Meituan sales weaken, profit plummets amid 'irrational' delivery price war

Chinese on-demand local services giant Meituan said its second-quarter earnings fell sharply, as it faced off against Alibaba Group Holding and JD.com in a costly delivery price war.

Meituan's management, however, said on Wednesday's earnings call that the company would not be "greatly affected by a short-term price war", highlighting its operational efficiency.

Still, the management said the company would continue to prioritise growth over profitability in instant commerce. They also projected an incurring loss in the third quarter, owing to strategic investments including higher incentives and marketing.

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Beijing-based Meituan on Wednesday reported weaker-than-expected revenue of 91.8 billion yuan (US$12.8 billion) for the quarter ended June 30. That was up 11.7 per cent from 82.2 billion yuan a year earlier, but fell short of the 93.7 billion yuan estimate by analysts.

Net profit for the period plunged 96.8 per cent to 365.3 million yuan from 11.4 billion yuan a year earlier. The firm's adjusted net profit fell 89 per cent to 1.5 billion yuan from 13.6 billion yuan.

"Due to the irrational competition which started this quarter", Meituan said the operating profit of its local commerce segment fell 75.6 per cent year on year to 3.7 billion yuan, while its operating margin decreased by 19.4 percentage points to 5.7 per cent, according to the company's filing on Wednesday. Total operating profit dropped 98 per cent to 226.4 million yuan.

The sharp profit decline was attributed to a 27 per cent increase in the cost of revenue, mainly due to increased number of on-demand delivery transactions and higher courier incentives; the expansion of grocery retail operations and the overseas business segment; a 51.8 per cent jump in selling and marketing expenses; and a 17.2 per cent rise in research and development spending, the filing said.

Meituan delivery riders seen in Shenzhen. Photo: Shutterstock alt=Meituan delivery riders seen in Shenzhen. Photo: Shutterstock>

Meituan's Hong Kong-listed shares closed about 3 per cent lower to HK$116.30 on Wednesday before its financial results were published.

The months-long battle of discounts with JD.com and Alibaba's Taobao, which has weighed heavily on industry margins, reflected the rivals' recent efforts to commit to a truce. Alibaba owns the Post.

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"Meituan cannot afford to lose" in China's instant commerce price war, according to a note released ahead of the company's earnings release by research firm Third Bridge analyst Jamie Chen.

Alibaba's Taobao unit and JD.com "see food delivery less as a core business and more as a strategic entry point to transform their platforms from pure e-commerce into all-scenario consumer ecosystems", the analyst said.

"Heavy subsidy spending continues to weigh on the industry," Chen said. "Our experts estimate that JD.com and Taobao are likely burning even more cash than Meituan."

Chinese food delivery market leader Meituan's logo is seen at the China International Fair for Trade in Services in Beijing. Photo: Reuters alt=Chinese food delivery market leader Meituan's logo is seen at the China International Fair for Trade in Services in Beijing. Photo: Reuters>

"Meituan has always upheld the principle of win-win cooperation and opposed involution," said chief financial officer Chen Shaohui in a statement.

Involution, known as neijuan in Chinese, refers to a self-defeating cycle of excessive competition in which companies are forced to invest increasing resources without benefiting from proportional returns.

"Our core local commerce business has proven resilient through multiple cycles, and new ventures are steadily gaining traction," CFO Chen said. "We remain confident in the long-term growth potential across all of our businesses."

Meituan CEO Wang Xing said the company maintains its long-term profitability target of "1 yuan per order and a margin of about 3 per cent" for 2025.

The firm's monthly active users reached 500 million in the second quarter, according to the company. In July, the firm announced that it hit a record daily peak of 150 million orders.

For the first half of 2025, Meituan's revenue grew 14.7 per cent year on year to 178.4 billion yuan, while its net profit declined 37.7 per cent to 10.4 billion yuan.

A Keeta delivery bike seen in Wan Chai. Photo: Jonathan Wong alt=A Keeta delivery bike seen in Wan Chai. Photo: Jonathan Wong>

Meituan's new initiatives division - which includes grocery retail and the overseas delivery service Keeta - grew revenue by 22.8 per cent to 26.5 billion yuan in the second quarter, but posted a wider operating loss of 1.9 billion yuan.

"For Keeta, we are very optimistic about its long-term growth potential, as our plan is to get to US$100 billion [in gross merchandise volume] in 10 years," CEO Wang said during the earnings call. The overseas delivery business started in Hong Kong in 2023.

Meituan last week launched the Keeta app in Doha, the capital of Qatar. The firm plans to officially launch the service in Brazil within the next few months.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

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