Meituan’s Food Delivery War Cracks as Q2 Profit Plummets 89% on Core Weakness and Expanding Losses

TradingKey - Fueled by “irrational competition” in the food delivery sector, Meituan (3690.HK) saw its Q2 2025 net profit crash 89% due to a surge in sales expenses. With its core local services business underperforming and new ventures deepening losses, the delivery giant faces mounting pressure on its profitability outlook.

On Wednesday, August 27, Chinese food delivery leader Meituan released its Q2 2025 earnings:

• Revenue: RMB 91.84 billion, up 11.7% YoY, below the RMB 93.69 billion consensus
• Operating profit: RMB 230 million, down 98% YoY, far below the RMB 8 billion forecast
• Net profit: RMB 1.49 billion, down 89% YoY, missing expectations of RMB 9.85 billion
• Core Local Services revenue: RMB 65.35 billion, up 7.7% YoY, below the RMB 67.55 billion estimate; operating margin fell 19.4 percentage points to 5.7%
• New Initiatives revenue: RMB 26.5 billion, up 22.8% YoY, above the RMB 25.96 billion forecast, but operating losses widened 43.1% to RMB 1.9 billion

In its earnings statement, Meituan attributed the sharp decline in core business profitability — with core operating profit dropping to RMB 3.7 billion — to intense competition in the food delivery industry. The widening loss in new ventures was driven by overseas expansion.

Within the core local business:

• Delivery services revenue: RMB 23.66 billion, below the RMB 26.18 billion forecast
• Revenue growth lagged far behind the increase in on-demand delivery order volume, primarily due to a sharp rise in subsidies deducted from delivery revenue to stay competitive

Meituan’s Q2 cost of sales rose 27% YoY from RMB 48.4 billion to RMB 61.4 billion, increasing as a percentage of revenue from 58.8% to 66.9%. This rise was driven by higher order volume, increased rider subsidies, expansion in grocery retail, and overseas operations.

Notably, sales and marketing expenses surged 51.8% YoY to RMB 22.5 billion, due to rising spending on promotions, advertising, and user incentives as Meituan adjusts its strategy to counter fierce competition in food delivery and instant retail.

Since JD.com entered the food delivery market and Taobao integrated Ele.me into its main app, China’s delivery landscape has shifted dramatically.

According to a UBS report, in terms of order volume, Ele.me’s market share rose from 11–13% to 28% in Q2, while JD’s share dropped from 13% to 7%, and Meituan’s share fell from 85% to 74%.

UBS noted a key development: Meituan’s exclusive merchant advantage has begun to erode — the daily active users (DAU) of merchants exclusively partnered with Meituan declined in July for the first time.

Combined with JD’s recent earnings, the food delivery war has effectively wiped out profits for these tech giants. JD’s new business revenue doubled, but its operating loss ballooned from RMB 700 million to RMB 14.8 billion, dragging the entire group’s Q2 net profit down by 51%.