Food delivery operations across internet companies are collectively showing improvement.
On the evening of June 1st, Meituan (03690.HK) released its 2026 first-quarter results. Prior to the announcement, its stock price surged 6.54% to close at HK$78.25, helping lift the Hang Seng Tech Index by 1.65% to 4,965 points, with daily turnover reaching HK$85.8 billion.
Over the past year, the Hang Seng Tech Index has been jokingly referred to by some investors as the "Hang Seng Food Delivery Index." With quarterly results improving sequentially for several heavily weighted internet firms, can the index, which has been in a downtrend for nearly eight months, stage a turnaround?
Industry experts suggest the "food delivery war" began in April 2025. Prior to that, internet companies were operating on a high earnings base, followed by a significant year-on-year decline. The intense competition has persisted for over a year, with most companies hitting their performance trough in the third quarter of 2025 before showing sequential improvement. While year-on-year data is also expected to improve, the ability of internet stocks to lead a sustained recovery in the Hang Seng Tech Index remains uncertain, as some companies continue to report losses.
Meituan's results surpassed expectations, with its loss narrowing sequentially.
Following the market close on June 1st, Meituan reported first-quarter 2026 revenue of RMB 91 billion, a 5.6% year-on-year increase, with a net loss of RMB 6.8 billion. On an adjusted basis, the net loss was RMB 5 billion, compared to adjusted net losses of RMB 15.1 billion in Q4 2025 and RMB 16 billion in Q3 2025.
Cost of sales for the quarter increased 20.2% year-on-year to RMB 65.1 billion, representing 71.5% of revenue, up 8.7 percentage points. The increase was primarily due to higher rider subsidies and benefits to ensure service quality amid fierce competition, alongside expansion in grocery retail and overseas businesses.
Selling and marketing expenses rose 51.1% year-on-year to RMB 23 billion, accounting for 25.2% of revenue, a 7.6 percentage point increase. This was mainly driven by intensified marketing and promotional efforts to enhance brand influence and price competitiveness, aiming to boost user transaction activity and loyalty.
Net cash used in operating activities for Q1 2026 was RMB 7 billion, primarily attributable to the loss before income tax. Net cash generated from financing activities was RMB 24.8 billion, mainly from proceeds of bank borrowings.
Analysts noted that Meituan's Q1 performance was better than market expectations. The adjusted net loss of RMB 5 billion was below market estimates of around RMB 7 billion, and the loss amount continued to decline quarter-on-quarter, which is likely to be viewed favorably by the market.
However, Meituan remains in a loss-making position. Having turned profitable only briefly after years of losses, it has now reported losses for three consecutive quarters, making its future outlook still subject to observation.
Other analysts pointed out that Meituan's Q1 results were solid, showing sequential improvement over the past three quarters. Revenue growth exceeded market expectations, surpassing 5%, while losses were smaller than anticipated, partly due to a strategy of reducing subsidies. From the worst performance in Q3 2025 to improvement in Q4 and further progress in Q1 2026, there is room for continued sequential improvement throughout the remainder of 2026.
Considering the intense competition and rising costs since the food delivery war began in 2025, investors are more focused on whether Meituan can effectively control costs, improve operational efficiency, and identify new growth drivers in the competitive landscape.
Have Food Delivery Losses Bottomed Out?
The sequential earnings improvement is not unique to Meituan. The first-quarter 2026 results from JD.com (09618.HK) and Alibaba (09988.HK) reflect similar trends. The peak period for industry-wide subsidies in the food delivery sector may have passed, making a gradual earnings recovery a plausible expectation.
Alibaba's results for the quarter ended March 31, 2026, showed its instant retail business revenue reached RMB 20 billion, a 57% year-on-year increase, largely driven by order growth from the "Taobao Flash Sale" launched in late April 2025. Management stated that while focusing on scale, the instant retail business is also improving unit economics and expanding into higher-average-order-value餐饮 and non-food categories to optimize its order structure.
JD Group reported in its first-quarter earnings that user scale and shopping frequency achieved robust growth, with annual active users reaching a record high. New businesses progressed steadily, showing significant sequential improvement. JD Retail demonstrated steady development, with daily necessities and high-margin businesses like platform and advertising services performing well. Meanwhile, losses in the "New Businesses" segment, which includes JD Food Delivery, narrowed substantially quarter-on-quarter, partly driven by JD Food Delivery.
The data improvement is also evident from the quarterly results of Alibaba and JD.com. These companies' worst performance quarter was Q3 2025, with sequential improvements since then.
Looking ahead, the performance of internet companies remains to be seen. For a significant operational improvement to translate into stock price recovery and subsequently lift the Hang Seng Tech Index, a notable easing of competitive pressures is likely required.
As the food delivery war has lasted over a year, quarterly results for internet giants are gradually improving. This suggests that after a period of adjustment and optimization, companies are better adapting to market changes and implementing measures to enhance competitiveness, such as technological upgrades to reduce costs and exploring new markets. Year-on-year data for the coming quarters is expected to show further improvement, potentially providing positive support for the Hang Seng Tech Index.
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