Meituan Plummets as Q2 Profit Drops 97% Amid Food Delivery Fight

Shares of the leading Chinese on-demand delivery firm took a nosedive after announcing a 97% drop in net profit for the second quarter, primarily due to escalating competition in the food delivery industry.

The company’s stock declined 12.6% and was trading at HKD 101.70 (roughly USD 13.05) around 1:30 p.m. in Hong Kong today.

According to the latest earnings release, net profit for the quarter ending June 30 was approximately CNY 365.3 million (USD 51.3 million), a sharp decrease from CNY 11.4 billion (USD 1.6 billion) a year earlier. Revenue, however, increased by 12%, reaching CNY 91.8 billion (USD 12.9 billion).

Revenue generated from the company’s core local commerce segment, which includes food delivery services, grew by 7.7% to CNY 65.3 billion. Yet, this segment’s operating profit fell dramatically by 76% to CNY 3.7 billion (USD 517.6 million), as operating margins shrank from 25.1% to 5.7%, reflecting intensified competition in the food delivery space.

The segment encompassing new initiatives—such as community group buying and innovative services—saw a 23% revenue boost to CNY 26.5 billion. However, its operating loss widened by 43% to CNY 1.9 billion, despite the operating margin improving slightly from -10.2% to -7.1%.

The company attributed the profit decline mainly to irrational competition in the food delivery sector that intensified during the second quarter. To stay ahead of rivals, the firm increased rider incentives and consumer subsidies, which significantly raised costs. Sales and marketing expenses surged 52% to CNY 22.5 billion.

“Our growth through intense competition has positioned us as a leader today,” said the CEO during a recent earnings call. He emphasized that the company’s strategy centers on ensuring high-quality supply, stable service delivery, and fair pricing, all aimed at providing a superior user experience and fostering a sustainable ecosystem.

The ongoing price war in food delivery, which started in April with JD.com launching a CNY 10 billion subsidy plan and reached its peak in July, has taken a toll on the industry. JD.com, for example, reported a 51% decrease in second-quarter net profit, dropping to CNY 6.2 billion from the previous year.

In early August, major platforms including this company, Alibaba Group’s Ele.me, JD.com, and others, jointly committed to ending predatory practices like zero-yuan purchases to curb excessive competition and promote a healthier market environment.

Concerning the instant retail sector, the CEO noted that low-tier city markets for the company grew 50% in the second quarter compared to last year. He added that the market size exceeds initial expectations, with long-term growth driven not only by subsidies but also by optimizing supply chains and shaping consumer habits.

Despite challenges at home, the company’s overseas segment, Keeta, experienced strong growth in order volume and gross transaction value during the quarter. Keeta’s goal is to hit a GTV of CNY 100 billion (USD 14 billion) within ten years, the CEO revealed.

As of June 30, the company’s cash and cash equivalents totaled CNY 101.7 billion, with an additional CNY 69.4 billion (USD 9.7 billion) held in short-term treasury investments, based on the financial report.

An industry analyst from a research center specializing in e-commerce highlighted that competition among online platforms is now multifaceted. He predicted that Taobao will speed up its efforts to integrate local lifestyle resources, including Ele.me, while the company will strengthen its focus on in-store and neighborhood services. Meanwhile, JD.com will continue employing a strategy centered on product quality and customer satisfaction.