By Sophie Yu and Deborah Mary Sophia

(Reuters) – China’s PDD Holdings missed market estimates for quarterly revenue on Monday, with executives’ despondent comments about e-commerce competition in China and the company’s global prospects sending its shares down more than 28%.

PDD shares’ biggest one-day drop since listing in the U.S. in 2018 wiped out nearly $40 billion in market capitalization. E-commerce retailer operates discount-focused platforms Pinduoduo (NASDAQ:) in China and Temu in the international market.

“(We see) many new challenges, from changing consumer demand to intensifying competition to uncertainties in the global environment,” co-CEO Chen Lei said in a conference call with analysts on financial results after the results were announced.

“We are entering a new phase of high-quality development that requires increased investment, and our profitability will suffer as a result,” he added.

China’s unstable economy, ongoing weakness in its real estate sector and high youth unemployment have caused consumers to curtail purchases, weighing on the country’s retail and e-commerce sectors and sparking fierce competition for market share among e-commerce giants.

While Pinduoduo’s low prices and deep discounts on everything from cleaning products to headphones have attracted cost-conscious shoppers, major competitors like Alibaba (NYSE:) and JD (NASDAQ:).com also offered gigantic promotions on their own platforms, putting competitive pressure on PDD.

“Looking ahead, we inevitably expect pressure on revenue growth due to intensified competition and external challenges,” said Jun Liu, vice president of finance at PDD.

UBS analyst Kenneth Fong said that while Pinduoduo has been doing well, posting solid growth and profitability despite the country’s highly competitive e-commerce market, the tone of management’s comments was confusing to investors.

“Investors are unsure whether Pinduoduo sees what we don’t see or is being too conservative in an uncertain macro environment,” Fong added.

M Science analyst Vinci Zhang agreed that PDD management’s forecasts seem “very pessimistic.”

“We know that we’re seeing a slowdown in consumer spending, but we were hoping that maybe PDD, with its lower-priced budget platform, could make up for the slowdown, but it turns out they’re losing out, too,” Zhang said.

Co-CEO Chen said consumers are increasingly choosing to spend money on experiences rather than material goods, and “there is an increasing emphasis on rational consumption.”

Chinese e-commerce giant Alibaba missed market estimates on revenue earlier this month, pressured by weaker domestic e-commerce sales, while quarterly revenue at JD.com rose just 1.2%.

Shares of both U.S.-listed companies also fell as PDD failed to post a profit.

PDD posted revenue of 97.06 billion yuan ($13.64 billion) in the second quarter, according to LSEG data, compared with analysts’ average forecast of 100 billion yuan.

Operating expenses rose 48% in the three months ended June 30 as the company invested in marketing, advertising and promotions to attract customers.

General and administrative expenses more than tripled to 1.84 billion yuan in the quarter, driven by staff expenses.

(1 dollar = 7.1173)