The news: PDD Holdings, the parent of Temu and Pinduoduo, reported second-quarter revenue of RMB 112.4 billion ($16.6 billion) on Monday, up 8% from a year earlier and short of analyst estimates. Net income fell 12% to RMB 27.2 billion ($4 billion).
Transaction services revenue, the line that includes Temu’s fulfillment and marketplace fees, grew 13% to RMB 54.7 billion. Advertising, PDD's other main revenue line, grew 3%.
“We stepped up our ecosystem investments in the second quarter,” said Jun Liu, PDD’s VP of finance, in the release. Non-GAAP operating profit grew 5%, slower than revenue, which works out to a margin of 25.9%, down from 26.6% a year earlier.
Behind the spending is the fulfillment rebuild Temu began when the US ended duty-free parcels from China. That rebuild has pulled demand out of trans-Pacific air cargo for more than a year. It has also made Chinese marketplace sellers a new class of tenant for US warehouses and 3PLs.
What changed: Until last year, Temu ran almost entirely on consignment. Sellers’ goods sat in warehouses in China, and each order flew to the buyer as an individual parcel, duty-free under the $800 de minimis threshold.
The company began hedging in March 2024 with a “semi-managed” model, in which merchants ship inventory in bulk to US warehouses while Temu keeps control of pricing, traffic and after-sales. By July 2024, about 20% of its US sales shipped from local warehouses, according to Marketplace Pulse.
When Washington ended the de minimis exemption for Chinese goods in May 2025, Temu made the full switch. It stopped shipping orders from China, dropped the import charges it had briefly added at checkout, and moved US fulfillment to locally based sellers and their logistics partners.
Temu’s US monthly active users fell 51% between March and June 2025, per Sensor Tower, while Shein’s fell 12%. Europe is now Temu’s largest market at about 40% of sales, per Tech Buzz China analyst Ed Sander, with the US at about 30%.
By the numbers: The rebuild shows up most clearly in air cargo, where Temu and Shein had driven much of the growth. Ecommerce filled about half the air cargo capacity from China to the US before the rule change, according to Xeneta.
China’s ecommerce air volumes to the US dropped 33% in April, a fifth straight monthly decline. China’s ecommerce exports overall fell 11% in the same month.
The pattern: Temu is not the only platform moving inventory into the destination country. Shein said in its Hong Kong IPO filing it is cutting cross-border duty exposure by holding more inventory locally and expanding partnerships with local fulfillment providers. Its warehouse and office leases sit mainly in China, the US and Poland, per the filing.
The counter: When Washington and Beijing agreed to a tariff truce in mid-2025 that cut small-parcel duties to 54%, Temu resumed some direct-from-China shipments within months, per PYMNTS.
Shein’s fulfillment costs rose to 47.7% of net revenue in the first quarter, from 42.8% a year earlier, even after it moved goods closer to buyers, per the same filing. Its US revenue fell 14% to $2 billion over the same period.
What’s next: The same shift is now underway in Europe. The EU ended its €150 duty-free parcel threshold in July. Because of that, cross-border orders in affected markets “will face lower fulfillment efficiency and higher costs” in the short term, PDD co-chief executive Chen Lei said on the earnings call.
Temu is making the same move there. Its local-seller program, the recruitment channel behind the US shift, now operates in 37 markets, per Digital Commerce 360.
