TLDR
- PDD Holdings Q3 revenue reached $15.2 billion, up 9% but below analyst expectations of $15.4 billion
- Earnings per ADS hit 21.08 yuan, surpassing estimates of 16.59 yuan with a 13.4% year-over-year increase
- Revenue growth accelerated from 7% in Q2 to 9% in Q3, ending several quarters of deceleration
- Competition from Alibaba and JD.com pressures domestic business while Temu adapts to U.S. tariff changes
- Shares dropped 3.6% to $124.37 in premarket trading despite the earnings beat
PDD Holdings delivered mixed third quarter results that left investors wanting more. The e-commerce giant behind Temu and Pinduoduo exceeded earnings targets but came up short on the top line.
The company posted adjusted earnings of 21.08 yuan per American depositary share. That beat analyst expectations of 16.59 yuan by a comfortable margin. Earnings climbed 13.4% compared to the same quarter last year.
Revenue growth told a less impressive story. PDD generated $15.2 billion in quarterly revenue, representing 9% growth year-over-year. However, analysts had projected $15.4 billion in sales.
The stock sold off in premarket trading Tuesday. Shares declined 3.6% to $124.37 as investors focused on the revenue shortfall rather than the earnings beat.
Growth Rate Shows Improvement
The quarter actually brought some good news on the growth front. PDD’s 9% revenue expansion marked an acceleration from the previous quarter’s 7% rate.
That ended a string of declining growth rates that worried investors. The company had grown revenue 10% in Q1, 24% in Q4 2024, and 44% in Q3 2024.
VP of Finance Jun Liu addressed the slower pace. “Revenues growth continued to moderate, reflecting the ongoing evolution of the competitive landscape and external uncertainties,” Liu stated in the earnings release.
Online marketing services revenue increased 8% to $7.5 billion. Transaction services grew faster at 10%, reaching $7.7 billion for the quarter.
Net income attributable to shareholders jumped 17% to $4.1 billion. Operating profit edged higher to $3.5 billion from $3.4 billion in the year-ago period.
Competition Intensifies Across Markets
PDD faces mounting challenges in its home market. Chinese consumer spending remains weak while competitors Alibaba and JD.com have stepped up their game.
The Temu platform confronts its own headwinds internationally. Changes to U.S. tariff exemptions for small imports have forced the company to adjust its strategy. New rivals have also emerged in key global markets.
Chairman and Co-CEO Lei Chen struck an optimistic tone despite the challenges. “As we grow in scale, we are prepared to take on greater social responsibility,” Chen said in announcing the results.
Rising Investment Pressures Margins
Operating costs surged 18% as fulfillment fees, server costs, and payment processing expenses all increased. Research and development spending jumped 41% to $608.5 million on higher staff and infrastructure costs.
The company warned that financial performance would remain choppy. “As we roll out greater merchant support initiatives and ecosystem investments, financial results may continue to fluctuate,” Liu said.
Operating cash flow climbed to $6.4 billion from $3.9 billion a year earlier. The company held $59.5 billion in cash and short-term investments as of September 30.
PDD stock had been performing well before the latest results. Shares were up 33% year-to-date and hit a 52-week high of $139.41 on October 29. However, the stock broke below its 50-day moving average Friday and extended losses Monday before Tuesday’s premarket decline.
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