PDD Holdings' second-quarter revenue demonstrated significant year-over-year growth, but it ultimately fell short of market expectations, highlighting the competitive landscape that the Chinese e-commerce company navigates. The company, which operates the Pinduoduo social commerce platform in China as well as Temu, its North American e-commerce marketplace, reported adjusted earnings that surged to 23.24 renminbi ($3.20) per American depositary share for the three months ending June 30.
This marks a notable increase from the 10.47 renminbi reported in the same period a year earlier, surpassing analysts' projections of 20.02 renminbi. The company's revenue skyrocketed by 86% year over year, reaching 97.06 billion renminbi, yet it still fell short of the Capital IQ consensus forecast of 100.1 billion renminbi.
Co-Chief Executive Lei Chen shared insights into the company's progress, stating, "While encouraged by the solid progress we made in the past few quarters, we see many challenges ahead." The executive further acknowledged their readiness to endure short-term sacrifices and potential profitability declines as they adjust to the shifting market dynamics. In premarket trading, PDD’s American depositary receipts experienced a sharp drop of 17%.
Jun Liu, the company’s vice president of finance, elaborated on the current state during an earnings call, stating, "In the second quarter, our top line growth slowed down significantly compared to the last few quarters. Further slowdown is inevitable as a result of competition and global uncertainties." Diving deeper into the performance metrics, revenue derived from online marketing services increased by 29%, totaling 49.12 billion renminbi.
Meanwhile, transaction services revenue experienced a remarkable surge, climbing to 47.94 billion renminbi from the 14.35 billion renminbi reported in the same quarter the previous year. In terms of operating expenses, PDD noted a year-over-year rise of 48%, with total expenses nearing 30.8 billion renminbi.
This increase is largely attributed to escalated sales and marketing costs. Looking toward the future, Liu affirmed that the anticipated revenue growth would inevitably confront pressures stemming from intensified competition and external challenges. Additionally, profitability is expected to face negative impacts as the company adheres to its investment strategy. Chen reiterated this commitment, stating that PDD intends to "invest firmly" in refining supply chain efficiencies to navigate heightened competition within the e-commerce sector.
"This will be the key focus for our high-quality development going forward," he assured analysts. As the company strives to balance growth with sustainability, stakeholders will be keenly observing its strategic maneuvers amidst a landscape marked by ferocious competition and evolving market conditions..