Abstract: This paper studies the impact of market power on enterprise performance in manufacturing, and analyzes the role of digital transformation. Theoretical analysis has showed that the digital transformation of enterprises may build digital barriers, strengthen product differences or user lock-in, which is conducive to market forces to improve enterprise performance, showing a positive regulatory effect. However, if the digital transformation of enterprises weakens the market boundary or intensifies the market competition, or if the use of digital technology expands the choices of consumers, it will weaken the effect of market power on improving enterprise performance, as a negative regulatory effect. The empirical results have showed that market power could significantly improve enterprise performance, while digital transformation may play a negative regulatory role in this process. Heterogeneity analysis has showed that the negative regulatory effect of digital transformation in equipment manufacturing industry is more significant. This paper has analyzed the performance of this problem in the industrial reality, and put forward countermeasures and suggestions.