Meituan (Trans): Q1 food delivery continued to narrow losses; Douyin is ramping up spend.

The following is Dolphin Research's$MEITUAN(03690.HK) FY2025 earnings call Trans. For the earnings take, cf. 'Meituan: Three Headwinds, Can the Takeaway 'Old Guard' Get Back Up?'.

I. Key takeaways from the results

1. Cash reserves: As of Dec 31, 2025, cash, cash equivalents and short-term investments totaled RMB 166.8bn. Q4 operating cash outflow narrowed QoQ to RMB 6.6bn.

2. Q4 snapshot: Revenue was RMB 92.1bn (+4.1% YoY). Adj. net loss narrowed QoQ to RMB 15.1bn, and total operating loss narrowed QoQ to RMB 16.1bn.

3. Core local commerce: Q4 revenue reached RMB 64.8bn (-1.1% YoY). Segment OP loss was RMB 10.0bn, narrowing sharply QoQ on lower takeaway losses, while takeaway net ticket stayed well above the industry average.

4. New initiatives: Q4 revenue was RMB 27.3bn (+18.9% YoY), mainly driven by Keeta and grocery retail. Segment OP loss widened to RMB 4.65bn, and management expects total new-biz losses in 2026 not to exceed 2025.

5. Cost/expense pressure: Q4 GPM fell approx. 11.6ppt YoY, driven by higher contra revenue from consumer subsidies, increased rider incentives, and higher overseas opex. S&M ratio rose to 34.4% (+14.8ppt) on heavier promotions and user subsidies, while R&D ratio increased to 7.6% reflecting higher AI spend.

II. Earnings call details

2.1 Management highlights

1) Takeaway

a. Platform GTV and orders posted double-digit growth in 2025. New transacting users, purchase frequency, and ARPU all hit record highs.

b. Focused on supply-side innovation, partnering with merchants on formats such as branded satellite stores, 'Pin Baiwei' clearance shops, and 'Shen Qiangshou' raccoon kitchen, helping many F&B brands and SMEs improve operating efficiency.

c. Through 'Pin Haofan' and 'Shen Qiangshou' models, co-launched value-for-money hero SKUs across different price bands with merchants. This served a broader range of consumers.

d. Industry-wide subsidies eased slightly vs. Q3 in Q4 but remained near record highs. We proactively pulled back resources from low-ticket and low-quality orders, lifting average ticket QoQ.

e. Online marketing revenue kept growing steadily. The advertiser base continued to expand.

2) On-demand retail (Flash Sale)

a. Deepened local supply and became a key omnichannel partner for many leading brands, while extending supply chain coverage.

b. Innovative supply formats include Meituan Flash Warehouses, Meituan Xiaoxiang, branded flagship flash warehouses, and self-operated Xiaoxiang front warehouses for supermarkets.

c. 'Waima' alcohol delivery scaled rapidly, building deep partnerships with leading liquor brands.

d. In healthcare, we strengthened local supply of common drugs and medical devices, supported online-first launches of innovative drugs, and expanded 24/7 pharmacies, telemedicine, and at-home testing.

e. Rolled out the industry's first full-cycle service guarantee 'Anxin Gou', offering free return shipping for premium Meituan members and selected branded goods. This raised the overall service bar.

f. Multiple categories, including healthcare, leisure & entertainment, fitness, and pet services, delivered double-digit growth in orders and GTV.

3) In-store / Hotel & travel

a. Launched curated merchant recommendation rankings, expanding the 'Six Series' lists to education, fitness, healthcare, elderly care and more.

b. Tapped into emerging demand by enriching supply in sports events, culture & arts ticketing, and home services. This broadened consumer options.

c. Helped over 1mn independent artisans build digital profiles on the platform, enhancing a unique services ecosystem.

4) Grocery retail (Xiaoxiang Supermarket)

a. Accelerated new city entries and warehouse expansion in Q4 to capture rising online fresh grocery demand. This bolstered capacity.

b. Built strong supply chain capabilities over recent years, improving fresh produce quality and developing leading private-label capabilities. Private-label GTV mix kept rising.

c. Opened the first offline Xiaoxiang Supermarket in Beijing, and added several Lehou stores. Offline pilots are underway.

d. Announced the acquisition of Dingdong Maicai's onshore assets for $717mn, pending regulatory approval, to strengthen Meituan's end-to-end capabilities in on-demand fresh retail, especially supply chain and East China coverage.

5) Overseas (Keeta)

a. Consolidated leadership in Hong Kong with positive unit economics in Q4. Keeta launched in May 2023 and recorded its first profitable month in Oct 2025, a 29-month path to profitability.

b. Order growth in Saudi Arabia remained strong, making Keeta one of the top consumer choices. After a sharp subsidy cut, orders proved resilient, and we expect the first profitable month before end-2026.

c. Entered Qatar, Kuwait, the UAE, and Brazil in H2 2025, all showing strong early momentum.

d. In Brazil, operations are focused on São Paulo for now. We will refine the business model first before broader expansion.

e. Keeta losses will remain sizable in 2026 due to multiple pipeline markets Macro-2H25 entries, but will be offset by efficiency gains in domestic new businesses.

6) Meituan membership and AI

a. In 2025 we fully upgraded Meituan Membership, the company's first cross-category consumer loyalty program spanning takeaway, hotel booking, lifestyle services, mobility, and healthcare. Member-only benefits lifted brand affinity and purchase frequency, moving many mid-tier members up, and growing the base of high-value members.

b. Since early 2023 we have invested heavily in AI CapEx and talent and may be among China's largest non-cloud spenders. We built the in-house multimodal LongCat model while leveraging third-party models in parallel.

c. Launched AI assistant Xiaomei (standalone app) and Xiaotuan (embedded in Meituan App and now open to all users), covering all local service categories on platform. This shifts search from keyword to natural language interaction.

d. Backed by Meituan's massive merchant database, POI data, real-time merchant ops data, and user reviews, Xiaotuan can precisely answer complex and personalized local-service needs.

2.2 Q&A

Q: How do you view the battle for the AI super entry point? Any updates on your AI Agent and the LongCat model?

A: As stated previously, AI will revolutionize everything, and the only rational stance is to play offense, not defense. That does not mean rushing to be a 'token factory', as we see AI as a strategic opportunity to upgrade and reinforce our core local-services businesses.

Since early 2023, we have invested heavily in CapEx and AI talent to build an in-house model and may be one of the largest investors among China's non-cloud companies. While this has clearly affected the balance sheet and cash flow, we will stick with self-developed LLMs because we believe we must have that capability, while also using third-party models. We are working to upgrade the main Meituan app into an AI-native application to better serve end-to-end needs in local services and on-demand retail.

In our view, the essence of the 'super entry' race is the ability to understand user intent precisely and execute efficiently. This is far more complex than a smart chatbot. Local services feature highly complex use cases with massive fragmented, real-time information, much of it from SMEs that are not fully digitized, so data must be digitized first, which is what we have been doing for years.

Many merchants run on our digital systems, giving us unmatched data access. In addition, local-services platforms must be deeply involved in fulfillment management, and generic AI cannot reliably ensure experience in the physical world.

Our deep expertise in takeaway logistics, on-demand delivery, BD/ops, and retail supply chain, together with future deployments in embodied AI such as drones and autonomous vehicles, gives us a clear edge in connecting AI with the physical world.

Q: Has the State Council's probe into takeaway competition affected the business? Any changes in the competitive landscape, and can takeaway keep narrowing losses as in Q4?

A: Regulators have sent a clear signal against 'involution' and aim to foster a healthy, orderly market. Subsidy- and price-led takeaway competition is a classic form of irrational involution, and we reiterate our stance against it, while cooperating with the probe and pulling back resources from low-quality orders to defend our leadership.

In 2026, regardless of the backdrop, our takeaway strategy is consistent: first, build core capabilities by broadening high-quality supply, ensuring fast and reliable delivery, and sustaining competitive pricing. Second, defend leadership while focusing on high-quality growth and efficiency. Third, create industry value through supply-side innovation, full-year rider welfare and safety, and AI-driven improvements in efficiency and experience.

Looking ahead, we expect competition to shift toward maximizing user LTV, improving supply quality and category breadth, and delivering a seamless end-to-end UX. Even amid intense and often irrational subsidy fights in recent months, Meituan remains the first choice for high-value diners because we offer a better overall experience, keeping an edge in mid- to high-ticket orders with average ticket far above peers. Thanks to our focus on quality growth and a better order mix, we expect Q1 per-order losses in takeaway to improve more meaningfully QoQ vs. Q4, and a more orderly market should pivot competition from subsidies to innovation, service, and efficiency, where we are stronger.

Q: Douyin has ramped subsidies in in-store services since Q4 and may keep heavy spend through 2026. How do you view today's competitive setup, and how does your approach differ from the 2022–23 cycle?

A: In the near term, we do see a competitor stepping up investment, which may weigh on our near-term profitability. More important, however, is our long-term playbook.

The in-store landscape has changed materially, with participants now more differentiated across categories, merchants, and use cases, and leaders are focusing more on efficient operations. For us, the top priority is always sustainable long-term industry growth, not short-term tactical wins.

We firmly believe in the long runway for in-store services, requiring sustained investment and full value-chain innovation. Consumer needs have evolved toward personalization and value in F&B, with demand growing for extended services such as online booking, online ordering, and in-store pickup. On the supply side, new formats and service categories continue to emerge, while on the tech side both consumers and merchants increasingly expect AI-driven products.

Against these trends, we will keep converting our deep industry insight into innovation. We are building and reinforcing differentiation in category mix, merchant ecosystem, and operating efficiency, and, leveraging years of Meituan and Dazhong Dianping expertise in F&B, we shared insights on the shifting logic of fine dining to help partners adapt quickly. We continue to explore new supply in self-service, leisure & entertainment, sports, arts ticketing, and self-operated home services, while our trove of authentic user reviews and one-stop online services spanning group-buying, online ordering, in-store pickup, reservations and queuing is a unique edge.

On the tech side, the AI operations toolkit 'Smart Zha Gui' helps merchants optimize digital services, using AI to analyze preferences for personalization and to mine feedback for ops optimization. AI digital staff and AIBD tools simplify the full merchant lifecycle from store-opening to daily ops and customer acquisition. In 2026, we will further differentiate, reallocating more resources to higher-ROI areas, reinforcing core categories, and trimming inefficient spend in non-core fields.

Q: Why acquire Dingdong Maicai? What synergies do you expect, and how will the self-operated grocery retail strategy evolve?

A: We announced the $717mn acquisition of Dingdong Maicai's mainland China business, pending regulatory approval. The most important reason is our conviction in China's fresh grocery retail opportunity, both online and offline.

There are two key reasons: first, this will strengthen Meituan's end-to-end capabilities in on-demand fresh retail, particularly supply chain, while further improving the operating efficiency of our grocery retail business. Second, Dingdong has built a strong position in East China, and closing the deal will significantly expand our coverage and service quality in the region.

Grocery retail aligns closely with our mission and is a long-term strategic priority. As the market evolves, we see self-operated supply like Xiaoxiang Supermarket becoming increasingly important within the instant delivery ecosystem, and last year we restructured the portfolio toward a more efficient, sustainable growth model.

Over recent years, Xiaoxiang has delivered robust growth while improving efficiency, broadening private-label coverage, extending into night-time consumption, and maintaining industry-leading fulfillment speed and experience. We plan to scale this model to more cities and regions, bringing faster, fresher, and better-value on-demand fresh groceries to more consumers.

Q: Keeta has made progress in HK/Macau and Saudi, but the road ahead is tough. Any update on 2026 overseas strategy, Brazil spend this year, and the breakeven timeline for Saudi?

A: First, our deepest thanks to Keeta's teams, merchants, riders, and partners in the Middle East for their dedication in difficult times. We are doing everything we can to ensure safety and livelihoods as we navigate challenges together.

In China, our core philosophy is to create value for the entire ecosystem and support long-term industry development rather than foster involution. Keeta's overseas playbook is the same: grow with local partners, accelerate the digital transformation of local services, and expand the market together.

In 2026, Keeta will focus on existing markets, staying flexible and tailoring strategy to local dynamics, balancing growth and profitability by market and by stage. Compliance remains the top priority, and we are working closely with regulators. Longer term, we are committed to globalization, focused on on-demand delivery and on-demand retail where our core strengths apply best.

By market: in Hong Kong, Keeta launched in May 2023 and posted its first profitable month in Oct 2025 after 29 months, and this year we will concentrate on further optimizing operations. In Saudi, the market is highly favorable for takeaway profitability, so we expect the first profitable month to come much faster than in Hong Kong and certainly before year-end, with some cities already at breakeven and others catching up quickly.

Following substantial subsidy cuts in Saudi, orders held up well, indicating users choose Keeta for superior service rather than subsidies or low prices. In 2026 we will keep optimizing other Middle East markets, and, leveraging Saudi experience and regional brand recognition, I am confident we can lift efficiency quickly in new markets, though Middle East growth still faces external risks such as ongoing regional conflict.

In Brazil, we see substantial long-term value and remain committed. We are currently focused on São Paulo, the largest city, prioritizing business-model refinement over rapid national rollout, while pursuing strategies that build differentiation.

Overall, Keeta losses will remain sizable in 2026 because we entered many new countries and markets in 2H25 and order scale is still ramping. However, this will be offset by efficiency gains in domestic new businesses, and we expect total new-biz losses in 2026 not to exceed 2025.

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