TMTPost -- The American depositary receipts (ADRs) of PDD Holdings Inc. Plunged as much as 31.5% before settling 28.5% lower Monday, setting their largest ever daily percentage decline ever since Temu parent went public in the United States in 2018. Shares sold off after the company recorded disappointed sales and issued warning about the dwindling growth amid intense competition.
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PDD said total revenue for the quarter ended June 30 climbed 86% year-over-year (YoY) to RMB97.06 billion (US$13.34 billion), still missing Wall Street projection of RMB99.99 billion. The revenue, decreasing 11.8% quarter-over-quarter (QoQ), slowed from a 131% YoY increase in the preceding quarter. With a , the December quarter saw PDD sales delivered a 123% YoY surge, the first triple-digit growth pace since the first quarter of 2021.
Despite a slowdown, PDD beat on the bottom line in the second quarter. Net income attributable to ordinary shareholders rose 144% YoY to RMB32.01 billion, topping analysts estimated RMB27.5 billion. On non-GAAP adjusted basis, net income for the June quarter grew 125% YoY to RMB34.43 billion, compared to a three-fold increase three months ago. Adjusted diluted earnings per American depositary share (ADS) was RMB23.24 with a 122% YoY increase whereas analysts projected RMB20.52. PDD logged operating profit of RMB32.56 billion with a 156% YoY increase, compared to a 275% YoY increase in the previous quarter.
Both of PDD』s two segments fell short of analysts』 expectation. Revenue from online marketing services and others for the second quarter gained 29% YoY to RMB49.12 billion, versus a forecast growth of 33.1%. the company recorded a 56% YoY increase in the previous quarter. Revenue from transaction services, the charges the company collected from merchants for transactions on its platform, was RMB47.9 billion, up 234% YoY, while analysts expected a 248.6% increase. That was the first quarter in a year that PDD』s transaction services delivered a YoY increase less than 300%.
PDD management warned of sustainability of the stellar growth as both of its established arch-rivals like Alibaba Group and JD.com and upstarts including Kuaishou Technology are ramping up promotional campaigns to ride the tide of consumers』 shift towards price sensitivity.
「In the past quarter, our revenue growth rate slowed quarter-on-quarter. Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges,」 said Liu Jun, VP of Finance of PDD. 「Profitability will also likely to be impacted as we continue to invest resolutely.」
PDD Co-Chief Executive Officer Chen Lei admitted the company sees many challenges ahead and vowed to double down investments in supporting merchants and its ecosystem. 「We are committed to transitioning toward high-quality development and fostering sustainable ecosystem. We will invest heavily in the platform』s trust and safety, support high-quality merchants, and relentlessly improve the merchant ecosystem. We are prepared to accept short-term sacrifices and potential decline in profitability,」 Chen said in a financial report Monday. 「Competition is here to stay and is expected to intensify in our industry,」 Chen told analysts during a post-results briefing. 「High revenue growth is not sustainable, and a downward trend in profitability is inevitable.」