Meituan Returns to Profit as Food Delivery War Cools, but Management Warns Subsidy Normalization Will Take "A Few Quarters"
Q2 2026 earnings call, August 28, 2026
Meituan turned the corner in the second quarter, posting positive net profit and accelerating revenue growth as the brutal subsidy war in Chinese food delivery and quick commerce began to ease. Total revenue rose 14.4% year-over-year to RMB 104.6 billion, with adjusted net profit of RMB 2.5 billion and total segment operating profit of RMB 3.9 billion, a sharp reversal from the losses that defined the past year of competitive intensity. CFO Shaohui Chen framed the quarter plainly: "With the on-demand industry gradually shifting toward efficiency improvements, our focus on operational execution and structural advantages translated into meaningful financial improvement."
Unit Economics Turn Positive, But Q3 Will Look Worse Sequentially
The most important operational data point for investors is that on-demand delivery unit economics turned positive in Q2 across both food and non-food categories, which management says remains "far ahead of the industry." Food delivery returned to positive year-over-year revenue growth for the first time in several quarters, driven by a healthier order mix and rising average order values. However, Chen cautioned that Q3 unit economics will decline sequentially even as they improve year-over-year, citing seasonal peak-season marketing spend, extra courier subsidies during extreme summer heat, and the July 1 nationwide rollout of occupational injury insurance, which adds a new permanent cost layer. Critically, management does not expect subsidy levels to normalize quickly: "the industry subsidy level is still much higher than the 2024 level, and it will take a few quarters to normalize." This is a key signal for investors modeling near-term margin trajectory — the recovery is real, but not linear.
In-Store Business Faces New Competitive Format, Margins to Compress in H2
Perhaps the most candid disclosure of the call came on the in-store, hotel and travel segment, where Chen acknowledged that competitors have been aggressively subsidizing a "dedicated shelf-based app" to pull traffic away from content-driven discovery models. He was direct about the nature of this threat: aggressive subsidies "did bring in many price-sensitive users, particularly in lower-tier cities, but these users typically show weaker repurchase behavior." Meituan claims its core user GTV quality and redemption rates remain "meaningfully ahead of key competitors," but the company is nonetheless increasing investment in the category through the second half, and Chen guided explicitly that operating margin in this segment "will come down from Q2." This is a notable admission that the in-store business, previously Meituan's most profitable and stable segment, is not immune to renewed competitive pressure, even as management insists any margin recovery will be gradual and medium-term.
LongCat 2.0: Meituan Draws a Clear Line on AI Monetization Strategy
CEO Xing Wang used the call to clarify Meituan's AI positioning following the open-sourcing of LongCat 2.0, described as one of the first trillion-parameter models trained entirely on Chinese infrastructure. Investors should note the explicit strategic framing: "AI is less about competing on the models. It's more about leveraging AI to reshape our organization, product and workflow." Wang was unambiguous that Meituan will not chase the commodity LLM-serving business: "We are not going to compete to be a token factory." Instead, the model is being deployed internally across software development, customer service, and AI agents, and externally through the CatPaw platform, which rolls out specialized agents to restaurants, retail, and hotel merchants — a move management describes as evolving Meituan's role "from merchants' online channel to their AI business partner." This is a disciplined, ROI-gated approach rather than a capital-intensive foundation-model arms race, which should reassure investors worried about runaway AI capex.
Overseas: Saudi Arabia Profitability Beats Hong Kong's Timeline, Brazil Stays Narrow
KeeTa's international unit economics data offers a genuinely new proof point. Hong Kong took 29 months to reach unit-economics profitability after its May 2023 launch; Saudi Arabia, a larger and unfamiliar market, reached the same milestone in just 22 months, turning profitable in July 2026. Wang used this as evidence that Meituan's operational playbook "can scale well across different overseas markets." On Brazil, management is deliberately narrowing scope rather than expanding aggressively, focusing on São Paulo, which represents 25% of the country's food delivery market, before any broader rollout. Combined with grocery retail investment, management guided that new initiatives segment losses for full-year 2026 will not exceed 2025 levels, an important ceiling for investors tracking cash burn.
Grocery Retail: Omnichannel Bet Deepens with Xiaoxiang Expansion
Xiaoxiang Supermarket now operates in 68 cities, and the company is pushing into offline flagship stores at a faster cadence, opening a fifth location in Shenzhen the same day as the call. Wang framed the offline push as a trust-building exercise rather than a pure sales channel: consumers "can see, they can smell and they can touch the products... that sensory experience is something they cannot get from a digital screen." Separately, the smaller-format Happy Monkey neighborhood grocery concept has reached 40 stores but remains, in Wang's words, "at a very early stage." Losses from grocery retail increased quarter-over-quarter on the back of scale expansion, a reminder that this remains an investment-phase business even as new initiatives segment losses narrowed overall to RMB 1.7 billion.
Capital Allocation: Door Left Open on Investment Portfolio Monetization
Meituan disclosed that its investment portfolio stakes are currently worth more than RMB 70 billion, with a separate RMB 22.2 billion fair value gain recognized in other comprehensive income this quarter rather than flowing through the P&L. Chen signaled a more active capital recycling posture than in prior quarters: "When time is right, we are very open to exit or monetizing selected positions to free up capital." Share buybacks remain the primary shareholder return mechanism, and management reiterated that core business investment takes priority, with capital allocation to overseas and grocery segments remaining strictly ROI-gated rather than growth-at-all-costs.