Temu-Owner PDD’s Revenue Misses Estimates as Expansions Slow

PDD Holdings Inc.’s revenue grew a less-than-anticipated 24 percent after intensifying domestic competition and US tariffs crimped its expansion.

The e-commerce company reported revenue of 110.6 billion yuan ($15.3 billion) for the December quarter. Net income was up 18 percent to 27.4 billion yuan. PDD’s shares in the US dropped more than 7 percent pre-market at one point.

Executives acknowledged challenges from growing global uncertainties and said intense competitions also affected short-term growth. They reiterated their increasing support for merchants and efforts to boost consumer experience.

“As mentioned in previous quarters, our significant ecosystem investment coupled with fast-changing external environment and intensified competition landscape will impact short-term financials,” chairman and co-chief executive officer Chen Lei told analysts on a call on Thursday.

PDD’s results comes after rivals JD.com Inc. and Alibaba Group Holding Ltd. reported better-than-projected sales for the December quarter, when Beijing ramped up policies such as subsidies and trade-in incentives to boost spending. Beijing has prioritized expanding domestic demand as the country seeks to offset the impact of US President Donald Trump’s tariffs and achieve a growth target of around 5 percent.

PDD has warned about domestic competition since August and predicted that its profitability will trend downward over time. It is also facing increasing uncertainties abroad as its fast-expanding global e-commerce platform Temu encounters an economic and regulatory backlash around the world.

Temu, the world’s largest discount online retailer, is grappling with elevated US tariffs on Chinese products and the potential closure of a tax loophole for small-value parcels.

That last would remove a key advantage that Temu and Shein have used to expand in the US at the expense of Amazon.com Inc. The Chinese retailers may also be forced eventually to subsidize merchants on their platforms, given the increased shipping expense. In response, PDD and Shein have begun diversifying their logistics chains, expanding networks in the US and moving to bigger bulk orders.

What Bloomberg Intelligence Says

PDD’s 4Q adjusted operating-profit miss of 6 percent — the second straight quarter the metric trailed consensus — and lower-than-expected revenue gains reflect heightened financial risks from Temu’s growing global business. Amid disruptions to both supply and demand from US tariff hikes on products made in China, PDD will struggle to avert operating-profit declines if the revenue-growth pace stays below 25 percent.

Temu had already been shipping more inventory in bulk to the US and paying tariffs to have it stored in warehouses near big cities to narrow delivery times. That shift should help blunt the effects of any de minimis change, but will still apply pressure on its discount model.

Last year, companies including Shein and Temu shipped some $46 billion of small parcels to the US that had a declared value of less than $800, according to estimates from Nomura Holdings Inc. That represented about 11 percent of all US-reported imports from China.

Elsewhere, the European Union late last year has launched an investigation into whether Temu is selling illegal products or has an “additive design of the service,” while Vietnam suspended the platform after the it failed to meet a government re-registration deadline.

By Luz Ding

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