**PDD Holdings Shares Plummet Amid Warnings of Declining Profitability**

Shares of PDD Holdings Inc. faced a sharp decline as the company issued a warning regarding its future profitability, influenced by growing competition in China. Competing with giants like Alibaba Group Holding Ltd., PDD revealed that its team lacks the necessary expertise to keep pace with unspecified rivals, leading to a dim financial forecast. The company's shares fell by as much as 10% during early trading in the US.

The company’s gloomy outlook emerged shortly after PDD's quarterly sales and profit figures failed to meet expectations. This comes as no surprise given previous warnings about the potential negative impact of China’s slowing economy on major tech companies. In the most recent quarter, PDD reported revenue of 99.4 billion yuan ($13.7 billion), falling short of the projected 102.8 billion yuan, and a net income of 25 billion yuan, below the forecasted 26.6 billion yuan.

Despite a flourishing overseas venture, particularly with its popular shopping app Temu, PDD continues to struggle with tepid consumer spending in China. Temu, which quickly became one of the most downloaded apps in the US, has even begun to compete with Amazon.com Inc. in certain market segments. However, Temu’s rapid rise has attracted growing scrutiny, including an investigation by the European Union into whether it adequately combats the sale of illegal products and complies with the Digital Services Act.

Citigroup analyst Alicia Yap highlighted uncertainties related to potential tariff changes and increasing international pushback against Temu’s low prices. These challenges could negatively impact PDD's profitability prospects. The company's operating profit missed non-GAAP expectations for the first time in seven quarters, coming in 12% below consensus estimates for the third quarter. Analysts suggest that the company's earnings could see a reduction of at least 10% through 2025 if revenue grows by around 20% next year, compared to an annual growth rate of approximately 62% from 2021-2024.

At home, PDD has employed strategies like low prices and aggressive rural expansion, incorporating game-like elements into its platform to capture market share from Alibaba and JD. Both Alibaba and JD.com have recently started collaborating on logistics and payments, adding to the competitive pressure on PDD. Additionally, PDD faces discontent from consumers and merchants due to its pricing policies and refund procedures, which have led to protests outside its offices in southern China.

Adding to the scrutiny, China’s richest man and Nongfu Spring's founder, Zhong Shanshan, openly criticized PDD’s pricing system. Since reaching a peak in August, PDD's shares have consistently declined, a period during which founder Colin Huang briefly overtook Zhong as the wealthiest person in China.