By Tracy Qu
The Chinese owner of bargain-shopping app Temu reported a smaller-than-expected profit decline in the second quarter despite revenue growth hitting a three-and-a-half-year low as tariffs and increased support for domestic merchants weighed on profitability.
Net profit fell 3.9% from a year earlier to 30.75 billion yuan, equivalent to $4.29 billion, PDD Holdings said, better than the consensus estimate of a 40% decline in a FactSet poll. Revenue narrowly missed expectations, rising 7.1% to 103.98 billion yuan for its slowest pace of growth since the fourth quarter of 2021.
PDD on Monday also warned of continued pressure on results in the near future. "As we remain focused on long-term value creation, the sustained investments may continue to weigh on short-term profitability," Jun Liu, vice president of finance, said in a filing.
The mixed results reflect the challenging landscape PDD is navigating, with both competition and trade barriers rising. E-commerce sites Temu and Shein had for years significantly benefited from the de minimis provision that allowed low-value goods to enter the U.S. duty-free--a tariff exemption the Trump administration ended for China and Hong Kong in early May and is set to end for all U.S. trading partners on Friday.
Temu has been actively seeking solutions, such as shifting its focus to markets outside the U.S. and encouraging merchants to stockpile goods in U.S. warehouses. The latter move has helped keep prices stable amid tariff pressure but has also eroded much of the bargain site's price advantage. Still, any slowdown in U.S. gross merchandise value will likely be offset by solid growth in Europe and an aggressive ramp-up in Brazil, analysts at Citi wrote in a recent research note.
PDD doesn't break out revenue for Temu. The bulk of its sales comes from China, analysts say.
At home, the company's Pinduoduo business faces fierce competition from e-commerce giants Alibaba Group and JD.com, as well as newer players such as ByteDance's Douyin, the sister app to TikTok in China.
The Chinese bargain platform also recently launched a multibillion-dollar initiative to strengthen its e-commerce ecosystem and support merchants, a major drag on profitability.
Investor interest in PDD's stock has waned amid the uncertainty over when its profit decline will stabilize, the Citi analysts said. However, implementing higher prices and logistics fees, as well as cuts to sales and marketing spending by Temu, will improve the profit profile of the company's overseas business, they said.
Nasdaq-listed PDD has risen 31% so far this year but remains well below its 2024 highs. The company's American depositary receipts were recently about 2% higher in premarket trading after the earnings release.
Write to Tracy Qu at tracy.qu@wsj.com
(END) Dow Jones Newswires
August 25, 2025 08:39 ET (12:39 GMT)
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