PDD Holdings, the parent company of budget shopping app Temu and Pinduoduo, reported its first-quarter earnings on May 26, with revenue surging 58% year-over-year.
Total revenues of the Shanghai-headquartered e-tailer in the quarter were 37.64 billion yuan ($15.48 billion), an increase of 58% from 23.79 billion yuan in the same quarter of 2022.
The company's net income attributable to ordinary shareholders rose to 8.10 billion yuan from 2.60 billion yuan a year earlier.
The increase in sales is impressive, considering China's weak consumer market and the flat growth of Chinese e-commerce giant Alibaba during the same period.
Behind the revenue upswing is increased spending on promotion and advertising activities. Sales and marketing expenses came in at 16.26 billion yuan ($2.37 billion), an increase of 45% from 11.22 billion yuan in the same quarter of 2022.
Temu may be counting the big bucks in terms of marketing spending. The app, which targets price-sensitive consumers overseas, reportedly paid $14 million for two 30-second slots during Super Bowl LVII in February 2023. According to Apptopia, a data analysis company, Temu has paid for more than 900 app store search terms to get to the top of listings.
Launched in the US last September, Temu quickly became the most downloaded shopping app in the US thanks to its jaw-droppingly low prices, aggressive social media marketing, massive discounts, and more. The app is now available in more countries including Canada, the UK, Spain, Italy, France, New Zealand, and Australia.
As a new business line under PDD Holdings, Temu has yet to contribute significant revenue to the parent company. However, its importance has already been established, and the company is investing heavily in it. This includes aggressive hiring in both China and the US.
In a recent reorganization that was described as the company’s largest in history, PDD Holding’s CEO, Chen Lei, announced that he would be shifting his focus to the cross-border e-commerce business, further highlighting the company’s commitment to the success of Temu.
However, it is worth noting that a growing number of Chinese sellers have expressed their dissatisfaction with PDD Holdings, including the company's deprivation of their pricing power, unconditional support for consumers even in situations without merit, and relentless squeezing of their profits. They even organized a flurry of retaliatory actions against the company at the end of March, forcing it to temporarily shut down its self-operated store and some brands' flagship stores on Pinduoduo.
During the earnings call with analysts, co-CEO Jiazhen Zhao indicated that unnamed competitors were responsible for the recent wave of "malicious attacks" targeted at "dozens" of Pinduoduo flagship stores.
Shares of Nasdaq-listed PDD Holdings soared 18.99% Friday to close at $71.42 apiece.