(Bloomberg) — PDD Holdings Inc. reported sales that missed estimates, lending weight to fears that China’s slowdown is hurting its biggest tech companies more than anticipated.
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The Chinese-owned e-commerce platform reported revenue of 99.4 billion yuan ($13.7 billion) in the September quarter, versus the average analyst estimate of 102.8 billion yuan. Net income was 25 billion yuan, compared to a projected 26.6 billion yuan. PDD’s shares slid as much as 16% in pre-market US trading.
The disappointing results highlight how PDD, despite a thriving overseas business anchored by hot shopping app Temu, is grappling with an anemic Chinese consumer economy. A quarter ago, PDD issued a surprisingly strong warning about a slowdown in the world’s No. 2 economy and talked up challenges including uncertainties in the global environment.
That’s offsetting some of PDD’s gains from abroad. It’s been spending big on Temu to drive its global presence, helping push growth well above that of rivals Alibaba Group Holding Ltd. and JD.com Inc. Temu became one of the most downloaded US apps after a splashy 2022 debut, and has begun challenging even Amazon.com Inc. in certain segments.
Temu is also encountering growing regulatory scrutiny following its meteoric rise overseas.
The European Union has opened an investigation into the e-commerce platform, looking into whether the company is doing enough to combat sales of illegal products. The EU said it suspects the company is violating its new Digital Services Act, a law aimed at stamping out illegal content and disinformation online. It’s also unclear how a Trump administration will wield tariffs as a political tool, potentially disrupting the cross-border trade on which Temu depends.
“There’s uncertainty on potential tariff change and increasing pushback from more countries related to its ‘cheap’ prices,” Citigroup analyst Alicia Yap wrote ahead of the results. “While still growing robustly, Temu is also facing multiple headwinds.”
At home, the company in past years has combined low prices with aggressive rural expansion and game-like elements on its platform to grab market share from Alibaba and JD. Those two rivals have recently begun to team up on logistics and payments.
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