The news: Temu parent PDD Holdings missed earnings expectations in Q1 2026 as fierce competition in China and more challenging operating conditions in the US and other markets hurt growth.

• Net profits fell 15% YoY to RMB 12.55 billion ($1.74 billion), well below expectations for RMB 22.8 billion ($3.16 billion).
• Revenues of RMB 106.23 billion ($14.74 billion) fell short of estimates for RMB 109.95 billion ($15.22 billion).

Zoom out: In the face of rising global macroeconomic uncertainty, PDD has made its supply chain its “core strategic priority,” co-CEO and chairman Jiazhen Zhao said in a statement. Those investments are meant to serve a variety of functions, such as reducing fulfillment costs in the US now that it can no longer rely on de minimis and beefing up its domestic supply chain to better compete with Alibaba and JD.

While conditions in China show no signs of improvement, PDD has an opportunity to capitalize on consumers’ growing financial unease worldwide. Temu’s value proposition is poised to resonate strongly with households grappling with elevated energy prices and higher inflation.

• Temu’s US popularity has surged as gas prices have risen: Downloads rose 196% and 235% in the last two weeks of April, according to Apptopia data cited by Barrons.
• While Temu’s US growth has slowed sharply since 2024, we expect its marketplace sales to rise 12.2% this year, an acceleration compared with 2025 and considerably faster than the 6.7% increase we forecast for overall ecommerce sales.