Meituan Q1 Loss Narrows Sharply, Beating Expectations; Morgan Stanley and UBS Reiterate Bullish Outlook
Claire Weston
Meituan's Q1 adjusted net loss came in at RMB 4.97 billion, 26% narrower than consensus; food-delivery unit economics turned profitable in April–May. Morgan Stanley and UBS both reiterate bullish ratings with targets of HK$120 and HK$128.
How much did the loss narrow?
Q1 revenue reached RMB 91.0 billion, up 5.6% year-on-year. Adjusted net loss was RMB 4.97 billion versus consensus of RMB 6.72 billion — a 26% beat.
Operating loss fell to RMB 6.5 billion from RMB 16.1 billion last quarter — a RMB 9.6 billion sequential improvement. This means → nearly 60% of the operating loss was cut in a single quarter.
Core Local Commerce (CLC — the main segment covering food delivery, in-store, and hotel & travel) posted an operating loss of RMB 2.03 billion, far better than Morgan Stanley's estimate of RMB 4.27 billion and consensus of RMB 4.38 billion, beating by 33%.
How far behind is it compared to a year ago?
In Q1 2025, Meituan booked an operating profit of RMB 10.6 billion. This quarter it posted a RMB 6.5 billion loss — a gap of over RMB 17 billion.
CLC revenue grew just 0.1% year-on-year to RMB 64.1 billion, nearly flat. This means → the narrowing loss was driven by spending less, not earning more. The revenue engine has not restarted yet.
Is the food-delivery price war actually cooling?
Q1 food-delivery order volume grew roughly 8% year-on-year. Revenue fell 7%, but improved from -10% in Q4, mainly as subsidies pulled back.
Management disclosed that delivery unit economics (UE — whether each order makes or loses money) turned profitable in April and May. June depends on the intensity of the 618 shopping festival promotions.
Meituan holds 70% market share in orders above RMB 30 per ticket, with an estimated 60% share of total GTV. In plain terms = the high-value order base held firm; the subsidy battle was fought mostly in the low-price segment.
UBS notes average order value (AOV) has rebounded more visibly since March, driven by stronger user stickiness and lower sensitivity to subsidies. Morgan Stanley argues Meituan's per-order economic advantage over Alibaba's delivery arm widened to roughly RMB 3 in Q1, from RMB 2 in Q4 — the competitive landscape has largely stabilised.
What are Morgan Stanley and UBS saying?
Morgan Stanley keeps an Overweight rating with a HK$120 target (implying 18x 2027E P/E) and lifts its 2026 CLC operating-profit forecast by 12%.
It expects Q2 CLC operating profit to turn positive at roughly RMB 3.0 billion (including membership investment), with overall on-demand delivery losses narrowing to about RMB 437 million — delivery profitable at RMB 313 million, Flash Purchase losing RMB 750 million.
UBS keeps a Buy rating with a HK$128 target (SOTP-based) and raises 2027–2028 EPS estimates by 15%–19%.
UBS forecasts Q2 CLC revenue growth accelerating to roughly 5% (from 0.1% in Q1), with operating profit swinging to about RMB 3.2 billion. This means → both banks see Q2 as the inflection point for profitability.
How are retail and overseas businesses progressing?
Xiaoxiang Supermarket now covers 55 cities with over 2,000 warehouse-stores; roughly 60% are profitable. Merchandise sales revenue rose 40.7% year-on-year to RMB 18.0 billion.
New initiatives revenue grew 21.3% to RMB 27.0 billion; operating loss narrowed from RMB 4.6 billion to RMB 2.1 billion.
Overseas brand Keeta is already sustainably profitable in Hong Kong. Saudi Arabia's UE improvement is accelerating; break-even is expected at some point in 2026, with full profitability in FY2027.
What did the CEO say about the second half?
CEO Wang Xing told the earnings call: "Order growth driven solely by subsidies is not sustainable."
He struck a cautious tone on H2, warning that year-on-year order growth may slow — and did not rule out a year-on-year decline. This reflects management already setting expectations for a growth deceleration once subsidies fade.
Q1 R&D spending hit RMB 7.0 billion, up 22% year-on-year. AI's direct contribution to revenue and profit remains limited at this stage.
Order growth driven solely by subsidies is not sustainable.
Wang Xing
CEO, Meituan
(Q1 2026 earnings call)
Content is for reference only, not financial advice.