PDD Holdings, which operates e-commerce platforms Pinduoduo and Temu, missed market estimates for quarterly revenue on Thursday, as demand remained weak in China despite deep discounts and government stimulus to boost spending.

While government stimulus measures and deep price cuts from retailers have drawn some shoppers, PDD’s sales report indicates persistent weakness in the Chinese economy is still forcing consumers to keep a tight lid on their spending.

The company is also facing stiff competition from e-commerce industry leaders Alibaba, opens new tab and JD.com, with both reporting better-than-expected revenues in recent weeks. PDD operates Pinduoduo only in China, and Temu internationally.

“We were expecting a miss because Alibaba’s outperformance indicated a share gain versus PDD. Alibaba was investing in merchant retention, so it naturally hurts PDD since they have overlapping merchants and categories,” said M Science analyst Vinci Zhang.

In addition, JD.com’s strength in electronics and appliances meant it was better positioned versus PDD to leverage increased purchases linked to government subsidies for those products, Zhang said.

The company reported revenue of 110.61 billion yuan ($15.3 billion) for the three months ended December 31, compared with analysts’ average estimate of 115.38 billion yuan according to data compiled by LSEG.

Still, it reported an adjusted profit of 20.15 yuan per American Depository Share, beating estimates of 19.81 yuan, benefiting from a higher interest and investment income and favorable currency exchange rates.

PDD has benefited from Temu’s surging popularity in international markets – the shopping site’s rock bottom prices on everything from clothing and home goods to electronics has attracted cost-conscious shoppers in major markets such as the U.S. and Europe.

But Temu faces a threat from possible changes to the U.S. de minimis policy, a trade perk that exempts imported items worth less than $800 from tariffs and customs procedures. The exemption has so far helped Chinese retailers such as Temu and Shein keep prices low and grab market share.

“For our global business, as we discussed in recent quarters, changes in the external environment have been accelerating and competition is fierce,” said co-CEO Chen Lei.

“These external changes taken together will inevitably bring some challenges to our global business,” he said, adding that PDD’s response includes exploring new business models and experimenting with “innovative localised supply chain solutions”.

The number of de minimis shipments entering the U.S. from China hit 89 million in January, up 12% compared to a year ago, according to U.S. Customs and Border Protection data, opens new tab.

U.S. President Donald Trump last month moved to suspend the de minimis exemption, but paused the repeal after the rapid change created disruptions for customs inspectors, postal and delivery services and online retailers. Even amid that chaos, the number of de minimis shipments from China recorded a slight increase in February compared with the same period in 2024.