The era of aggressive food delivery subsidies is over, and Meituan is now gearing up for its next major challenge.
Following the ebb of the subsidy war in 2025, the first quarter of 2026 saw Meituan deliver a pivotal financial report, signaling a turning point.
The data reveals that Meituan achieved total operating revenue of 91.039 billion yuan for the period, marking a year-on-year increase of 5.6%. While high prior-year investments led to a shift from profit to loss in net income attributable to shareholders compared to the same period last year, the quarter-on-quarter loss narrowed substantially by over 10 billion yuan.
During the subsequent earnings call, the company's management directly addressed key issues including industry competition, profit recovery, and new business initiatives. They clearly stated that irrational price competition within the industry had receded for the time being, and the company's strategic focus has fully shifted towards a phase centered on operational efficiency and user experience.
However, standing at this new industry juncture and at the starting point of its recovery, Meituan still faces tough battles ahead. A new round of competition for market dominance has just begun.
Rationality Returns to Food Delivery Subsidies
In Q1 2026, Meituan's total revenue reached 91.039 billion yuan, up 5.6% year-on-year, demonstrating resilient growth on the top line. However, profitability faced pressure, turning from a profit to a loss compared to the prior year. In Q1 2025, Meituan's adjusted net profit was 10.949 billion yuan, which shifted to a loss of 4.968 billion yuan in Q1 2026. Nonetheless, the sequential improvement was notable, with the adjusted net loss of 15.08 billion yuan in Q4 2025 narrowing by over 10 billion yuan.
Meituan's current operations are primarily divided into two segments: Core Local Commerce (mainly including food delivery, in-store/hotel & travel, and Meituan Instashopping) and New Initiatives (mainly including Xiaoxiang Supermarket and the overseas Keeta platform).
Within these, the Core Local Commerce segment generated revenue of 64.063 billion yuan in Q1, showing a slight year-on-year increase of 0.1% and returning to positive growth. The operating loss for this segment narrowed to 2 billion yuan, an 8 billion yuan improvement from the 10 billion yuan loss in Q4 2025, making it the core pillar of the group's overall loss reduction. The financial report attributed this primarily to a significant reduction in losses from the on-demand delivery business.
Breaking down the revenue structure, merchant services revenue reached 35.609 billion yuan, showing a slight year-on-year increase. Delivery service revenue was 24.081 billion yuan, down 6.5% year-on-year. Revenue from merchandise sales surged to 2.983 billion yuan, nearly doubling compared to the previous year.
"In the first quarter, irrational subsidies in the on-demand delivery industry moderated compared to the previous quarter," stated Meituan Chairman and CEO Wang Xing during the earnings call. He noted that even as subsidy intensity contracted, Meituan's food delivery business continued to attract a large number of new users, indicating that consumers choose Meituan for its comprehensive and reliable service, not just price incentives.
Structural optimization on the expense side also confirms the strategic shift. Although still showing year-on-year growth, sales and marketing expenses in Q1 2026 decreased by 8.7 billion yuan compared to Q4 of the previous year sequentially. Cost of sales also fell by 2.9 billion yuan quarter-on-quarter, directly contributing to the rapid loss contraction. In 2025, facing industry-wide subsidy offensives, Meituan sustained various incentive policies such as user red packets, merchant commission waivers, and rider delivery subsidies. Entering 2026, the platform began scaling back irrational subsidies, no longer simply trading subsidies for order volume.
Meituan CFO Chen Shaohui added that following the subsidy reduction, the order volume and GTV (Gross Transaction Value) of Meituan's self-operated delivery business maintained resilient year-on-year growth. The UE (Unit Economics) of the self-operated delivery business also improved significantly quarter-on-quarter. However, he noted that restoring the average order value and subsidy levels of the self-operated delivery business to reasonable levels will require more time, and they continue to impact the revenue growth and operating profit of the on-demand delivery business.
Regarding the company's traditional in-store/hotel & travel business, management stated it effectively captured holiday consumption growth and emerging consumer trends this quarter, achieving stable growth. Categories such as leisure & entertainment, sports & fitness, and pet services saw continued rapid growth in order volume and GTV. Meanwhile, service formats like medical aesthetics, in-home elderly care, and home decoration also showed positive development momentum.
New Initiatives Show Broad Progress
If Core Local Commerce is tasked with stabilizing the foundation and achieving profit recovery, then New Initiatives represent the key engine for Meituan to break through growth bottlenecks and unlock long-term development space, also serving as a core highlight of this earnings report.
In Q1 2026, Meituan's New Initiatives (Xiaoxiang Supermarket, overseas Keeta) generated revenue of 27 billion yuan, a year-on-year increase of 21.3%. The operating loss narrowed to 2.1 billion yuan, a 2.5 billion yuan improvement from the 4.6 billion yuan loss in Q4. Breaking down the revenue, merchant services revenue was 2.45 billion yuan, up 97.6% year-on-year, while merchandise sales revenue reached 17.99 billion yuan, increasing 40.7% year-on-year.
It is noteworthy that starting from Q1 2026, Meituan updated its revenue presentation to better align with the strategic evolution of its businesses. The main changes include: merchandise sales revenue is now disclosed separately to reflect the strategic importance of the retail business. This revenue refers to sales of goods, primarily from grocery retail (mainly Xiaoxiang Supermarket and Kuailv) and other self-operated categories like pharmaceuticals and alcohol. Merchant services revenue now combines commission income and online marketing service revenue to better reflect the integrated value proposition provided to platform merchants.
Chen Shaohui stated during the call that the fresh groceries and daily necessities retail business saw its loss narrow sequentially, supported by improved operational efficiency and seasonal benefits. Given its growing strategic importance and sustained growth, product sales data for this business is now disclosed separately starting this quarter. In Q1, product sales revenue from the fresh groceries and daily necessities retail business grew approximately 41% year-on-year, making a significant contribution to the segment's growth.
Looking at specific businesses, Xiaoxiang Supermarket continues to accelerate its offline footprint, now covering 55 cities, with overall GTV maintaining high growth. Leveraging upgraded supply chain capabilities, the platform continues to enrich its selection of high-quality, cost-effective products, and the proportion of sales from its own brands within the overall transaction volume is steadily increasing.
The overseas business Keeta also performed strongly. In mature markets like Hong Kong, China and Saudi Arabia, it achieved efficiency leaps through economies of scale and refined operations. Emerging markets like the Middle East and Brazil, launched simultaneously, are also steadily gaining volume. Furthermore, leveraging mature operational experience, the speed of profitability improvement in new markets is outpacing that of early mature markets. Going forward, Meituan will continue to export its product, technological, and operational capabilities to optimize the consumption and delivery experience for overseas users.
In addition, Meituan continues to heavily invest in technology R&D. In Q1 2026, R&D expenditure reached 7 billion yuan, a 22% year-on-year increase from 5.8 billion yuan in the same period last year. As a percentage of total revenue, it increased by 1 percentage point from 6.7% to 7.7%. Meituan explained in its report that this was mainly due to increased investment in AI.
Currently, Meituan's AI ecosystem has been comprehensively deployed across all scenarios: the consumer-facing AI assistant "Xiao Tuan" is integrated into the app's core navigation bar as a primary traffic entry point. The business-facing "Smart Shopkeeper" has cumulatively served over 700,000 merchants, with its service scope expanding from single stores to chain brands this quarter. The "Digital Employee" also now covers over 300,000 service retail merchants. In April this year, Meituan's next-generation large language model, LongCat-2.0-Preview, officially entered testing. The model's total parameter scale exceeds one trillion, and its entire training and inference process relies on domestic computing power clusters.
Wang Xing stated that Meituan aims to "attack" rather than "defend" in the field of AI, viewing AI as a crucial strategic opportunity to consolidate its moat and unlock new value.
In Wang Xing's view, Meituan's advantages lie in its more comprehensive business coverage in the local services sector, more complete and authentic merchant information and user reviews, and a more reliable fulfillment system. Combining these structural advantages with AI will provide users with an exceptional AI-driven local search experience. He also revealed that a collaboration between Meituan's AI assistant "Xiao Mei" and Tencent's "Yuanbao" is即将推出.届时，users will be able to directly input their requests in "Yuanbao" and access local services like food delivery through "Xiao Mei," helping users complete one-stop local service transactions more conveniently and seamlessly.
The Future of the On-Demand Retail Market
In the first half of 2025, the food delivery subsidy war was in full swing. Alibaba renamed Ele.me to Taobao Flash Purchase, elevating on-demand retail to a group-level strategy. JD.com entered the food delivery market with high-profile "billions in subsidies." Meituan was forced to respond, but the cost was three consecutive quarters of turning from profit to loss, with the full-year 2025 loss exceeding 23 billion yuan. It wasn't until Q1 2026 that a turning point in loss reduction arrived.
From management's perspective, the industry's return to rational subsidies and competition refocusing on the two cores of operational efficiency and user experience恰好能够发挥美团的固有优势. This wave of irrational competition also confirmed that a model relying solely on price subsidies to drive orders is unsustainable. The core of long-term industry growth lies in supply-side innovation and precise matching of supply and demand. Technologies like artificial intelligence serve as the underlying support driving efficiency and experience upgrades across the entire industry. These are the true foundations for healthy and sustainable growth and the direction Meituan will continue to deepen in the future.
Regarding the full-year operating trend, Wang Xing offered a forecast: supported by rational competition and seasonal factors, Meituan's UE (Unit Economics) is expected to see significant improvement in Q2. However, the pace of UE recovery in the second half of the year will still depend on how the external competitive environment evolves. Additionally, higher delivery costs in Q3 and Q4 will exert some pressure on profitability. In terms of orders, affected by the high base from last year, order volume may see a year-on-year decline in the second half. However, the order structure will continue to optimize and become healthier, as consumers are increasingly willing to pay for quality, which is a very positive signal for merchants investing in high-quality supply.
Looking further ahead, Wang Xing believes that Meituan remains optimistic about the potential of China's food service market. Services are becoming high-frequency daily necessities for an increasingly broad population, and this structural shift provides sustained momentum for deeper market penetration, with the industry's user base continuing to expand.
On-demand retail, represented by Xiaoxiang Supermarket, is undoubtedly the core strategic battleground for Meituan's next phase.
In the view of Meituan's management, the future growth of the on-demand retail market will be driven by a hybrid model, including 3PL models (like Meituan Instashopping) and 1P models (like Xiaoxiang Supermarket). This is a model directly built upon Meituan's core strengths and has a clear path to profitability.
To strengthen its omni-channel layout, Meituan is simultaneously advancing the construction of offline physical stores: the first Xiaoxiang Supermarket physical store opened in Beijing in December last year, and the second store entered Ningbo in April this year. Offline stores serve as important vehicles for strengthening brand recognition and integrating online and offline scenarios.
For the long-term development of Xiaoxiang Supermarket, Meituan has clear goals: strive to grow into a leading online retail brand in China, achieving sustainable, stable low single-digit profit margins. It aims not only to meet users' food delivery needs but also, leveraging categories like fresh produce and ingredients, to cover daily household procurement scenarios, becoming one of the most beloved retail brands.
According to the "2025 On-Demand Retail Industry Development Report" released by the Chinese Academy of International Trade and Economic Cooperation earlier this year, China's on-demand retail industry is striding towards a trillion-yuan scale, expected to officially突破1 trillion yuan in 2026 and reach 2 trillion yuan by 2030. The report指出 that on-demand retail is upgrading towards full-chain life services, with competition revolving around multi-dimensional capabilities like speed, certainty, and scenario adaptation. The on-demand delivery market may become comparable to e-commerce express delivery.
Against this backdrop, besides Meituan, players like Alibaba and JD.com have also emphasized the importance of their on-demand retail businesses, viewing them as core to their future strategies.
The substantial loss reduction in Q1 has helped Meituan emerge from the trough of the subsidy war, with its performance entering a修复 phase. However, looking across the entire赛道, the on-demand retail battlefield is fiercely contested. Challenges such as supply chain refinement, overseas market expansion, AI technology implementation, and cost control依旧存在. Having weathered short-term阵痛, Meituan still faces a series of tough battles to conquer on its path to profit recovery.
Comments