PDD's Profit Surge Can't Offset E-Commerce Growth Woes

PDD Holdings Inc. (PDD), the parent company of China's Pinduoduo and the U.S.-focused Temu, reported mixed third-quarter results in 2025, sending its shares down 3.6% in premarket trading despite surpassing earnings expectations. While the company's non-GAAP earnings per American depositary share (EPADS) of $2.96 beat analyst estimates by $0.63, revenue of $15.21 billion fell short of forecasts by $90 million, reflecting moderating growth amid intensifying competition and external challenges.

The revenue shortfall, which marked a 9% year-over-year increase but missed the consensus estimate of $15.32 billion, underscored broader pressures facing the e-commerce giant. In China, Pinduoduo faces heightened competition from rivals like Alibaba Group and JD.com, which have ramped up discounts to capture market share during a period of weak consumer spending. Internationally, Temu is recalibrating operations after the U.S. eliminated the de minimis tariff exemption for small imports, while new global competitors emerge.

Profitability, however, showed resilience. Adjusted earnings per share rose 13.4% year-over-year to 21.08 yuan, outpacing estimates by 23%. Non-GAAP net income attributable to shareholders grew 14% to $4.41 billion, driven by cost discipline and operational efficiency. Operating profit inched up to $3.52 billion, reflecting a 17% year-over-year increase in net income attributable to ordinary shareholders.

The results, while highlighting robust profitability, revealed strategic trade-offs. PDD's VP of Finance, Jun Liu, noted that "revenue growth continued to moderate, reflecting the ongoing evolution of the competitive landscape and external uncertainties," as the company invests in merchant support initiatives and ecosystem development. Research and development expenses surged 41% year-over-year to $608.5 million, attributed to expanded staff and server costs.

Cash reserves remained a bright spot, with the company holding $59.5 billion in cash, cash equivalents, and short-term investments as of September 30, 2025, up from $47.1 billion at the end of 2024. Executives emphasized long-term commitments to platform sustainability, with Co-CEO Lei Chen stating, "As we grow in scale, we are prepared to take on greater social responsibility" as the company invests in merchant support.

Looking ahead, PDD's path to growth remains clouded by macroeconomic headwinds. The company's revenue growth, while improving from 7% in Q2 to 9% in Q3, lags behind the explosive expansion rates of 24% to 86% seen in 2023 and 2024. Analysts project Q4 2025 revenue of $17.4 billion, but PDD's ability to meet these targets will depend on navigating regulatory shifts, competitive pricing wars, and global supply-chain adjustments.