PDD Q3 Revenue Rises 9% as Temu Slashes Prices to Offset U.S. Tax Hurdles

PDD Holdings Inc.

Earnings Report Analysis

PDD Holdings Inc., the parent company of Chinese e-commerce platform Pinduoduo, reported revenue of RMB 108.28 billion ($15.21 billion) for Q3 2025, reflecting a 9% year-over-year increase. Net income also saw a 17% rise to RMB 29.33 billion ($4.12 billion) according to reports. The figures suggest a gradual recovery in the company's domestic business amid a challenging economic environment and intensified competition from rivals like Alibaba and JD.com as research shows. However, the results fell short of expectations in some areas, with revenue missing estimates by $90 million according to Seeking Alpha.

The report highlighted continued challenges in PDD's international operations, particularly with its Temu platform. The closure of a key U.S. tax loophole significantly impacted sales, prompting Temu to slash prices as part of a strategic push to retain market share. Some products saw price reductions of up to 60%.

The company's management acknowledged the need to navigate a complex and increasingly competitive global e-commerce landscape while maintaining long-term growth.

Operating profit for the quarter was RMB 25.03 billion ($3.52 billion), slightly higher than the same period in 2024. Non-GAAP net income attributable to ordinary shareholders rose 14% to RMB 31.38 billion ($4.41 billion) according to Investing.com. PDD's chairman and co-CEO, Lei Chen, emphasized the company's commitment to long-term growth and social responsibility, particularly as it marks its tenth anniversary. The firm also noted the importance of investing in merchant support initiatives to drive sustainable development according to QuiverQuant.

Challenges in the Domestic and Global Markets

PDD's growth in China remains mixed. While the recent revenue figures indicate a slight upturn, the company continues to grapple with volatile consumer spending and rising competition. Rivals such as Alibaba and JD.com are aggressively expanding into areas like food delivery and rapid commerce, intensifying the pressure on PDD to innovate and retain its market position as Bloomberg reports. The Chinese economy's weak trajectory also remains a concern, with the company noting external uncertainties as a factor in its performance according to Investing.com.

Internationally, Temu's struggles are more pronounced. The platform's U.S. sales have declined following the closure of the de minimis tariff exemption, which previously allowed small parcels to enter the country tax-free. Monthly active users for Temu dropped as much as 46% in the April–June period, according to Bloomberg Intelligence. To counter this, Temu is attempting a price-driven comeback, with steep discounts on a wide range of products. However, such a strategy may not be sustainable in the long run, especially with rising costs and the need for continued investment in logistics and marketing as Seeking Alpha notes.

Market and Institutional Reactions

The stock initially responded positively to the earnings report but soon gave up its gains in U.S. pre-market trading. Institutional investors have shown a mixed outlook, with some increasing their stakes while others have reduced holdings. AE Wealth Management LLC increased its position by 32.3%, while Allianz SE and the State of New Jersey Common Pension Fund D cut their stakes significantly according to reports. These divergent moves reflect differing views on PDD's ability to navigate current challenges and maintain its growth trajectory.

Analysts, however, remain largely optimistic. PDD has an average 12-month price target of $145.88, suggesting an 11.4% upside from its current price according to analysis. Multiple firms, including Barclays, Benchmark, and Jefferies, have issued "Buy" ratings or "Overweight" recommendations, with target prices ranging from $120 to $165 according to Investing.com. Despite these positive signals, there are also cautionary voices. Zacks Research downgraded the stock to "Hold," and New Street Research cut its rating to "Neutral," citing uncertainties in the competitive landscape and macroeconomic environment according to MarketBeat.

For investors, the key question is whether PDD can adapt its business model to these evolving conditions. The company's strong cash position, with RMB 423.8 billion ($59.5 billion) in cash and short-term investments, provides a buffer against potential headwinds according to QuiverQuant. However, continued innovation, cost management, and a clear differentiation strategy will be essential for sustaining long-term growth and profitability.