PDD Holdings' Fourth-Quarter Revenue Miss: A Wake-Up Call for Investors

In the ever-evolving world of e-commerce, PDD Holdings Inc., the parent company of Pinduoduo and Temu, has been a standout performer. However, the company's recent fourth-quarter financial results have raised some eyebrows among investors. PDD Holdings reported a 24% increase in total revenues to RMB110,610.1 million (US$15,153.5 million), but this growth rate was slower than in previous quarters, indicating a deceleration in revenue expansion. The company's net income also rose by 18% to RMB27,446.6 million (US$3,760.2 million), which, while positive, was slower than the 61% rise in the third quarter and the more than twofold increase a year earlier.

The primary factors contributing to PDD Holdings' slower revenue growth in the fourth quarter of 2024 include slower-than-expected revenue growth from transaction services and increased competition. According to Jefferies analysts, "PDD's top-line miss was due to slower-than-expected revenue growth from transaction services, while revenue from online marketing services and others was in line with consensus." This indicates that while some revenue streams remained stable, the transaction services, which are a significant part of the company's revenue, did not perform as well as anticipated.

Comparing this to previous quarters, PDD Holdings had experienced much higher growth rates. For instance, in the third quarter of 2024, the company reported a 61% rise in net profit, and in the fourth quarter of 2023, the company saw a more than twofold increase in net profit. The slowing momentum in the fourth quarter of 2024 is a stark contrast to these previous high growth rates. The company's vice president of finance, Jun Liu, acknowledged this shift, stating, "The easing momentum contrasted sharply with the stunning growth rates the company delivered in past years." This highlights the significant deceleration in PDD Holdings' revenue growth in the fourth quarter of 2024 compared to previous periods.



PDD Holdings' financial performance in the fourth quarter of 2024 showed a 24% increase in total revenues to RMB110,610.1 million (US$15,153.5 million), driven by growth in online marketing services and transaction services. However, this growth rate was slower than in previous quarters, indicating a deceleration in revenue expansion. The company's net income also rose by 18% to RMB27,446.6 million (US$3,760.2 million), which, while positive, was slower than the 61% rise in the third quarter and the more than twofold increase a year earlier.

In comparison, Alibaba Group reported a 7.6% increase in revenue for the latest quarter to 280 billion yuan, marking its fastest pace of revenue growth since late 2023. JD.com nearly tripled its quarterly net profit as revenue climbed 13% to 346.99 billion yuan. These figures suggest that while PDD Holdings continues to grow, its competitors are experiencing stronger revenue growth and profitability.

The insights drawn from these comparisons are that PDD Holdings is facing intensified competition in the e-commerce sector. The slower revenue growth and deceleration in profit expansion indicate that the company may be struggling to maintain its market share against competitors like Alibaba Group and JD.com. Additionally, the regulatory scrutiny and geopolitical tensions mentioned in the materials further complicate PDD Holdings' operating environment, making it challenging to sustain rapid growth.

PDD Holdings is implementing several strategic initiatives to address the challenges highlighted in the fourth-quarter results. One of the key initiatives is the continued investment in the platform ecosystem. According to Jun Liu, PDD's vice president of finance, the company will prioritize investments in the platform ecosystem as the cornerstone of its long-term value creation strategy. This focus on the platform ecosystem is aimed at driving sustainable growth for both the platform and the broader supply chain. By leveraging targeted innovations in platform operations and industry support policies, PDD aims to benefit the broader e-commerce ecosystem. This strategy is expected to create value for all participants, including consumers and quality merchants, by giving back to consumers and supporting quality merchants.

Additionally, PDD Holdings is committed to driving high-quality development strategies. Lei Chen, the Chairman and Co-Chief Executive Officer of PDD Holdings, emphasized that the company remains committed to driving sustainable growth for both its platform ecosystem and the broader supply chain. Through targeted innovations in platform operations and industry support policies, PDD continues to drive its high-quality development strategy to benefit the broader e-commerce ecosystem. This strategy is expected to create value for all participants, including consumers and quality merchants, by giving back to consumers and supporting quality merchants.

These initiatives are expected to have a positive impact on PDD Holdings' future growth prospects. By prioritizing investments in the platform ecosystem and driving high-quality development strategies, PDD is positioning itself to navigate the challenges in the e-commerce sector and maintain its competitive edge. The company's focus on creating value for all participants in the ecosystem is expected to drive sustainable growth and enhance its market position.