BRIEF: PDD profit tumbles, shares sink

Bargain e-commerce platform operator PDD Holdings (PDD.US) reported Tuesday that its first-quarter revenue rose 10% year-over-year to 95.67 billion yuan ($13.2 billion), falling short of market expectations for 101.6 billion yuan. Meanwhile, the company, which operates the Temu e-commerce service outside China, said its net profit plunged 47% to 14.74 billion yuan.

The company’s sales and marketing expenses surged 43% to 23.4 billion yuan during the period, while its administrative costs declined 8% to 1.82 billion yuan. Its R&D spending increased 22% year-over-year to 3.58 billion yuan.

Chairman and Co-CEO Chen Lei attributed the slower-than-expected revenue growth to rapid shifts in the external environment and a mismatch between the company’s business investments and return cycles, while ongoing ecosystem investments weighed on its profitability. He added that as PDD communicated in previous quarters, slowing growth rates have become inevitable as the company’s business scales up and new challenges emerge.

The company has rolled out a new “100 Billion Yuan Support” strategy this year, building on existing merchant friendly initiatives like its “10 Billion Yuan Relief” program to support its merchants as China’s economy slows. Such substantial financial commitments are aimed at bolstering both supply and demand over its platforms through continued fee reductions for merchants and accelerated industrial upgrades.

PDD’s U.S.-listed shares tumbled nearly 14% to close at $102.98 on Tuesday after the announcement.

By Lau Chi Hang

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