PDD Holdings Surpasses Q2 Estimates Amid Tariff Pressure, Temu Competes

PDD Holdings, the parent company of Temu, reported Q2 results that exceeded analysts' estimates despite the loss of a key US tariff exemption. Revenue rose 7% YoY to CNY103.98 billion ($14.51 billion), while adjusted earnings per ADS reached CNY22.07 ($3.08). However, intense competition weighed on revenue growth, and the company's shares rose 1% in premarket trading.

PDD Holdings, the parent company of the fast-growing e-commerce platform Temu, reported its second-quarter (Q2) financial results that exceeded analysts' estimates. The company's revenue rose 7% year-over-year (YoY) to CNY103.98 billion ($14.51 billion), while adjusted earnings per American Depositary Share (ADS) reached CNY22.07 ($3.08) [1].

The results were notable despite the expiration of a key U.S. tariff exemption known as the de minimis rule, which allowed foreign firms to avoid tariffs on shipments worth less than $800. The loss of this exemption put pressure on Chinese bargain sites like Temu and Shein. However, the company's performance was buoyed by a stimulus boost from Beijing, which increased subsidies for consumer goods such as phones and appliances [1].

PDD's revenue growth, however, moderated compared to the 10% jump it posted in the first quarter. This was attributed to intense competition in the e-commerce sector. The company's shares rose 1% in premarket trading following the announcement [1].

During the conference call, PDD Finance Vice President Jun Liu noted that while revenues grew, the company's focus on long-term value creation may continue to weigh on short-term profitability. Co-CEO Jiazhen Zhao also warned that the quarter's profit levels were not sustainable, attributing the strong results to positive e-commerce seasonality [2].

The company's non-GAAP operating profit beat expectations for the first time in four quarters, aided by lower-than-expected marketing expenses. While margins are unlikely to return to prior highs, early signs suggest that profitability may prove more resilient as the company sustains investment and prioritizes long-term growth over short-term gains [2].

References:

[1] https://www.investopedia.com/temu-parent-pdds-results-beat-estimates-despite-tariff-exemption-loss-11796653
[2] https://sherwood.news/markets/cost-controls-by-temu-parent-pdd-holdings-fuel-big-q2-profit-beat/