PDD Holdings, the parent company of the online marketplace Temu, reported its second-quarter results on Monday, failing to meet analysts' expectations.

The company reported a significant increase in sales and marketing expenses by 48 percent year over year. This development is attributed to increased spending on promotions and advertising. Additionally, general and administrative expenses in the second quarter tripled to 1.84 billion yuan, primarily due to higher personnel-related expenses.

Despite these cost increases, PDD Holdings was able to achieve an operating profit of 32.56 billion yuan, representing an increase of 156 percent compared to the same period last year. The net profit attributable to common shareholders increased by 144 percent to 32.01 billion yuan.

Lei Chen, Chairman and Co-CEO of PDD Holdings, emphasized the challenges the company faces despite its solid progress. "We will invest heavily in the trust and security of the platform, support high-quality merchants, and continuously improve the merchant ecosystem," Chen said in the company's press release. In doing so, they are prepared to make short-term sacrifices and accept a possible decline in profitability.

Vice President of Finance Jun Liu also warned of future challenges.

The unexpectedly weak sales figures and cautious forecasts from management have unsettled investors, reflected in a significant drop in the stock price. PDD Holdings faces the challenge of maintaining its position in an increasingly competitive market environment while also regaining investor confidence.