What happened

Shares of Pinduoduo (NASDAQ:PDD) were surging Thursday after the Chinese social commerce platform posted better-than-expected results in its third-quarter report. The company also reported a surprise profit.

As of 2:11 p.m. EST, the stock was up by 21.4%.

A Chinese man delivering a package.

Image source: Getty Images.

So what

Pinduoduo said that its gross merchandise volume in the 12-month period that ended on Sept. 30 rose by 73% to $214.7 billion, while revenue in the third quarter jumped 89% to $2.09 billion, beating analysts' expectations of $1.86 billion. Average monthly users rose 50% to 643.4 million, showing the company's customer base continues to expand, driven both by the coronavirus pandemic and the company's unique business model, which encourages users to form buying clubs with friends and family members to help them save money.

Perhaps more important, the company transitioned to profitability as management slowed the rate at which it was growing its marketing spending -- its biggest cost item. Sales and marketing expenses were up 46% to $1.48 billion. That led to an adjusted profit of $0.05 per share, compared to a loss of $0.22 per share in the year-ago quarter, and better than analysts' consensus expectation of a $0.17 per share loss.

"This quarter we continued to invest in user engagement, which resulted in strong growth of MAUs and active buyers," CEO Lei Chen said. "Our strategic priorities are informed by the changes in consumer habits that we observe and anticipate."

Now what

Pinduoduo's stock price may also be getting buoyed by news of a strong Singles Day in China; rivals Alibaba and JD.com both reported record sales during China's biggest shopping holiday Wednesday, showing broad growth for e-commerce even as the coronavirus pandemic fades in that country.

Management did not offer guidance, but with the company now profitable on an adjusted basis and continuing to grow rapidly, it's easy to see why the stock is surging again. Shares of the social commerce juggernaut are up by more than 250% so far this year.

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