Meituan profit tumbles as China’s leading food-delivery giant struggles with a brutal price war that has deeply hurt its bottom line. The company, known for dominating the online food delivery sector, has seen its earnings collapse due to aggressive discounting, rising competition, and increasing operational costs. Competitors like Alibaba’s Ele.me and JD.com have intensified the fight by flooding the market with heavy subsidies, forcing Meituan to defend its market share at the cost of profitability.
This article explains the scale of Meituan’s financial decline, the reasons behind the ongoing price war, how the market has reacted, and the company’s strategy to bounce back.
The Depth of the Decline
In the latest quarterly report, Meituan announced that its net income plunged by more than 95 percent compared to last year. Despite generating strong revenue growth of over 11 percent to nearly RMB 92 billion, the company’s profit shrank to just RMB 365 million, around 51 million US dollars.
The adjusted net profit also fell sharply, down almost 90 percent, highlighting how serious the impact of the price war has been. Analysts said the results were far below market expectations, with the company’s local commerce business seeing operating profits collapse by more than three-fourths.
The company attributed this steep decline to “irrational competition” in the second quarter of 2025. Rivals rolled out aggressive campaigns that included heavy subsidies, free delivery offers, and discount vouchers, forcing Meituan to match the pace to maintain its customer base.
Understanding the Food-Delivery Price War
The food delivery industry in China is massive and highly competitive. Meituan, which has long enjoyed a dominant position with over 65 percent of the market share, is now facing growing pressure from Alibaba’s Ele.me and JD.com.
Both rivals have committed billions of yuan to attract customers, offering zero-cost meals, deep discounts, and free delivery services. These promotions, while appealing to consumers, are eating into the profit margins of all players.
This kind of “subsidy battle” has also caught the attention of regulators. Authorities have expressed concerns about destructive competition in the instant retail and delivery sectors, often referred to in China as “neijuan,” which describes endless, wasteful competition.
In July, Meituan, JD.com, and Ele.me jointly agreed to reduce extreme promotional practices such as “zero-yuan purchases,” signaling a possible attempt to stabilize the market. However, whether these agreements will hold in the long term remains uncertain.
Financial Fallout and Market Backlash
The financial results immediately triggered a negative reaction in the market. Meituan’s stock price in Hong Kong plunged between 10 and 13 percent following the earnings report. Analysts at major banks such as Citi and HSBC downgraded the company’s stock outlook, citing shrinking margins and rising costs.
The profit drop also dragged down Hong Kong’s broader technology and internet indices, underlining how significant Meituan’s performance is to investor sentiment. Many investors fear that if the price war continues, Meituan may have to endure further earnings pressure, reducing confidence in its medium-term profitability.
Operating margins also shrank dramatically, with the local commerce unit losing nearly 20 percentage points in profitability compared to the previous year. This shows how fast subsidies and promotional spending can erode business performance in such a competitive sector.
Meituan’s Response to the Crisis
Despite the grim numbers, Meituan insists that the company is playing the long game. Chief Executive Wang Xing emphasized that the company would prioritize growth and market leadership, even if it meant short-term sacrifices. He highlighted four key areas of focus: selection, price, service, and delivery.
To maintain its market share, Meituan has continued to spend heavily on marketing and rider incentives. This has pushed up sales costs significantly, but the company sees it as necessary to retain its position as China’s go-to food delivery platform.
The company is also investing in emerging technologies such as artificial intelligence, automation, and drone delivery to improve efficiency in the future. These initiatives may not pay off immediately, but they are seen as critical for long-term competitiveness.
Global Expansion Strategy
Meituan is not limiting its ambitions to China. Through its overseas brand Keeta, the company has entered markets such as Brazil, Hong Kong, Qatar, and Saudi Arabia. While this global expansion is still in its early stages, it represents an important strategy to diversify revenue streams and reduce reliance on the intensely competitive Chinese market.
However, these new ventures are still loss-making. The unit responsible for international operations and other new initiatives reported a 43 percent increase in operating losses year-on-year. Still, Meituan believes that investing early in global growth will give it an edge in the long term.
Strong Cash Reserves Provide Flexibility
One reason Meituan can afford to sustain such heavy losses is its strong cash reserves. The company has built up substantial holdings of cash and short-term investments, which provide a financial cushion during turbulent times.
This gives Meituan more flexibility to withstand a drawn-out price war compared to smaller competitors who may not have the financial strength to continue burning cash. Investors see this as one of the company’s biggest advantages, even though short-term profits are being sacrificed.
Risks and Challenges Ahead
While Meituan still commands the largest market share, it faces several challenges that could shape its future performance.
- Government regulators may tighten rules to prevent unfair competition, which could force companies to scale back subsidies.
- Labor and courier welfare issues could increase operational costs, particularly if stricter labor protection measures are introduced.
- Weaker consumer spending in China could limit overall growth in the sector, making it harder for subsidies to convert into sustainable revenue.
- International expansion may take years before it generates meaningful profit, keeping pressure on domestic operations.
Despite these risks, Meituan remains confident that its scale, technology investments, and deep cash reserves will help it survive the current turbulence and emerge stronger.
Outlook for the Future
Meituan’s leadership in China’s food delivery sector remains intact, but the path ahead is uncertain. If the price war eases and regulators succeed in curbing destructive practices, the company could recover profitability over the next few quarters.
On the other hand, if rivals continue to aggressively push subsidies, Meituan may face another round of sharp profit declines. The company’s ability to balance market share protection with financial discipline will be key to its long-term success.
For investors, the big question is whether Meituan’s strategy of enduring short-term pain for long-term gain will pay off. The company’s focus on technology, efficiency, and global expansion suggests it is preparing for the future, but patience will be required.
Conclusion
Meituan profit tumbles as a fierce food-delivery price war forces the company into a difficult position. While revenues continue to rise, profits have nearly vanished due to heavy subsidies and growing competition. The company’s stock has taken a hit, and investor confidence has weakened.
Still, Meituan is betting on resilience. With strong cash reserves, technological investments, and global ambitions, the company is trying to outlast its competitors and secure its long-term dominance. Whether this strategy succeeds or results in deeper financial pain will depend on how quickly the market stabilizes and whether regulatory action helps bring discipline back to China’s food delivery sector.
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