Tuesday’s trading saw a sharp decline in Temu parent company PDD Holdings Inc. shares after the e-commerce giant failed quarterly earnings projections by a significant margin, citing the expenses incurred to protect customers and retailers from the impact of tariffs.
Companies who offer their goods directly to customers are becoming more and more competitive, according to the China-based business, giving Temu’s third-party marketplace model an advantage. The first-quarter results were also impacted by the expenses incurred to support those third-party merchants.
“In the first quarter, we made substantial investments in our platform ecosystem to support merchants and consumers amid rapid changes in the external environment,” Lei Chen, co-chief executive of PDD, stated.
In lunchtime trading, the U.S.-listed stock (PDD) fell 15.1%, setting it up for its largest one-day selloff since a record 28.5% decline on August 26, 2024.
PDD’s initiatives demonstrate how businesses on both sides of the trade war are being negatively impacted by tariffs; nevertheless, the Chinese company is experiencing a significant difference.
When Walmart Inc. (WMT) stated earlier this month that it could have to increase prices to cover increased tariff expenses, President Trump criticized the corporation and urged it to “eat the tariffs.” On the other hand, China’s National Subsidy Program, which aims to increase consumer spending, is supporting PDD’s efforts to help protect both the supply and demand for products from tariffs.
Also read: Walmart is allegedly reducing staff in an effort to save expenses and cope with tariffs.
PDD is helping merchants on the supply side by offering a support program worth RMB100 billion ($13.7 billion) to help them compete.
Since Temu is a third-party marketplace, which means it serves as a middleman between merchants and consumers, PDD feels it must help its merchants in the long run since it believes that its merchants are at a “clear disadvantage” compared to competitors who operate as first-party businesses.
Additionally, PDD supports customers on the demand side with initiatives like a discount program worth RMB10 billion ($1.4 billion). With the aid of government subsidies, the business is also maintaining some of its rates.
Co-CEO Jiazhen Zhao stated, “The platform will continue to benchmark prices against the national subsidy program and expand the promotion coverage to categories such as daily necessities,” according to a FactSet transcript of a teleconference with analysts following the company’s earnings.
PDD, meanwhile, posted first-quarter net income of RMB14.7 billion ($2.03 billion), a 47% decrease from the same period last year and far less than the average analyst forecast of RMB25.9 billion published by FactSet. In four years, that was the largest failure to meet bottom-line projections.
Although revenue increased by 10% to RMB95.7 billion, it fell short of the RMB103.1 billion forecast.
In 2025, PDD’s stock has increased 4.3%, the S&P 500 index SPX has increased by a little over 0.5%, and the iShares MSCI China ETF MCHI has increased by over 15%.
