What happened

Shares of Pinduoduo (PDD -0.34%) -- the company with ambitions to become China's Amazon.com, although it bears more resemblance to a Chinese Groupon -- tumbled in early Wednesday trading and are down 16.1% as of 11:15 a.m. EDT.

The reason: Earnings.

Downward pointing stock chart superimposed on Chinese flag and columns of numbers

Image source: Getty Images.

So what

Expected to lose $0.22 per American depositary share pro forma on revenue of $777.9 million in its fiscal Q4, Pinduoduo ended up selling more stuff -- and losing more money.

Revenue surged nearly fivefold compared to the year-ago quarter, to $822.3 million. Losses on that revenue grew as well, to $0.24 per ADS pro forma, and $0.32 GAAP.

For the full year, Pinduoduo's revenue more than septupled to $1.9 billion, while losses ballooned to $2 per ADS -- 12 times what the company lost in 2017.

Gross merchandise volume (GMV), or the value of all the goods that passed through Pinduoduo's platform from seller to buyer in fiscal 2018, more than tripled to $68.6 billion.

Check out the latest earnings call transcript for Pinduoduo.

Now what

CEO Zheng Huang called Q4 "a strong finish to 2018," emphasizing the company's growing GMV, "the rapid growth in our annual active buyer base and a near doubling in the annual spending per active buyer."

But here's the problem in a nutshell: Yes, Pinduoduo is getting bigger, faster -- but the more stuff it sells, the more money it loses. At the same time, operating cash flow at the company actually declined 20% year over year in yuan terms, despite the massive ramp in sales, and cash spent on "investing activities," which includes capex, ate up almost every last yuan Pinduoduo generated.

No wonder investors are upset.