Meituan warned its profitability may suffer as the Chinese food delivery leader faces intensifying competition at home and is aggressively expanding into new markets.
The firm is now considering rolling out its on-demand delivery service outside China as part of its goal to become a global company, CEO Wang Xing told analysts on a post-earnings call on Monday. Meituan will not move too fast in its international push, he added.
“It will have some impact on our short term profitability,” Wang said. “Longer term, the global expansion represents a very good, very promising growth opportunity for us.”
Meituan has ramped up efforts over the past year to grow its presence in Hong Kong, the Middle East and beyond with its Keeta food delivery app, even as it faces growing challenges from JD.com at home.
Sales growth in Meituan’s core local commerce operations will decelerate in April to June compared to the previous quarter, while operating profit will fall significantly from a year earlier due to growing competition in China, according to Wang.
“We are going to take whatever measure it takes to win the game,” he said. Meituan shares fell about 5% in early trading on Tuesday.
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The Beijing-based company reported better-than-expected sales and profit in the past quarter. Sales for the three-month period ending in March rose 18% to 86.6 billion yuan ($15.4 billion), while analysts on average expected 85.4 billion yuan. Net income of 10.1 billion yuan also surpassed the average analyst estimate of 8.63 billion yuan.
Keeta’s success helped revenue of Meituan’s new initiatives segment grow 19.2% to 22.2 billion yuan in the last quarter, according to an exchange filing.
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However, Meituan is affected by Beijing’s growing scrutiny of the online platform industry as Chinese officials are trying to help shore up local merchants who are getting squeezed by prolonged economic uncertainties and the US trade war.
On Monday, Meituan’s shares in Hong Kong fell 5.5% after Chinese regulators published draft guidelines for fees online platforms charge third-party merchants. In its filing, Meituan pledged to expand support for merchants as well as protect the rights of delivery drivers.
The company recently said it is planning to spend US$1 billion to bring Keeta to Brazil, following the service’s recent success in Hong Kong and the Middle East.
Earlier this year, Deliveroo decided to retreat from Hong Kong after a decade of operating in the city, becoming the first casualty of Keeta’s aggressive pricing tactics in the Chinese territory.
Keeta has also rolled out its service throughout Saudi Arabia’s major cities since entering the market in September 2024. The app is likely to match or overtake No. 2 player Jahez later this year, Citigroup has said.
Meituan announced in March plans to build its own AI model, becoming the latest big Chinese company to join an intensifying global race to develop the best thinking machines.
The company has started to integrate AI into work processes and across its range of consumer services, which include a travel site and e-commerce platform.
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It’s developing its own “LongCat” large language model, a platform that will compete with rivals such as ByteDance’s Doubao and Alibaba Group Holding’s Qwen.
Wang said that LongCat’s performance now closely approaches GPT-4o.
Chart: Bloomberg
