Chinese e-commerce giant PDD Holdings, the parent company of bargain shopping platform Temu, experienced a 47% plunge in first-quarter net profit, falling to 14.74 billion yuan ($2.05billion). The downturn comes as the company grapples with fierce competition at home and economic uncertainty abroad.
The company’s U.S.-listed shares nosedived over 17% following the earnings report. Analysts cite a disappointing operating margin, likely dented by newly imposed U.S. tariffs, as a key reason behind the shortfall. Vinci Zhang of MScience noted, “The significant earnings miss stems from weaker-than-expected margins, possibly due to tariff pressures.”
Despite government-led incentives and aggressive retailer discounts aimed at spurring domestic spending, China’s deepening property crisis continues to restrain consumer confidence. Even Pinduoduo, PDD’s domestic star known for its low-price strategy, has not been immune. Bo Pei of U.S. Tiger Securities remarked, “Declining consumption, escalating competition, and global trade tension are all dragging down growth.”
Marketing expenses and promotional campaigns, while seen as strategic for strengthening merchant partnerships and user engagement, have also weighed heavily on near-term profitability. PDD emphasized these investments were meant to safeguard the platform’s long-term ecosystem.
At home, PDD faces a three-way e-commerce war with Alibaba and JD.com, all vying for dominance. This has triggered a sustained price war, as platforms compete to win over value-conscious shoppers. While Alibaba’s recent earnings disappointed, JD.com beat expectations, helped by a government-sponsored trade-in program, especially in big-ticket segments like electronics and appliances.
On the international front, Temu faces uncertainty due to escalating U.S.-China trade tensions. Although there’s been a temporary 90-day pause in tariff increases, the back-and-forth has disrupted global operations. PDD Co-CEO Chen Lei acknowledged the challenges, stating, “Sudden shifts in trade policy have burdened our merchants significantly.”
However, the company remains committed to keeping prices stable. Leveraging the U.S. “de minimis” exemption for goods under $800, Temu has thus far managed to bypass certain tariffs and maintain competitive pricing. Chen reiterated their strategic pivot toward fulfilling more orders via local merchants, aiming for supply chain resilience and market adaptation.
PDD also reported quarterly revenue of 95.67 billion yuan ($13.30 billion)—falling short of analysts’ expectations of 102.51 billion yuan, according to LSEG data—further highlighting the pressure the company faces in a volatile global landscape.