PDD Holdings (NASDAQ:PDD) exceeded first-quarter revenue expectations, driven by its international shopping site Temu and the increasing consumer interest in its Chinese discount e-commerce platform Pinduoduo (NASDAQ:PDD).
According to data from the London Stock Exchange Group, the company experienced a remarkable 131% increase in revenue, reaching 86.81 billion yuan ($11.99 billion) in the first quarter. This figure surpassed analysts’ average estimate of 75.66 billion yuan. As a result of this impressive performance, PDD stock surged by 5.7% in pre-market trading upon the announcement.
PDD stock rose by 5.7% in pre-market trading following the announcement.
In China, consumers have increasingly turned to more affordable shopping platforms like Pinduoduo and Bytedance’s Douyin amid a property sector downturn and rising local debt, which have impacted the country’s economic growth.
Temu, Pinduoduo’s affiliate app, offers a wide range of products, many of which are made in China, at discounted prices. Since its launch in September 2022, its popularity has grown, leading to heightened competition with e-commerce giants such as Shein and Amazon in the United States and other markets.
Rivals Alibaba (NYSE:BABA) and JD.com (NASDAQ:JD) also reported revenue that exceeded market expectations last week, expressing optimism about consumer confidence for the rest of the year.
During a call with analysts following the earnings release, PDD’s co-CEO Chen Lei acknowledged intense competition in the first quarter, noting that consumers are increasingly comfortable shopping across multiple platforms rather than sticking to just one.
PDD’s net income surged to 28 billion yuan from 8.1 billion yuan a year ago. Its earnings per share (EPS) of 20.72 yuan significantly outperformed analysts’ expectations of 10.07 yuan, according to LSEG data.
However, the cost of revenue increased by 194% to 32.7 billion yuan, outpacing the rise in revenue. Analysts had anticipated the cost of goods sold to reach 30.78 billion yuan in the first quarter, according to a poll by LSEG.
PDD attributed the surge in cost of revenue primarily to higher fulfillment fees, payment processing fees, maintenance costs, and call center expenses.
Bernstein analysts estimated that Temu allocated over $1 billion to advertising outside the Asia-Pacific region last year.
Temu has faced criticism from consumer groups, including the pan-European consumer organization BEUC, which recently filed a complaint with the European Commission regarding the information provided by Temu about its sellers and the compliance of its listed products with EU safety standards.
Temu, having recently entered the EU market, has expressed its commitment to adapting its services to match local customs and preferences. The company emphasizes its dedication to fully complying with the laws and regulations of each market it serves.
Featured Image: Megapixl
Author Faith Yakubu 
