PDD Holdings dragged down Chinese e-commerce stocks in morning trading. PDD Holdings plunged 25%, Alibaba and JD.com sank nearly 5%.

PDD Holdings, the Chinese owner of online retailer Temu, plunged after it reported quarterly revenue that missed analysts ’ expectations.

PDD also said profitability could be hurt in the short term by investments in the business.  

Temu has grown quickly to become a challenger to Amazon and Chinese rivals Alibaba and JD.com. The question now is whether it can continue to outperform others at a larger scale.

"While encouraged by the solid progress we made in the past few quarters, we see many challenges ahead," said Lei Chen, co-CEO of PDD Holdings. "We will invest heavily in the platform ’ s trust and safety, support high-quality merchants, and relentlessly improve the merchant ecosystem. We are prepared to accept short-term sacrifices and potential decline in profitability."  

PDD said total revenue for the quarter ended in June came in at $13.4 billion. Analysts had expected it to be just above $14 billion, according to FactSet estimates.