PDD Holdings stock tumbled Tuesday after the Temu parent-company reported first quarter sales that missed expectations and a nearly 50% decrease in adjusted earnings. The e-commerce company said it was stepping up investments to support merchants and consumers against uncertainty.
PDD said that it earned an adjusted 11.41 yuan per American depositary receipt on sales of 95.67 billion yuan, or $13.28 billion, for the March-ended quarter. Analysts polled by FactSet projected the company to post adjusted earnings of 18.89 yuan per ADS on sales of 103.06 billion yuan.
Adjusted earnings decreased 44% compared to same period a year earlier. Sales increased 10%, slowing down further from the 24%, 44%, 86% and 131% growth PDD posted in the four previous quarters
PDD Holdings operates the Pinduoduo e-commerce platform in China and Temu internationally, including the U.S. It domestic business is facing challenges from a still-sluggish consumer spending environment in China. Temu, meanwhile, faces challenges from the U.S.-China trade war and the elimination of the de minimis tariff exemption for small imports from China into the U.S.
"As communicated previously, a slowdown in growth rate is expected as our business scales and challenges emerge," PDD's VP of Finance Jun Liu said in the news release. "This trend has been further accelerated by the changes in the external environment in the first quarter. Our financial results may continue to reflect the impact of sustained investments in the ecosystem as we support merchants and consumers through uncertain times."
On the stock market today, U.S.-listed PDD stock is down more than 14% at 102.06 in recent trading. PDD stock tumbled below its 21-day, 50-day and 200-day moving averages.
Temu's Trade Uncertainty
PDD's decade-old domestic website and app called Pinduoduo is challenging incumbents such as Alibaba Group and JD.com for e-commerce market share.
Meanwhile, PDD's Temu utilized big spending on advertising from PDD — including Super Bowl ads — to emerge as a challenger to Amazon and other global e-commerce brands.
However, growth has slowed significantly in recent quarters amid what the company called heightened e-commerce competition. Changes to U.S. trade policy have also weighed on PDD stock.
Shares for the company got a boost when the U.S. and China agreed to lower tariffs earlier this month, including on de minimis qualifying packages to American households. Temu is also shifting its fulfillment operations to store more products in local markets, rather than ship directly from merchants to consumers.
"No matter how policies shift, we will continue to strengthen our operations in the markets we serve, helping more local merchants grow on our platform and enabling more orders to be fulfilled from local warehouses," PDD Chairman Chen Lei said in a conference call with analysts Tuesday, according to a FactSet transcript. "And right now, we're seeing these merchants becoming more proactive with better stock inventory and more value passed on to consumers with differentiated products and services."
PDD is based in Dublin after moving its headquarters from China in 2023. The company does not separately break out sales for Temu within its quarterly results.
Separately, PDD pledged earlier this year to invest 100 billion yuan into initiatives that support merchants who sells through PDD's platforms. Temu sellers protested at PDD's headquarters last year over what they said were unfair penalties and other costs from the company.
"During a period of uncertainties when merchants face difficulties, we choose to invest more to help our merchants grow their business and reduce cost," Lei said.
PDD Stock Up 7% This Year
PDD's slide Tuesday is taking a big bite out of its 2025 gains. PDD's U.S. shares have now gained 7% so far this year. PDD stock is down 35% from 12 months ago.
Coming into the report, PDD stock had an IBD Composite Rating of 86 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one rating. The best growth stocks have a Composite Rating of 90 or better.
Further, PDD's IBD Relative Strength Rating was a weak 35 out of 99.
