Temu Owner's Profit Falls but Beats Expectations

By Tracy Qu

The Chinese owner of bargain-shopping app Temu reported better-than-expected profit in the second quarter as the company navigated fierce domestic competition and increased regulatory pressure.

PDD Holdings has cautioned that its financial performance could fluctuate as it strengthens its e-commerce ecosystem. In recent quarters, the company has rolled out more support initiatives to prevent merchants from defecting to other platforms. It has also emphasized the need for these investments to secure its long-term growth.

At the same time, rising competition from livestreaming and social e-commerce is challenging PDD's market position. As short video platforms such as ByteDance's Douyin--TikTok's sister app in China--and Xiaohongshu, an Instagram-like platform known as RedNote, gain in popularity, they have also taken a sizable share of the market held by traditional e-commerce players.

The company behind Temu and Chinese platform Pinduoduo on Monday said net profit fell 12% from a year earlier to 27.18 billion yuan, equivalent to $4.04 billion, for the three months ended June. Revenue rose 8.1% to 112.36 billion yuan.

Analysts had expected net profit of 24.40 billion yuan on revenue of 115.41 billion yuan, according to a FactSet consensus estimate.

"We view compliance as a fundamental priority and are fully committed to safeguarding consumer rights and building lasting trust," said Jiazhen Zhao, co-chairman and co-chief executive of PDD.

Nasdaq-listed PDD hit a 2026 low in June but has since retraced some of those declines. Its American depositary receipts remain more than 20% lower this year.

"The company's fundamentals haven't yet bottomed out, and near-term catalysts are not apparent," Deutsche Bank said ahead of the earnings release. It also highlighted PDD's "consistent lack of shareholder returns" and "insufficient disclosure transparency."

The investment bank said stricter reporting regulations also continue to pose a headwind to PDD's revenue growth.

PDD's online marketplace has also come under regulatory scrutiny outside China, with Temu recently fined more than $230 million in the European Union over the risk of consumers coming across illegal items on the Chinese e-commerce group's platform.

The challenges aren't unique to Temu, however. Shein, its main competitor in the fast-fashion industry, has been facing regulatory headwinds in the U.S. and the EU and has also struggled with flagging sales. After a yearslong effort to go public, Shein is finally set to make its trading debut in Hong Kong soon, though at nearly a quarter of the valuation it once boasted.

Write to Tracy Qu at tracy.qu@wsj.com

(END) Dow Jones Newswires

August 24, 2026 07:08 ET (11:08 GMT)