Temu parent PDD Holdings Inc. (NASDAQ:PDD) stock declined in premarket on Tuesday after the company reported fiscal first-quarter 2025 results.
Revenue grew 10% year-on-year to $13.18 billion (95.67 billion Chinese yuan), missing the analyst consensus estimate of $14.17 billion.
Revenues from online marketing services and others rose 15% Y/Y to $6.71 billion, and revenues from transaction services grew 6% Y/Y to $6.47 billion.
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Adjusted operating profit declined by 36% Y/Y to $2.52 billion. The adjusted operating margin plunged from 32.9% to 19.1% Y/Y.
The Chinese online retailer’s adjusted earnings per ADS of $1.56 (11.41 Chinese yuan) decreased from $2.86 (20.72 Chinese yuan) Y/Y, missing the analyst consensus estimate of $2.49.
PDD Holdings held $50.2 billion in cash and equivalents as of March 31, 2025. The company generated $2.14 billion in operating cash flow.
Chairman and Co-CEO Lei Chen said its investments in the platform ecosystem weighed on short-term profitability.
A deceleration in growth rate is anticipated as the business expands and challenges arise, a trend that has been further expedited by shifts in the external environment during the first quarter, asserted Jun Liu, VP of Finance of PDD Holdings. Liu also indicated that the company’s financial results might continue to show the impact of sustained investments in the ecosystem as they provide support to merchants and consumers through uncertain periods.
PDD Holdings stock surged over 23% year-to-date amid the U.S. and China trade truce.
On May 12, U.S. President Donald Trump significantly reduced tariffs on Chinese imports via executive order, signaling a major shift in trade strategy as the United States entered a 90-day period of trade negotiations with China.
Effective May 14, the de minimis tariff rate on low-value Chinese imports was cut from 120% to 54%, a planned increase in the per-postal-item duty from $100 to $200 was suspended, and general Chinese import tariffs were lowered to 10%, suspending 24% of the previously imposed rate for the 90-day negotiation period.
Trump justified these reductions by stating that China has taken “significant steps to remedy non-reciprocal trade arrangements.”
This move is particularly noteworthy as it reverses Trump’s earlier crackdown on Chinese e-commerce platforms like Temu and Shein, which had previously targeted their use of the de minimis exemption, allowing goods valued under $800 to enter the U.S. duty-free.
The prior enforcement had substantial ripple effects, causing Temu to significantly reduce its U.S. advertising spend and its share of Google Shopping ads to drop to zero.
Price Action: PDD stock is trading lower by 18.2% to $97.50 premarket at last check Tuesday.
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