Meituan: Can it Recover from the Losses After the AI Frenzy Subsides?
After the Hong Kong stock market closed on June 1st, Meituan, the last player in the "food delivery index", also released its financial report for the first quarter of 2026. Although its absolute performance is still undoubtedly poor - revenue has hardly grown and it is still in the red. However, compared with market expectations, it can be said to be good. The main highlight is that the actual loss of the core local business segment is much lower than the previous guidance, suggesting that the progress of the company's instant retail business in reducing losses is faster than expected. Specifically:
1. Readjustment of performance caliber: Before analyzing this quarter's performance, it should be noted that Meituan has made a slight adjustment to the disclosure caliber of its segmented revenues, which also brings about some adjustments to historical financial data.
Among them, the delivery revenue remains the same as the previous caliber without any change; there are two main changes. One is that commission and advertising revenues are unified as merchant service revenue, and the other is that self - operated retail revenue is separated from "other revenues" and disclosed separately.
We believe that the main impacts of this caliber adjustment are: a. It is more difficult to split the performance of the home - delivery and in - store businesses through the financial report data; b. Separating self - operated retail can better track the growth performance of Xiaoxiang Supermarket and Dingdong Maicai, which will be consolidated in the future.
2. The growth of the core local business is not good: The revenue of the core local business segment this quarter is about 64.1 billion, with a year - on - year growth of 0.2%, which is generally in line with market expectations, and the performance is not good.
Among them, the delivery - related revenue decreased by 6.4% year - on - year, continuing to narrow compared with - 10% in the previous quarter, but the narrowing range is not large. It can be inferred that the reduction of losses in the home - delivery business this quarter is not mainly achieved by reducing freight subsidies.
The merchant service revenue under the new caliber is 35.6 billion, with a year - on - year growth of 0.2%. Compared with the previous quarter, the overall revenue growth rate of "advertising + commission" has only slightly improved and is basically flat. Considering that the growth rate of the home - delivery business has improved, the growth of the in - store business should have slowed down. However, this is not unexpected, as due to the impact of Douyin's competition, the market's expectations for the in - store business were already poor.
3. The growth of new businesses continues to accelerate: In contrast, the total revenue of innovative businesses this quarter is 27 billion, with a year - on - year growth of 21%, continuing to rise from 19% in the previous quarter, slightly better than market expectations. It is still mainly driven by self - operated businesses such as Xiaoxiang Supermarket and the overseas growth of Meituan Keeta.
Among them, the merchant service revenue (mainly reflecting the performance of Keeta) increased by about 96% year - on - year, with a slightly slower growth rate than the previous quarter. And the newly separated self - operated retail revenue increased by nearly 41% this quarter, with a quite high growth rate, and the impact of the acquisition of Dingdong Maicai has not been reflected yet.
4. The main highlight is the better - than - expected loss reduction: Compared with the mediocre growth, the main highlight of Meituan's performance this time lies in the better - than - expected loss reduction. The overall operating loss is 6.5 billion, significantly lower than the market expectation of 9 billion. After excluding non - operating influencing factors, the actual loss is about 2 billion less than expected.
Among them, the actual loss of the core local business segment is 2 billion compared with the market expectation of over 4 billion, which is the main reason for the better - than - expected overall profit. In the view of Dolphin Research, it should mainly be that the loss of the home - delivery business is less than expected, rather than the profit of the in - store business being higher than expected.
According to the calculation , the overall average loss per order of Meituan Food Delivery + Flash Purchase may have dropped to 1 - 1.1 yuan, better than the market expectation of 1.4 yuan. This means that the UE gap between Meituan and Alibaba Flash Purchase has widened from about 1.6 yuan in the previous quarter to about 2 yuan, which is a key and optimistic signal.
In addition, this quarter the loss of new businesses has also narrowed to 2.1 billion, better than the market expectation of 2.6 billion, and has significantly narrowed compared with the previous quarter. On the one hand, it is because the operating efficiency of Xiaoxiang Supermarket and overseas businesses has improved, and on the other hand, the first quarter is the trough of investment, which has a positive impact.
5. The reduction of subsidies is the fundamental reason: This quarter the gross profit margin performance is also not good, with a year - on - year decrease of nearly 9 percentage points, lower than the Bloomberg consensus expectation. Combining the performance of revenue and gross profit, it can be seen that the company's exemptions for riders and merchants (reflected as a reduction in revenue) have not significantly declined.
The main reason for the better - than - expected loss reduction is the reduction of red - envelope subsidies for consumers - the expense expenditure has significantly decreased. Specifically, the marketing expense expenditure this quarter is about 23 billion, far lower than the market expectation of over 25 billion, and the difference exactly matches the profit expectation difference of about 2 billion.
For other expenses, the R & D expense this quarter still increased by 22% year - on - year, mainly due to the demand for R & D of functions such as AI. As for the management expense, it only increased by 10% year - on - year.
Dolphin Research's Viewpoint:
As can be seen from the above analysis, from the perspective of expectation difference, Meituan's performance this quarter can be said to be good. The main points of concern include:
a. The loss reduction of the home - delivery business is better than expected. The key is that the gap between the UE of Taobao Flash Purchase and Meituan's UE has reversed the narrowing trend of the previous two quarters and instead widened. This implies that the efficiency gap between Taobao Flash Purchase and Meituan has widened, which is an important trend signal.
b. It can be inferred that the revenue growth of the in - store business continues to slow down, which verifies the market's concern about the pressure exerted by Douyin on Meituan in the local life business.
c. On the premise of good growth, the new businesses have reduced losses quarter - on - quarter as expected and the reduction amplitude is better than expected, which is also a good signal. However, due to the seasonal impact that the first quarter is the off - season for investment, we cannot simply expect the losses of new businesses to continue to narrow in the next quarter.
2. Looking forward to the subsequent development trend:
1) Competition in instant retail: Within this quarter, all three participants in the food delivery war, as expected by the market consensus, continued to reduce losses. Looking ahead, Meituan and Alibaba will gradually move towards turning losses into profits in the instant retail business (at least they will try their best). Dolphin Research believes that there is basically no disagreement in the market on this general direction.
The key question is what level the UE of each company will eventually stabilize at in the steady - state, and the short - to - medium - term loss - reduction rhythm may not be that important.
The reason behind this is that instant retail is a battlefield that is still in dynamic change. Among them, the average UE per order of each player will change dynamically with the change of the opponent's subsidy intensity. Just as the UE of Meituan improved rapidly after the reduction of red - envelope subsidies this quarter, if the competition for market share intensifies again in the "daily battle" season of the third - quarter summer vacation, the UE is likely to deteriorate again.
Dolphin Research believes that the most important thing to focus on is still the change in market share. If it can be observed that Meituan's share in instant retail continues to increase, it means the inflection point of Meituan's steady - state average UE per order and investment logic. If the shares of all competitors are still very close, then the UE of each company is likely to fluctuate between good and bad for a long time, and Meituan's competitive barrier in this industry has not been fully rebuilt.
2) Has the in - store business become a bigger problem?: Although the outcome of the "instant retail" war is still unclear, after all, the intensity of competition is gradually decreasing. Therefore, recently, the market's focus on Meituan has actually shifted more to the "in - store business" competition between Meituan and Douyin.
The company's previous guidance was that the GTV growth rate of Meituan's in - store hotel and tourism business as a whole would drop below 15% in the first quarter . But in fact, the expected GTV growth rate of the in - store business by leading external analysts has generally been adjusted down to only a high single - digit percentage, and there is a further slow - down trend in the future.
In contrast, the GTV growth rate of Douyin's in - store hotel and tourism business in the first quarter, although the predictions from different channels vary, is still close to a mid - double - digit percentage (about 20% - 40%, and the GTV mentioned here is before verification). According to the current expectations, the ratio of Douyin's in - store hotel and tourism GTV to Meituan's will increase from just over 70% in 2025 to nearly 100% in 2026.
It can be seen that although the impact of the "in - store war" on profitability will not be as severe as the "food delivery war", the pressure on market share and market position may even be greater.
Another reason for the market to mention Douyin's competitive threat again this time is that Douyin recently made a major organizational adjustment to its local life business. The main change is to distinguish merchants according to whether their monthly GMV is greater than 50,000. For merchants with a monthly GMV greater than 50,000, they will continue to be maintained and expanded mainly through the original display channels. For small and medium - sized merchants with a monthly GMV less than 50,000, they will be maintained and expanded through the offline door - to - door promotion model instead.
Douyin said that small and medium - sized merchants lack sufficient funds and capabilities to make investments on Douyin and obtain enough traffic. Therefore, they are more suitable for the offline development model, and they can use the independent in - store business app - Dousheng Sheng to obtain more traffic based on LBS (as long as the store is near the consumer, it is less dependent on video promotion, etc.).
If the implementation goes smoothly, it means that in addition to its advantage in large merchants, Douyin's in - store business can further strengthen its coverage of small and medium - sized merchants and the LBS - based shelf - style in - store entrance, which were relatively weak before. According to QM data, the monthly active users of Douyin's in - store merchants have exceeded those of Meituan and the gap is widening. The current daily active users of the Dousheng Sheng app, which was launched about two months ago, are close to 10 million. This indeed means considerable competitive pressure for Meituan.
4. From the perspective of value analysis, although the short - term loss - reduction progress may not have a strong guiding significance for the medium - to - long - term steady - state UE, in the short - to - medium - term, since the loss reduction this time is indeed better than expected, and currently the market has certain expectations that Meituan's food delivery UE may turn positive during the peak profit season of instant retail in the second quarter.
At the same time, logically, since there have been rumors recently that both Alibaba and Douyin will significantly increase their AI - related Capex investments, if this is true, then these two, which are Meituan's biggest competitors in the home - delivery and in - store businesses respectively, may indeed reduce their investment in these two businesses and instead focus more on loss reduction or improving monetization in order to reserve more funds for AI development.
Therefore, in the short - to - medium - term, Meituan is more likely to develop towards a neutral - to - optimistic scenario. However, as the company also admits, the UE of the home - delivery business in the third and fourth quarters will depend on the competition situation at that time, and the medium - to - long - term steady - state situation still cannot be accurately judged.
Moreover, the second half of the year will enter a high - base period, and it is very likely that the order volume and revenue scale of the home - delivery business will decline year - on - year. The competition and business prospects of the in - store business are even more unclear, and it is more difficult to achieve the goals of an optimistic scenario.
The following is a detailed review of the financial report
I. The growth of local business remains mediocre
After the latest disclosure caliber, the new segmented revenues disclosed by the company include the following four categories: a. Delivery revenue (the only one that is the same as the old caliber); b. Merchant service revenue, including the original commission revenue and advertising revenue, but not exactly the same as historical data; c. Self - operated retail revenue, with revenue and costs calculated based on total sales, which should be to independently show the performance of Xiaoxiang and Dingdong Maicai, which will be consolidated in the future; d. The remaining other revenues.
After the change of caliber, it is more difficult to infer the performance of the in - store and home - delivery businesses within the core local segment. Therefore, more reliance needs to be placed on the information from the small meeting. Dolphin Research will issue a short review separately to share the information communicated in the small meeting with everyone.
Specifically, this quarter the revenue of the core local business segment is about 64.1 billion, with a year - on - year growth of 0.2%, which is only generally in line with market expectations, and the performance is not good.
Breaking it down, the delivery - related revenue, which mainly reflects the home - delivery business, decreased by 6.4% year - on - year, continuing to narrow compared with - 10% in the previous quarter, but the narrowing range is not large. It can be inferred that the reduction of losses in the home - delivery business this quarter is not mainly achieved by reducing freight subsidies, but should be mainly achieved by reducing red - envelope subsidies for consumers.
Since the advertising and commission revenues are now disclosed together, it is no longer possible to initially judge the performance of the