PDD Holdings misses estimates, stock tumbles on revenue growth concerns

PDD Holdings (PDD) reported second-quarter revenue that fell short of analyst expectations, sending its shares plummeting over 25% as the company warned of slowing growth ahead.

The Chinese e-commerce giant posted revenue of RMB97.06 billion ($13.36 billion) for the quarter ended June 30, up 86% YoY but below the consensus estimate of RMB99.42 billion. Adjusted earnings per share came in at RMB23.24 ($3.20), beating expectations of RMB20.43.

Despite the earnings beat, investors focused on the company’s cautious outlook. PDD Holdings warned that revenue growth would “inevitably face pressure due to intensified competition and external challenges.”

“In the past quarter, our revenue growth rate slowed quarter-on-quarter,” said Jun Liu, VP of Finance. “Profitability will also likely be impacted as we continue to invest resolutely.”

The company’s operating profit surged 156% YoY to RMB32.56 billion ($4.48 billion), while net income attributable to shareholders jumped 144% to RMB32.01 billion ($4.40 billion).

PDD Holdings’ Chairman and Co-CEO Lei Chen emphasized the company’s commitment to high-quality development, stating, “We are prepared to accept short-term sacrifices and potential decline in profitability.”

The e-commerce firm ended the quarter with RMB284.9 billion ($39.2 billion) in cash, cash equivalents, and short-term investments, up from RMB217.2 billion at the end of 2023.

Following the results, analysts at Citi said that due to PDD’s limited communication, it is not surprising that it “delivers a set of results that missed consensus expectation given estimates have been revised up substantially after several quarters of strong beat.”

“We view the magnitude of the revs miss as slightly bigger-than-expected likely attributed to slowing macro and intensified competition in domestic China landscape and normalizing growth of Temu penetration relative to expectation,” they added.

Meanwhile, analysts at JPMorgan stated: “We expect PDD’s share price to respond negatively to another strong yet just inline result with a small miss on revenue, given already high expectations, based on feedback from investors we talked to recently. The key concern will be on a clear deceleration of online market service revenue growth (29% YoY vs. 56% YoY in 1Q24, 2% above JPMe but 3% below consensus), which will raise questions about PDD’s ability to further increase monetization/grow domestic revenue.”