Revenue Misses Market Estimates

PDD Holdings (NASDAQ:PDD) reported quarterly revenue on Monday, falling short of market expectations. The company’s e-commerce platform, Pinduoduo, struggled due to decreased consumer spending, leading to a significant decline in PDD stock during early trading. This downturn in consumer spending has been exacerbated by a weak economy, ongoing issues in the property sector, and high unemployment rates in China, resulting in reduced purchases across retail and e-commerce sectors.

Increased Competition and Investment Challenges

Despite Pinduoduo’s appeal to cost-conscious consumers through low prices and discounts, competitive pressure has intensified as rivals boost their promotional efforts. PDD has announced plans to invest significantly in improving the platform’s trust and safety features, supporting high-quality merchants, and addressing the challenges posed by low-quality vendors. The company anticipates that revenue growth will face considerable pressure from both heightened competition and external economic factors, which may also impact profitability.

In addition to PDD Holdings, other prominent Chinese e-commerce companies have encountered challenges. Alibaba Group Holding Limited (NYSE:BABA) also missed revenue estimates earlier this month due to weaker domestic e-commerce sales, while JD.com, Inc. (NASDAQ:JD) reported a modest 1.2% increase in quarterly revenue.

For the second quarter, PDD reported revenue of 97.06 billion yuan (approximately $13.64 billion), falling short of analysts’ average estimate of 100 billion yuan. Operating expenses surged by 48% as the company invested in marketing and promotions to attract shoppers, with general and administrative costs more than tripling to 1.84 billion yuan due to increased staff-related expenses.