PDD Q4: strong profits, slowing growth, and rising global scrutiny

PDD posted 24% revenue growth in Q4 2024, marking its slowest pace since 2022 with strong profitability offset by rising costs from Temu’s global push and growing regulatory scrutiny.

PDD Holdings Inc. (NASDAQ: PDD), the multinational commerce group behind Pinduoduo and cross-border platform Temu, reported its fourth-quarter and full-year 2024 results yesterday, revealing a complex picture of strong profitability amid a deceleration in revenue growth and growing regulatory pressure.

Slowing Yet Substantial Growth

For Q4 2024, PDD posted total revenue of RMB 110.61 billion (US$15.15 billion), representing a 24% year-over-year increase.

While the growth rate would be enviable for most companies, it marked PDD’s slowest since early 2022, falling short of analyst estimates of around RMB 115.38 billion.

Online marketing services and transaction services contributed nearly equally, growing 17% and 33% respectively.

Net income attributable to shareholders rose 18% to RMB 27.45 billion (US$3.76 billion), with non-GAAP net income reaching RMB 29.85 billion (US$4.09 billion), up 17%.

The company maintained a strong operating margin, supported by tight control over costs despite increased marketing expenditure—up 18% YoY.

Temu’s aggressive global push, especially in the U.S. and Southeast Asia, helped sustain topline momentum, but questions remain about the long-term efficiency of its discount-driven growth model.

Market Response: Mixed Reactions

Markets reacted cautiously. PDD’s U.S.-listed shares initially fell up to 6.5% in premarket trading following the earnings release, reflecting concerns over revenue deceleration and heightened geopolitical risk .

However, shares recovered some losses later, buoyed by stronger-than-expected EPS of RMB 18.53 (US$2.54), exceeding consensus forecasts .

Analysts remain divided. Some cite the 59% full-year revenue growth and expanding margins as signs of resilience, while others point to weaker-than-hoped sequential growth and slowing cash generation (Q4 operating cash flow dipped to RMB 29.5 billion, down from RMB 36.9 billion in Q4 2023).

Strategic Focus: Ecosystem Investment

Executives emphasized a long-term strategy centered on platform ecosystem investment and supply chain digitalization.

We remain committed to driving sustainable growth through targeted innovations and support policies

said Lei Chen, Chairman and Co-CEO of PDD Holdings.

This includes reinvestments into merchant tools, consumer engagement features, and overseas logistics—core pillars supporting Temu’s global expansion.

Geopolitical Pressures and Regulatory Heat

Despite business momentum, PDD faces intensified geopolitical scrutiny. A bipartisan call from the U.S. House Intelligence Committee demanded an investigation into Temu’s alleged ties to the Chinese Communist Party and possible misuse of American consumer data .

Meanwhile, Vietnam suspended Temu operations over compliance failures, signaling growing resistance in Southeast Asia, even as Temu remains popular with price-sensitive consumers .

Separately, Pinduoduo’s domestic app is still grappling with reputational damage after past malware allegations, though not reflected in recent earnings.

PDD vs. AI

PDD is quietly moving into AI. Recent reports suggest it has formed a LLM team focused on e-commerce recommendations, led by a former core member of Baidu’s ad-tech group.

The company hasn’t confirmed the move, but it’s gaining attention. Unlike rivals pouring billions into building foundational models, PDD is taking a more application-first approach.

It’s using AI to boost efficiency in search, pricing, customer service, and recommendations. This fits founder Colin Huang’s earlier vision of making PDD a distributed AI company.

The strategy echoes Apple’s—focused on user-facing improvements, not chasing AI hype.

Outlook: High Potential, Higher Expectations

As PDD sits on RMB 331.6 billion (US$45.4 billion) in cash and short-term investments, its financial firepower is undeniable. Yet investors are looking beyond the numbers.

Future performance will hinge on Temu’s ability to maintain momentum without burning margins, and how effectively PDD navigates rising political and regulatory headwinds.

With competition intensifying globally—from Amazon in the West to TikTok Shop and Shein in emerging markets—PDD’s ability to balance aggressive growth with sustainable practices will define its next chapter.