Key Takeaways:
- PDD reported Q1 revenue of 106.23 billion yuan, missing consensus by 3.1 billion yuan
- Net income fell 15% year over year to 12.5 billion yuan
- Shares dropped 13%, hitting the lowest level since August 2023
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PDD Holdings plunges 13% as Q1 revenue misses estimates
PDD Holdings Inc. reported first-quarter revenue of 106.23 billion yuan ($15.67 billion), missing the 109.33 billion yuan average analyst estimate, as lingering economic weakness in China weighed on consumer spending.
"The macro environment remains challenging for domestic consumption, and competition has intensified," a company spokesperson said on the earnings call. PDD operates the Pinduoduo discount marketplace in China and the Temu platform internationally.
Net income attributable to ordinary shareholders fell 15 percent from a year earlier to 12.5 billion yuan, dragged by higher research and development expenses as well as increased order fulfillment and payment processing fees. The company did not provide formal guidance for the current quarter.
The results underscore the pressure on Chinese e-commerce companies as a prolonged property crisis and persistent job market concerns crimp household spending power. Rivals JD.com Inc. and Alibaba Group Holding Ltd. have rolled out steep promotions and discounts to defend market share, squeezing margins across the sector.
Temu, PDD's international fast-shipping platform, has emerged as a popular destination for budget-conscious shoppers globally, capturing demand from lower-income households. But the low-cost model of shipping goods directly from China faces growing regulatory scrutiny in several markets, adding uncertainty to the company's growth outlook.
Shares of the Shanghai-based company fell 13 percent in U.S. trading, reaching the lowest level since August 2023. The decline wipes out roughly $12 billion in market value, based on the company's prior closing price.
The selloff puts PDD at its cheapest valuation in more than two years on a price-to-earnings basis. Investors will watch for any updates on Temu's regulatory status and whether management signals a recovery in domestic demand on the next earnings call.
This article is for informational purposes only and does not constitute investment advice.
