PDD Holdings, which operates the e-commerce platforms Pinduoduo and Temu, reported quarterly revenue that fell short of market expectations, reflecting ongoing weak demand in China despite significant discounts aimed at stimulating spending.
While government stimulus measures and aggressive price cuts from retailers have attracted some consumers, PDD's sales figures reveal that the sluggishness of the Chinese economy continues to pressure consumer spending.
The company is encountering strong competition from industry leaders, both of which have recently reported better-than-expected revenues. PDD operates Pinduoduo solely in China and Temu internationally.
"We were expecting a miss because Alibaba's outperformance indicated a share gain versus PDD. Alibaba's investment in merchant retention has naturally disadvantages PDD, as they share overlapping merchants and categories," said M Science analyst Vinci Zhang.
Additionally, JD.com's strengths in electronics and appliances position it more favorably compared to PDD in leveraging increased purchases in these product categories, Zhang noted.
For the three months ending December 31, PDD reported revenue of 110.61 billion yuan ($15.3 billion), below analysts' average estimate of 115.38 billion yuan.
Despite this, the company posted an adjusted profit of 20.15 yuan per American Depository Share, exceeding estimates of 19.81 yuan, benefiting from higher interest and investment income as well as favorable currency exchange rates.
U.S.-listed shares of PDD saw an increase of approximately 2% in early trading.
PDD has also benefited from the rising popularity of Temu in international markets, attracting budget-conscious consumers in major regions like the U.S. and Europe with extremely competitive pricing on a wide range of products.
However, Temu faces potential challenges from proposed policy changes regarding the de minimis exemption, which currently allows imported items valued under $800 to bypass tariffs and customs procedures. This exemption has enabled Chinese retailers, including Temu and Shein, to maintain low prices and increase market share.
"For our global business, as we've mentioned in previous quarters, shifts in the external environment are accelerating, and competition is fierce," said co-CEO Chen Lei. "These external changes will inevitably pose challenges to our global business, prompting us to explore new business models and innovative localized supply chain solutions."
In January, the number of de minimis shipments entering the U.S. from China reached 89 million, a 12% increase compared to the previous year. U.S. President Donald Trump recently moved to suspend the de minimis exemption but later paused the repeal due to rapid changes causing disruptions for customs inspectors, postal services, and online retailers. Even amidst this turmoil, there was a slight uptick in de minimis shipments from China in February compared to the same month in 2024.