of certain merchants on our platforms. Potential liabilities under PRC law for negligence in participating or assisting in infringement activities associated with counterfeit goods include injunctions to cease infringing activities, rectification, compensation, administrative penalties and even criminal liability. The negative public perception resulting therefrom could damage our reputation, harm our business, diminish the value of our brand name and negatively affect trading price of our ADSs. Some of our merchants interact and exchange information with our users through our livestreaming feature. As these communications are conducted in real time, we may be unable to verify and moderate the information exchanged. Therefore, it is possible that users may engage in conversations or activities with illegal, obscene or infringing content that may be deemed unlawful under the applicable laws and regulations on our platforms. In addition, certain merchants may post and sell on our platforms products that may not be sold via e-commerce platforms under the applicable regulations. Failure to identify and remove such products and content from our platforms in a timely manner may subject us to liability and administrative penalties. Any of these events could have a material and adverse effect on our business, results of operations or financial condition. In addition to fraudulent transactions with legitimate buyers, merchants on our platforms may engage in fictitious transactions with themselves or collaborate with third parties to artificially inflate their sales records and search results rankings. Such activity may frustrate other merchants by enabling the perpetrating merchants to be favored over legitimate merchants, and may harm buyers by misleading them to believe that a merchant is more reliable or trustworthy than the merchant actually is. Some merchants and users also engage in fictitious transactions on e-commerce platforms to facilitate illegal activities. Fictitious transactions may result in the inflation of our key metrics. Although we have implemented strict measures to detect and penalize merchants who engage in fictitious transactions on our platforms, there can be no assurance that such measures will be effective in preventing all fraudulent transactions or in deterring illegal activities. Under our standard form agreements, we require our merchants to indemnify us for any losses we suffer or any costs that we incur due to any products sold by these merchants. However, we may not be able to successfully enforce our contractual rights and may need to initiate costly and lengthy legal proceedings to protect our rights. Additionally, while we are a platform that does not control merchants, we nevertheless frequently receive and respond to inquiries and demands related to merchants from regulators around the globe, and we expect to continue to receive more such inquiries and demands in the future. If our policies are violated by merchants, or if our policies and practices or responses to such conduct are perceived as or found to be inadequate by regulators, it could subject us to governmental inquiries, investigations, enforcement actions, civil or criminal liabilities, fines or penalties, or require us to change our policies and practices in ways that could lower our revenue, increase our costs, make our platform less user-friendly, all of which could adversely impact our business. 23 Table of Contents Our controls over fraud and policy violations are essential to maintaining user trust, but they may not be sufficient to keep up with the rapidly evolving techniques used by those engaging in fraudulent activity on our platforms. The increasing sophistication of these techniques has made fraud by sellers and buyers more difficult to combat and has amplified its impact. We take action against sellers whom we believe may have violated our policies or engaged in fraud. The volume of enforcement actions against sellers has fluctuated over time and may rise again in the future. Furthermore, our actions may be insufficient, untimely, or ineffective in ensuring a positive purchasing experience for buyers or mitigating negative publicity. While we regularly update our processes for handling complaints and detecting policy violations and fraud, these processes are inherently imperfect in a dynamic marketplace. They pose risks to us, our sellers, and our buyers due to both under-enforcement and over-enforcement, potentially increasing friction on our platforms and undermining seller and buyer trust. In certain jurisdictions, we benefit from statutory safe harbor provisions and other legal protections that limit our liability for content posted on our platforms by merchants and buyers, as well as for products and services offered through our platforms. However, such protections are not uniformly available across all jurisdictions where we operate, nor do they necessarily extend to all types of claims, including those relating to trademark and patent infringement. Laws governing platform liability for content, products offered by third-party merchants continue to evolve and vary significantly by jurisdiction. Legislative developments, court rulings and regulatory actions affecting the scope of these protections may have an adverse impact on us. In jurisdictions where such limitations on platform liability are or become unavailable, we may be held directly or secondarily liable in connection with claims arising from content posted or products offered by merchants on our platforms. Moreover, illegal, fraudulent or collusive activities by our employees could also subject us to liability or negative publicity. Historically, there have been instances of our employees accepting payments from merchants in exchange for preferential treatment on our platforms, and we reported these behaviors to the government authorities. Although we implement a zero-tolerance policy towards these activities and have not been charged with any wrongdoing, there can be no assurance that our controls and policies will prevent all fictitious, fraudulent or illegal activities by merchants, users or our employees, or that similar incidents will not occur in the future. Any inquiries, investigations and other governmental actions associated with and negative publicity and user sentiment resulting from similar incidents could divert significant management time and attention, severely diminish consumer confidence in us and the value of our brands, and would materially and adversely affect our business, financial condition and results of operations. We may be subject to claims under consumer protection laws, including health and safety claims and product liability claims, if property or people are harmed by the products and services sold on our platforms. Meanwhile, we are subject to existing and new laws and regulations imposing various requirements on our business operations. The products sold on our platforms may be defectively designed or manufactured, and offerings of defective products on our platforms may expose us to liabilities associated with consumer protection laws. Third parties who purchase defective products sold on our platforms and sustain personal injury or property damage may bring claims or legal proceedings against us, even though we are neither the seller nor the manufacturer of the products in question. We have been, and may continue to be, involved in product safety lawsuits filed by consumers on both the Pinduoduo and Temu platforms. Although we would have legal recourse against the manufacturer of such products under the applicable law, attempting to enforce our rights against the manufacturer may be expensive, time-consuming and ultimately futile. Also, operators of e-commerce platforms may be subject to certain provisions of consumer protection laws even where the operator is not the manufacturer, provider or retailer of the products or services purchased by the consumer. In addition, if we do not take appropriate remedial actions against merchants on our platforms for their actions that we know, or should have known, would infringe upon the rights and interests of consumers, we may be held jointly liable for infringement alongside the merchants. For example, if the operator of the Pinduoduo platform fails to provide a consumer with the real name, address and contact details of the merchant that sold the defective product on the Pinduoduo platform, the operator of the Pinduoduo platform may be liable to compensate such consumer for damages suffered by him or her. Moreover, consumer protection laws in China provide that a platform will be held liable for failing to meet any undertaking that it made to consumers with regard to products listed on it, and the Pinduoduo platform is required to report violations of applicable consumer protection laws, regulations or administrative rules by merchants on the platform to the SAMR or its local branches, and to take appropriate remedial measures, including ceasing to provide services to those merchants, as a platform. The operator of the Pinduoduo platform may also be held jointly liable with merchants on the platform who do not possess the proper licenses or authorizations to sell goods or sell goods that do not meet product standards. 24 Table of Contents We do not maintain product liability insurance for products transacted on our platforms, and our rights of indemnity from the merchants or suppliers on our platforms may not adequately cover us for any liability we may incur. Claims against us, even if they are eventually unsuccessful, could result in significant expenditure of funds and diversion of management time and resources, which could materially and adversely affect our business, financial condition and prospects. In addition, governments and regulatory authorities of the jurisdictions where we operate may continue to promulgate new laws and regulations governing the e-commerce industry, tighten enforcement of existing laws and regulations, and impose additional requirements and other obligations on our business including the operation of our platforms and our market promotion activities. Compliance with these laws and regulations may be costly, and any non-compliance or associated inquiries, investigations and other governmental actions may divert significant management time and attention and our financial resources, bring negative publicity, or subject us to liabilities or administrative penalties. In the case of the Pinduoduo platform we are subject to the following laws and regulations in China: ● In August 2018, the Standing Committee of the National People’s Congress of the PRC promulgated the E-Commerce Law, pursuant to which we may be held responsible if fresh produce or other products sold through Duo Duo Grocery caused harm to the interests and health of consumers. Please see “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to E-Commerce—The E-Commerce Law” for details. ● The E-Commerce Law requires certain e-commerce operators, including, but not limited to, e-commerce platform operators and merchants on these platforms, to register with the relevant local branches of the SAMR, and requires that e-commerce platform operators should provide the identity information of the merchants on their platforms to local branches of the SAMR and procure those merchants who fail to make such registrations to comply with the registration requirements. The Measures for the Supervision and Administration of Online Transactions, promulgated by the SAMR in 2021 and amended in 2025, also require e-commerce platforms to remind individual merchants to timely register with the applicable local branches of the SAMR if those merchants have an aggregate annual online business turnover of RMB100,000 or more. Further, pursuant to the Provisions on the Reporting of Tax-Related Information by Internet Platform Enterprises, internet platform enterprises, like us, shall report tax-related information, including but not limited to the identity information and income information of merchants and personnel operating on platforms, to the competent tax authorities. In addition, the PRC Food Safety Law requires providers of third-party online platforms for food trading to conduct real-name registration for all food business operators on their platforms and verify the applicable business licenses. Please see “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to E-Commerce—The E-Commerce Law” and “—Regulations on Online Transactions” and “—Regulations on Online Platform for Food Trading” for details. The policy of the Pinduoduo platform expressly requires all merchants on the platform to complete these registrations. The Pinduoduo platform may lose existing or potential merchants who do not or are unwilling to comply with the registration and related requirements, and the Pinduoduo platform may be found liable under the E-Commerce Law and related regulations if it is deemed to have failed to implement the required procedures. For example, in April 2026, the SAMR fined seven platform operators a total of approximately RMB3.6 billion, including approximately RMB1.5 billion against the operator of the Pinduoduo platform, for violations of the E-Commerce Law and PRC food safety laws that included failing to properly verify food business licenses and failing to take measures against cake vendors on the platform transferring consumers’ orders to other vendors without notifying the consumers. As part of the same regulatory action, the SAMR imposed a nine-month suspension on the onboarding of new cake (except pre-packaged cake) vendors on the Pinduoduo platform. We have accepted the penalty and intend to strictly comply with the SAMR’s requirements. ● In October 2020, the SAMR issued the Interim Provisions for Regulating Promotional Activities, which require platform operators to design rules and procedures to foster fair and transparent merchandise promotional activities, and assist the authorities in their investigation of violations by platform merchants. In addition, according to the PRC Anti-unfair Competition Law and other laws and regulations, business operators are prohibited from inducing consumers into transactions via misleading pricing terms or engaging in other anti-competitive conducts associated with product price. Violators of these laws and regulations may be subject to fines and other administrative penalties. For example, in March 2021, the SAMR fined five platform operators a sum of RMB6.5 million, including RMB1.5 million against the operator of the Pinduoduo platform, for unfair pricing conduct with respect to their online grocery businesses. ● In February 2021, the Anti-monopoly Committee of the State Council of the PRC published the Anti-monopoly Guidelines for the Platform Economy Sector, which prohibit business practices such as deploying big data analytics to set discriminatory terms for merchandise prices or other transaction terms; coercive exclusivity arrangements with transaction counterparties; blocking of a competitor’s interface through technological means; and unlawful collection of user data without consent. If the Pinduoduo platform is found to have any non-compliance issues by the authorities, it may be subject to fines and other penalties. 25 Table of Contents ● In April 2021, the SAMR, together with the CAC and the State Administration of Taxation of the PRC, held a meeting with more than 30 major platform operators, including the operator of the Pinduoduo platform. All platform operators that participated in the meeting were required to conduct a self-inspection within one month to identify and correct possible violations of anti-monopoly, anti-unfair competition, tax and other related laws and regulations and submit their compliance commitments for public supervision. The authorities may regulate these compliance commitments through further legislation or administrative activities. As a result, we may incur additional costs and expenses, devote more of management’s attention and allocate additional resources to be in compliance with the applicable laws and regulations. If the operator of the Pinduoduo platform is required to take any rectifying or remedial measures or is subject to any penalty, the reputation and business operations of the Pinduoduo platform may be materially and adversely affected. ● In August 2022, certain amendments to the Anti-monopoly Law became effective and the amended PRC Anti-unfair Competition Law took effect in October 2025. These amendments generally impose stricter requirements for completing acquisitive transactions. Please see “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Anti-unfair Competition and Anti-monopoly” for details. Any failure or perceived failure by the Pinduoduo platform to comply with the anti-monopoly laws and regulations may result in governmental investigations or enforcement actions, lawsuits or claims against the Pinduoduo platform or its operator, and could have an adverse effect on our business, financial condition and results of operations. In the case of the Temu platform, we as the operator of the e-commerce platform and merchants that offer to sell products into the jurisdictions where we operate are subject to the consumer protection laws of such jurisdictions, including those relating to health and safety and product liability. For instance, merchants that offer to sell products into the U.S. are subject to laws and regulations enforced by the U.S. Consumer Product Safety Commission and other similar regulatory authorities at the state level. Merchants that offer to sell products into the European Union are subject to the General Product Safety Regulation in the EU. If certain products sold in a jurisdiction by merchants on our platforms are found to be in violation of the applicable consumer protection laws of such jurisdiction, such products could be subject to involuntary recalls, takedown notices, and other actions by the applicable authorities. Recalls and government or user concerns about product safety could harm our reputation and reduce sales, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Due to evolving legislative activities and varied local implementation practices regarding consumer protection, anti-monopoly and competition laws and regulations in the countries or regions where we have operations, compliance with these laws, regulations, rules and guidelines may be costly, and any actual or alleged non-compliance or associated inquiries, investigations and other governmental actions may divert significant management time and attention, strain our financial resources, bring negative publicity, subject us to liabilities or administrative penalties, or otherwise materially and adversely affect our financial condition, operations and business prospects. Marketing, advertising, trade and commercial practices on our platforms may subject us to regulatory scrutiny, which may affect our business and results of operations. Each jurisdiction in which we operate has its own laws and regulations governing online platforms, including those relating to marketing and advertising practices, consumer protection and unfair or deceptive trade practices. Regulators around the world are increasingly scrutinizing the use of “dark patterns,” or practices that can allegedly manipulate users’ behavior, often without their knowledge or consent, through the use of deceptive techniques. These practices are regulated by numerous laws globally, such as the GDPR, Digital Services Act, and Unfair Commercial Practices Directive in Europe and various federal and state laws in the U.S. Companies deploying online advertising and marketing have been subject to government investigation by regulatory bodies. Given the nature of our platform and the scale of our operations, we have been subject to inquiries, investigations, or enforcement actions from regulators in various jurisdictions regarding our marketing, advertising, trade and commercial practices. We may continue to face similar investigations or enforcement actions, or claims and legal proceedings (including putative class actions) in jurisdictions where we operate concerning various aspects of our business, such as user acquisition and retention strategies, pricing and discounting practices, product listings, third-party merchant conduct, or the collection or use of consumer data. Any such proceedings, regardless of their outcome, could have an adverse effect on us because of legal costs, disruptions to our operations, diversion of management resources, negative publicity, and other factors. 26 Table of Contents We may experience fluctuations in our tax obligations and effective tax rate. We are subject to a variety of taxes and tax collection obligations in multiple jurisdictions. We may recognize additional tax expense and be subject to additional tax liabilities, including other liabilities for tax collection obligations due to changes in laws, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions. Such changes could come about as a result of economic, political, and other conditions. An increasing number of jurisdictions are considering or have adopted laws or administrative practices that impose new tax measures relating to online services and e-commerce, including revenue-based taxes, such as digital service taxes or online sales tax. These include new obligations to withhold or collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result in liability for third party obligations. In addition, beginning in 2024, some jurisdictions (including those in which we operate) have either enacted or may enact legislation to adopt certain components of the Global Anti‑Base Erosion (GloBE) Model Rules, which form part of a set of rules commonly referred to as the Pillar Two Model Rules and are designed to define the global minimum tax rules and may increase our tax expense. Our results of operations and cash flows could be adversely affected by additional taxes imposed on us prospectively or retroactively or additional taxes or penalties resulting from the failure to comply with any tax obligations or failure to provide information about our merchants, suppliers, and other third parties for tax reporting purposes to various government agencies. In some cases, we also may not have sufficient notice to enable us to build systems and adopt processes to properly comply with new reporting or collection obligations by the effective date. In the ordinary course of our business, there are transactions and calculations for which the ultimate tax determination is uncertain and judgment is required in evaluating and estimating our tax expense, assets, and liabilities. We are subject to review and audit by tax authorities as well as subject to the prospective and retrospective effects of changing tax regulations, legislation and interpretations. Due to the inherent complexity and uncertainty of these matters, interpretations of certain tax laws by authorities, and judicial, administrative, and regulatory processes in these jurisdictions, the final outcome of such matters may be materially different from our expectations If we fail to maintain and expand our relationships with merchants, our revenues and results of operations would be harmed. We rely on our merchants to offer merchandise that appeals to our existing and potential buyers at attractive prices. Our ability to provide popular products on our platforms at attractive prices depends on our ability to develop mutually beneficial relationships with our merchants. For example, we rely on our merchants to make available sufficient inventory for the timely fulfillment of large volumes of orders on our platforms in an efficient manner to ensure our user experience. However, we may experience merchant attrition in the ordinary course of business resulting from several factors, such as losses to competitors, perception that marketing on our platforms is ineffective, reduction in merchants’ marketing budgets, and closures or bankruptcies of merchants. In addition, we may have disputes with merchants with respect to their compliance with our quality control policies and measures and the penalties we impose for violation of these policies or measures from time to time, which may cause them to be dissatisfied with our platforms. Their complaints may in turn result in a negative impact on our public image and reputation. Our agreements with merchants also typically do not restrict them from establishing or maintaining business relationships with our competitors. We cannot assure you that merchants will continue to offer merchandise on our platforms if they are pressured to use only one platform to market their products. If we experience significant merchant attrition, or if we are unable to attract new merchants, our revenues and results of operations may be materially and adversely affected. Any change, disruption, or discontinuity in the features and functions of major social networks could severely limit our ability to continue growing our buyer base, and our business may be materially and adversely affected. Our success depends on our ability to attract and retain new buyers and expand our buyer base. Acquiring and retaining buyers on our platforms is important to the growth and profitability of our business. We leverage social networks as a tool for buyer acquisition and engagement. Although buyers can access our platforms and make purchases directly through our platforms, we leverage social networks to enable buyers to share product information and their purchase experiences with their friends, family and other social contacts to generate effective and organic traffic and active interactions among buyers. A portion of our buyer traffic comes from these recommendations or product introductions that buyers share through social networks. Due to the nature of our business model, which resembles a dynamic and interactive shopping experience, it is impracticable for us to accurately bifurcate and quantify the buyer traffic generated directly through our platforms and through social networks. Therefore, during our daily operations, we focus more on the delivery of a seamless user experience across different access points, and believe that the final purchase destination cannot be used to reflect the significance of social networks to our business operations. 27 Table of Contents To the extent that we fail to effectively leverage such social networks, our ability to attract or retain buyers may be severely harmed. If any of these social networks makes changes to its functions or support, such as charging fees for functions or support that are currently provided for free, or stops offering its functions or support to us, we may not be able to locate alternative platforms of similar scale to provide similar functions or support on commercially reasonable terms in a timely manner, or at all. Any interruption to or discontinuation of our relationships with major social network operators may severely and negatively impact our ability to continue growing our buyer base. Furthermore, we may fail to establish or maintain relationships with additional social network operators to support the growth of our business on economically viable terms, or at all. Any occurrence of the circumstances mentioned above may have a material adverse effect on our business, financial condition and results of operations. We are dependent on app stores to disseminate our mobile apps. Consumers primarily access our services through the Pinduoduo and Temu mobile apps. Our mobile apps are offered via app stores operated by third parties, such as Apple’s App Store, which could suspend or terminate users’ access to our mobile apps, increase access costs or change the terms of access in a way that makes our apps less desirable or harder to access. As a result, our ability to expand our user base may be hindered if potential users experience difficulties in or are barred from accessing our mobile apps. In the past, our mobile apps were taken down from certain third-party app stores. We cannot assure you that we will not experience such incidents of a similar nature in the future. The occurrence of a similar incident may adversely affect our brands and reputation, business, financial condition and results of operations. Any disruption to our IT systems could materially affect our ability to maintain the satisfactory performance of our IT systems and deliver consistent services to our buyers and merchants. The satisfactory performance, reliability and availability of our IT systems are critical to our success, our ability to attract and retain buyers and our ability to maintain and deliver consistent services to our buyers and merchants. However, our technology infrastructure may fail to keep pace with the growth of our business, particularly with respect to the new product and service offerings on our platforms. Our buyers may experience delays as we seek to source additional capacity. If our buyers are dissatisfied with their experience on our platforms as a result of such delays, our results of operations as well as our reputation could be adversely affected. Additionally, we must continue to upgrade and improve our technology infrastructure to support the growth of our business. However, we cannot assure you that we will be successful in executing these system upgrades, and the failure to do so may impede our growth. We currently rely on cloud services and servers operated by external cloud service providers to store our data, to allow us to analyze a large amount of data simultaneously and to update our buyer database and buyer profiles quickly. Any interruption or delay in the functionality of these external cloud service and server providers may materially and adversely affect the operations of our business. We may be unable to satisfactorily monitor, maintain or upgrade our IT systems and infrastructure on a real-time basis, and buyers may experience service outages and delays in accessing and using our platforms to place orders. In addition, we may experience surges in online traffic and orders associated with specific promotional activities or the general increase of our scale and complexity of our operations which can put additional demand on our platforms at specific times. Our technology or infrastructure may not function properly at all times. Any system interruptions caused by telecommunications failures, computer viruses, hacking or other attempts to harm our systems that result in the unavailability or slowdown of our platforms or reduced order fulfillment performance could reduce the volume of products sold and the attractiveness of product offerings on our platforms. Our servers may also be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to system interruptions, mobile app slowdowns or unavailability, delays or errors in transaction processing, loss of data or the inability to accept and fulfill buyer orders. Any such occurrence could cause disruption to our daily operations. As a result, our reputation may be materially and adversely affected, our market share could decline and we could be subject to liability claims. We rely on certain key operating metrics to evaluate the performance of our business, and perceived inaccuracies in such metrics may harm our reputation and negatively affect our business. We rely on certain key operating metrics to evaluate the performance of our business. Our operating metrics may differ from estimates published by third parties or from similarly titled metrics used by other companies due to differences in methodology and assumptions. If these metrics are perceived to be inaccurate by investors or investors make investment decisions based on operating metrics that we disclosed in the past but with their own methodology and assumptions or those published or used by third parties or other companies, our reputation may be harmed, which could negatively affect our business, and we may also face potential lawsuits or disputes. 28 Table of Contents We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations. We and our merchants are vulnerable to natural disasters, health epidemics, and other calamities. Any such occurrence could cause disruption to our and our merchants’ daily operations or the closure of facilities and logistics delivery networks, which may disrupt our business operations and adversely affect our results of operations. In recent years, there have been outbreaks of epidemics in the countries or regions where we have operations. Our results of operations could be adversely affected to the extent that any other epidemics or catastrophic events harm the local or global economy in general. Our success depends on the continuing efforts of our key employees. If we fail to hire, retain and motivate our key employees, our business may suffer. Our future success is significantly dependent upon the continued service of our key executives and other key employees. If we lose the services of any member of our management or key personnel, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to recruit and train new staff, which could severely disrupt our business and growth. Our management and key personnel are critical to our vision, strategic direction, culture and overall business success. If there is any internal organizational structure change or change in responsibilities for our management or key personnel, the operation of our business and our business prospects may be adversely affected. Our employees, including members of our management, may choose to pursue other opportunities. If we are unable to motivate or retain key employees, our business may be severely disrupted and our prospects would suffer. The increasing scale of our business also requires us to hire and retain a wide range of capable and experienced personnel and technological talents who can adapt to a dynamic, competitive and challenging business environment. We may need to hire additional personnel with special sets of skills and experience for our new initiatives and businesses. Competition for talent is intense, and the availability of suitable and qualified candidates is limited. Competition for talent could cause us to offer higher compensation and other benefits to attract and retain suitable individuals. Even if we were to offer higher compensation and other benefits, these individuals may choose not to join or continue to work for us. Any failure to attract or retain management and key personnel could severely disrupt our business and growth. If we are unable to manage our growth or execute our strategies effectively, our business and prospects may be materially and adversely affected. We expect to further expand our businesses. Expansion in general increases the complexity of our operations and places significant strains on our management, operational and financial resources, and may cause additional risks and costs in relation to compliance, such as dealing with regulatory enforcement or labor disputes. We may continue to hire, train and effectively manage new employees and contractors. If our new hires perform poorly or if we are unsuccessful in hiring, training, managing and integrating new employees and contractors, our business, financial condition and results of operations may be materially harmed. In addition, we plan to further establish relationships with more merchants to increase the product offerings on our platforms. Such expansion may require us to work with a variety of additional merchants to introduce new products and address the evolving needs of our buyers. We may have limited or no experience with certain new product offerings, and our expansion into these new product offerings may not achieve broad buyer acceptance. These offerings may present new and difficult technological or operational challenges, and we and our merchants may be subject to claims if buyers are not satisfied with the quality of the products or do not have satisfactory experiences in general. To effectively execute our business strategies and manage the expected growth of our operations and personnel, we will need to continue to improve our transaction processing, technological, operational and financial systems, policies, procedures and controls. All of these endeavors involve risks and will require significant management, financial and human resources. We cannot assure you that we will be able to effectively manage our growth or to implement our strategies successfully. If we are not able to manage our growth or implement our strategies effectively, or at all, our business and prospects may be materially and adversely affected. We have launched a number of new initiatives in recent years. For example, in August 2020, as an extension to the Pinduoduo platform, we started Duo Duo Grocery, a next-day grocery pick-up service that allows users to order groceries and related products online and collect their orders the next day at nearby designated pickup points. In September 2022, we launched Temu, a global online platform that brings together consumers, merchants, manufacturers and brands around the world. We cannot assure you that we will be able to manage or operate these new business initiatives successfully or effectively, including by providing the requisite services to merchants, attracting and retaining capable employees and partners, or leasing suitable facilities on commercially acceptable terms. Failure to manage and operate the new initiatives could materially and adversely affect our business, financial condition and results of operations. 29 Table of Contents We may face challenges in expanding product offerings on our platforms. The merchants on our platforms carry a wide range of products. Expansion of product offerings on our platforms, in terms of both categories and items, involves new risks and challenges. Our lack of familiarity with new products and lack of buyer data relating to these products may make it more difficult for us to anticipate buyer demand and preferences, inspect and control the quality of these products, and ensure that these products are properly handled, stored and delivered. Our merchants may experience higher return rates on new products, receive more buyer complaints about such products and face costly product liability claims as a result of selling such products, which would harm our brands, reputation and financial performance. We may also be involved in disputes with the merchants in connection with these claims and complaints. As we broaden product offerings on our platforms, we will need to work with a large number of new merchants efficiently and establish and maintain mutually beneficial relationships with our existing and new merchants. To support our growth and our expansion, we will need to devote management, operating, financial and human resources which may divert our attention from existing businesses, incur upfront costs, and implement a variety of new and upgraded management, operating and financial systems, procedures and controls. There is no assurance that we will be able to implement all of these systems, procedures and control measures successfully or address the various challenges in expanding our future businesses and operations effectively. In addition, the initiatives that we are pursuing to diversify our business operations face risks and uncertainties and may not grow successfully. Tencent provides services to us in connection with various aspects of our operations. If these services become limited, compromised, restricted, curtailed or less effective, more expensive or unavailable to us for any reason or in any way, our business may be materially and adversely affected. We collaborate with Tencent, one of our principal shareholders and the owner of Weixin and QQ, with respect to various aspects of our business. If the services provided by Tencent to us become limited, compromised, restricted, curtailed or less effective, more expensive or unavailable to us for any reason, our business may be materially and adversely affected. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions.” We rely on the proper operation and maintenance of our platforms, internet infrastructure and telecommunications networks in the countries or regions where we have operations. Any malfunction, capacity constraint or operation interruption may have an adverse impact on our business. We provide products and services online through our platforms. The satisfactory performance, reliability and availability of our platforms are critical to our success and our ability to attract and retain buyers. Our business depends on the performance and reliability of the internet infrastructure in the countries or regions where we have operations. The reliability and availability of our platforms also depends on telecommunications carriers and other third-party providers for communications and storage capacity, including bandwidth and server storage, among other things. If we are unable to enter into or renew agreements with these providers on acceptable terms, or if any of our existing agreements with such providers are terminated as a result of our breach or otherwise, our ability to provide our services to our buyers could be adversely affected. In the case of the Pinduoduo platform, almost all access to the internet in China is maintained through state-owned telecommunications carriers under the administrative control and regulatory supervision of the MIIT. The Pinduoduo platform obtains access to end-user networks operated by such telecommunications carriers and internet service providers. We may face similar or other limitations in other countries in which we operate. The failure of telecommunications network operators to provide us with the requisite bandwidth could also interfere with the speed and availability of our platforms. Service interruptions prevent buyers from accessing our platforms and placing orders, and frequent interruptions could frustrate buyers and discourage them from attempting to place orders, which could cause us to lose buyers and harm our operating results. We may not have access to alternative networks in the event of disruptions, failures or other problems with the internet infrastructure in China or elsewhere. The internet infrastructure in the countries or regions in which we operate may not support the demand associated with continued growth in internet usage. In addition, we have no control over the costs of the services provided by the telecommunications operators. If the prices that we pay for telecommunications and internet services rise significantly, our financial results could be adversely affected. We may engage in acquisitions, investments or strategic alliances, which could require significant management attention and materially and adversely affect our business and results of operations. We may, from time to time, identify strategic partners to form strategic alliances, invest in or acquire additional assets, technologies or businesses that are complementary to our existing business. These transactions may involve minority investments in other companies, acquisitions of controlling stakes in other companies or acquisitions of selected assets. 30 Table of Contents Any strategic alliances, investments or acquisitions and the subsequent integration of the new assets and businesses obtained or developed from such transactions into our own businesses may divert management from their primary responsibilities and subject us to additional liabilities. In addition, the costs of identifying and consummating investments and acquisitions may be significant. We may also incur costs and experience uncertainties in completing necessary registrations and obtaining necessary approvals from the government authorities. The costs and duration of integrating newly acquired assets and businesses could also materially exceed our expectations. Any such negative developments could have a material adverse effect on our business, financial condition, results of operations and cash flow. Our financial results could be adversely affected by our investments or acquisitions. The investments and acquired assets or businesses may not generate anticipated synergies with our business or achieve anticipated financial growth. They could result in significant investments and goodwill impairment charges and amortization expenses for other intangible assets, which would adversely affect our financial condition and operating results. Undetected programming errors or flaws could negatively affect user experience, damage our reputation or even cause direct loss to us, which would materially and adversely affect our results of operations. Our platforms and internal systems rely on software that is highly technical and complex. In addition, our platforms and internal systems depend on the ability of such software to store, retrieve, process and manage an immense amount of data and the ability of their operators to operate these complex systems properly. The software on which we rely may contain undetected programming errors or design defects, some of which may only be discovered after the code has been released. Improper operations or other human errors may also occur from time to time as a result of operating such software and complex systems. Programming errors or design defects within the software or human errors in connection with the operation of the software may result in a negative experience to buyers using our platforms, disruptions to the operations of our merchants, delays in the introduction of new features or enhancements, unintended disclosure of confidential information of buyers, merchants and our platforms, compromise in our ability to provide effective customer service and enjoyable user engagement or exploitation of loopholes by dishonest buyers or merchants. Programming errors or design defects could cause damage to our reputation, loss of buyers or merchants, or direct economic loss to us. Our business generates and processes a large amount of data, and we are required to comply with laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects. Our business generates and processes a large amount of data. We face a number of demanding expectations relating to processing data from transactions and other activities on our platforms, including: ● protecting the data in and hosted on our system, including against attacks on our system by outside parties or fraudulent behavior or improper use by our employees, and securely transmitting such data over public networks; ● addressing concerns related to privacy, sharing, safety, security and other factors; and ● complying with applicable laws and regulations relating to the collection, use, storage, transfer, disclosure and security of personal data, including any requests from regulatory and government authorities relating to these data. To address these expectations, we have adopted security policies and measures, including encryption technology, designed to protect our proprietary data and buyer information. Maintaining complete security on our platforms and systems for the storage and transmission of confidential or private data, such as buyers’ personal information, payment-related information and transaction information, is essential to maintaining consumer confidence in our platforms and systems. However, advances in technology, the expertise of hackers, new discoveries in the field of cryptography or other events or developments could result in a compromise or breach of the technology that we use to protect our data. We may not be able to prevent third parties, especially hackers or other individuals or entities engaging in similar activities through viruses, ransomware, malicious software, break-ins, phishing attacks, third-party manipulation or security breaches, from illegally obtaining the confidential or private data we hold on our platforms. Individuals or entities that illegally obtain confidential or private data may further engage in various other illegal activities using such data. The methods used by hackers and others engaging in illegal online activities are increasingly more sophisticated and constantly evolving. In addition, we work with third-party payment service providers on payments for products sold on our platforms. Despite our efforts, we have limited control or influence over the security policies or measures adopted by third-party providers of online payment services through which some of our buyers may choose to make payment for purchases. ​ 31 Table of Contents Any negative publicity on our platforms’ data safety or privacy protection mechanisms and policies, and any claims asserted or investigations against us or fines that may be imposed upon us as a result of actual or perceived failures, could have a material and adverse effect on our public image, reputation, financial condition and results of operations. Any compromise of our information security or the information security of our contracted third-party payment service providers that results in data being improperly used or disclosed could also materially and adversely affect us. Significant capital, managerial and other resources, including costs incurred to deploy additional personnel, develop network protection technologies, train employees, and engage third-party experts and consultants, may be required to ensure and enhance information security or to address the issues caused by a potential security failure. We currently rely on commercial banks and third-party payment service providers for payment processing and escrow services. If these payment services are restricted or curtailed in any way, are offered to us on less favorable terms, or become unavailable to us or our buyers for any reason, our business may be materially and adversely affected. Buyers on our platforms may opt to pay for purchases using a variety of methods, including through credit cards, debit cards, and payment methods provided by third-party payment service providers such as mobile wallets or buy now pay later solutions. Our business therefore depends on the billing, payment and escrow systems of these service providers to maintain accurate records of payments of sales proceeds by buyers and collect such payments. Business involving online payment services is subject to a number of risks that could materially and adversely affect third-party payment service providers’ ability to provide payment processing and escrow services to us, including: ● dissatisfaction with these online payment services or decreased use of their services by buyers and merchants; ● increasing competition, including from other established internet companies, payment service providers and companies engaged in other financial technology services; ● changes to rules or practices applicable to payment systems that link to third-party payment service providers; ● breach of buyers’ personal information and concerns over the use and security of information collected from buyers; ● service outages, system failures or failures to effectively scale the system to handle large and growing transaction volumes; ● increasing costs to third-party payment service providers, including fees charged by banks to process transactions through online payment channels, which would also increase our costs of revenues; and ● failure to manage funds accurately or loss of funds, whether due to employee fraud, security breaches, technical errors or otherwise. Our reliance on third-party payment service providers subjects us to limitations imposed by the providers. For example, some commercial banks in China impose limits on the amounts that may be transferred by automated payments from buyers’ bank accounts to their linked accounts with third-party payment services. We cannot predict whether these and any additional restrictions that could be put in place would have a material adverse effect on our business. We cannot assure you that we will be successful in entering and maintaining amicable relationships with commercial banks and online payment service providers that work with us. Identifying, negotiating and maintaining relationships with these providers require significant time and resources. Our current agreements with these service providers also do not prohibit them from working with our competitors. They could choose to terminate their relationships with us or propose terms that we cannot accept. Moreover, we cannot guarantee that the terms we have negotiated with these payment service providers, including the payment processing fee rates, will remain as favorable. If the terms with these payment service providers become less favorable to us, such as the increase of payment processing fee rate, we may have to raise the transaction services fees for certain of our merchants, which may cause us to lose merchants, or absorb the additional costs by ourselves, both of which may materially and adversely affect our business, financial condition and results of operations. Furthermore, these service providers may not perform as expected under our agreements with them, and we may have disagreements or disputes with such payment service providers, either of which could adversely affect our brands and reputation as well as our business operations. 32 Table of Contents The laws, regulations, rules, and standards relating to payments span multiple jurisdictions globally, and are complex and evolving. The laws and regulations related to payments are complex, evolving, subject to change and vary across the PRC, the United States and other jurisdictions globally. Jurisdictions may subject us to requirements for licensing, regulatory inspection, handling of funds, data processing and privacy or other obligations. Any failure or claim of our failure to comply, or any failure by our third-party payment processors to comply, could cost us substantial resources, result in liabilities and harm our reputation. In addition, through our agreements with third-party payment processors, we are subject to credit card association operating rules, which are subject to change or reinterpretation. Any failure to comply with these rules could impact our ability to meet our contractual obligations to our third-party payment processors. Any changes in these rules, including any change in our designation by major payment card providers, could require a change in our business operations. In China, the commercial banks and third-party payment service providers that work with the Pinduoduo platform are subject to the supervision of the People’s Bank of China. The People’s Bank of China may publish rules, guidelines and interpretations from time to time regulating the operation of financial institutions and payment service providers that may in turn affect the pattern of services provided by such entities to the Pinduoduo platform. For example, in November 2017, the People’s Bank of China published the Notice on Further Strengthening the Rectification of Uncertificated Payment Business Operations without a Certificate. This notice was intended to prevent unlicensed entities from using licensed payment service providers as a conduit for conducting the unlicensed payment settlement services, so as to safeguard the fund security and information security. We believe that the pattern of the Pinduoduo platform receiving settlement services from third-party payment service providers is not in violation of the notice because (i) the commercial bank opens a special internal account to receive payment from the buyers, (ii) the Pinduoduo platform submits to the bank materials verifying the truthfulness of the transactions and (iii) the bank also verifies other information, if it deems necessary, before it distributes the payment to merchants on the Pinduoduo platform and the Pinduoduo platform, as applicable. However, we cannot assure you that the People’s Bank of China or other governmental authorities will take the same view as ours. If required by the People’s Bank of China or new legislation, the payment service providers that work with the Pinduoduo platform will have to suspend their services or explore new models to offer their services to the Pinduoduo platform, the Pinduoduo platform may not be able to claim its ownership and exclusive control of the payments from the buyers in the bank accounts opened with the commercial banks, and the Pinduoduo platform may incur additional expenses or invest considerable resources in complying with the requirements. If the People’s Bank of China or other governmental authorities deem the Pinduoduo platform’s cooperation with payment service providers to be in violation of law, the Pinduoduo platform may also have to suspend or terminate its cooperation with these payment service providers or explore new models for using their services, and the income derived from the accrued interests in the bank accounts may be confiscated, and the Pinduoduo platform may be subject to a fine of one to five times of such income. In addition, similar to a potential increase in fee rates from third-party payment service providers described above, any increased costs associated with compliance with rules on payment processing could lead us to bear increased costs or increased fees for our merchants, each of which may negatively impact our business. We do not control Shanghai Fufeitong and the majority of its equity interests is indirectly controlled by our executive officers. If any conflict arises between us and Shanghai Fufeitong and cannot be resolved in our favor, our business, financial condition, results of operations and prospects may be materially and adversely affected. In April 2020, Shanghai Xunmeng, a subsidiary of the VIE, entered into a business cooperation agreement with Shanghai Fufeitong Payment Service Co., Ltd., or Shanghai Fufeitong, pursuant to which both parties agreed to conduct comprehensive business cooperation in payment services, technical resources and other related professional areas. Mr. Lei Chen and Mr. Zhenwei Zheng, our executive officers, indirectly hold 93.89% of the equity interests in Shanghai Fufeitong. As such, the transaction constitutes a related party transaction. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Loan to Ningbo Hexin and Business Cooperation Agreement with Shanghai Fufeitong” for more details about the transactions. As Shanghai Fufeitong, which we do not have control over, also provides payment services to other parties from time to time, we cannot assure you that Shanghai Fufeitong’s transactions with other parties or its pursuit of opportunities and development would not conflict with our interests. There can be no assurance that Mr. Lei Chen and Mr. Zhenwei Zheng, in light of their control over Shanghai Fufeitong, would act in favor of our interests if any conflict arises between us and Shanghai Fufeitong. If the conflict cannot be resolved in our favor, our business, financial condition, results of operations and prospects may be materially and adversely affected. Moreover, due to our cooperation with Shanghai Fufeitong, any event that negatively affects Shanghai Fufeitong may also negatively affect the perception of our buyers, merchants, regulators and other third parties on us and may further adversely and materially affect our reputation, business, results of operations and prospects. 33 Table of Contents Any lack of additional requisite approvals, licenses or permits or failure to comply with any requirements of the applicable laws, regulations and policies may materially and adversely affect our daily operations and hinder our growth. Our business is subject to governmental supervision and regulation by the governmental authorities. In the case of the Pinduoduo platform, these authorities include the Ministry of Commerce of the PRC, the MIIT, the National Radio and Television Administration of the PRC, or the NRTA, and other governmental authorities in charge of the relevant categories of products sold on the Pinduoduo platform. Together, these government authorities promulgate and enforce regulations that cover many aspects of the operation of online retailing and related business, including entry into the industry, the scope of permissible business activities, licenses and permits for various business activities, and foreign investment. For instance, the Pinduoduo platform is required to hold a number of licenses and permits in connection with its business operations, including VATS Licenses and approvals for the establishment of PRC foreign-invested enterprises engaging in the sale of goods over the internet. We have in the past held and currently hold all material licenses and permits described above and may apply for certain additional licenses with the government authorities in the future to maintain compliances especially when we take on new business activities. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Foreign Investment” and “—Licenses, Permits and Filings.” As of the date of this annual report, other than as disclosed elsewhere in this annual report, we have not been subject to material penalties or other material disciplinary action from the governmental authorities regarding conducting our business without proper approvals, licenses and permits. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We and certain of our directors and officers have been named as defendants in several lawsuits, and we may be the target of future claims, litigation, government investigations or other proceedings, all of which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation”, “—Our business is subject to a large number of laws across many jurisdictions, many of which are evolving” and “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” We cannot assure you that we will not receive such notice of warning or be subject to penalties or other disciplinary actions in the future. The interpretation and implementation of current and any future laws and regulations applicable to online retail and related businesses may substantially impact our business and financial condition. New laws and regulations may be adopted from time to time that require additional licenses and permits other than those we currently have, and to address new issues that arise from time to time. Interpretations of existing laws and regulations could also change, resulting in us being subject to licensing requirements that we believe we are not currently subject to. If any governmental authority considers us operating without proper approvals, licenses, filings, registrations or permits or promulgates new laws and regulations that require additional approvals, filings, registrations or licenses or impose additional restrictions on the operation of any part of our business, it has the power to, among other things, levy fines, confiscate our income, revoke our business licenses, require us to discontinue the relevant part of our business or impose restrictions on the affected portion of our business. Any of these and other regulatory actions by the governmental authorities, including issuance of official notices, change of policies, promulgation of regulations and imposition of sanctions, may adversely affect our business. In addition, if we were to use new or additional domain names to conduct our business, we would have to apply for the same set of government authorizations or amend the current ones. There is no assurance that we will be able to complete such procedures timely. Applicable laws and regulations may also require e-commerce platform operators to take measures to protect consumer rights. Failure to do so may subject the e-commerce platform operators to rectification requirements and penalties. Although we endeavor to comply with the applicable laws and regulations, there is no assurance that we can timely react to the evolving requirements. If the competent governmental authorities deem that we fail to meet such requirements, we may receive warnings, be ordered to make rectifications, or be subject to other administrative sanctions and/or penalties that may have a material adverse effect on our reputation, business, financial condition and results of operations. For instance, on November 12, 2020, the NRTA issued the Circular on Strengthening the Administration of Livestreaming, also known as Notice 78. Pursuant to Notice 78, platforms that provide livestreaming must register their information and business operations. On April 23, 2021, seven PRC regulatory authorities jointly promulgated the Administrative Measures on Online Livestreaming Marketing (Trial), effective May 25, 2021, which require livestreaming platforms to adopt measures to (i) intervene in risky or illegal transactions by limiting traffic, suspending livestreaming or other methods, and (ii) prominently warn users of the risks involved in transactions conducted outside of the livestreaming platforms. On December 18, 2025, the SAMR and the CAC issued the Measures for the Supervision and Administration of Live E-commerce, which took effect on February 01, 2026, which clarify the legal obligation of key participants in the livestreaming e-commerce ecosystem. Regulatory authorities may promulgate new laws and regulations from time to time to address new issues and regulate emerging activities. The interpretation and implementation of existing laws and regulations applicable to business activities in livestreaming and e-commerce are complex and evolving. We cannot assure you that we will not be found in violation of any of the laws and regulations currently in effect due to the evolving interpretation and implementation of these laws and regulations. 34 Table of Contents We are subject to the labor laws and regulations of the jurisdictions in which we have employees. If we are found to violate these laws or regulations, or if these laws and regulations change, we could be negatively affected. Our entities in China are required by PRC laws and regulations to comply with PRC labor laws and regulations, pursuant to which they must pay overtime compensation and provide various government statutory employee benefit plans, including medical insurance, maternity insurance, workplace injury insurance, unemployment insurance and pension benefits through a PRC government-mandated multi-employer defined contribution plan. The relevant government agencies may examine whether an employer has made adequate payments of the requisite statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. If the PRC authorities determine that the PRC entities need to make supplemental contributions, that these entities are not in compliance with labor laws and regulations, or that these entities are subject to fines or other legal sanctions, such as order of timely rectification, our business, financial condition and results of operations may be adversely affected. Pursuant to the Individual Income Tax Law of the PRC, as amended on August 31, 2018, which became effective on January 1, 2019, an individual’s taxable income shall be an amount equal to such individual’s total annual income less a general deductible of RMB60,000 and various special deductibles permitted under relevant laws. Determination and calculation of such special deductibles in accordance with the law may result in an increase of the operating costs and expenses of the Pinduoduo platform. However, as the interpretations of these laws and implementing rules have not been entirely settled yet, our determination and calculation of the special deductibles based on our understanding may be different from how the tax authorities or our employees in the PRC would do. These differences may result in inquiries or reassessment by the tax authorities, as well as disputes with our employees in the PRC. We may increasingly become a target of public scrutiny and anti-competitive actions conducted by competitors or third parties with ill intent, including complaints to regulatory agencies, negative media coverage, and public dissemination of malicious reports or accusations about our business, all of which could severely damage our reputation and materially and adversely affect our business and prospects. We process an extremely large number of transactions on a daily basis on our platforms, and the high volume of transactions taking place on our platforms as well as publicity about our business create the possibility of heightened attention from the public, competitors, regulators and the media. Heightened regulatory and public concerns over consumer protection and consumer safety issues may subject us to additional legal and social responsibilities and increased scrutiny and negative publicity over these issues, due to the large number of transactions that take place on our platform and the increasing scope of our overall business operations. In addition, changes in our services or policies have resulted or could result in objections by the public, our competitors, operators of traditional or new media and social networks, merchants on our platform or others. From time to time, these objections or allegations, regardless of their veracity, may result in consumer dissatisfaction, public protests or negative publicity, which could result in government inquiry or substantial harm to our brand, reputation and operations. In particular, as the competition in the e-commerce industry further intensifies, we are increasingly susceptible to aggressive, anti-competitive and potentially malicious behaviors, conducts and campaigns by our competitors or third parties with ill intent. For example, untrue and unsubstantiated allegations targeting our platforms or merchants on our platforms may be posted on internet forums, social media platforms or websites by anyone on an anonymous basis. The availability of information on the internet is virtually immediate, as is its impact. These information platforms may not necessarily filter or check the accuracy of information before allowing them to be published. We are often afforded little or no time to respond. For instance, in March 2023, a number of media channels reported cybersecurity concerns about our Pinduoduo mobile app alleged by an anonymous source. Competitors or third parties with ulterior motives could launch aggressive marketing and publicity strategies against us and place the media coverage about this incident among other innocuous or unrelated matters. We are working with stakeholders to refute the allegations while using this opportunity to review our practices. As a result of this anti-competitive conduct, or activities of a similar nature, our brand name and reputation may be materially and adversely affected, and our business operations and strategies may be disrupted or harmed. We may even be subject to governmental or regulatory scrutiny or third-party claims as a result. Meanwhile, we may be required to spend significant amount of time and incur substantial costs to react to or address these consequences. There is no assurance that we will be able to effectively defend ourselves against this type of anti-competitive conduct within a reasonable period of time, or at all. Moreover, as our business expands and grows, both organically and through acquisitions of and investments in other businesses, we may be exposed to heightened public scrutiny in jurisdictions where we already operate as well as in new jurisdictions where we may operate. There is no assurance that we would not become a target for regulatory or public scrutiny in the future or that scrutiny and public exposure would not severely damage our reputation, business or prospects. 35 Table of Contents The online marketing services provided by us are subject to complex and evolving advertising laws and regulations across multiple jurisdictions, and any failure to comply with such laws and regulations could materially and adversely affect our business, financial condition and results of operations. We generate a significant amount of our revenues from online marketing services and other related services. Such commercial advertising activities are, or may in the future be, subject to online advertising and other applicable laws and regulations in jurisdictions where we operate or where such advertisements are displayed or targeted. If we are unable to comply with any of these changing laws or regulations, we could be subject to investigations, penalties, restrictions on our advertising and marketing activities or other enforcement actions, which could materially and adversely affect the operation, growth and financial performance of our platform. See also “—Marketing, advertising, trade and commercial practices on our platforms may subject us to regulatory scrutiny, which may affect our business and results of operations” for additional discussion of regulatory scrutiny of our marketing and advertising practices. The PRC Advertising Law and the Administrative Measures on Internet Advertising govern commercial advertising activities conducted within the territory of the PRC that directly or indirectly promote a product or service through text, images, audio, video, or any other form, using any website, web page, web application, or other online media. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Internet Advertising Business.” Under the Administrative Measures on Internet Advertising, our online marketing services and other related services fall within the purview of the PRC Advertising Law. PRC advertising laws and regulations require advertisers, advertising operators and advertising distributors to ensure that the content of the advertisements they prepare or distribute is fair and accurate and is in full compliance with applicable laws. The Pinduoduo platform currently generates revenues primarily from online marketing services. Violation of these laws, rules or regulations may result in penalties, including fines, confiscation of advertising fees and orders to cease dissemination of the advertisements. In circumstances involving serious violations, the PRC government may suspend or revoke a violator’s business license or license for operating advertising business. In addition, the Administrative Measures on Internet Advertising require paid-for search results to be prominently marked as an advertisement and distinguished from natural search results so that consumers will not be misled as to the nature of these search results. As such, the Pinduoduo platform must distinguish between merchants who purchase the relevant online marketing and related services (or the listings posted by these merchants) and other merchants. Complying with these requirements and any penalties or fines for any failure to comply may significantly reduce the attractiveness of the Pinduoduo platform and increase our costs and could have a material adverse effect on our business, financial condition and results of operations. In addition, for advertising content related to specific types of products and services, advertisers, advertising operators and advertising distributors must confirm that the advertisers have obtained requisite government approvals, including the advertiser’s operating qualifications, proof of quality inspection of the advertised products, and, with respect to certain industries, government approval of the content of the advertisement and filing with the local authorities. Pursuant to the Administrative Measures on Internet Advertising, the Pinduoduo platform is required to take steps to monitor the content of advertisements displayed on the platform. Complying with PRC requirements on online advertising requires considerable resources and time, and could significantly affect the operation of the Pinduoduo platform, while exposing the Pinduoduo platform to increased liability under the relevant laws and regulations. The costs associated with complying with these laws and regulations, including any penalties or fines for our failure to comply if required, could have a material adverse effect on the Pinduoduo platform’s business, financial condition and results of operations. Any further change in the classification of the Pinduoduo platform’s online marketing and other related services by the PRC government may also significantly disrupt the Pinduoduo platform’s operations, and materially and adversely affect its business and prospects. In addition, the Chinese government may, from time to time, promulgate new advertising laws and regulations in the future to impose further requirements on online advertising services. To the extent such new laws or regulations are enacted, our costs of complying with and our potential liability under the relevant laws or regulations could increase, which may have a material adverse effect on our business, financial condition and results of operations. In addition to the PRC regulatory framework described above, the on-platform advertising services provided on the Temu platform are subject to a broad and evolving range of advertising laws and regulations across the multiple jurisdictions in which Temu operates. These laws and regulations impose varying requirements on digital advertising activities, including in relation to transparency and disclosure obligations, restrictions on targeting and personalization of advertisements, requirements relating to the identification of paid promotional content, and consumer protection standards applicable to advertising claims and representations. Any failure, or perceived failure, to comply with these requirements could expose us to regulatory investigations, enforcement actions, fines, reputational harm, or restrictions on our advertising and marketing activities. 36 Table of Contents In the European Union, for example, the on-platform advertising services provided on the Temu platform are subject to the Digital Services Act (“DSA”), which imposes specific obligations on online platforms with respect to advertising transparency, including requirements to maintain a publicly accessible advertisement repository, disclose to users why they are being shown a particular advertisement, and refrain from using certain targeting parameters based on sensitive personal data or directed at minors. Temu, as a very large online platform designated under the DSA, is further required to conduct annual systemic risk assessments addressing, among other areas, the potential negative effects of its advertising systems on fundamental rights, consumer protection and public health, and to implement reasonable mitigation measures in respect of identified risks. Non-compliance with DSA obligations may result in fines of up to six percent of the global annual turnover of the relevant entity, and, in cases of repeated or serious infringement, temporary restrictions on access to the platform. In the United Kingdom, our activities may also be subject to the Digital Markets, Competition and Consumers Act 2024 (“DMCCA”), which enhances the enforcement powers of the Competition and Markets Authority (“CMA”) in relation to consumer protection and unfair commercial practices, including in the context of online advertising. The CMA has the authority to directly impose significant fines for breaches, including for misleading advertising, inadequate disclosures, or non-compliant online practices, without the need for court proceedings. Any failure to comply with applicable requirements under the DMCCA or related UK consumer protection laws could expose us to investigations, enforcement actions, and financial penalties. The legal and regulatory landscape governing digital advertising across the jurisdictions in which the Temu platform operates is complex, rapidly evolving, and subject to significant uncertainty with respect to interpretation and enforcement. We may not always be able to anticipate, monitor or ensure full compliance with the advertising laws and regulations of every jurisdiction in which we operate or into which its advertisements may be delivered or targeted. Any failure or perceived failure by us to comply with applicable advertising laws and regulations, or any change in such laws and regulations or their interpretation or enforcement by the relevant governmental authorities, could result in investigations, regulatory actions, fines, penalties, restrictions on the Temu platform’s advertising and marketing activities, reputational damage, or other adverse consequences, which could have a material adverse effect on our business, financial condition and results of operations. We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations. We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate patents, copyrights or other intellectual property rights held by third parties. We have been, are, and from time to time in the future may be, subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be other third-party intellectual property that is infringed by products offered by our merchants, our services or other aspects of our business. There could also be existing patents of which we are not aware that our products may inadvertently infringe. We cannot assure you that holders of patents purportedly relating to some aspect of our technology platforms or business, if any such holders exist, would not seek to enforce such patents against us in any jurisdiction. Further, the application and interpretation of patent laws and the procedures and standards for granting patents in certain countries or regions where we operate may be evolving and are uncertain, and we cannot assure you that their courts or regulatory authorities would agree with our analysis. If we are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. In addition, we may incur significant expenses, and may be forced to divert management’s time and other resources from our business and operations to defend against these infringement claims, regardless of their merits. Successful infringement or licensing claims made against us may result in significant monetary liabilities and may materially disrupt our business and operations by restricting or prohibiting our use of the intellectual property in question. Finally, we use open-source software in connection with our products and services. Companies that incorporate open-source software into their products and services have, from time to time, faced claims challenging the ownership of open-source software and compliance with open-source license terms. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open-source software or non-compliance with open-source licensing terms. Some open-source software licenses require users who distribute open-source software as part of their software to publicly disclose all or part of the source code to such software and make available any derivative works of the open-source code on unfavorable terms or at no cost. Any requirement to disclose our source code or pay damages for breach of contract could be harmful to our business, results of operations and financial condition. 37 Table of Contents We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. We regard our trademarks, copyrights, patents, domain names, know-how, proprietary technologies, and similar intellectual property as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality, invention assignment and non-compete agreements with our employees and others, to protect our proprietary rights. We are aware of certain copycat websites that attempt to cause confusion or diversion of traffic from us, against which we have initiated or are considering initiating legal proceedings. However, there is no guarantee we would prevail in any legal proceeding, and we may continue to become an attractive target to these types of attacks in the future because of our brand recognition in the online retail industry. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages. In addition, there can be no assurance that (i) our application for registration of trademarks, patents, and other intellectual property rights will be approved, (ii) any intellectual property rights will be adequately protected, or (iii) such intellectual property rights will not be challenged by third parties or found by a judicial authority to be invalid or unenforceable. Further, because of the rapid pace of technological change in our industry, parts of our business rely on technologies developed or licensed by third parties, and we may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms or at all. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or enforce our contractual rights. Policing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the infringement or misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our management and financial resources, and could put our intellectual property at risk of being invalidated or narrowed in scope. We have initiated litigation to defend our trademarks against infringement. However, we can provide no assurance that we will prevail in these ongoing actions or any other future litigation, and even if we do prevail, we may not obtain a meaningful recovery. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in maintaining, protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations. Tightening of tax compliance efforts that affect our merchants could materially and adversely affect our business, financial condition and results of operations. Tax legislation relating to the e-commerce industry is still developing. Governments may promulgate or strengthen the implementation of tax regulations that impose obligations on e-commerce platforms, which could increase the costs to consumers and merchants and make our platforms less competitive. Governments may require e-commerce platform operators to assist in the enforcement of tax registration requirements and the collection of taxes with respect to the revenue or profit generated by merchants from transactions conducted on their platforms. We may also be requested by tax authorities to supply information about merchants on our platforms, such as transaction records and bank account information, and assist in the enforcement of other tax regulations, including payment and withholding obligations against merchants. As a result of more stringent tax compliance requirements and liabilities, we may lose existing merchants and potential merchants might not be willing to sell products through our platforms, which could in turn negatively affect us. Stricter tax enforcement by tax authorities may also reduce the activities of merchants on our platforms and increase our liabilities and obligations. Any heightened tax law enforcement against us or participants in our ecosystem (including imposition of reporting or withholding obligations on operators of e-commerce platforms with respect to indirect taxes of merchants and stricter tax enforcement against merchants generally) could have a material adverse effect on our business, financial condition and results of operations. Our business may be subject to seasonal sales fluctuations which could result in volatility or have an adverse effect on the market price of our ADSs. We experience seasonality in our business, reflecting a combination of seasonal fluctuations in internet usage and traditional retail seasonality patterns. For example, we generally experience less buyer traffic and purchase orders in the first quarter of each year. Furthermore, sales are generally higher in the fourth quarter of each calendar year than in the preceding three quarters. Due to the foregoing factors, our financial condition and results of operations for future quarters may continue to fluctuate and our historical quarterly results may not be comparable to future quarters. Moreover, due to our relatively limited operating history, the seasonal trends that we have experienced in the past may not apply to, or be indicative of, our future operating results. As a result, the trading price of our ADSs may fluctuate from time to time due to seasonality. 38 Table of Contents We have granted and may continue to grant options and other types of awards under our share incentive plans, which may result in increased share-based compensation expenses. We adopted a global share incentive plan in 2015 (the “2015 Plan”) and a share incentive plan in 2018 (the “2018 Plan”) for the purpose of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. Under each of the share incentive plans, we are authorized to grant options and other types of awards. The maximum aggregate number of ordinary shares which may be issued pursuant to all awards under the 2015 Plan is 581,972,860 Class A ordinary shares, subject to adjustment and amendment, and the maximum aggregate number of shares which may be issued pursuant to all awards under the 2018 Plan was initially 363,130,400 Class A ordinary shares, plus an annual increase on the first day of each fiscal year of our company during the term of the 2018 Plan commencing with the fiscal year beginning January 1, 2019, by an amount equal to the lesser of (i) 1.0% of the total number of shares issued and outstanding on the last day of the immediately preceding fiscal year, and (ii) such number of shares as may be determined by our board of directors. In March 2021, our board of directors approved an amendment to the 2018 Plan to increase the annual increase percentage from 1.0% to 3.0% effective from the fiscal year beginning January 1, 2022. See “Item 6. Directors, Senior Management and Employees—B. Compensation” for further details. We recognized substantial share-based compensation expenses in our consolidated financial statements in connection with these grants, and may continue to incur such expenses in the future. We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees, and we will continue to grant share-based compensation to employees in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations. We may re-evaluate the vesting schedules, lock-up period, exercise price or other key terms applicable to the grants under our currently effective share incentive plans from time to time. If we choose to do so, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations. If we fail to implement and maintain an effective system of internal control over financial reporting, our ability to accurately and timely report our financial results or prevent fraud may be adversely affected, and investor confidence and the market price of our ADSs may be adversely impacted. We are subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules and regulations of the Nasdaq Global Select Market. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting in our Form 20-F filing for that year, as required by Section 404 of the Sarbanes-Oxley Act. In addition, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2025. See “Item 15. Controls and Procedures.” If we fail to implement and maintain an effective system of internal control, we will not be able to conclude and our independent registered public accounting firm will not be able to report that we have effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act in our future annual report on Form 20-F covering the fiscal year in which this failure occurs. Effective internal control over financial reporting is necessary for us to produce reliable financial reports. Any failure to maintain effective internal control over financial reporting could prevent us from identifying fraud and result in the loss of investor confidence in the reliability of our financial statements, which in turn could have a material and adverse effect on the trading price of our ADSs. Furthermore, we may need to incur additional costs and use additional management and other resources as our business and operations further expand or in an effort to remediate any significant control deficiencies that may be identified in the future. If we cannot obtain sufficient cash when we need it, we may not be able to meet our payment obligations. We may rely upon distributions and advances from our subsidiaries, as well as service fees paid by the VIE and its subsidiaries pursuant to our contractual arrangements with them, to meet our cash requirements. Our subsidiaries and the VIE and its subsidiaries are distinct legal entities and do not have any obligation, legal or otherwise, to provide us with distributions or advances. We may face tax or other adverse consequences, or legal limitations, on our ability to obtain funds from these entities. In addition, our ability to obtain external financing in the future is subject to a variety of uncertainties, including: ● our financial condition, results of operations and cash flows; ● general market conditions for financing activities by internet companies; and ● economic, political and other conditions in the PRC and elsewhere. 39 Table of Contents If we are unable to obtain funding in a timely manner or on commercially acceptable terms, we may not be able to meet our payment obligations, which in turn may constitute a default under the existing and/or future agreements governing our indebtedness. We do not have any business insurance. We do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured risks may result in substantial costs and the diversion of resources, which could adversely affect our results of operations and financial condition. A severe or prolonged downturn in the global economy could materially and adversely affect our business and financial condition. The global macroeconomic environment faces numerous challenges. Economic conditions in the jurisdictions in which we operate are sensitive to global economic conditions, as well as changes in economic and political policies and the expected or perceived overall economic growth rate in such jurisdictions. In recent years, geopolitical tensions and military conflicts in various regions of the world have created additional uncertainties in the global economy. For example, the Russia-Ukraine conflict, the Hamas-Israel conflict, the recent military conflict involving the United States and Iran, and the resultant restrictions at various times on shipping through the straits of Hormuz, have heightened geopolitical tensions globally. Regional conflicts have contributed to increase in food and energy prices and thus to inflation more generally, with the potential for even more serious consequences if oil and gas facilities are destroyed or shipping is affected for an affected for an extended period of time. Although these developments have not had a direct material impact on our business operations and financial results to date, they may lead to increased energy prices, disruptions in international trade, logistics and supply chains, volatility in financial markets, sanctions, export controls, trade restrictions or other governmental measures, broader economic instability Such developments may also adversely affect consumer confidence and discretionary spending, disrupt cross-border commerce and logistics networks, increase freight costs, and create uncertainties in the jurisdictions where we operate or plan to expand. Any severe or prolonged slowdown in the global economy or the economies of the jurisdictions in which we operate may materially and adversely affect our business, results of operations and financial condition. We and certain of our directors and officers have been named as defendants in several lawsuits, and we may be the target of future claims, litigation, government investigations or other proceedings, all of which could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation. We are regularly subject to actual and threatened claims, litigation (including putative class action lawsuits), reviews, investigations, and other proceedings, including proceedings by governments and regulatory authorities, involving a wide range of issues, including intellectual property infringement, data security and privacy, marketing and advertising practices, commercial practices, merchandise safety and consumer protection, environmental protection, advertising and marketing, labor and employment, supply chain compliance, competition and antitrust, commercial disputes, taxation, and other matters. For instance, our promotional practices and the manner in which content is presented to users on our platforms have been, and may continue to be, subject to claims, litigation, reviews, investigations, and other proceedings. Each jurisdiction in which we operate has its own laws and regulations governing internet companies. We have been, and may continue to be, subject to inquiries, investigations, and/or enforcement actions from regulatory agencies and bodies across the jurisdictions in which we operate. We are currently defending five lawsuits filed by state Attorneys General of Arkansas, Nebraska, Kentucky, Arizona and Texas of the United States alleging violations of various state consumer protection and deceptive trade practices laws. We dispute these allegations of wrongdoing and intend to continue defending ourselves vigorously. In addition to these active lawsuits, we are aware of ongoing investigations and potential litigation being considered by several other state authorities. Additional states may initiate similar investigations or legal proceedings in the future. Any unfavorable outcomes in these matters—including the imposition of significant fines, penalties or injunctive relief—could result in damage to our reputation and brand, and may have a material adverse effect on our business, financial condition and results of operations. 40 Table of Contents In October 2024, the European Commission initiated a formal investigation into the Temu platform to assess potential violations of the Digital Services Act related to the alleged sale of illegal products by merchants on Temu, the design of the Temu user interface and Temu’s recommendation systems. In July 2025, the European Commission preliminarily found the Temu platform to be in breach of the obligation under the Digital Services Act (DSA) to properly assess the risks of illegal products being disseminated on its marketplace. We are engaging constructively with the European Commission in respect of those preliminary findings and the other open matters within its ongoing investigation in accordance with the applicable process. If the Commission’s preliminary views were to be ultimately confirmed, the Commission would adopt a non-compliance decision finding that Temu is in breach of Article 34 of the DSA. Such a decision could entail fines of up to 6% of the total worldwide annual turnover of the provider and an order requiring the provider to take measures to address the breach. A non-compliance decision may also trigger an enhanced supervision period to ensure compliance with the measures the provider intends to take to remedy the breach. In November 2024, the Consumer Protection Cooperation (CPC) Network and the European Commission notified us of a number of practices on the Temu platform that allegedly infringe EU consumer laws. The CPC Network directed Temu to bring those practices in line with EU consumer laws and initiated an investigation requesting Temu to provide further information. We have responded to the European Commission and the CPC Network. As of the date of this annual report, the European Commission and CPC Network investigations remain ongoing. In December 2024, Vietnamese authorities suspended the operations of several e-commerce platforms, including the Temu platform, in Vietnam, pending the completion of their e-commerce service registration with the relevant authorities. Similarly, in March 2025, Uzbekistani authorities suspended the Temu platform due to matters relating to tax compliance and local entity registration. As of the date of this annual report, our operations of the Temu platform in Vietnam and Uzbekistan have not resumed. We are also subject to multiple investigations, inquiries, and other proceedings involving law enforcement and regulatory agencies globally, including in the U.S., Germany, France, Hungary, the Czech Republic, Poland, Australia and South Korea, among others. These actions cover various aspects of our business operations, including privacy and data protection, merchandise safety and consumer protection, environmental protection, pricing and product information displays, marketing and advertising practices, delivery service, and seller information disclosures, among others. A number of such instances have resulted in the assessment of fines and penalties against us. In addition, inquiries from law enforcement and other regulatory agencies may lead to investigations, other forms of regulatory response, or even legal actions against us. Historically, government authorities have carried out unannounced onsite inspections at our premises to review our compliance. Such inspections, and any resulting formal proceedings, among other investigations, inquiries and proceedings, could subject us to substantial monetary remedies and costs, interrupt or require us to change our business practices, divert resources and the attention of management from our business, or subject us to other structural or behavioral remedies that adversely affect our business. In December 2023, to protect Temu’s intellectual property and defend Temu against further harm from unfair competitive practices, Temu filed a complaint in the United States District Court for the District of Columbia against SHEIN. In September 2025, the court partially granted SHEIN’s motion to dismiss, allowing claims for violations of the Digital Millennium Copyright Act, copyright infringement, trade dress infringement, and unfair competition to proceed while dismissing other claims. This matter, as of the date of this annual report, remains ongoing. In August 2024, SHEIN initiated a separate lawsuit against us in the same court, asserting claims of copyright and trademark infringement, unfair competition and false advertising, among other things. In January 2026, the court partially granted our motion to dismiss, dismissed PDD Holdings Inc. from the action for lack of personal jurisdiction and dismissed certain of SHEIN’s other claims. Temu disputes the remaining allegations and is defending itself vigorously in this matter. Additionally, in 2024, several putative securities class actions were filed against us and several of our current and former officers in the United States District Court for the Eastern District of New York. In October 2024, these cases were consolidated and, in November 2024, a lead plaintiff was appointed by the court. This lead plaintiff filed an amended complaint on March 4, 2025, alleging violations of the Securities Exchange Act against PDD Holdings Inc., Lei Chen, Jing Ma, Jun Liu and Jiazhen Zhao for allegedly making false and misleading statements concerning the Company’s data security practices and compliance with the Uyghur Forced Labor Prevention Act. On September 26, 2025, the defendants filed a motion to dismiss the amended complaint, which is fully briefed and remains pending. We dispute the allegations and are defending ourselves vigorously. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings” for more details. The number and scale of these proceedings have increased, and will likely continue to increase, as our business has expanded in scope and geographic reach, and as our platforms become more complex, available to, and used by more people, and as governments and regulatory authorities seek to regulate us on a pre-emptive basis. In addition to the matters described above, we have also been, and may continue to be, involved in legal proceedings arising from our ordinary course of business, both filed by us and against us. 41 Table of Contents The outcome of any claims, litigation, government investigations, and other proceedings is inherently uncertain. Regardless of the outcome, such investigations and proceedings can have a material adverse impact on us because of legal costs, diversion of management resources, and other factors. There can be no assurance that we will be able to prevail in our defense or reverse any unfavorable judgment on appeal, and we may decide to settle lawsuits on unfavorable terms. Any adverse outcome of these matters could result in payments of substantial monetary damages or fines, reputational harm, harm to our relations with various government agencies and regulators, orders preventing us from offering certain products or services or requiring us to changes to our business practices in costly ways, and would thus have a material adverse effect on our business, financial condition, results of operation, cash flows and reputation. In addition, all or part of the defense costs, or any liabilities that may arise from these matters may not be covered by any insurance. The litigation process may utilize a significant portion of our cash resources and divert management’s attention from the day-to-day operations of our company, all of which could harm our business. We may also be subject to claims for indemnification related to these matters, and we cannot predict the impact that indemnification claims may have on our business or financial results. We have incurred net losses in the past, and we may not be able to maintain profitability in the future. We incurred net losses from our inception until 2020. We recorded a net income of RMB60,026.5 million, RMB112,434.5 million and RMB97,842.5 million (US$13,991.3 million) in 2023, 2024 and 2025, respectively. We cannot assure you that we will be able to maintain profitability in the future. In particular, we expect our operating costs and expenses to increase in absolute amounts in the future due to: (i) the continued expansion of our business operations, buyer base and merchant network, (ii) the continued investment in technology infrastructure and network, (iii) our promotion and marketing efforts as we continue to enhance our brand recognition, retain and grow our buyer base, and increase our buyer activities, (iv) the launch of new services, and (v) the investment in new initiatives, which may incur upfront costs, change our existing revenue and cost structures, and affect our ability to maintain profitability. We prioritize long-term growth over short-term profitability. We have historically invested, and will continue to invest, significant resources in growth initiatives, including providing support to merchants and developing our platform ecosystem. The resources required for these initiatives will grow commensurately with our expanding geographic footprint. In recent years, we have announced initiatives with commitments of billions of dollars to strengthen and scale our platform ecosystem globally. These initiatives may not result in increased revenue or growth in our business and could adversely affect our profitability. Moreover, any reduction in the support offered under these initiatives could adversely affect our relationships with our merchants and demand for our products and services. In addition to managing the foregoing costs and expenses, our ability to maintain profitability depends on our ability to, among other things, attract and retain buyers and increase buyer activities, establish and maintain relationships with merchants, provide valuable online platform services, broaden service offerings, and optimize our cost structure. However, we may not be able to achieve any of the above. In particular, our sales and marketing expenses increased by 12.6% from RMB111,300.5 million in 2024 to RMB125,287.9 million (US$17,915.9 million) in 2025, as we invested in cultivating greater user recognition and engagement through online and offline advertising campaigns and promotions. Similarly, our research and development expenses increased by 30.3% from RMB12,659.4 million in 2024 to RMB16,496.2 million (US$2,358.9 million) in 2025. If we incur substantial sales and marketing expenses without being able to achieve the anticipated growth in the number of buyers and merchants on our platforms or their spending, our operating results may be materially and adversely affected. Moreover, if our investment in our research and development does not result in improvements to the quality or efficiency of our services or otherwise fails to generate returns as expected, our operating results may also be materially and adversely affected. As a result, we may experience decreasing operating margin, and may incur net losses in the future. In addition, our ability to use our net losses, to the extent we record such net losses in future periods, to offset future taxable income may be subject to certain limitations, including limitations resulting from the reorganization of our corporate structure and change of our primary operating entities. As such, we may not be able to fully utilize our net losses or at all. 42 Table of Contents Risks Related to Our Corporate Structure If the PRC government determines that the contractual arrangements that establish part of the VIE structure do not comply with the PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in our operations in China, and our ADSs may decline in value or become worthless. In China, foreign ownership of certain parts of our businesses, including value-added telecommunications services (“VATS”), is subject to restrictions under current PRC laws and regulations. In particular, foreign investors are prohibited from owning more than 50% of the equity interests in any company that provides value-added telecommunications services, which are broadly defined to mean any telecommunications and information services provided through the use of public network infrastructure, including internet-content related services and information services. Certain types of value-added telecommunications services are exempted from this foreign ownership restriction, including services related to e-commerce, domestic multi-party communications, storage and forwarding, and call centers. Certain aspects of our operations in the Chinese mainland involve value-added telecommunications services subject to the foreign ownership restrictions described above, such as internet content-related services and information services. Therefore, PDD Holdings Inc. a Cayman Islands holding company, and certain of its PRC subsidiaries which are considered PRC foreign-invested enterprises under PRC laws, are not eligible to provide all of the value-added telecommunications services required for our operations. As a result, we conduct our operations in the Chinese mainland through (i) our Chinese mainland subsidiaries, (ii) the VIE, in which PDD Holdings Inc. does not have any equity interest but with which we maintain contractual arrangements, and (iii) the subsidiaries of the VIE. In particular, we currently conduct the business activities of the Pinduoduo platform through Shanghai Xunmeng, a subsidiary of the VIE, which holds the VATS Licenses for (i) online data processing and transaction processing business (operating e-commerce), (ii) internet content-related services, (iii) call center business within the Chinese mainland, (iv) information services and (v) internet data center services (limited to internet resources cooperation services). We, through Hangzhou Weimi, entered into a series of contractual arrangements, including a shareholders’ voting rights proxy agreement, equity pledge agreement, spousal consent letters, exclusive consulting and services agreement and exclusive option agreement, with Hangzhou Aimi, its shareholders and, as applicable, their spouses, which enable us to (i) direct the activities of the VIE, (ii) receive substantially all of the economic benefits of the VIE and its subsidiaries, and (iii) have an exclusive option to purchase all or part of the equity interests and assets in the VIE when and to the extent permitted by PRC law. As a result of these contractual arrangements, we are considered the primary beneficiary of the VIE and its subsidiaries for accounting purposes and hence consolidate their financial results into our consolidated financial statements under U.S. GAAP. The VIE and its subsidiaries contributed 13.1% of our revenues in 2025. See “Item 4. Information on the Company—C. Organizational Structure” for further details. In the opinion of King & Wood, our PRC legal counsel, (i) the structures of the VIE and Hangzhou Weimi are not in violation of applicable PRC laws and regulations currently in effect; and (ii) the contractual arrangements between Hangzhou Weimi, the VIE and its shareholders governed by PRC law are legal, valid, binding and enforceable in accordance with its terms and applicable PRC laws. However, as of the date of this annual report, the legality and enforceability of our contractual arrangements, as a whole, have not been tested in any PRC court, and we cannot guarantee you that the contractual arrangements, as a whole, would ultimately be legal or enforceable if they were to be tested in a PRC court. King & Wood, our PRC legal counsel, has also advised us that there are uncertainties regarding the interpretation and application of current and future PRC laws and regulations over the validity of the whole or any part of our contractual arrangements with the VIE. Accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. The PRC government has discretion in determining rectifiable or punitive measures for non-compliance with or violations of PRC laws and regulations. If we, the VIE or its subsidiaries are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the PRC regulatory authorities would have discretion to take action in dealing with such violations or failures, including, but not limited to: ● revoking the business license and/or operating license of such entities; ● discontinuing or placing restrictions or onerous conditions on our operations, including by blocking the VIE’s websites or apps; ● imposing fines, confiscating the income from Hangzhou Weimi, the VIE or its subsidiaries, or imposing other requirements with which we, the VIE or its subsidiaries may not be able to comply; 43 Table of Contents ● requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or direct the activities of the VIE and its subsidiaries; or ● restricting or prohibiting our use of the proceeds of financings conducted outside of China to finance our business and operations in China. The imposition of any of the penalties listed above would result in a material and adverse effect on our ability to conduct our business in the PRC. We may not be able to repay the notes and other indebtedness. In addition, if the PRC government authorities determine that the contractual arrangements constituting part of the VIE structure to be in violation of PRC laws and regulations, or if these PRC laws and regulations change or are interpreted differently in the future, our ADSs may decline in value or become worthless if the determinations, changes, or interpretations result in our inability to assert contractual control over the assets of the VIE that conducts our operations in China. In particular, if the imposition of any of these government actions causes us to lose our right to direct the activities of the VIE and its subsidiaries or our right to receive substantially all the economic benefits and residual returns from the VIE and its subsidiaries and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of the VIE and its subsidiaries in our consolidated financial statements. This would have a material adverse effect on our financial condition and results of operations and the value of our ADSs. We face uncertainties with respect to the implementation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. On March 15, 2019, the National People’s Congress of China approved the PRC Foreign Investment Law, which took effect on January 1, 2020 and replaced most of the laws and regulations previously governing foreign investment in the PRC. The PRC Foreign Investment Law is the foundation for regulating foreign investments in China. Subsequently, on December 26, 2019, the State Council promulgated the Implementation Regulations on the PRC Foreign Investment Law, which came into effect on January 1, 2020. Under the PRC Foreign Investment Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other foreign entities in China. The PRC Foreign Investment Law stipulates three forms of foreign investment, but is silent as to whether contractual arrangements are a form of foreign investment. The Implementation Regulations on the PRC Foreign Investment Law are also silent as to whether contractual arrangements should be deemed to be a form of foreign investment. However, the definition of “foreign investment” under the PRC Foreign Investment Law is broad and covers all activities whereby foreign investors invest in China, including investments made through “any other methods” under laws, administrative regulations, or provisions prescribed by the State Council. Before clarification or confirmation by future laws, administrative regulations or provisions promulgated by the State Council on the nature of contractual arrangements, there is no assurance that contractual arrangements would not be considered to be foreign investment under the PRC Foreign Investment Law. The State Council may in the future enact laws or issue administrative regulations or provisions to classify contractual arrangements as a form of foreign investment, at which time it would be uncertain as to how contractual arrangements would be regulated and whether such contractual arrangements would be deemed to be in violation of the foreign investment restrictions. There is no guarantee that our contractual arrangements and our business will not be materially and adversely affected in the future due to changes in PRC laws and regulations. If future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be completed by companies with existing contractual arrangements, we may face substantial uncertainties as to the timely completion of such actions. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure and business operations. 44 Table of Contents The rights and functions of the PDD Partnership, once effective, may impact your ability to appoint executive directors and nominate the chief executive officer of our company, and the interests of the PDD Partnership may conflict with your interests. Under our currently effective articles of association, the PDD Partnership, upon and for so long as certain conditions are satisfied, will be entitled to nominate two executive directors (if there are no more than five directors on the board of directors) or three executive directors (if there are more than five but no more than nine directors on the board of directors) and nominate the chief executive officer candidate of our company. Such executive director candidate duly nominated by the PDD Partnership shall be approved and appointed by our board of directors and serve as an executive director of our company until expiry of his or her terms (if any), removal by the PDD Partnership, the shareholders by an ordinary resolution or vacation of office if such executive director, among other things, resigns his office by notice in writing to us or dies or is found to be or becomes of unsound mind. The chief executive officer candidate nominated by the PDD Partnership shall stand for appointment by the nominating and corporate governance committee of the board of directors. If the candidate is not appointed by the nominating and corporate governance committee in accordance with the then effective articles of association of the company, the PDD Partnership may nominate a replacement nominee until the nominating and corporate governance committee appoints such nominee as chief executive officer, or if the nominating and corporate governance committee fails to appoint more than three candidates nominated by the PDD Partnership consecutively, the board of directors may then nominate and appoint any person to serve as our chief executive officer in accordance with the then effective articles of association of the company. See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—PDD Partnership.” This governance structure and contractual arrangements will limit your ability to influence corporate matters, including the matters determined at the board level. In addition, the interests of the PDD Partnership may not coincide with your interests, including certain managerial decisions such as partner compensation. For example, each year, once an aggregate bonus pool is approved by the board of directors, the partnership committee of the PDD Partnership will make further determinations as to, among other things, the allocation of the current bonus pool among all partners and these allocations may not be entirely aligned with the interest of shareholders who are not partners. Because the partners may be largely comprised of members of our management team, the PDD Partnership and its executive director nominees may focus on the operational and financial results that may differ from the expectations and desires of shareholders. To the extent that the interests of the PDD Partnership differ from your interests on certain matters, you may be disadvantaged. We rely on contractual arrangements with the VIE and its shareholders for a large portion of our business operations, which may not be as effective as direct ownership in providing operational control. The VIE and its subsidiaries contributed 45.7%, 22.5% and 13.1% of our consolidated total revenues in 2023, 2024 and 2025, respectively. We have relied and expect to continue to rely on contractual arrangements with the VIE and its shareholders to conduct our business in the PRC. For a description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” These contractual arrangements may not be as effective as direct ownership in providing us with control over the VIE and its subsidiaries. For example, the VIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests. If we had direct ownership of the VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIE, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level. However, under the current contractual arrangements, we rely on the performance by the VIE and its shareholders of their obligations under the contracts to exercise control over the VIE and its subsidiaries. The shareholders of our consolidated VIE may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate certain portions of our business through the contractual arrangements with the VIE. If any dispute relating to these contracts remains unresolved, we would have to enforce our rights under these contracts through the operations of PRC law and arbitration, litigation and other legal proceedings, the outcome of which cannot be predicted with certainty. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.” Therefore, our contractual arrangements with the VIE may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be. 45 Table of Contents Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business. Although the shareholders of the VIE hold equity interests on record in the VIE, each such shareholder has irrevocably authorized Hangzhou Weimi to exercise his rights as a shareholder of the VIE pursuant to the terms of the shareholders’ voting rights proxy agreement. However, if the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which may not be effective under PRC law. For example, if the shareholders of the VIE refuse to transfer their equity interest in the VIE to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they otherwise act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. All of the arrangements under our contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. There are uncertainties under PRC laws and regulations regarding the validity of the whole or any part of our contractual arrangements with the VIE. Uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The regulatory environment in China is complex and evolving, which could adversely affect us.” Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a VIE should be interpreted or enforced under PRC law. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event we are unable to enforce these contractual arrangements, or if we suffer significant delays or other obstacles in the process of enforcing these contractual arrangements, we may not be able to direct the activities of the VIE and its subsidiaries, and our ability to conduct our business may be negatively affected. The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition. Mr. Lei Chen and Mr. Jiazhen Zhao hold 86.6% and 13.4% equity interests in the VIE, respectively. They are employees of our company and have entered into a series of contractual arrangements with Hangzhou Weimi, pursuant to which we are able to (i) direct the activities of the VIE and its subsidiaries; (ii) receive substantially all of the economic benefits of the VIE and its subsidiaries; and (iii) have an exclusive option to purchase all or part of the equity interests in and assets of the VIE when and to the extent permitted by PRC law. We are considered the primary beneficiary of the VIE and its subsidiaries for accounting purposes and hence consolidate their financial results into our consolidated financial statements under U.S. GAAP. These shareholders of the VIE may have potential conflicts of interest with us. See “Item 4. Information on the Company—C. Organizational Structure.” These shareholders may breach, or cause the VIE to breach, or refuse to renew, the existing contractual arrangements we have with them and the VIE, which would have a material and adverse effect on our ability to direct the activities of the VIE and its subsidiaries and receive economic benefits from it. For example, the shareholders may be able to cause our arrangements with the VIE to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that when conflicts of interest arise any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor. Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the exclusive option arrangements with these shareholders to request them to transfer all of their equity interests in the VIE to a PRC entity or individual we designate, to the extent permitted by PRC law. We also rely on these shareholders to abide by the laws of the Cayman Islands, which provide that directors and officers owe a fiduciary duty to the company that requires them to act in good faith and in what they believe to be the best interests of the company and not to use their position for personal gains. The shareholders of the VIE have executed shareholders’ voting rights proxy agreement to appoint Hangzhou Weimi or a person designated by Hangzhou Weimi to vote on their behalf and exercise voting rights as shareholders of the VIE. If we cannot resolve any conflict of interest or dispute between us and the shareholders of the VIE, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings. 46 Table of Contents The shareholders of the VIE may be involved in personal disputes with third parties or other incidents that may have an adverse effect on their respective equity interests in the VIE and the validity or enforceability of our contractual arrangements with that entity and its shareholders. For example, in the event that any of the shareholders of the VIE divorces his spouse, the spouse may claim that the equity interest of the VIE held by such shareholder is part of their community property and should be divided between such shareholder and his spouse. If such claim is supported by the court, the equity interest may be obtained by the shareholder’s spouse or another third party who is not subject to obligations under our contractual arrangements, which could result in a loss of our ability to direct the activities of the VIE and its subsidiaries. Similarly, if any of the equity interests of the VIE is inherited by a third party with whom the current contractual arrangements are not binding, we could lose our control over the VIE and its subsidiaries or have to maintain such control by incurring unpredictable costs, which could cause significant disruption to our business and operations and harm our financial condition and results of operations. Although under our current contractual arrangements, (i) to the extent applicable, the spouse of each of the shareholders of the VIE has executed a spousal consent letter, under which the spouse agrees not to raise any claim against the equity interest, and to take every action to ensure the performance of the contractual arrangements, and (ii) it is expressly provided that the rights and obligations under the contractual arrangements shall be equally effective and binding on the heirs and successors of the parties thereto, or that the VIE shall not assign or delegate its rights and obligations under the contractual arrangements to third parties without our prior consent, we cannot assure you that these undertakings and arrangements will be complied with or effectively enforced. In the case any of them is breached or becomes unenforceable and leads to legal proceedings, it could disrupt our business, distract our management’s attention and subject us to substantial uncertainties as to the outcome of any such legal proceedings. Contractual arrangements in relation to the VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we, the VIE or its subsidiaries owes additional taxes, which could negatively affect our financial condition and the value of your investment. Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities determine that the VIE contractual arrangements were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws and regulations, and adjust the income of the VIE in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by the VIE for PRC tax purposes, which could in turn increase its tax liabilities without reducing Hangzhou Weimi’s tax expenses. In addition, the PRC tax authorities may impose late payment fees and other penalties on the VIE for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and adversely affected if the VIE’s tax liabilities increase or if it is required to pay late payment fees and other penalties. We may lose the ability to use and enjoy assets held by the VIE that are material to the operation of certain portion of our business if the VIE goes bankrupt or become subject to a dissolution or liquidation proceeding. As part of our contractual arrangements with the VIE, the VIE and its subsidiaries hold certain assets that are material to the operation of certain portion of our business, including intellectual property and premise and VATS licenses. If the VIE goes bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. Under the contractual arrangements, the VIE may not, in any manner, sell, transfer, mortgage or dispose of their assets or legal or beneficial interests in the business without our prior consent. If the VIE undergoes a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations. 47 Table of Contents If the chops of our PRC subsidiaries and the VIE are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised. In China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature. Each legally registered company in China is required to maintain a company chop, which must be registered with the local Public Security Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes. The chops of our PRC subsidiaries and the VIE are generally held securely by personnel designated or approved by us in accordance with our internal control procedures. To the extent those chops are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so. In addition, if the chops are misused by unauthorized persons, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations. Risks Related to Our Multi-jurisdictional Operations Our global operations expose us to a number of risks. We began our business operations in multiple jurisdictions through the launch of the Temu platform in September 2022. As we continue to expand our global operations, we face risks associated with expanding into markets where we have limited or no experience and where we may be less well-known or have fewer local resources. We are subject to a variety of risks inherent in doing business on a global scale, including: ● international geopolitical tensions and events; ● the political, social and economic conditions of each jurisdiction where we operate; ● compliance challenges due to the different laws and regulatory environments of the jurisdictions where we operate, including, but not limited to those related to trade protection (including import and export control, custom duties and tariffs), data privacy and protection, network security, consumer protection, product liability, online payments and money transmission, funds transfer, currency exchange controls, marketing and advertising, intellectual property protection, employment and labor, trust and safety, supply chain compliance, and competition; ● compliance challenges under different tax regimes and policies in jurisdictions where we operate; ● compliance challenges arising from conflicts in the laws, rules, regulations, policies and orders of different jurisdictions; ● potential damage to our brands and reputation due to compliance with local laws, including requirements to censor content and/or requirements to provide user information to local authorities; ● local and/or regional competition; ● lack of experience operating in new markets to which we may expand in the future, including limited understanding of local user behaviors, cultural characteristics, user acceptance and preferences; ● difficulties in adapting our business approach, operating models and market strategies from existing markets to new ones; ● fluctuations in currency exchange rates; ● difficulties in staffing and managing global operations; ● limitations on global, regional and local fulfillment and technology infrastructure; and ● higher costs of doing business globally. 48 Table of Contents As we expand further into new and existing countries, regions and markets, these risks could intensify, and efforts we make to expand our business and operations globally may not be successful. Failure to successfully expand globally and manage the complexity of our global operations could materially and adversely affect our business, financial condition and results of operations. These risks may differ from those associated with doing business in the PRC. For a detailed discussion of the risks related to operations in the PRC, both generally and specifically, please refer to the risk factors set out under “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China.” Despite our global footprint, we are still in the early stages of operating the Temu platform. There can be no assurance we will be able to continue to generate revenue from the Temu platform. We have devoted, and will need to continue to devote, substantial managerial, financial and human resources to devise and implement monetization strategies and product and service offerings that are suitable for diverse global markets with different user needs, competitive landscapes and operational requirements. If we fail to generate revenue globally in an effective and efficient manner, our business, financial condition and results of operations may be materially and adversely affected. Changes in international trade and investment policies, escalations of tensions in international relations, and increased scrutiny from customs and other authorities—particularly with regard to China—could materially and adversely impact our business and operating results. There have been heightened tensions in international relations in recent years, particularly with regard to China, which has resulted in and may continue to cause changes in international trade policies and additional barriers to trade. Countries impose, modify, and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national economic and political conditions, which make it difficult to predict future developments regarding tariffs and other trade restrictions. Recent developments in international trade relations have led to increased tariffs on multiple product categories across several of our operating markets. For example, since early 2025, the U.S. has implemented tariffs on imports from numerous countries. Other countries have also imposed tariffs on imports. As our business model involves cross-border trade, these tariff measures may increase import costs for goods sold through our platforms. Such cost increases are expected to result in reduced sales volumes or higher consumer prices on our platforms, which could adversely affect our competitiveness, business, financial condition or operating results. Global trade tensions have intensified and may escalate even further, which may affect global trade and economic conditions. It is possible that additional trade policy measures including new tariffs, import/export restrictions, or technology controls may be implemented. Any such developments could create additional challenges for e-commerce platforms like ours. The exemption under Section 321 of the Tariff Act of 1930 exempts packages shipped to the United States under a specified de minimis monetary threshold from import duties and certain U.S. customs procedures as long as the prescribed requirements are met. Effective May 2, 2025, this exemption ceased to apply for imports from China and Hong Kong. Effective August 29, 2025, this exemption was eliminated for imports from all countries. A lawsuit has been filed challenging the Administration’s elimination of this exemption, but the outcome of these proceedings remains uncertain. Governments in other jurisdictions are also considering proposals to amend laws and regulations relating to customs that, if adopted, would lower duty-free thresholds or make importing goods into those jurisdictions more costly or complicated. For example, the European Union has proposed measures that would impose a fixed customs duty on low-value parcels entering the EU, including packages valued below €150 that are commonly used in cross-border e-commerce transactions. These proposals are expected to introduce a fixed customs duty of approximately €3 per item category for small parcels valued at less than €150 beginning in July 2026, as well as an additional processing fee that will be imposed beginning in November 2026 in an amount to be decided in an European Commission delegated act. Certain EU member states have also begun implementing similar measures at the national level, such as Italy, which has introduced a handling fee for small parcels expected to begin on July 1, 2026, and France, which introduced a small parcel tax of approximately €2 per item category for small parcels valued at less than €150, effective as of March 2026. These policy changes introduce significant adverse impact and uncertainty for operators of e-commerce platforms like ours. The elimination of the duty-free thresholds will subject merchants operating on our platform who relied on such thresholds or similar exemptions to a significantly higher level of customs duties and taxes. Moreover, additional informational or other procedural requirements imposed by the customs authorities of the markets in which we operate may further delay shipments and increase costs. These changes may lead to higher prices for consumers, reduced order volumes and decreased merchant participation on our platform, any of which could materially and adversely affect our business, financial condition, and results of operations. 49 Table of Contents Tense international relations have led to legal challenges in cross-border trade, such as issues relating to data arrangements and transfers in cross-border transactions, trade restriction or import/export control, and restrictions on public sector procurement. The increased regulatory and public attention worldwide towards international platforms reflect growing policy interest in strategic digital oversight, supply chain resilience and the governance of cross-border commerce. For example, cross-border data transfers has been a subject of ongoing scrutiny. The Privacy Shield between the U.S. and EU, which previously allowed companies to transfer personal data from the EU to the U.S. while complying with EU data protection requirements, was invalidated by the European Court of Justice, citing inadequate protection against U.S. surveillance laws. This has led to a period of uncertainty and transitional mechanisms like Standard Contractual Clauses, but questions remain regarding compliance, enforcement and the future of cross-border data flows. Import/export restrictions have also tightened in certain jurisdictions. Several governments maintain import or export control lists to restrict identified foreign persons, businesses, or organizations from selling or receiving certain goods. For example, the U.S. Department of Commerce’s Bureau of Industry and Security maintains a series of export control lists, most notably the Entity List, which restricts certain foreign persons from receiving U.S. origin goods. The Uyghur Forced Labor Prevention Act, or the UFLPA, creates a rebuttable presumption that goods mined, produced, or manufactured in a certain region of China, or by entities listed on the UFLPA Entity List, are made with forced labor and thus prohibited from importation into the U.S. We have received related inquiries from various stakeholders, such as congressional committees, state attorneys general and regulatory bodies. In June 2023, a select committee of the U.S. House of Representatives issued interim findings regarding practices of certain e-commerce platforms, including Temu, in relation to the UFLPA. Separately, regulators in the European Union have also intensified their oversight of large online platforms. The European Commission has intensified its oversight of international platforms designated as “Very Large Online Platforms” under the Digital Services Act, including the identification and removal of non-compliant products and the traceability of third-party traders. In October 2024, the European Commission initiated a formal investigation into the Temu platform to assess potential violations of the Digital Services Act related to, among other things, the alleged sale of illegal products by merchants on Temu. In July 2025, the European Commission preliminarily found the Temu platform to be in breach of the obligation under the DSA to properly assess the risks of illegal products being disseminated on its marketplace. We are engaging constructively with the European Commission in respect of those preliminary findings and the other open matters within its ongoing investigation in accordance with the applicable process. If the Commission’s preliminary views were to be ultimately confirmed, the Commission would adopt a non-compliance decision finding that Temu is in breach of Article 34 of the DSA. Such a decision could entail fines of up to 6% of the total worldwide annual turnover of the provider and an order requiring the provider to take measures to address the breach. A non-compliance decision may also trigger an enhanced supervision period to ensure compliance with the measures the provider intends to take to remedy the breach. We cannot predict the outcomes of these inquiries, discussions, plans or proceedings. Any further action could adversely affect our business. Furthermore, other businesses or individuals may choose not to use our products or services due to legal or policy concerns. In addition, laws and regulations may restrict our ability to conduct business with government entities or customers affiliated with governmental agencies. For instance, certain U.S. states have prohibited the use of specific applications, including Temu, on government-issued devices. We cannot guarantee that these restrictions will not expand, or that other authorities will not adopt similar measures, which could limit our ability to engage with a broader range of clients and partners. Beyond operational consequences, negative public perceptions arising from government actions could damage our reputation, harm our business, weaken our brand, and negatively impact the trading price of our ADSs. Any actual or perceived failure on our part to comply with the above laws or related obligations may result in substantial fines, penalties, regulatory investigations, lawsuits, significant remediation costs, reputational harm, or other liabilities. More generally, any unfavorable future actions or escalations by countries which we operate in, such as the imposition of tariffs, quotas, embargoes, safeguards, customs restrictions, capital controls and other restrictions, may affect the demand for our products and services, impact the competitive position of our services, increase our and merchants’ costs, prevent merchants on our platforms from being able to sell products overseas or cause delays in the shipment and delivery of products to our buyers, any of which could affect our business and financial condition. In response to any such future actions or escalations, we may have to change our business model and practices, and there is no guarantee that we may be able to do so successfully in a timely manner or at all. Any failure to do so may materially and adversely affect our business, financial condition and results of operations, and could lead to the temporary suspension of our operations in certain jurisdictions. The adoption of new business models or practices may limit our ability to attract new merchants and consumers or maintain relationships with existing ones; cause us to incur unanticipated or significant costs, expose us to additional liabilities and other risks, require substantial changes in our operations and compliance regime, impair our business growth, directly reduce revenue or adversely affect our profitability. For example, we have been subject to claims concerning refunds that were obtained in connection with the International Emergency Economic Powers Act, and we may be subject to additional claims of a similar nature. Any of these factors could materially and adversely affect our business prospects, financial condition, reputation, and the trading price of our listed securities. 50 Table of Contents In addition, geopolitical tensions may intensify, and certain jurisdictions may adopt drastic measures in the future that impact our global business operations. Recent legislative activities and regulatory developments by major economies concerning economic and trade sanctions affecting a number of technology companies have raised concerns about potential future regulatory challenges or restrictions for similar companies. The potential introduction of additional or expanded restrictions by relevant jurisdictions could materially and adversely affect our business operations. For example, on October 28, 2024, the U.S. Department of the Treasury issued a final rule on outbound investment, or the “Outbound Rule.” The Outbound Rule, which came into effect on January 2, 2025, imposes investment prohibition and notification requirements for certain types of outbound investments made by U.S. persons in certain entities associated with a country of concern (currently, the only country of concern is China) who are involved in specified activities in certain sensitive sectors, collectively defined as “Covered Foreign Persons.” The Outbound Rule identifies three sensitive sectors: semiconductors and microelectronics, quantum information technologies and artificial intelligence. If we were to be deemed a “Covered Foreign Person” under the Outbound Rule, our ability to raise capital could be significantly and negatively affected. Additionally, the trading price of our shares and/or the ADSs could be materially and adversely affected, and the value of our securities could decline significantly. On December 18, 2025, the Comprehensive Outbound Investment National Security Act of 2025 (the “COINS Act”) was signed into law. The COINS Act will keep the core of the Outbound Rule while expanding its scope and coverage and clearly including underwriting services as an exception and amending certain key definitions such as “Covered Foreign Person.” The COINS Act will also expand the list of countries of concern beyond just China to also encompass Russia, Iran, North Korea, Cuba, and Venezuela. The COINS Act will not take effect until the Department of Treasury issues new regulations (subject to notice and comment), which it must do by March 13, 2027, providing Department of Treasury with the opportunity to further amend or expand existing prohibitions and restrictions in accordance with the COINS Act. In the meantime, the existing Outbound Rule will remain in effect. The content of the implementation regulations remain uncertain. If our ability to raise such capital is significantly and negatively affected, it could be detrimental to our business, financial condition and prospects, and our ADSs may significantly decline in value. Furthermore, there have been reports about the possibility of delisting China-associated companies from U.S. stock exchanges as part of broader trade tensions. These developments create uncertainty regarding our ability to maintain our Nasdaq listing. Any governmental actions or policies that adversely affect economic activity, including the adoption or expansion of restrictions or bans on access to apps and other platforms, cross-border data transfers, trade, investment, stock listings or capital flows, may adversely impact our business, operational results and financial position. Our business is subject to a large number of laws across many jurisdictions, many of which are evolving. We are subject to a variety of laws and regulation across the many jurisdictions where we operate, including without limitation those relating to international trade, investment restrictions, product liability, employment and labor, taxation, competition, consumer protection, marketing and advertising, online payments and money transmission, data privacy and protection, intellectual property protection, trust and safety, and supply chain compliance. These laws and regulations can be significantly different across different jurisdictions and are continually evolving. Compliance with these laws and regulations is costly, requires significant management time and effort and may require changes to our business practices for local adaptation. Additionally, it is not always clear how these laws and regulations apply to e-commerce platforms as many of them, when enacted, did not address the unique issues that arise in the context of e-commerce platforms. In some jurisdictions, the authorities may seek to impose domestic laws and regulations on our global operations extraterritorially. We may also be subject to inconsistent compliance obligations across jurisdictions. New platform liability laws, potential amendments to existing laws, and ongoing regulatory and judicial interpretation of platform liability laws may impose costs, burdens and uncertainty on us and the merchants on our platforms. Our business may face additional costs and uncertainty due to new and evolving legislation impacting intermediary liability, as well as their ongoing interpretation by regulators and courts. This is in addition to the increased obligations on traders (sellers), particularly those who are manufacturers, which may further impact our costs and responsibilities when ensuring and verifying compliance on our marketplace. The applicability of the Platform-to-Business Regulation in the EU, the Online Safety Act in the UK, and other upcoming regulations affecting online intermediaries may impose additional obligations, such as increased platform transparency, while also potentially narrowing the availability of intermediary defenses. In combination with obligations under the General Product Safety Regulation (in both the EU and UK), the updated EU Product Liability Directive, the proposed UK Product Regulation and Metrology Bill and newer regulations for specific products, such as those related to toy safety and lithium-ion battery use in the UK, may increase our responsibilities and obligations as an intermediary in the European Union and the United Kingdom. Ongoing discussions on EU customs reforms may further impact our business by altering intermediary responsibilities or revising import threshold requirements. In addition, there have been various U.S. Congressional and U.S. state efforts to require platforms to vet and police sellers or proactively screen content, to regulate content moderation, or to restrict the scope of the intermediary liability protections available to online platforms for third-party user content, such as the proposed SHOP SAFE Act. The scope of platform liability may also be affected by judicial rulings as issues of platform liability are litigated in the courts. 51 Table of Contents Additionally, regulations, directives and treaties such as the General Data Protection Regulation (GDPR) the European Accessibility Act, the Treaty on the Functioning of the European Union and the Foreign Subsidies Regulation continue to apply directly to our operations, requiring sustained compliance efforts. Our classification as a Very Large Online Platform under the EU Digital Services Act (DSA), as well as the possibility of a future categorization as a Gatekeeper under the EU Digital Markets Act or the Undertaking of Paramount Significance for Competition Across Markets under S19a of the Gesetz gegen Wettbewerbsbeschränkungen (German Competition Act - GWB) could add to our obligations and existing compliance requirements (without prejudice of other applicable and equivalent European and national rules). The Digital Markets, Competition and Consumers Act 2024 (DMCCA) also places additional obligations with respect to consumer compliance in the UK. While regulations addressing sustainability and product standards, including the Cyber Resilience Act, the EU Deforestation Regulation and various rules on waste management and eco-design are primarily applicable to manufacturers and traders (sellers), such regulations may also create additional obligations for us in terms of compliance verification when acting as an intermediary. To comply with new platform liability laws, we could incur significant costs implementing any required changes, investigating and defending claims and, if we are found liable for any violations of such laws, significant damages. In addition, if legislation or regulatory inquiries, even if focused on other entities, require us to expend significant resources in response or result in the imposition of new obligations, our business and results of operations could be adversely affected. We strive to comply with all laws and regulations that are applicable to our operations around the world. Despite our efforts, we may not have fully complied in the past, and may not be able to fully or timely comply in the future, with all applicable laws and regulations, particularly where the regulatory regimes have not been broadly applied to e-commerce platforms. We may also be subject to conflicting laws, regulations, rules and orders, where compliance with those of one jurisdiction could result in violation of those of another jurisdiction. Relatedly, in the ordinary course of our business and in light of the scale of our global operations, we are, and will continue to be, regularly subjected to formal and informal reviews, queries, investigations, proceedings or other types of administrative actions by governmental and regulatory authorities in the jurisdictions in which we operate under existing laws, regulations, or interpretations or pursuing new and novel approaches to regulate our operations. The number and scale of these proceedings have increased, and will likely continue to increase, as our business expands in scope and geographic reach, and as our platforms become more complex, available to, and used by more people, and as governments and regulatory authorities seek to regulate us on a pre-emptive basis. Unfavorable regulations, laws, decisions, or interpretations by government or regulatory authorities applying those laws and regulations, or inquiries, investigations, or enforcement actions threatened or initiated by them could expose us to unanticipated civil and criminal liability or penalties (including substantial monetary fines); subject us to sanctions; harm our brands and reputation; increase our cost of doing business; require us to change the way we operate in a way adverse to our business, including by discontinuing certain services or restricting our operations in one or more jurisdictions; adversely affect our ability to attract merchants and buyers; impede our growth; or otherwise have a material effect on our business. The media, political, and regulatory scrutiny we face, which may continue to increase, amplifies these risks. All of these could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities. The DSA came into force in November 2022 and became fully applicable in February 2024. In May 2024, the European Commission designated the Temu platform as a Very Large Online Platform under the Digital Services Act. The Digital Services Act introduces heightened regulatory obligations for Very Large Online Platforms, including requirements to assess and mitigate systemic risks arising from their services, such as the listing and sale of counterfeit goods, unsafe or illegal products, and items that infringe intellectual property rights. Compliance with these obligations may increase our operational costs. Subsequently, in October 2024, the European Commission initiated a formal investigation into the Temu platform to assess potential violations of the Digital Services Act related to the alleged sale of illegal products by merchants on Temu, the design of the Temu user interface and Temu’s recommendation systems and researcher data access. In July 2025, the European Commission preliminarily found the Temu platform to be in breach of the obligation under the DSA to properly assess the risks of illegal products being disseminated on its marketplace. We are engaging constructively with the European Commission in respect of those preliminary findings and the other open matters within its ongoing investigation in accordance with the applicable process. If the Commission’s preliminary views were to be ultimately confirmed, the Commission would adopt a non-compliance decision finding that Temu is in breach of Article 34 of the DSA. Such a decision could entail fines of up to 6% of the total worldwide annual turnover of the provider and an order requiring the provider to take measures to address the breach. A non-compliance decision may also trigger an enhanced supervision period to ensure compliance with the measures the provider intends to take to remedy the breach. Certain jurisdictions also require local registration for specific activities, which could lead to additional costs or operational impacts. In December 2024, Vietnamese authorities suspended the operations of several e-commerce platforms, including the Temu platform, in Vietnam, pending the completion of their e-commerce service registration with the relevant authorities. Similarly, in March 2025, Uzbekistani authorities suspended the Temu platform due to matters relating to tax compliance and local entity registration. As of the date of this annual report, our operations of the Temu platform in Vietnam and Uzbekistan have not resumed. 52 Table of Contents We may have to change our business practices, often within stringent or relatively short timeframes, in response to changes in laws and policies. We may be unable to modify our business practices, in a timely manner, or at all, to adequately address these changes. This may materially and adversely affect our business, financial condition and results of operations, and could lead to temporary suspension of operations in certain jurisdictions. Even if we successfully adapt our practices in response to changes, the required operational changes may prove unfavorable to our business. For example, such changes may limit our ability to attract new merchants and consumers or maintain relationships with existing ones, cause us to incur unanticipated or significant costs, expose us to additional liabilities and other risks, require substantial changes in our operations and compliance regime, impair our business growth, directly reduce revenue or adversely affect our profitability. We may also incur significant additional compliance costs. Any of these factors could materially and adversely affect our business, prospects, financial condition, reputation and the trading price of our listed securities. Additionally, if the third-party merchants that sell merchandise on our platforms or the third-party vendors that provide services to us violate applicable laws or regulations, those violations could also result in liabilities for us and harm our brands, reputation and business. For example, in June 2022, the Uyghur Forced Labor Prevention Act, or the UFLPA, became effective in the U.S., establishing a rebuttable presumption that goods mined, produced, or manufactured in a certain region in China or by an entity on the UFLPA Entity List are prohibited from importation into the U.S. We require merchants on the Temu platform to comply with our third-party code of conduct, which, among other things, strictly prohibits the use of forced, penal or child labor. In addition, we establish policies and procedures to ensure that no seller on the Temu platform is on the UFLPA Entity List, and use technology to identify products that are at higher risk of non-compliance. Any third-party violations of applicable laws or our policies may subject us to negative publicity, investigations, fines, fees, settlements or other costs and liabilities as a result of the enforcement of laws, regulations, sanctions, embargoes, export controls programs or other restrictions. Our ability to rely on insurance, contracts, indemnification and other remedies to limit these liabilities may be insufficient or unavailable in some cases. Furthermore, the circumstances in which we may be held liable for the acts, omissions, or responsibilities of our merchants or other third parties are uncertain, complex, and evolving. Upcoming and proposed regulations may require platforms like ours to comply with additional obligations, and the resulting compliance costs and potential liability risk could negatively impact our business. Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment. The conversion of Renminbi into other currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar is affected by changes in the political and economic conditions of the PRC and the U.S., and by the foreign exchange policies of the PRC and the U.S., among other things. We cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future. Any significant appreciation or depreciation of Renminbi may materially and adversely affect our revenues, earnings and financial position, and the value of, and any dividends payable on, our ADSs in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we received from our equity or debt offerings into Renminbi for our operations in the PRC, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or ADSs, or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. In addition, certain of our businesses are denominated in local currencies. Fluctuations in the exchange rates of these currencies against our reporting currency Renminbi may have a material adverse effect on our financial condition and results of operations. In addition, as we continue to expand our international operations, our exposure to foreign currency exchange rate fluctuations has increased. We hold cash, cash equivalents, and/or marketable securities denominated in various foreign currencies. To the extent these foreign currencies depreciate relative to the currencies in which we present our financial results, such cash equivalents and marketable securities balances, when translated, may be less than expected, adversely affecting our financial position. Fluctuations in the relative value of local currencies in the markets where we operate could also have negative effects on the level of economic activity and consumer purchasing power in those markets and may adversely affect our business and results of operations. We generally do not use hedging to reduce our exposure to exchange rate fluctuations. As of December 31, 2025, we had not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into other currencies. As a result, fluctuations in exchange rates may have a material adverse effect on your investment. 53 Table of Contents Any factors that reduce cross-border e-commerce or make such trade activities more difficult could harm our business. The shipping and handling of goods across national borders is often expensive and complicated in the context of cross-border e-commerce. Customs and duty procedures and reviews, including duty-free thresholds in various key markets, the interaction of national postal systems, and security related governmental processes at international borders, may increase costs, discourage cross-border purchases, delay transit, and create shipping uncertainties. Any factors that increase the costs of cross-border e-commerce or restrict, delay, or make cross-border e-commerce more difficult or impractical would lower our revenue and profits and could harm our business. Risks Related to Doing Business in China Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. A significant portion of our assets and operations is located in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in certain respects, including the level of government involvement, level of development, growth rate, control of currency exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also influences and drives China’s economic growth by allocating resources, controlling payment of obligations denominated in currencies other than Renminbi, setting monetary policy, and providing preferential treatment to particular industries or companies. There have been concerns about geopolitical conditions in certain regions or around the world, which may result in or intensify potential conflicts in relation to territorial, regional security and trade disputes. Changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China may have a material effect on the overall economic growth of China, which could adversely affect our business and operating results, lead to reduction in demand for our services and adversely affect our competitive position. Any disruptions or continuing or worsening slowdown could significantly reduce commerce activities in China, which could lead to significant reduction in merchants’ demand for and spending on the various services we offer. An economic downturn, whether actual or perceived, a further decrease in economic growth rates or an otherwise uncertain economic outlook in China could have a material adverse effect on business and consumer spending and, as a result, adversely affect our business, financial condition and results of operations. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, because we hold a significant amount of cash and cash equivalents and short-term investments, if financial institutions and issuers of financial instruments that we hold become insolvent or if the market for these financial instruments becomes illiquid as a result of a severe economic downturn, our business and financial condition could be materially and adversely affected. The regulatory environment in China is complex and evolving, which could adversely affect us. We conduct our business in China primarily through our PRC subsidiaries, the VIE and its subsidiaries. Our operations in China are governed by PRC laws and regulations. Our PRC subsidiaries are subject to laws and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under a civil law system may be cited for reference but have limited precedential value. In addition, any new or changes in PRC laws and regulations related to foreign investment in China could affect the business environment and our ability to operate our business in China. From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management’s attention. Since PRC administrative and judicial authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may impede our ability to enforce the contracts we have entered into and could materially and adversely affect our business and results of operations. 54 Table of Contents Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. Such unpredictability could adversely affect our business and impede our ability to continue our operations. We may be adversely affected by the complexity, uncertainties and changes in the PRC’s regulation of internet-related businesses and companies, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business and results of operations. The PRC government regulates many aspects of the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving. As a result, in certain circumstances it may be difficult to determine what actions or omissions may violate applicable laws and regulations. We only have contractual control over the Pinduoduo platform. We do not directly own the Pinduoduo platform due to the restrictions on foreign investment in businesses providing value-added telecommunications services in China, including e-commerce services and internet content-related services. This may significantly disrupt our business, subject us to sanctions, compromise enforceability of related contractual arrangements, or have other harmful effects on us. The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May 2011, the State Council announced the establishment of the State Internet Information Office (with the involvement of the State Council Information Office, the MIIT and the Ministry of Public Security). The primary role of the State Internet Information Office is to facilitate the policy-making and legislative development in this field, to direct and coordinate with the relevant departments in connection with online content administration and to deal with cross-ministry regulatory matters in relation to the internet industry. The Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, issued by the MIIT in July 2006, prohibits PRC telecommunications service providers from leasing, transferring or selling VATS Licenses to any foreign investor in any form, or providing any resources, sites or facilities to any foreign investor for their illegal operation of a telecommunications business in China. According to this circular, either the holder of a value-added telecommunications services operation permit or its shareholders must directly own the domain names and trademarks used by such license holders in their provision of value-added telecommunications services. The circular also requires each license holder to have the necessary facilities, including servers, for its approved business operations and to maintain such facilities in the regions covered by its license. Shanghai Xunmeng owns the relevant domain names and trademarks in connection with the Pinduoduo platform and has the necessary personnel to operate the Pinduoduo platform. The landscape of PRC laws, regulations and policies relating to the internet industry is complex and developing. There are uncertainties regarding the interpretation and enforcement of PRC laws, rules, and regulations. Existing laws, regulations and policies are relatively new and have been applied and interpreted for only a short period of time. New laws, regulations or policies may also be adopted in the future or evolve quickly with little advance notice. Determining the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China, including the Pinduoduo platform, is therefore a complex and evolving process. We cannot assure you that the Pinduoduo platform has obtained all the permits or licenses required for conducting its business or will be able to maintain its existing licenses or obtain new ones. If the PRC government determines that the Pinduoduo platform was operating without the proper approvals, licenses or permits or promulgates new laws and regulations that require additional approvals or licenses or imposes additional restrictions on any part of the operations of the Pinduoduo platform, the PRC government has the power to, among other things, levy fines, confiscate income, revoke business licenses, and require the Pinduoduo platform to discontinue the relevant part of its business or impose restrictions on the affected portion of the Pinduoduo platform. Any of these actions by the PRC government may have a material adverse effect on our business and results of operations. 55 Table of Contents The PRC government’s significant oversight and discretion over our business operations could result in a material change in our operations and the value of our ADSs. Our operations in China are governed by PRC laws and regulations. The PRC government has significant oversight and discretion over the conduct of our business. The PRC government has released regulations and policies that have impacted various industries in general and specific operators within such industries, and may in the future release new regulations or policies that could intervene in or influence our operations or the industry sectors in which we operate. The PRC government may also require us to obtain new permits or approvals to continue our operations. If we fail to comply with these regulations, policies or requirements, the enforcement actions taken by the PRC government may intervene or influence our operations at any time and it could result in a material adverse change in our operations and the value of our ADSs. In addition, the PRC government has indicated an intent to exert more oversight and control over offerings conducted outside of the Chinese mainland and foreign investment in Chinese mainland-based companies. Any such actions could significantly limit or completely hinder our ability to offer or continue to offer our ADSs to investors and cause the value of our ADSs to significantly decline or become worthless. Therefore, investors of our company and our business face uncertainty from potential actions taken by regulators that may affect our business and the value of our ADSs. Discontinuation of any preferential tax treatments or imposition of any additional taxes could adversely affect our financial condition and results of operations. Each of Shanghai Xunmeng and Walnut Shanghai has been recognized as a “high and new technology enterprise” and is eligible for a preferential corporate income tax rate of 15% until 2026. These preferential corporate income tax treatments are subject to the discretion of the governmental authorities. The discontinuation of any preferential tax treatments or the imposition of any additional taxes could adversely affect our financial condition and results of operations. You may experience difficulties in effecting service of legal process, enforcing judgments or bringing actions in China against us or our management named in the annual report based on non-PRC laws. We are an exempted company incorporated under the laws of the Cayman Islands. Through our PRC subsidiaries, the VIE, and the VIE’s subsidiaries, we conduct a significant portion of our operations in China and a significant portion of our assets are located in China. It may be difficult for you to effect service of process upon us or our directors and officers residing outside the United States. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors as most of our current directors and officers are nationals and residents of countries other than the United States and a significant portion of the assets of these persons may be located outside the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state. The recognition and enforcement of non-PRC judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce non-PRC judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a non-PRC judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States. 56 Table of Contents We may rely on distributions and advances paid by our Chinese mainland subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our Chinese mainland subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business. We are a Cayman Islands holding company and we may rely on distributions and advances from our Chinese mainland subsidiaries, as well as service fees paid by the VIE and its subsidiaries pursuant to our contractual arrangements with them, to meet our cash requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders to the extent we elect to make such distributions. If any of our Chinese mainland subsidiaries incur debt on its own behalf, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Under PRC laws and regulations, our Chinese mainland subsidiaries may pay dividends only out of its respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a Chinese mainland company is required to set aside at least 10% of its after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. At its discretion, a Chinese mainland company may allocate a portion of its after-tax profits based on PRC accounting standards to a staff welfare and bonus fund. These reserve funds and staff welfare and bonus funds cannot be distributed to us as dividends. Our Chinese mainland subsidiaries generate primarily all of their revenue in Renminbi, which is not freely convertible into other currencies. As a result, any restrictions on currency exchange may limit the ability of our Chinese mainland subsidiaries to use their Renminbi-denominated revenues to pay dividends to us. Additional regulatory requirements or a more substantial vetting process may be adopted by SAFE for cross-border transactions falling under both current accounts and capital accounts. Any limitation on the ability of our Chinese mainland subsidiaries to pay dividends or make other kinds of payments to us, or on the ability of the VIE and its subsidiaries to pay service fees to us, could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese mainland companies to non-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-resident enterprises are incorporated. PRC regulations on loans to and direct investment in Chinese mainland entities may delay or prevent us from using the proceeds of any financing conducted outside of the Chinese mainland to make loans or additional capital contributions to our Chinese mainland subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business. We are a Cayman Islands holding company, and a significant portion of our holdings conduct operations in China. We may make loans to our Chinese mainland subsidiaries, the VIE and its subsidiaries, but these loans are subject to limits in size and may need to be approved by or registered with the governmental authorities. Besides loans, we may also make additional capital contributions to our Chinese mainland subsidiaries. Any loans to our PRC wholly foreign owned enterprises are subject to foreign exchange loan registrations. In addition, a PRC foreign-invested enterprise must use its capital for its own use in furtherance of bona fide purposes within its business scope. The capital of a PRC foreign-invested enterprise may not be used, whether directly or indirectly, (i) to make payments for purposes beyond the business scope of the enterprise or which are otherwise prohibited by the law; (ii) for investments in securities or any other instruments other than banks’ principal-secured products unless otherwise specifically permitted by law; (iii) to grant loans to non-affiliated enterprises, except where it is expressly permitted in the enterprise’s business license; and (iv) to pay for expenses related to the purchase of real estate that is not for self-use, unless the enterprise is a PRC foreign-invested real estate enterprise. In light of the various requirements imposed by PRC regulations on loans to and direct investment in Chinese mainland entities, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals or filings on a timely basis, if at all, with respect to future loans we make to our Chinese mainland subsidiaries or the VIE or with respect to future capital contributions we make to our Chinese mainland subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from financings conducted outside of the Chinese mainland and to capitalize or otherwise fund our Chinese mainland operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business. 57 Table of Contents Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment. The PRC government imposes regulatory requirements on the convertibility of the Renminbi into other currencies and, in certain cases, the remittance of currency out of the Chinese mainland. To the extent cash in our business is in the Chinese mainland, such cash may not be available to fund operations or for other use outside of the Chinese mainland due to restrictions and limitations imposed by the governmental authorities on currency conversion, cross-border transactions and cross-border capital flows. We receive a significant portion of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company may rely on distributions and advances from our Chinese mainland subsidiaries, as well as service fees from the VIE and its subsidiaries, to fund our cash and financing requirements. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in currencies other than Renminbi without prior approval of SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our subsidiaries in the Chinese mainland may be used to pay dividends to entities outside of the Chinese mainland, including our Cayman Islands holding company. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into other currencies and remitted out of the Chinese mainland to pay capital expenses such as the repayment of loans denominated in currencies other than Renminbi. As a result, we need to obtain SAFE approval to use cash generated from the operations of our Chinese mainland subsidiaries, the VIE and its subsidiaries to pay off any foreign currency debt that our Chinese mainland subsidiaries, the VIE or its subsidiaries may owe to entities outside of the Chinese mainland, or to make other capital expenditure payments outside of the Chinese mainland in a currency other than Renminbi. The PRC government may impose more restrictive foreign exchange policies and step up scrutiny of major cross-border capital movements. If the foreign exchange control system prevents us from satisfying our multi-currency demands, we may not be able to utilize cash held in the Chinese mainland to fund any cash or financing requirements we may have outside of the Chinese mainland or pay dividends to our shareholders, including holders of our ADSs. Certain PRC regulations may make it more difficult for us to pursue growth through acquisitions. The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, established additional procedures and requirements that could make merger and acquisition activities more time-consuming and complex. The M&A Rules require, among other things, that the Ministry of Commerce be notified in advance of any change-of-control transaction in which an investor based outside of the Chinese mainland acquires control of a Chinese mainland enterprise and involves any of the following circumstances: (i) an important industry is concerned, (ii) the transaction involves factors that impact or may impact national economic security, or (iii) the transaction will lead to a change in control of an enterprise that holds a famous trademark or a PRC time-honored brand. The M&A Rules also require that, in accordance with the Anti-monopoly Law promulgated by the Standing Committee of the National People’s Congress, which was most recently amended in 2022, any merger and acquisitions of PRC enterprises which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by the Ministry of Commerce before they can be completed. In addition, the PRC national security review rules that became effective in September 2011 require acquisitions by non-Chinese mainland investors of companies engaged in military related or certain other industries that are crucial to Chinese national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval or clearance from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share. We are subject to anti-monopoly laws and regulations with respect to investments in or by us. For example, our operations in the PRC are subject to the PRC Anti-monopoly Law, pursuant to which companies conducting certain investments and acquisitions relating to businesses in China must file a notification with the PRC regulator in advance. Furthermore, in February 2021, the Anti-monopoly Committee of the State Council published the Anti-monopoly Guidelines for the Platform Economy Sector, which provide that concentrations involving companies with VIE structure fall within the scope of the SAMR’s merger control review if certain reporting thresholds are met. Any failure or perceived failure to comply with the anti-monopoly laws and guidelines relating to investments in or by us may result in governmental investigations or enforcement actions, litigations or claims against us and could have an adverse effect on our business, financial condition and results of operations. 58 Table of Contents PRC regulations relating to overseas investment activities by Chinese mainland residents may limit our subsidiaries’ ability to change their registered capital or distribute profits to us or otherwise expose us or our beneficial owners who are resident in the Chinese mainland to liability and penalties under PRC laws. In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Overseas Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37. SAFE Circular 37 requires Chinese mainland residents (including Chinese mainland individuals and corporate entities, as well as individuals that are deemed to be Chinese mainland residents for foreign exchange administration purposes) to register with SAFE or its local branches in connection with their direct or indirect overseas investment activities. SAFE Circular 37 further requires registrants to amend their SAFE registrations if such special purpose vehicle experiences material changes, such as a (i) change in name, (ii) change in the composition of its Chinese mainland shareholders, (iii) increase or decrease in capital contributions, (iv) share transfer or exchange, or (v) merger or division. SAFE Circular 37 is applicable to our shareholders who are Chinese mainland residents and may be applicable to any acquisitions that we make outside of the Chinese mainland in the future. If our shareholders who are Chinese mainland residents fail to make the required registration or to update the previously filed registration, our Chinese mainland subsidiaries may be prohibited from distributing their profits or the proceeds from any capital reduction, share transfer or liquidation to us, and we may also be prohibited from making additional capital contributions into our Chinese mainland subsidiaries. Moreover, pursuant to the Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE. All of our shareholders who we know to be subject to the SAFE regulations have completed the initial registrations with the local SAFE branch or qualified banks as required by SAFE Circular 37. However, we may not be informed of the identities of all Chinese mainland residents holding direct or indirect interest in our company, and we cannot provide any assurance that they will comply with our request to make the necessary registrations or otherwise comply with the requirements of SAFE Circular 37 or other related rules. The failure or inability of any shareholder to comply with the registration procedures set forth in these regulations may subject us to fines and legal sanctions, such as restrictions on our cross-border investment activities, as well as restrictions on the ability of our Chinese mainland subsidiaries to distribute dividends, or the proceeds from any reduction in capital, share transfer or liquidation, to us. Moreover, any failure to comply with the various foreign exchange registration requirements described above could result in liability under PRC law for circumventing applicable foreign exchange restrictions. As a result, our business operations and ability to distribute profits to you could be materially and adversely affected. Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions. In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens, as well as non-PRC citizens who resided in the Chinese mainland for a continuous period of not less than one year, who participate in any stock incentive plan of a company listed outside of the Chinese mainland, subject to a few exceptions, are required to register with SAFE through a qualified agent in the Chinese mainland, which could be the Chinese mainland subsidiaries of such listed company, and complete certain other procedures. In addition, an entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are either PRC citizens or non-PRC citizens who have resided in the Chinese mainland for a continuous period of not less than one year, and who have been granted options are subject to these regulations as our company is listed on the Nasdaq. Failure to complete SAFE registrations may subject them to fines of up to RMB300,000 for entities and up to RMB50,000 for individuals, and legal sanctions and may also limit our ability to contribute additional capital into our Chinese mainland subsidiaries and limit certain of our Chinese mainland subsidiaries’ ability to distribute dividends to us. We also face regulatory requirements that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Foreign Exchange—Regulations on Stock Incentive Plans.” 59 Table of Contents In addition, the State Administration of Taxation has issued certain circulars concerning employee share options and restricted shares. Under these circulars, our employees working in the Chinese mainland who exercise share options or are granted restricted shares will be subject to PRC individual income tax. Our Chinese mainland subsidiaries have obligations to file documents related to employee share options or restricted shares with the tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to the relevant laws and regulations, we may face sanctions imposed by the tax authorities or other Chinese mainland government authorities. See “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Foreign Exchange—Regulations on Stock Incentive Plans.” Our use of some leased properties could be challenged by third parties or government authorities, which may cause interruptions to our business operations. Certain of our leasehold interests in leased properties in China have not been registered with the PRC government authorities as required by PRC law, which may expose us to potential fines if we fail to make the required registrations after receiving notice from the PRC government authorities. In the case of failure to register or file a lease in China, the parties to the unregistered lease may be ordered to make rectifications (which would involve registering such lease with the relevant PRC authority) before being subject to penalties. The penalty ranges from RMB1,000 to RMB10,000 for each unregistered lease, at the discretion of the relevant PRC authority. The law is not clear as to which of the parties, the lessor or the lessee, is liable for the failure to register the lease. Although we have proactively requested that the applicable lessors complete or cooperate with us to complete the registration in a timely manner, we are unable to control whether and when such lessors will do so. In the event that a fine or a portion thereof is imposed on the lessee, and if we are unable to recover from the lessor any fine we pay, we will bear the cost of the fine. Moreover, certain lessors have not provided us with valid ownership certificates or authorization of sublease for our leased properties in China. As a result, there is a risk that these lessors may not have the right to lease such properties to us, in which case the lease agreements may be deemed invalid or we may face challenges from the property owners or other third parties regarding our right to occupy the premises. We are not aware of any actions, claims or investigations being initiated by third parties or competent governmental authorities with respect to the defects in our leased real properties. However, if we are unable to continue our operations on the current premises and cannot find a suitable replacement in a timely manner, our business, results of operations and financial condition could be materially and adversely affected. If we are classified as a Chinese mainland resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-Chinese mainland shareholders or ADS holders. Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the Chinese mainland with a “de facto management body” within the Chinese mainland is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the State Administration of Taxation issued a circular, known as SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a Chinese mainland-controlled enterprise is located in the Chinese mainland. Although this circular only applies to enterprises incorporated outside of the Chinese mainland that are controlled by Chinese mainland enterprises or enterprise groups, not those controlled by individuals, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all non-Chinese mainland enterprises. According to SAT Circular 82, an enterprise incorporated outside of the Chinese mainland that is controlled by a Chinese mainland enterprise or enterprise group will be regarded as a tax resident of the Chinese mainland by virtue of having its “de facto management body” in the Chinese mainland and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the Chinese mainland; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the Chinese mainland; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the Chinese mainland; and (iv) at least 50% of voting board members or senior executives habitually reside in the Chinese mainland. 60 Table of Contents We believe that we are not a Chinese mainland resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a Chinese mainland resident enterprise for enterprise income tax purposes, we could be subject to PRC tax at a rate of 25% on our worldwide income, which could materially reduce our net income, and we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our ADSs. In addition, non-resident enterprise shareholders (including our ADS holders) may be subject to PRC tax on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a Chinese mainland resident enterprise, dividends payable to our non-Chinese mainland individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such shareholders may be subject to PRC tax at a rate of 10% in the case of non-Chinese mainland enterprises or a rate of 20% in the case of non-Chinese mainland individuals unless a reduced rate is available under an applicable tax treaty. It is unclear whether non-Chinese mainland shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a Chinese mainland resident enterprise. Any such tax may reduce the returns on your investment in the ADSs or ordinary shares. We face uncertainty with respect to indirect transfers of equity interests in the Chinese mainland resident enterprises by their non-resident holding companies. In February 2015, the State Administration of Taxation issued the Public Notice on Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Resident Enterprises, or SAT Circular 7. SAT Circular 7 governs the indirect transfer of equity interests of a Chinese mainland resident enterprise and other taxable assets through transfer of an intermediate holding company incorporated outside of the Chinese mainland. In addition, SAT Circular 7 provides criteria for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Circular 7 also brings challenges to both non-Chinese mainland transferors and transferees (or other persons who are obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of a holding company, the non-resident enterprise as either transferor or transferee, or the Chinese mainland entity that directly owns the taxable assets, may report the indirect transfer to the tax authorities. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from the indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a Chinese mainland resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes. In October 2017, the State Administration of Taxation issued an Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or SAT Circular 37, which became effective in December 2017. According to SAT Circular 37, where a non-resident enterprise fails to declare the tax payable pursuant to Article 39 of the Enterprise Income Tax, the tax authority may order it to pay the tax due within required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax authority. However, if the non-resident enterprise voluntarily declares and pays the tax payable before the tax authority orders it to do so within required time limits, it shall be deemed that such enterprise has paid the tax in time. We face uncertainties as to the reporting and other implications of certain past and future transactions where Chinese mainland taxable assets are involved, such as restructurings carried out outside of the Chinese mainland, sale of the shares in our non-Chinese mainland subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under SAT Circular 7 and SAT Circular 37. For transfer of shares in our company by investors who are non-Chinese mainland resident enterprises, our subsidiaries may be requested to assist in the filing under the SAT circulars. As a result, we may be required to expend valuable resources to comply with the SAT circulars or to request the transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations. 61 Table of Contents Under PRC laws, the approval of or filing with the CSRC or other PRC government authorities may be required in connection with our previous or future offerings, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing. Pursuant to the M&A Rules, a special purpose vehicle incorporated outside of the Chinese mainland that (i) was formed for listing purposes through the acquisition of Chinese mainland companies and (ii) is controlled by Chinese mainland persons or entities must obtain the approval of the CSRC before it can list its securities on a stock exchange outside of the PRC. Based on the advice of King & Wood, our PRC legal counsel, we are of the view that we did not need, and will not need, to obtain the CSRC’s approval under the M&A Rules for our previous offerings. However, the interpretation and application of the regulations could change so that we may need to obtain the CSRC’s approval with respect to our previous or future offerings. To the extent such CSRC approvals are required, we cannot assure you that we would be able to obtain them in a timely manner. Any failure to obtain or delay in obtaining the requisite CSRC approvals for any of our previous or future offerings would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in the Chinese mainland, restrictions or limitations on our ability to pay dividends outside of the Chinese mainland. The PRC government authorities have recently indicated an intent to exert more oversight and control over securities offerings and other capital markets activities that are conducted outside of the Chinese mainland. In July 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council issued the Opinions on Strictly Scrutinizing Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to, among other things, strengthen the supervision of listings conducted by companies with significant operations in the Chinese mainland. These opinions also proposed the development of a regulatory system to oversee companies with significant operations in the Chinese mainland that conduct listings in jurisdictions other than the Chinese mainland. In September 2024, the National Development and Reform Commission of the PRC, or the NDRC, and the Ministry of Commerce jointly issued the Special Administrative Measures (Negative List) for Foreign Investment Access (2024 Version), or the 2024 Negative List, which became effective on November 1, 2024. Pursuant to the 2024 Negative List, a Chinese mainland company that is engaged in business prohibited by the 2024 Negative List must obtain approval from the competent governmental authorities to seek an offering and listing of securities outside of the Chinese mainland. In addition, the foreign investors of such Chinese mainland company may not be involved in the company’s operations and management, and their shareholding percentage is subject to the regulations on Chinese mainland securities investments by foreign investors, which regulations are set out in more detail under “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Foreign Investment.” On February 17, 2023, the CSRC released a set of regulations, including the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines, or, collectively, the Filing Measures, which took effect on March 31, 2023. The Filing Measures establish a new filing-based regime for regulating direct or indirect offerings and listings outside of the Chinese mainland. The Filing Measures require, among others, that the issuers of Chinese mainland companies or their main operating entities in the Chinese mainland, in the case of indirect offering and listing in jurisdictions outside of the Chinese mainland, to file with the CSRC for such offering or listing within three working days after submitting the application documents for offerings and listings outside of the Chinese mainland. Companies that have already completed such listings or offerings before March 31, 2023 are not required to complete the filling procedures immediately but are required to file with the CSRC for their follow-on offerings. For details about the Filing Measures, see “Item 4. Information on the Company—B. Business Overview—Regulations in the PRC—Regulations Relating to Listings and M&A Outside of the Chinese Mainland.” If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, including the cybersecurity review under the Cybersecurity Review Measures, are required for our offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures. Any failure to obtain (including possible rescission of any approvals that had been obtained) or delay in obtaining such approval or completing such filing procedures for our offerings could subject us to penalties and sanctions such as fines and penalties on our operations in the Chinese mainland, orders limiting our ability to pay dividends outside of the Chinese mainland, reduction of our operating privileges in the Chinese mainland, or delay or restrictions on repatriation of the proceeds from offerings conducted outside of the Chinese mainland into the Chinese mainland. These penalties and sanctions could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our securities. Similarly, the CSRC or other PRC regulatory authorities could also require us to halt offerings that we conduct outside of the Chinese mainland before settlement and delivery of the shares offered. Consequently, if investors engage in trading or hedging activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities subsequently promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities. 62 Table of Contents The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors of the benefits of such inspections. Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Historically, our auditor had been located in the Chinese mainland and, since July 2025, our auditor has been located in Hong Kong. Prior to December 2022, each of the Chinese mainland and Hong Kong was a jurisdiction where the PCAOB was historically unable to conduct inspections and investigations completely. As a result, investors in the ADSs or our other securities did not benefit from such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in the Chinese mainland and Hong Kong in the past has made it more difficult for the PCAOB to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors that are subject to the PCAOB inspections. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed the Chinese mainland and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. However, if the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in certain jurisdictions, and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, investors in the ADSs or our other securities would no longer be able to benefit from PCAOB inspections, which may cause investors and potential investors in our ADSs to lose confidence in our audit procedures and reported financial information and the quality of our financial statements. Our ADSs may be prohibited from trading in the United States under the HFCA Act in the future if the PCAOB is unable to inspect or investigate completely auditors located in the Chinese mainland or Hong Kong. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Pursuant to the HFCA Act, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in the Chinese mainland or Hong Kong and our auditor was subject to that determination. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCA Act following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB removed the Chinese mainland and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect or investigate completely registered public accounting firms headquartered in any jurisdiction. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCA Act after we file this annual report on Form 20-F. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in the Chinese mainland and Hong Kong, among other jurisdictions. If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in the Chinese mainland and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements to be filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. In accordance with the HFCA Act, our securities would be prohibited from being traded on a national securities exchange or in the over-the-counter trading market in the United States if we are identified as a Commission-Identified Issuer for two consecutive years in the future. If our shares and ADSs are prohibited from trading in the United States, there is no certainty that we will be able to list on a non-U.S. exchange or that a market for our shares will develop outside of the United States. A prohibition of being able to trade in the United States would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects. 63 Table of Contents It may be difficult for non-PRC regulators to conduct investigations or collect evidence within China. Shareholder claims or regulatory investigations that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of a mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no securities regulator outside of China is allowed to directly conduct investigations or collect evidence within the territory of the PRC. While detailed interpretation of or implementation of rules under Article 177 have yet to be promulgated, the inability for such securities regulator to directly conduct investigations or evidence collection activities within China may further increase difficulties faced by you in protecting your interests. Risks Related to Our ADSs The trading price of our ADSs may be volatile, which could result in substantial losses to investors. Since our ADSs became listed on the Nasdaq Global Select Market on July 26, 2018, the trading price of our ADSs has fluctuated significantly. The trading price of our ADSs may be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located in China that have listed their securities in the United States. The trading performances of these other companies’ securities, including internet and e-commerce companies, may affect the attitudes of investors toward similar companies listed in the United States, which consequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or matters of these other companies may also negatively affect the attitudes of investors towards companies with business operations in China in general, including us, regardless of our conduct. In addition, securities markets may from time to time experience significant price and volume fluctuations that are not related to our operating performance, such as the large decline in share prices in the United States, which may have a material and adverse effect on the trading price of our ADSs. In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the following: ● variations in our revenues, earnings and cash flow; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● announcements of new offerings, solutions and expansions by us or our competitors; ● changes in financial estimates by securities analysts; ● detrimental adverse publicity about us, our brands, our services or our industry; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; ● convertible arbitrage strategy employed by certain investors, including related short selling of our ADS; and ● potential litigation or regulatory investigations. Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade. In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities, such as the putative class action lawsuits we disclosed in the “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” These putative class action suits could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suits, which could harm our results of operations. Moreover, these class action suits, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages or indemnification claims, which could have a material adverse effect on our financial condition and results of operations. 64 Table of Contents If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline. The trading market for our ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our ADSs, the market price for our ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our ADSs to decline. Techniques employed by short sellers may drive down the market price of the ADSs. Short selling is the practice of selling securities that a seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. Short sellers hope to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as short sellers expect to pay less in that purchase than they received in the sale. As it is in short sellers’ interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market. We have been the subject of short selling, and it is not clear what long-term effect such negative publicity could have on us. We may also be subject to short seller attacks from time to time in the future. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we may have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the short sellers by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could divert management’s attention from the day-to-day operations of our company. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact the market price of our ADSs and our business operations. The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price. Sales of substantial amounts of our ADSs in the public market or the perception that these sales could occur, could adversely affect the market price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ADSs. Because we do not expect to pay dividends in the foreseeable future, you must rely on a price appreciation of our ADSs for return on your investment. The primary use of our capital continues to be to invest for the long-term growth of our business. As a result, we do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. Therefore, you should not rely on an investment in our ADSs as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share premium account, provided that in no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, we receive from our subsidiaries, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in our ADSs and you may even lose your entire investment in our ADSs. 65 Table of Contents Our memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs. Our currently effective memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. Our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected. You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law. We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (except the memorandum and articles of association, the register of mortgages and charges and any special resolutions passed by the shareholders) or to obtain copies of lists of shareholders of these companies. Under Cayman Islands law, the names of our current directors can be obtained from a search conducted at the Registrar of Companies in the Cayman Islands. Our directors have discretion under our currently effective articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreements, which could result in less favorable outcomes to the plaintiff(s) in any such action. The deposit agreements governing the ADSs representing our ordinary shares provide that, subject to the depositary’s right to require a claim to be submitted to arbitration, the federal or state courts in the City of New York have exclusive jurisdiction to hear and determine claims arising under the deposit agreements and in that regard, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreements, including any claim under the U.S. federal securities laws. 66 Table of Contents If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable U.S. state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the U.S. federal securities laws has not been finally adjudicated by the United States Supreme Court. However, based on past court decisions, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreements. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreements and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision under the deposit agreements before investing in the ADSs. If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreements or the ADSs, including claims under U.S. federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreements, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action. Nevertheless, if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit agreements with a jury trial. No condition, stipulation or provision of the deposit agreements or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with the U.S. federal securities laws and the rules and regulations promulgated thereunder. Certain judgments obtained against us by our shareholders may not be enforceable. We are a Cayman Islands exempted company and a significant portion of our assets are located outside of the United States. A significant portion of our business is conducted outside the United States. In addition, most of our current directors and officers are nationals and residents of countries other than the United States. A significant portion of the assets of these persons may be located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed upon under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. 67 Table of Contents The voting rights of holders of ADSs are limited by the terms of the deposit agreements, and you may not be able to exercise your right to vote your Class A ordinary shares. Holders of ADSs do not have the same rights as our registered shareholders. As a holder of our ADSs, you will not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings. As an ADS holder, you will only be able to exercise the voting rights carried by the underlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under the deposit agreements, you may vote only by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will try, as far as is practicable, to vote the underlying Class A ordinary shares represented by your ADSs in accordance with your instructions. If we ask for your instructions, then upon receipt of your voting instructions, the depositary will try to vote the underlying Class A ordinary shares represented by your ADSs in accordance with these instructions. If we do not instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so. You will not be able to directly exercise your right to vote with respect to the underlying Class A ordinary shares represented by your ADSs unless you withdraw such shares, and become the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened, you may not receive sufficient advance notice of the meeting to withdraw the underlying Class A ordinary shares represented by your ADSs and become the registered holder of such shares to allow you to attend the general meeting and to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition, under our currently effective memorandum and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the underlying Class A ordinary shares represented by your ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. If we ask for your instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We have agreed to give the depositary notice of shareholder meetings sufficiently in advance of such meetings. Nevertheless, we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the underlying Class A ordinary shares represented by your ADSs. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. The deposit agreements provide that if the depositary does not timely receive voting instructions from the ADS holders and if voting is by poll, then such holder shall be deemed, and the depositary shall deem such holder, to have instructed the depositary to give a discretionary proxy to a person we designate to vote the underlying Class A ordinary shares represented by the ADSs, with certain limited exceptions. This means that you may not be able to exercise your right to direct how the underlying Class A ordinary shares represented by your ADSs are voted and you may have no legal remedy if the underlying Class A ordinary shares represented your ADSs are not voted as you requested. You may experience dilution of your holdings due to the inability to participate in future rights offerings. We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreements, the depositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate are either exempt from registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the Securities Act. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We may be unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement with respect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as a result. You may be subject to limitations on the transfer of your ADSs. Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems it expedient in connection with the performance of its duties for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. 68 Table of Contents As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards. As a Cayman Islands exempted company listed on the Nasdaq Global Select Market, we are subject to the Nasdaq Stock Market corporate governance listing standards. However, the Nasdaq Stock Market rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq Stock Market corporate governance listing standards. For example, under Cayman Islands law, we are not required to (i) have a majority of independent directors in our board of directors, or (ii) obtain shareholders’ approval for material amendment to any share incentive plan. We may also opt to rely on additional home country practice exemptions in the future. As a result, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq Stock Market corporate governance listing standards applicable to U.S. domestic issuers. There can be no assurance that we will not be a passive foreign investment company for U.S. federal income tax purposes for any taxable year, which could subject U.S. holders of our ADSs or Class A ordinary shares to significant adverse U.S. federal income tax consequences. We will be a passive foreign investment company (“PFIC”) for a taxable year if either (a) 75% or more of our gross income for such year consists of certain types of “passive” income or (b) 50% or more of the value of our assets (generally determined on the basis of a quarterly average) during such year produce or are held for the production of passive income. Although the law in this regard is unclear, we intend to treat the VIE (including its subsidiaries) as being owned by us for U.S. federal income tax purposes because we are able to direct the activities of such entity and we are entitled to substantially all of its economic benefits, and, as a result, we consolidate its results of operations in our consolidated financial statements. Based on our current income and assets, it is possible that we were a PFIC for the taxable year ended December 31, 2025, and it is possible that we may be a PFIC for the current taxable year and for future taxable years, though there can be no assurances in this regard. Changes in the nature of our income or assets, or fluctuations in the market price of our Class A ordinary shares and/or ADSs, may cause us to become a PFIC for future taxable years because the value of our assets for the purpose of the asset test will generally be determined by reference to the market price of our ADSs, which may fluctuate considerably. PFIC status is a factual determination made annually after the close of each taxable year and is subject to uncertainty in several respects. Accordingly, there can be no assurances regarding our PFIC status for any taxable year. If we are a PFIC in any taxable year, a U.S. holder (as defined in “Item 10. Additional Information—E. Taxation—U.S. Federal Income Tax Considerations”) may incur significantly increased U.S. federal income tax on gain recognized on the sale or other disposition of our ADSs or Class A ordinary shares and on the receipt of certain distributions on our ADSs or Class A ordinary shares. Such holder may also be subject to burdensome reporting requirements. Further, if we are a PFIC for any year during which a U.S. holder holds our ADSs or Class A ordinary shares, we will generally continue to be treated as a PFIC for all succeeding years during which such U.S. holder holds our ADSs or Class A ordinary shares, although a shareholder election to terminate such deemed PFIC status may be available in certain circumstances. For more information, see “Item 10. Additional Information—E. Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Considerations” in this annual report. ​