Temu's Parent Company Suffers Major Q1 Profit Drop, Stock Plummets

The worrying first-quarter results for 2025 announced by PDD Holdings, the parent company of the discount e-commerce platform Temu, led to a significant drop in its share price.

The company announced that its total revenue for Q1 was 95.67 billion yuan (approximately 13.18 billion US dollars), representing a year-on-year increase of 10%. By contrast, the growth rates of the first four quarters were 24%, 44%, 86% and 131% respectively.

The slight increase in revenue was masked by the sharp decline in operating profit and net profit attributable to shareholders. Operating profit dropped significantly by 38% to 16.09 billion yuan (approximately 2.22 billion US dollars), and net profit decreased from 27.99 billion yuan in the previous year to 14.74 billion yuan (approximately 2.03 billion US dollars).

The increase in operating expenses is a key factor for the decline in profits of PDD Holdings. To maintain a competitive edge in the highly competitive e-commerce sector, PDD reported a 37% surge in operating expenses and a 43% increase in sales and marketing costs in the first quarter. 

The management emphasized that these investments are crucial for long-term growth, especially in response to global trade uncertainties and increasingly fierce competition from domestic giants such as Alibaba and JD.com, as well as international giants like Amazon.

After the release of the financial report, the stocks of PDD Holdings listed in the United States suffered a heavy blow, dropping by more than 13% in pre-market trading. Earlier this month, China and the United States agreed to lower tariffs, including those on packages from US households that meet the minimum conditions, which boosted the company's share price. However, the latest financial report data has once again undermined investors' confidence.

Source: TradingView

Tuesday's decline severely eroded its gains in 2025, having risen by only 7% so far this year. The share price of PDD has dropped by 35% compared to 12 months ago. Analysts pointed out that the lower-than-expected operating profit margin and concerns over the slowdown in revenue growth were the main reasons for the decline in its share price.

However, the cash flow situation of PDD Holdings remains stable. As of March 31, 2025, its total cash and equivalents reached 364.5 billion yuan (approximately 50.2 billion US dollars).

PDD Holdings operates two major e-commerce platforms. One is Pinduoduo targeting the Chinese market, and the other is Temu targeting other markets including the United States. However, Pinduoduo is currently facing the challenge of weak consumer demand in China, while Temu is confronted with the uncertainty of tariff policies between China and the United States.