On Thursday, Chinese e-commerce company Pinduoduo (NASDAQ: PDD) reported RMB 14.2 billion (USD 2.09 billion) in revenue in the third quarter of this year, representing an 89% year-on-year (YoY) increase and beating the market consensus of USD 1.86 billion.

“Pinduoduo’s financial results for this quarter are solid across each line,” Natalie Wu, managing director of equity research at Haitong International, told KrASIA on Thursday.

“The company has also turned profitable for the first time, a milestone in its corporate history,” Wu said, referring to Pinduoduo’s RMB 466.4 million Non-GAAP net gain booked in the quarter. Pinduoduo’s non-GAAP financial measures exclude share-based compensation expenses, interest expenses related to the convertible bonds’ amortization to face value, and fair value change of long-term investments.

The number of Pinduoduo’s active annual buyers in the year ended September 30 reached 731.3 million, an increase of 36% YoY, and closing the gap with rival Alibaba, which boasted 757 million annual active consumers in the same period.

General merchandise volume (GMV) in the twelve-month period ended September 30 2020 reached nearly RMB 1.5 trillion, up 73% YoY. In addition, the Shanghai-based firm recorded a net loss of RMB 784.7 million during the third quarter, narrowing from a loss of RMB 2.3 billion in the same quarter of 2019.

“Great to see such a positive quarter from Pinduoduo post-pandemic in China,” noted Arnold Ma, founder of Qumin, a digital marketing agency based in London and Shanghai, echoing Wu’s comments.

Ma believes that the key to Pinduoduo’s growth is its continuing focus on its D2C (direct to consumer) model across manufacturing, agriculture, independent sellers, and new brands. DuoDuo Maicai is a dedicated C2M function for farmers to directly reach consumers, which the company launched in October.

Pinduoduo’s strong performance is evidenced by the average annual spending per user increasing from RMB 1,857 (USD 280.84) in the second quarter to RMB 1,993 (USD 301.41) in the third quarter, despite the net addition of 48 million active buyers.

Despite the strong quarterly results, challenges remain for the e-commerce upstart.

“Operating losses were reduced, but the absence of operating profit is still a cause for concern as this shows us that the core operations are not yet bearing fruit,” explained Brock Silvers, chief investment officer at Kuaiyuan Capital, to KrASIA on Thursday, while he still affirmed that Pinduoduo’s third-quarter results were strong.

“Moreover, new antitrust rules are likely to rule out Pinduoduo’s current operating strategy of generating growth via discounts and subsidies,” Silvers said, sharing his concerns on whether the management is up to the challenge if the company is forced to rapidly shift focus from growth to profitability.

The Chinese government released new anti-monopoly laws for the internet sector on Tuesday, signaling its intention to rein in big tech companies in China.