PDD Holdings Inc (NASDAQ:PDD), the parent company of discount online retailer Temu, saw its US-listed shares plunge in early trade on Tuesday as its quarterly earnings fell short of expectations.
For the first quarter, profit fell by 47% to RMB14.74 billion (US$2.03 billion), down from RMB28 billion in the year-ago quarter.
Revenue was up 10% year-over-year to about RMB95.67 billion (US$13.3 billion), marking its slowest quarterly growth rate since early 2022 and short of Street estimates of RMB102.5 billion.
Online marketing services and other revenue grew 15%, ahead of the consensus 13.5%, while transaction services grew 6%, far below the 26% growth expected.
PDD Holdings co-CEO Lei Chen attributed the decline in profit to strategic investments in its platform amid “rapid changes in the external environment,” indirectly referring to global tariffs.
Jefferies analysts maintained their ‘Buy’ rating on PDD Holdings following the weaker-than-expected Q1 report, highlighting the company’s long-term potential despite short-term execution issues.
They noted that both Q1 revenue and profitability came in below consensus and internal estimates, but reiterated a price target of $156, representing a 31% upside from PDD Holdings’ share price at the time of writing.
PDD Holdings’ earnings miss was more pronounced at the bottom line, the analyst highlighted. Non-GAAP net profit reached RMB16.9 billion, well below the RMB27.9 billion consensus estimate. Higher-than-expected sales and marketing expenses, RMB33.4 billion versus a forecasted RMB29.5 billion, were a key driver of the profit shortfall.
Jefferies flagged several areas to watch at PDD Holdings, including the potential impact of new tariffs on Temu, strategic updates for international expansion, trends in online marketing take rates, and ongoing cost control.
PDD Holdings’ US-listed shares fell 17% to about $99 shortly after markets opened on Tuesday.