PDD Holdings Inc. shares climbed after the owner of Temu reported a faster-than-expected 18% earnings rise, assuaging investors’ concerns about a business vulnerable to US tariffs and intensifying domestic competition.

The stock gained 4% in New York even though the e-commerce company reported lower-than-anticipated revenue of 110.6 billion yuan ($15.3 billion) for the December quarter. Net income climbed to a stronger-than-expected 27.4 billion yuan.

PDD’s results come at a time of heightened uncertainty about its business both domestically and abroad, which has helped tamp down expectations. Temu is grappling with elevated US tariffs on Chinese products and the potential closure of a tax loophole for small-value parcels. Domestically, PDD has warned about competition since August and predicted that its profitability will trend downward over time.

“Earnings beat should help restore market confidence in its 2025 earnings outlook,” Morgan Stanley analysts wrote, adding that the stock was trading at just 11-times projected 2025 earnings. “Because of the tariff overhang on Temu and competition in EC, market expectations for the year are not high.”

Still, executives on Thursday acknowledged challenges from growing global uncertainty and said intense competition also affected short-term growth. They reiterated their support for merchants and efforts to boost the consumer experience.

“As mentioned in previous quarters, our significant ecosystem investment coupled with fast-changing external environment and intensified competition landscape will impact short-term financials,” Chairman and Co-Chief Executive Officer Chen Lei told analysts on a call.

In contrast, rivals JD.com Inc. and Alibaba Group Holding Ltd. reported better-than-projected sales for the December quarter, when Beijing ramped up policies such as subsidies and trade-in incentives to boost spending. The government has prioritized expanding domestic demand as the country seeks to offset the impact of US President Donald Trump’s tariffs and achieve a growth target of around 5%.

Thursday’s report “lacks any major bright spot,” JP Morgan analysts Andre Chang and Alex Yao wrote in a note, which cited misses on both transaction service revenue and online marketing service revenue.

Washington is now threatening to close a tax-free loophole that’s helped Temu and Shein expand in the US at the expense of Amazon.com Inc. The Chinese retailers may be forced eventually to subsidize merchants on their platforms, given the increased shipping expense. In response, PDD and Shein have begun diversifying their logistics chains, expanding networks in the US and moving to bigger bulk orders.

PDD’s 4Q adjusted operating-profit miss of 6% — the second straight quarter the metric trailed consensus — and lower-than-expected revenue gains reflect heightened financial risks from Temu’s growing global business. Amid disruptions to both supply and demand from US tariff hikes on products made in China, PDD will struggle to avert operating-profit declines if the revenue-growth pace stays below 25%.

Temu had already been shipping more inventory in bulk to the US and paying tariffs to have it stored in warehouses near big cities to narrow delivery times. That shift should help blunt the effects of any de minimis change, but will still apply pressure on its discount model. Last year, companies including Shein and Temu shipped some $46 billion of small parcels to the US that had a declared value of less than $800, according to estimates from Nomura Holdings Inc. That represented about 11% of all US-reported imports from China.

Elsewhere, the European Union launched an investigation into whether Temu is selling illegal products or has an “additive design of the service.” Vietnam suspended the platform after it failed to meet a government re-registration deadline.