PDD Holdings, the parent company of Chinese e-commerce giant Temu, reported a 38% drop in its first-quarter operating profit for 2025. The decline is attributed to several challenges, including tariff pressures and intensified competition in China’s e-commerce market.
Chairman and co-CEO Lei Chen explained that as a third-party marketplace, PDD faces limits in passing policy incentives to consumers.
This situation puts its merchants at a disadvantage compared to competitors with first-party business models. Additionally, changes in global policies, such as tariffs, have created significant difficulties for merchants who struggle to adapt quickly.
Since mid-2024, PDD has expanded its fee reduction programs to support merchants. While these investments have reduced short-term profits, they aim to help merchants focus on sustainable growth and strengthen the platform’s long-term health.
Tariffs imposed by the U.S. on Chinese goods have forced Temu to adjust its supply chains and halt direct shipping from China. A recent PYMNTS Intelligence report highlights that over 90% of medium-sized U.S. companies expect supply chain disruptions due to tariffs.
These companies lack the geographic diversity and bargaining power of larger firms and cannot pivot as quickly as smaller businesses, making them vulnerable to trade shocks.
In the first quarter of 2025, PDD’s total revenue rose 10% year-over-year to approximately RMB 95.7 billion (US$13.2 billion), but net income attributable to ordinary shareholders fell 47% to about RMB 14.7 billion (US$2.03 billion). The company’s stock declined sharply following the earnings announcement, reflecting investor concerns over the profit shortfall and ongoing external challenges.
PDD executives emphasized that despite the short-term financial impact, the increased support for merchants is essential for building a resilient ecosystem capable of delivering quality shopping experiences amid uncertain market conditions.
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