PDD 24Q4 Earnings Preview: 3 Must-Watch Highlights as Top Players Bet Big—Will Profits Ignite a Surge?

As the e-commerce giant prepares to release its Q4 2024 earnings on March 20, 2025, before the market opens, all eyes are on whether PDD can sustain its growth momentum while navigating a complex landscape of domestic resilience, global expansion, and profitability trade-offs.

Consensus estimates from analysts project Q4 revenue of RMB 115.77 billion, a robust year-over-year (YoY) increase of 30.3%, with earnings per share (EPS) expected at RMB 16.9, up 6.7% YoY.

Temu, PDD’s cross-border e-commerce arm, has emerged as a second growth engine, contributing an estimated 40% of total revenue according to Guosen Securities. The domestic Pinduoduo platform accounts for 55% and remains the profit bedrock, though intense competition and tariff risks are key concerns.

Temu has now expanded into over 60 countries and regions, tapping into China’s low-cost manufacturing chain to meet overseas consumers’ demand for value-for-money products. It began selling in the U.S. in 2022 and has since seen rapid growth, establishing itself as the second-largest online shopping platform there, trailing only Amazon.

Previously, Temu relied on a fully managed model for its swift expansion, shipping small packages directly from Chinese warehouses to overseas markets via centralized air transport. Now, it’s gradually shifting to a semi-managed model, where sellers maintain local inventory in destination markets and handle their own deliveries to consumers. This transition helps mitigate tariff risks, while also reducing costs and boosting average order values, significantly improving the platform’s profit structure.

Temu’s business is growing at breakneck speed. According to a Guosen Securities report, Europe and the U.S. account for 80% of its gross merchandise value (GMV), with 2024 GMV exceeding $60 billion—a year-over-year surge of 231%.

However, it faces challenges from intensifying competition and tariff risks. In the second half of 2024, Amazon rolled out “Haul,” a low-price storefront in developed markets like Europe and the U.S., targeting unbranded small items under $20 and directly challenging Temu’s fully managed approach.

Pinduoduo’s late-2024 merchant support, including RMB 10 billion in commission waivers over the next year, aims to foster a sustainable ecosystem but may squeeze the Take Rate — the percentage of each transaction that Pinduoduo keeps as revenue, typically from commissions and fees charged to merchants. Early user-centric policies like “refund-only” and “double compensation” improved experience at merchants’ expense. With fierce competition in China, merchant profitability is key, and this shift could hit short-term monetization but drive the platform’s long-term healthy growth.

Historically, online marketing services (advertising) led revenue, but with over 900 million users and slowing growth, ad revenue has dropped below 30% since Q2 2024. Transaction services (commissions) have surged ahead since Q1, outpacing ads in Q3 thanks to premium branding and higher monetization. Analysts expect commissions to dominate again in Q4.

In Q3, operating margins dropped 9 points quarter-over-quarter to 24.5%, with rising fulfillment and merchant support costs dragging gross margins down 5.3 points to 60%. Bloomberg consensus predicts a slight Q4 decline, with gross margins at 59.9% (down 0.2 points) and operating margins at 23.0% (down 0.5 points).

JPMorgan notes that Pinduoduo’s ongoing efforts to ease merchant monetization pressures make a Q4 margin improvement unlikely. However, any unexpected rise in operating or net profit margins could be a major positive surprise, boosting valuation. While a modest margin dip is anticipated, a steeper decline (e.g., over 5 points) could turn negative, prompting 2025 profit forecast cuts.

These focal points—Temu’s global expansion, domestic strength, and profitability trade-offs—will shape PDD’s story. Robust domestic performance, narrowing Temu losses, and upbeat guidance could bolster investor confidence, while missteps might heighten worries over margins and competition.

Additionally, Pinduoduo has stayed quiet amid the AI boom. If management unveils more about its AI capabilities and plans at the earnings call, the market could react strongly. Recent reports suggest Pinduoduo has formed internal teams to develop large-scale models for e-commerce recommendations, competing in areas like price comparison, recommendations, advertising, search, and customer service.

Over the past 15 quarters, PDD’s post-earnings moves averaged ±11.4% (absolute value), outpacing the ±10.4% implied volatility in six instances. For Q4, traders expect a ±9.45% swing—underscoring the stock’s knack for defying predictions.

Temu’s global rise and Pinduoduo’s domestic grit could propel the stock higher if results top estimates and guidance inspires confidence. Yet, hefty investments and macro risks—like tariffs and intensifying competition—cast a shadow. Whether you’re trading the event or riding the long-term wave, brace for volatility—and watch for opportunities in this unfolding growth saga.