Temu's Growth Surge Makes Parent PDD Surpass Alibaba as China's Most Valuable E-Commerce Giant

PDD Holdings Inc PDD and Alibaba Group Holding Limited BABA have played pivotal roles in China’s e-commerce sector. PDD’s value-for-money strategy and the growth of its Temu marketplace have helped it surpass Alibaba in market value, making it the most valuable company in the segment.

PDD Holdings reported impressive first-quarter results, boosting its shares by 7.5% and raising its market capitalization to about $208 billion, compared to Alibaba’s $196 billion, CNBC reports.

PDD’s revenue more than doubled, and profit almost tripled yearly, getting a boost from domestic marketplace strength and international expansion of Temu.

Analysts attribute PDD’s success to its cost-effective approach and strong consumer perception. Analysts projected continued strength for PDD from new markets and increasing penetration of opened markets, especially in Europe and Asia.

Morningstar highlighted the profitability of Temu’s half consignment model and PDD’s solid market position.

Goldman Sachs upgraded PDD’s rating to “buy,” citing its growth momentum in advertising revenue and Temu’s potential.

The market has now priced in concerns about domestic competition and U.S.-China tensions. Analysts consider China eCommerce emerging as one of the more undervalued sub-sectors within China’s internet.

PDD’s net income for the March quarter surged 246% year-on-year to $3.87 billion, while its revenue from transaction services increased by 327%. In contrast, Alibaba’s net income dropped 86% to 3.3 billion yuan for the same period.

PDD has also made significant international strides with Temu, rapidly expanding into markets like the U.S., Australia, and Europe.

BofA noted Temu’s strong positioning among its peers, leveraging the experience of its parent and sister companies.

Meanwhile, Alibaba remains engaged in the geographical diversification of its cloud computing business. In China, Alibaba Cloud had a 39% market share versus its global market share of below 5%.