(Yicai) Nov. 19 -- Shares in PDD Holdings tumbled in New York yesterday despite the operator of Chinese e-commerce giant Pinduoduo logging a 17 percent leap in net profit in the third quarter as competition in the sector intensifies.

PDD Holdings’ share price [NASDAQ:PDD] closed down 7.3 percent at USD119.58 yesterday.

PDD Holdings raked in net income of CNY29.3 billion (USD4.12 million) in the three months ended Sept. 30, according to the Shanghai-based company’s latest financial statement.

Revenue surged 9 percent to CNY108.2 billion (USD15.2 billion). Of this, revenue from online marketing and other services soared 8 percent to CNY53.3 billion, and that from transaction services jumped 10 percent to CNY54.9 billion.

The strong performance comes despite a big jump in expenses. Cost of sales soared 18 percent to CNY46.8 billion (USD6.5 billion), while research and development expenses surged 41 percent to CNY4.3 billion, primarily due to increased staff-related as well as bandwidth and server costs.

“In the third quarter, revenue growth continued to moderate, reflecting the ongoing evolution of the competitive landscape and external uncertainties,” said Liu Jun, vice president of finance at PDD Holdings. “As we roll out greater merchant support initiatives and ecosystem investments, financial results may continue to fluctuate from quarter to quarter.”

While rivals such as Alibaba Group Holding and JD.com continue to ramp up investment in artificial intelligence and instant retail, Pinduoduo has been relatively low-key about its “future strategy.” However, Yicai reported in August that Pinduoduo had quietly accelerated hiring in fields such as AI and large models, with several positions aimed at exploring efficiency improvements for e-commerce scenarios using AI.

“When it comes to the challenges brought by our peers’ investments in new business formats and models, Pinduoduo will continue to optimize its supply chain and build its platform ecosystem, which are an ongoing and challenging processes,” said Executive Director and Co-Chief Executive Officer Zhao Jiazhen.

“Pinduoduo might be at a temporary disadvantage for a considerable period of time, compared with some of its peers, which could put the firm under financial pressure,” Zhao said. “But we will still choose to sacrifice some short-term profits to create more long-term growth potential.”

JD.com, on the other hand, logged a 55 percent dive in net profit in the third quarter from a year ago as the Beijing-based firm’s push into food delivery services this year puts great pressure on profits. Revenue soared 14.9 percent to CNY299.1 billion (USD42 billion). Hangzhou-based Alibaba has not released its third-quarter financial data yet.

Pinduoduo has been promoting compliance for its global operations and actively cooperating with external parties, said Chen Lei, chairman and co-chief executive officer of PDD Holdings. But regulations in different countries and regions are still changing significantly, so as a young global company, Pinduoduo must acknowledge that this process comes with substantial uncertainty. This could expose the company to unpredictable and hard-to-quantify risks that may affect its short-term and even long-term financial performance.

Pinduoduo has not disclosed any figures for its international business performance. Its overseas platform Temu is under pressure as the US has scrapped duty-free exemptions on parcels worth less than USD800 and the European Union looks to introduce duties on low-cost packages from next year.

Editor: Kim Taylor