E-commerce company PDD Holdings, which operates Pinduoduo in China and Temu internationally, beat revenue estimates despite a drop in net profit due to increased investments to fend off competition. Shares rose 1% after a 11% premarket jump, with executives warning of near-term financial choppiness.

To boost domestic consumption in China, e-commerce giants like Pinduoduo, JD.com, and Alibaba are offering steep discounts, sparking a price war. PDD’s margins suffered due to heavy investments in merchant support programs and rising costs from U.S. tariffs on international shipping.

PDD’s second-quarter earnings showed increased spending on various areas to enhance the ecosystem for merchants and consumers. Co-chief executive Jiazhen Zhao acknowledged intensified industry competition, leading to a slowdown in revenue growth and declining operating profit, expecting future profit fluctuations.

Temu, PDD’s international platform, faces competition from Amazon and has been promoting products from U.S. warehouses and targeting local sellers. It is shifting to a “fully-managed” model to control product selection, pricing, and logistics, aiming to leverage its supply-chain network for competitive pricing.

Despite efforts to keep prices low, a survey found 30% of American shoppers noticed price increases on Temu. PDD’s revenue for the quarter rose 7% to 103.98 billion yuan, beating estimates, while operating profit fell 21%. Adjusted earnings per ADS exceeded expectations. CFRA analyst Jian Xiong Lim noted a declining trend in earnings and potential revenue growth dampening due to Temu’s heavier U.S. exposure.

Read more at Yahoo Finance: Temu-owner PDD tops revenue estimates, competition squeezes margins