Meituan Earnings Call: 'Firmly Oppose Internal Competition,' 'Not in a Rush to Become a 'Token' Factory,' Keeta's Profitability in Saudi Arabia Within Sight

Facing unprecedented intense competition,Meituan-W (03690.HK)While stabilizing its core commercial foundation, the company is explicitly rejecting the industry's 'involution' and placing all future growth expectations on the AI-driven restructuring of the physical world and the acceleration of Keeta's globalization.

At tonight's conference call for Meituan’s Q4 and full-year 2025 financial results, Meituan Chairman and CEO Wang Xing, along with CFO Chen Shaohui, delivered a report demonstrating steady progress amid a complex environment, providing detailed updates on the company’s core local commerce, AI strategy, retail mergers and acquisitions, and overseas business developments.

Financial reports show that Meituan's total revenue in the fourth quarter of 2025 reached 92.1 billion yuan, a year-on-year increase of 4.1%. By the end of 2025, the company’s cash and cash equivalents and short-term treasury bond investments totaled 166.8 billion yuan. Among various business segments, the core local commerce segment generated 64.8 billion yuan in revenue for the fourth quarter; meanwhile, the new business segment, driven by Keeta and retail expansion, performed exceptionally well, with fourth-quarter revenue reaching 27.3 billion yuan, marking an 18.9% year-on-year increase.

In response to the market's high attention on competitive dynamics, earnings guidance, and future growth drivers,Meituan-W (03690.HK)management provided clear answers during the meeting.

Confronting Competition and Regulation: "We Firmly Oppose Involution"

Regarding the recent market concerns over price wars in food delivery and regulatory investigations into the industry, Wang Xing expressed a very firm stance during the meeting. He pointed out that regulators aim to foster a healthy and orderly market, and subsidy-driven or price-driven competition in the food delivery sector constitutes "a very typical form of irrational competition."

"We firmly oppose involution. We will actively cooperate with regulatory investigations."

Wang Xing emphasized,Meituan-W (03690.HK) that resources are being reallocated away from low-value and low-quality orders to defend market share and promote high-quality growth. 'Regardless of how the market environment evolves, our food delivery strategy remains clear and consistent.'

This strategy has already shown initial financial success. Chen Shaohui revealed that the operating loss of the core local commerce segment narrowed significantly quarter-over-quarter in Q4, mainly due to a marked reduction in losses from the food delivery business. Wang Xing also provided an optimistic outlook:

"We expect to see a more meaningful quarter-over-quarter improvement in per-order losses for food delivery in Q1 compared to Q4 last year."

The Ambition of the AI Era: 'Never Rush to Become a Token Factory'

AI was another major focus of market attention during this conference call. As a service platform with an extensive offline merchant and fulfillment network, how does Meituan plan to respond to the potential crisis brought about by AI's possible creation of a 'super entrance'? Wang Xing stated:

"Although I believe AI will fundamentally change everything, in this AI revolution, the only meaningful strategy is to take the initiative rather than merely adopting a defensive posture. But this does not mean we should rush to become one of the 'token factories'—not at all."

Wang Xing believes that general-purpose AI cannot reliably manage real-world physical service experiences; without deep involvement in fulfillment service management, AI would simply be 'a clever chatbot.' Currently, Meituan has rolled out its embedded AI assistant, 'Xiao Guan,' to all users and is committed to developing it into a user-centric local services AI agent.

He vividly illustrated with an example: users can directly ask 'Xiao Guan' in natural language—"My friend and I are located in Wangjing and Zhongguancun respectively, and we only have two hours for lunch. Can you find a restaurant midway between us that has private rooms, serves spicy dishes, and offers convenient parking?"

Wang Xing emphasized that to truly address such complex, long-text queries, it takes more than just large models—it requires real-time POI (Point of Interest) data, traffic information, restaurant availability, and genuine reviews, which constitute Meituan's deeply entrenched competitive advantage in the physical world.

Retail M&A and Global Expansion: Planned Acquisition of Dingdong Assets, Keeta’s Profitability in the Middle East on the Horizon

In seeking new growth curves,Meituan-W (03690.HK)Meituan is making dual efforts in instant retail and overseas markets (Keeta).

During the earnings call, Wang Xing confirmed that Meituan plans to acquire Dingdong's retail business in mainland China for $717 million (subject to regulatory approval). He stated that this move not only demonstrates confidence in China's retail sector but will also greatly enhance Meituan's supply chain capabilities in the instant retail space and significantly improve coverage and service quality in the eastern region.

In overseas markets, Keeta’s globalization pace is accelerating. Following its entry into Qatar, Kuwait, the United Arab Emirates, and Brazil (with a focus on São Paulo) in the second half of 2025, its mature market profitability model has been successfully validated.

“Keeta achieved its first profitable month in Hong Kong in October 2025, taking us 29 months to reach profitability,” Wang Xing revealed an encouraging outlook for the market:

“Saudi Arabia is a highly favorable market for achieving profitability in delivery services. We expect Keeta to achieve profitability in Saudi Arabia much faster than in Hong Kong, certainly before the end of this year.”

Wang Xing emphasized that the core philosophy behind Meituan’s international expansion remains focused on creating value for the ecosystem rather than engaging in internal competition. Even though the company entered numerous new markets in the second half of 2025, thanks to improved efficiency in domestic new business operations, management anticipates that the overall losses from new business segments in 2026 will not exceed those of 2025.

Below is the full transcript of Meituan's earnings call:

Operator
Thank you for your patience, and welcome to Meituan’s 2025 fourth-quarter and full-year earnings conference call. All participants are currently in listen-only mode. The call will include a presentation segment followed by a Q&A session. To ask a question, please press the star key followed by the number 1 on your telephone keypad. I will now hand the call over to Ms. Scarlett Xu, Head of Investor Relations and Capital Markets at Meituan. Please proceed.

Scarlett Xu
Thank you, operator. Good evening, and good morning, everyone. Welcome to Meituan’s 2025 fourth-quarter and fiscal year earnings conference call. Joining us today are Mr. Wang Xing, Chairman and Chief Executive Officer, and Mr. Chen Shaohui, Senior Vice President and Chief Financial Officer. During this call, management will first review our performance for the fourth quarter and fiscal year of 2025, followed by the Q&A session.

Xu Xiaowen
Before we begin, we would like to remind you that our statements contain forward-looking information, which involves certain risks and uncertainties. Actual future results may differ materially from these statements. This presentation also includes unaudited non-IFRS financial metrics, which should be viewed as supplementary to, and not a replacement for, the company’s financial performance measures prepared in accordance with IFRS. For a detailed discussion of risk factors and non-IFRS metrics, please refer to the disclosure documents available on the investor relations section of our website. Now, I will hand the call over to Mr. Wang Xing. Please go ahead, Xing.

Wang Xing
Thank you, Scarlet, and hello everyone. For Meituan, 2025 is a year full of opportunities as well as challenges. Facing unprecedented fierce competition, we remain focused on serving consumers, merchants, delivery riders, and all ecosystem partners. We are committed to creating long-term value. In 2025, our platform achieved double-digit growth in GTV and transaction volume, with new transaction users, user transaction frequency, and ARPU all reaching new highs. These key metrics have solidified our position as the preferred local service platform for Chinese consumers.

In 2025, we comprehensively upgraded the Meituan membership program. This is our first consumer loyalty program covering almost all categories. It has helped us drive cross-selling and enhanced the stickiness of core users.

At the same time, leveraging our comprehensive advantages in the local services field, we launched our self-developed AI assistants, Xiao Mei and Xiao Guan. We have brought AI technology into real consumption scenarios. Looking ahead, Meituan membership and AI will continue to be key tools in providing differentiated and enhanced local experiences.

Regardless of how the market environment evolves, we remain focused on strengthening our long-term competitive moat and promoting the healthy and sustainable development of the entire industry. We also actively seek new growth opportunities. During 2025, we achieved a series of key milestones. First, we accelerated deep penetration into the supply side and, through supply-side innovation, built a comprehensive and cost-effective supply system covering all price ranges and diverse categories. This enabled us to precisely meet users' integrated needs in food delivery, instant retail, and service retail, further consolidating our position as a one-stop local service platform.

In food delivery, we collaborated with merchants to focus on innovation in products, store formats, and channels. Innovative models such as brand satellite stores, revolving hot pot buffets, and shared kitchens have helped numerous catering brands and small- and medium-sized merchants improve operational efficiency and expand their businesses. Working with merchants, we introduced other models like 'Super Grabbers,' launching high-quality and fairly-priced blockbuster products across different price ranges to serve a broader consumer base.

In instant retail, we deepened our layout in local supply and became an important partner in the omnichannel strategies of many leading brands. We continuously extended our reach in the supply chain. Our innovative supply models, including Meituan Ready-to-Eat Warehouses, Meituan Flash Warehouses, brand flagship flash warehouses, as well as our self-operated Xiaoxiang Supermarket and micro-warehouses, have become crucial supplies in instant retail.

We closely collaborated with top liquor brands, achieving rapid growth in the alcohol business. In healthcare, we continued to strengthen the local supply of household medicines and medical devices, supported the online debut of many innovative drugs, and further expanded the coverage of 24-hour pharmacies, online consultations, and home testing services.

Xiaoxiang Supermarket accelerated its city expansion pace in the fourth quarter. Over the past few years, Xiaoxiang Supermarket has built a strong supply chain, improved the quality of fresh produce, and developed industry-leading product capabilities. Our private-label products now cover a wider range of categories, contributing a higher share of GTV.

In our in-store, hotel, and travel businesses, we launched a high-quality merchant recommendation list and expanded projects like the 'Must-Eat List' and 'Black Pearl' to more categories such as education, fitness, healthcare, and elderly care services. Based on deep insights into consumer trends, we further enriched offerings in sports events, cultural and artistic ticketing, and domestic services. Additionally, we supported over one million independent artisans (Little Swallows) in achieving digital transformation on our platform, enhancing our unique service ecosystem connectivity.

Second, we focused on enhancing our integrated service capabilities through product iteration and the upgrade of the Meituan membership program, providing consumers with an exceptional consumption experience. In terms of fulfillment, we upgraded services like On-Time Guarantee and Direct Delivery by Dedicated Personnel, significantly expanding their coverage in 2025. This provided consumers with more reliable and higher-quality fulfillment assurance, reinforcing our competitive advantage in fulfillment. In instant retail, we partnered with millions of merchants and brands to launch the industry's first full-cycle service guarantee program.

This program offers free return shipping fees for premium members and selected branded products, setting a benchmark for industry-wide service standards in experience, fulfillment, delivery, and after-sales support. In terms of healthcare, we have expanded our cooperation with doctors from Class A tertiary hospitals for online consultations. We have upgraded the verification and service guarantees for dental and cosmetic medical services. These efforts have comprehensively improved the reliability of online medical services. We have integrated these high-quality services deeply into our fully upgraded Meituan membership program. We have introduced a series of exclusive benefits for members, covering diverse consumption scenarios such as food delivery, hotel reservations, lifestyle services, travel, and healthcare.

These exclusive member benefits have significantly enhanced user engagement and transaction frequency, allowing us to better serve our core user base. As a result, a large number of mid-tier members have advanced to higher levels. Amid fierce competition, our high-value membership group has continued to grow steadily, with both transaction frequency and spending amounts increasing. Notably, they are also engaging in cross-purchases across a wider range of product categories.

Our continuously enhanced Meituan membership program provides robust multi-dimensional support. It promotes traffic, operational, and transaction growth while driving cross-selling across different categories and scenarios within our core local commerce business. Overall, we have consolidated our leadership position in infrastructure and consumer perception, even amidst highly competitive market conditions.

We remain committed to fostering a sustainable ecosystem and are taking concrete actions to drive high-frequency, high-quality growth across the entire local services industry. We continue to empower small and medium-sized merchants. For example, we increase financial support, promote the 'Transparent Kitchen' project, and utilize AI tools to enhance merchant operational efficiency. Our aim is to promote the healthy development of the foodservice industry and address structural challenges such as marketing inefficiencies and food safety governance. We have also made progress in improving welfare for delivery riders.

In 2025, we became the first company to implement a nationwide pension subsidy plan for various types of delivery riders. Our occupational injury protection pilot program has now expanded to 17 provinces, municipalities, and regions, covering over 16 million delivery riders. This initiative imposes no financial burden on the group. Additionally, we continue to improve the multi-layered welfare system for delivery riders in areas such as healthcare, education, and housing.

Fourthly, in our overseas markets, Keeta has accelerated its global expansion and achieved strong growth momentum in 2025. In Hong Kong, Keeta solidified its leading position and achieved positive unit economics in the fourth quarter. In Saudi Arabia, Keeta's order volume grew consistently throughout 2025, and with higher-quality services, it has become one of the preferred platforms for local consumers.

In the second half of 2025, we launched operations in Qatar, Kuwait, the UAE, and Brazil. All these new markets have demonstrated strong growth momentum since their inception. Looking ahead, Keeta will continue to leverage its strengths in product innovation, technology, and operational expertise. We will collaborate closely with merchants and delivery riders in global markets to jointly advance the digital transformation of the industry, enabling consumers in more countries and regions to enjoy our high-quality, efficient services.

Moreover, in 2025, we embraced the opportunities brought by artificial intelligence. We are dedicated to driving the AI transformation of the physical world by combining AI innovations with our proven strengths in real-world services. Over the years, we have made significant investments in AI technology. Leveraging our internal R&D capabilities, we have developed our own series of multimodal long-text models. Simultaneously, we utilize cutting-edge third-party models. We also harness Meituan’s unique digital assets, including extensive merchant information, high-quality and diversified offerings, real consumer behavior, and user reviews.

We initially tested the intelligent lifestyle assistant 'Xiao Mei' on a standalone app. More importantly, we have rolled out the AI assistant 'Xiao Guan,' embedded within the Meituan app, to all users. By integrating AI technology with application scenarios on the Meituan platform, we cover the full spectrum of local services. The AI functionality 'Xiao Guan' within the Meituan app will fundamentally transform how consumers interact with our app.

Searches will evolve to allow requests in natural language rather than merely entering keywords. 'Xiao Guan' leverages Meituan’s abundant offerings and robust fulfillment capabilities, combined with the mature native interface of the Meituan app, to deliver a new, user-friendly, and exceptional experience to consumers in 2025. In 2026, we will continue optimizing the user experience of 'Xiao Guan.' Our goal is to make 'Xiao Guan' the most user-centric AI assistant for local services.

Looking back at 2025, we faced a complex external environment and unprecedentedly fierce competition. However, we have always adhered to our mission of "helping everyone eat better and live better," striving to create tangible value for consumers, merchants, delivery riders, and all ecosystem partners. Looking ahead, we believe that core local commerce still holds strong growth potential and robust business resilience. We will continue to deepen supply-side penetration, enhance service quality, refine the Meituan membership program, and invest in ecosystem construction.

We will further solidify our position as the preferred local service platform for the majority of consumers and promote high-quality development in the industry. Meanwhile, retail operations (including instant retail) and overseas markets represent long-term growth trajectories with clear strategies and significant potential. We will adhere to disciplined investment and actively explore these areas. More importantly, as we enter the artificial intelligence era, we will steadfastly execute our "retail + technology" strategy, leveraging AI to deeply empower the local services sector and bring enhanced experiences to consumers and merchants. With that, I will now turn the call over to Shaohui, who will introduce the latest financial results.

Chen Shaohui
Thank you, Xing. Hello, everyone. Let us now begin reviewing the financial performance for the fourth quarter. Please note that unless otherwise specified, all comparisons are year-over-year. In the fourth quarter, our total revenue reached RMB 92.1 billion, representing a year-over-year increase of 4.1%. The cost of revenue ratio rose by 11.6 percentage points to 33.8%.

This was primarily driven by three factors: higher consumer incentives deducted from revenue, increased rider incentives to maintain leading service quality, and rising operational costs in overseas markets. The sales and marketing expense ratio increased by 14.8 percentage points to 34.4%, mainly due to our heightened investments in promotions, advertising, and user incentives aimed at enhancing brand awareness and core user engagement. The research and development expense ratio rose to 7.6%, reflecting our increased investments in AI, while the general and administrative expense ratio slightly increased to 4%.

In the fourth quarter, the total operating loss and adjusted net loss narrowed sequentially to RMB 14.7 billion and RMB 15.1 billion, respectively. These sequential improvements reflect our focus on high-quality growth and execution efficiency amid intense competition. As of December 31, 2025, our total cash, cash equivalents, and short-term government bond investments amounted to RMB 166.8 billion. While operating cash flow remained negative, it showed sequential improvement, with cash outflows narrowing to RMB 6.6 billion.

Now let us examine segment performance, starting with the Core Local Commerce segment. This quarter, we continued to see healthy growth in order volume and GTV. Our leadership positions in food delivery and Meituan's in-store businesses remained solid, and our market standing in other categories within core local commerce stayed stable. Our core user base continued to grow healthily and exhibited higher engagement on the platform. These users not only transacted more frequently but also explored more services on our platform.

This quarter, their retention rate improved further compared to the third quarter. Multiple consumer categories, including pharmaceuticals and healthcare, leisure and entertainment, fitness, pet services, and most categories within Meituan's instant retail, maintained double-digit growth in both order volume and GTV.

Financially, the segment revenue for the fourth quarter was RMB 64.8 billion, representing a year-over-year decrease of 1.1%. Although subsidy levels in the food delivery industry moderated slightly from the third quarter, they remained historically high. In the fourth quarter, we focused on high-quality growth and reallocated resources away from low-ticket and low-quality orders. This drove a sequential recovery in the average order value (AOV) for food delivery, although our net AOV for food delivery remains significantly above the industry average. Intense competition did result in a substantial year-over-year decline in food delivery AOV, which impacted our commission revenue growth.

The impact of consumer subsidies on delivery service revenue persisted into the fourth quarter. Our online marketing revenue maintained steady growth. We continued to observe that merchants across various categories, from small and medium-sized restaurants to offline retailers and other local service providers, regarded Meituan as a key marketing channel. Our advertiser base continued to expand steadily.

In terms of costs and expenses, we increased marketing expenditures and promotional activities to enhance brand positioning and price competitiveness while boosting engagement among all users. We allocated more resources to strengthen the membership program. We also provided additional incentives for delivery riders to ensure service quality and user experience. Meanwhile, we continued to invest in ecosystem development.

The core local commerce segment recorded an operating loss of 10 billion yuan in the fourth quarter, with a significant narrowing of the operating loss on a quarter-over-quarter basis. This improvement was primarily driven by a substantial reduction in losses from the food delivery business. Turning to the new business segment, fourth-quarter revenue reached 27.3 billion yuan, representing a year-over-year increase of 18.9%, mainly propelled by the expansion of Keeta and the retail business. However, the segment's operating loss widened to 4.6 billion yuan, reflecting seasonal headwinds in businesses such as bike-sharing, as well as strategic investments in overseas expansion and the retail business during this quarter. In this quarter, we expanded Keeta into four new markets, which required significant upfront investments.

However, we are encouraged by the healthy improvement in unit economics observed in established markets like Hong Kong and Saudi Arabia, driven by increased order density and operational efficiency. We are optimistic that Keeta's new markets will follow this positive trend. As for the retail business, it remains a key long-term strategic focus for Meituan. Over the past few years, Xiaoxiang Supermarket has made solid progress, with key metrics trending positively. In the fourth quarter, we accelerated our expansion into new cities and expanded our warehouse network to capture the growing demand for online retail.

We have also strengthened our physical presence by opening the first Xiaoxiang Supermarket offline store in Beijing and launching multiple new 'Huanluo Monkey' outlets. Additionally, we recently announced plans to acquire Dingdong’s domestic retail assets, which we expect will further enhance Meituan’s overall capabilities in the instant retail sector.

We believe these strategic investments will reinforce our competitive advantages and create long-term value in the retail sector. Looking ahead, we remain confident in the company’s long-term, sustainable growth trajectory. We firmly believe the industry will gradually move towards standardization, with competition returning to normalcy under regulatory guidance. We will focus more on improving efficiency and achieving higher-quality growth, while continuing to invest in technology, service quality, and ecosystem development. With that, we now open the floor for questions.

Operator
Thank you. If you wish to ask a question, please press the star key followed by 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, press the star key followed by 2. If you are using a speakerphone, please pick up the handset to ask your question. The first question comes from Ronald Young at Goldman Sachs. Please go ahead.

Analyst at Goldman Sachs
Thank you. Hello, Shaohui, Scarlett, and Xing. I would like to ask about the competition surrounding AI super entry points or gateways, as this new era has begun. How does the company view this trend and its future development? From a risk perspective, could this lead to the loss of status as a primary traffic entry point in the App era? What strategies or plans does management have to address this risk? Could you also share the latest developments regarding AI agents and long-text models?

Wang Xing
Thank you, Rona. In previous earnings calls, I have clearly stated that while I believe AI will fundamentally transform everything, the only meaningful strategy in this AI revolution is to take the initiative rather than merely adopting a defensive stance. However, this does not mean we should rush to become one of the 'token factories.' Not at all.

We view AI as a strategic opportunity to improve, strengthen, and even revolutionize our offerings in local services, which is our core business. Allow me to elaborate further.

First, I believe that AI requires substantial investment. Therefore, since the beginning of 2023, we have allocated significant resources toward capital expenditures and attracting AI talent. Consequently, apart from cloud companies, we are likely one of the Chinese firms with the highest investments in the AI domain.

We have been doing this for over three years. This has clearly impacted our balance sheet and cash flow, but we will continue to focus on developing proprietary large-scale models for long-text processing because we believe that to understand the physical world more accurately, leveraging our vast proprietary data, we need the ability to build internal models. At the same time, we are collaborating with some of the most advanced third-party models. We are striving to transform our main Meituan App into an AI-driven platform to better meet consumers' end-to-end needs in local services and e-commerce.

Thus, we believe that competition for the so-called 'super entry point' fundamentally hinges on the ability to accurately understand user needs and then execute tasks efficiently. However, this goes far beyond having a smart chatbot. The local services industry involves highly complex use cases, including a vast amount of fragmented information and numerous real-time updates from small and medium-sized merchants.

Many of these merchants are not fully digitized. As a result, much of the data from both the merchant side and the consumer side has yet to be effectively digitized to benefit from AI. I believe this data must first be digitized, which is precisely what we have been working on for many years. Many merchants operate within our digital systems, giving us unparalleled access to their data. Moreover, local service platforms must also be capable of deeply engaging in the management of fulfillment services; otherwise, they remain merely a clever chatbot.

In this regard, I believe general-purpose AI cannot reliably manage and ensure the quality of real-world physical services. In contrast, Meituan has amassed an extensive dataset of the physical world, including merchant POI data, dynamic real-time operational data, and the most comprehensive and authentic user reviews of local services.

I am confident that our deep expertise in food delivery networks, instant delivery networks, business development operations, retail supply chains, and future technologies such as drones, unmanned vehicles, and other embodied intelligence solutions will provide us with a significant advantage in bridging AI with the physical world. Our self-developed models are catching up with advanced open-source models, and our intelligent agents are rapidly evolving, enabling us to seamlessly integrate information from both the digital and physical worlds.

Let me provide a few examples. Recently, we have made our AI assistant 'Xiaoguan' available to all users within the Meituan App. Prior to this, we launched a standalone AI app called 'Xiaomei.' However, with 'Xiaoguan,' hundreds of millions of existing Meituan App users will now benefit from these new AI features. 'Xiaoguan' covers all local service categories on our platform, allowing users to express their needs in a more natural manner. In the past, most people were accustomed to searching using a few keywords. Now, with enhanced AI capabilities, 'Xiaoguan' can understand longer queries expressed in natural language. 'Xiaoguan' has access to all data within the Meituan App.

Let me provide another specific example. It is common for users to search for restaurants using the Meituan App. However, sometimes it is necessary to better understand the use case. For instance, one day, I might ask Meituan a very specific question: I am at my office in Wangjing, located in the northeast corner of Beijing, and I have a friend working in Zhongguancun (in the west of Beijing). We plan to have lunch together, but we only have two hours. Can you help us find a restaurant midway with a good private room, spicy dishes, and convenient parking? I believe this represents a very natural and real-world demand.

However, in the past, constrained by limited keyword-based searches, users could not pose such questions. Now, with enhanced AI capabilities, this has become possible. This is a highly realistic use case. But to truly answer this question, you need map information, POI data, and even traffic information. You also need to know not just the location of the restaurant but also details about its menu or real-time availability of tables. Otherwise, you might recommend an extremely popular restaurant where users cannot book a table or private room.

This is not what the users need. Therefore, to truly meet this demand, our system needs to be able to access a vast amount of information from the physical world. AI is helping us integrate all this physical-world data to provide a better user experience for our users.

Therefore, relying on Meituan's comprehensive and authentic merchant database, 'Xiaoguan' can now actually answer these specific questions, not only involving merchants or locations, business hours, store facilities, etc. 'Xiaoguan' can also leverage our genuine user reviews and recommendations to provide valuable insights. With this enhanced reasoning capability, 'Xiaoguan' can address more personalized queries and generate one-stop guides for dining, entertainment, travel, shopping, and more. We are pleased to see that 'Xiaoguan's functionality effectively met user needs during the Spring Festival, but this is just the beginning. It has received positive feedback and further strengthened user engagement.

In the future, I believe models will continue to improve, and we will deepen the integration of 'Xiaoguan's functionality within the Meituan app. We aim to leverage new AI technologies to make the Meituan app the preferred destination for all users to meet their local needs and service requirements. We will enhance AI search capabilities and strengthen execution capabilities. Then, we strive to upgrade Meituan into a leading AI-driven app, becoming the AI gateway for future local service demands. Thank you.

Analyst at Goldman Sachs
Very good. Thank you.

Operator
Thank you. The next question comes from Ya Jiana of CITIC Securities. Please proceed.

CITIC Securities analyst
Thank you. Good evening. I appreciate you taking my question. Regarding the State Council’s investigation into competition in the food delivery market starting from early January, have there been any changes in our business strategy? What shifts have we observed recently in the competitive landscape? Looking ahead, how do we plan to maintain or expand our competitive edge under the current regulatory environment? Additionally, the losses in our food delivery business have continued to narrow from Q4 to Q1. That is my question. Thank you.

Wang Xing
Thank you, Zhang Yao. We believe the regulatory direction has become very clear. The competent authorities are firmly opposed to so-called 'involution,' and they aim to foster a healthy and orderly market. Subsidy-driven or price-driven competition in the food delivery industry represents a classic form of irrational competition and is also a typical example of involution. We take this matter very seriously. Let me reiterate our position: we are firmly against involution. We will actively cooperate with the regulatory investigation. At the same time, we will reallocate resources away from low-quality orders. We strive to defend our market share and leadership position.

Therefore, in 2026, regardless of how the market environment evolves, our food delivery strategy will remain clear and consistent. First, we will continue to focus on doing the right things and strengthening our core advantages, which include expanding high-quality options, ensuring fast and reliable delivery, and offering consistently competitive pricing. Second, as I mentioned earlier, we will maintain our leadership position while concentrating resources on driving high-quality growth and improving operational efficiency. Third, we will continue to create value, building on ongoing efforts such as supply-side innovation, providing year-round support for riders, and enhancing their welfare.

We are also advancing upgrades in products and services, along with innovations in AI and other automation technologies, to enhance the overall efficiency and experience of the industry. Looking ahead, we believe competition will shift toward deeper exploration of user lifetime value, improving supply quality and diversity, and delivering a seamless end-to-end user experience. In recent months, despite intense competition and significant irrational subsidies, Meituan remains the preferred choice for high-value consumers seeking food services because we provide a superior overall experience.

We have maintained a competitive edge in orders with medium to high average ticket sizes, with our average order value consistently exceeding industry averages, thanks to our focus on high-quality growth and improvements in order structure. We expect to see a more meaningful quarter-on-quarter improvement in per-order losses for food delivery in the first quarter compared to the fourth quarter of last year. We believe a more regulated market will help shift competition from pure subsidy wars to innovation, service experience, and efficiency.

These are areas where we have a stronger advantage. We will continue to refine our core strengths through better operations, product innovation, and iteration, which will help us solidify structural advantages in medium to high ticket size orders, high-value users, and an efficient delivery network. We are confident in the competitiveness and long-term potential of our food delivery business. Thank you.

CITIC Securities analyst
Thank you.

Operator
Thank you. The next question comes from Kenneth Kong at UBS Group. Please proceed.

Wang Xing
Hi, good evening, management team. Thank you for taking my question. We have noticed that since the fourth quarter of last year, Douyin has significantly increased subsidies for its in-store business, and these subsidies are expected to remain high throughout 2026. Therefore, I would like to understand your perspective on the current competitive landscape in local services and how Meituan's strategy differs now compared to the competitive cycles of 2022-2023.

Wang Xing
Thank you for Kenneth’s question. To briefly address your query from a short-term perspective: yes, we have observed that competitors have recently increased their investments and spending. This may negatively impact our short-term profitability. This is the reality we face, and we hope the market understands. However, I will spend more time discussing our long-term strategy for this business. I believe it is crucial to recognize that the competitive landscape has changed significantly in recent years.

The entire in-store industry has undergone significant changes over the past few years. In terms of competition, industry participants now focus on highly differentiated aspects in categories, merchants, and consumption scenarios. Leading players are increasingly prioritizing efficient operational strategies. For us, our top priority has always been the long-term sustainable development of this business, rather than short-term tactical victories. We firmly believe that the end-to-end business still holds tremendous potential but requires substantial investment and more innovation across the entire value chain. Regardless of how the competitive landscape evolves, providing efficient and high-quality services to consumers and merchants while driving robust offline consumption growth remains the key to success.

Over the years, we have observed shifts in consumer demand, with customers seeking more personalized experiences and value-for-money consumption. Simultaneously, demand for extended services, such as online tutoring, reservations, and online ordering with offline pickup, continues to grow. On the supply side, new forms of offerings and service categories are constantly emerging, closely following consumption trends. This ongoing momentum is also a key driver of digital transformation. At the technological forefront, both consumers and merchants are showing growing expectations and demand for AI-driven products. Amid these trends, Meituan remains vigilant and continues to innovate by leveraging our extensive experience and deep understanding of the industry.

We have strengthened and will further enhance our differentiated advantages in areas such as category mix, merchant ecosystem, and operational efficiency. For example, thanks to Meituan and Dianping's years of expertise and insights in the food and beverage sector, we have noticed a shift in the business logic of this segment. We directly share these insights with our premium F&B partners to help them maintain their leadership and quickly adapt to evolving consumer demands. We are also continuously tracking industry trends and exploring new offerings, such as self-service models, leisure and entertainment, ticketing for sports and cultural events, and proprietary home services.

The genuine user reviews accumulated on our platform over the years, along with integrated one-stop online services (including group buying, online reservations, self-pickup, Meituan reservations, and QA management), have become our unique competitive advantages. Additionally, more than one million skilled artisans have become a distinctive supply feature on our platform. In terms of technology, our AI agent, the 'Merchant Operation Assistant,' helps merchants optimize their digital services. Merchants can leverage AI to retrieve and analyze consumer preferences for personalized services and intelligently analyze consumer feedback to improve operations.

Furthermore, our AI agents, such as digital employees and AI business development tools, streamline merchant operations in areas like store openings, daily operations, and customer acquisition. We will continue to provide merchants with their own AI assistants. By 2026, we will further differentiate our services and allocate more resources to achieve higher returns on investment. We will strengthen our position in core categories and minimize inefficient investments in non-core areas.

Looking ahead, we will remain committed to providing consumers with a seamless closed-loop service, enabling precise decision-making and a one-stop experience. Our aim is to establish a more comprehensive merchant empowerment system covering customer acquisition, conversion, and retention. We will continue to promote the sustainable development of the industry through digital transformation. Thank you. Thank you.

Operator 2
Thank you. The next question comes from Thomas Cheong at Jefferies. Please proceed.

Wang Xing
Hi, good evening.

Jefferies analyst
Thank you, management, for addressing my question. What synergies can Meituan achieve from acquiring Dingdong? How is Meituan’s retail strategy evolving? And what is the strategy for Meituan’s self-operated retail business?

Wang Xing
Thank you, Thomas, for your question about Dingdong. Regarding our retail strategy, we recently announced a plan to acquire Dingdong’s business in mainland China for $717 million. However, please note that the transaction remains subject to regulatory approval. The reasons are clear: most importantly, we remain highly confident in China’s retail sector, encompassing both online and offline operations. Beyond that, there are two key reasons for this acquisition. First, it will strengthen Meituan’s overall capabilities in the instant retail space, particularly enhancing our supply chain capacity. It will also help us further improve operational efficiency within our retail business.

Second, Dingdong has already established a strong market position in the eastern region. If this acquisition is successful, it will significantly expand our coverage and improve service quality in that area. Retail aligns closely with our company mission and represents one of our long-term strategic priorities. As market dynamics evolve, we observe that self-operated offerings like Xiaoxiang Supermarket are becoming increasingly important within the instant delivery ecosystem. Xiaoxiang Supermarket symbolizes high-quality supply assurance on the platform, providing users with a more reliable shopping experience. Given the growth potential of this industry, we see tremendous opportunities ahead.

Last year, we restructured our retail portfolio to adopt a more efficient approach to drive sustainable growth. Over the past few years, Xiaoxiang Supermarket has maintained robust growth while continuously improving operational efficiency. We have expanded our private-label product offerings, addressed nighttime consumption scenarios, and maintained industry-leading fulfillment speeds and experiences. We believe Xiaoxiang Supermarket exemplifies a model where Meituan can leverage its strengths to move toward a clear path to profitability. Looking ahead, we plan to expand this model to more cities and regions, bringing faster, fresher, and more affordable instant retail to a broader consumer base. Thank you. Thank you.

Operator 2
Thank you. The next question comes from Gary New of Morgan Stanley. Please proceed.

Morgan Stanley analyst
Hi, thank you for the opportunity to ask a question. My query relates to Keeta. Keeta has made some progress in Hong Kong and Saudi Arabia, but considering regulatory and competitive constraints, the road ahead appears quite challenging. Could management share any updates on the company’s overseas strategy for 2026? How much do you plan to invest in Brazil this year? When do you expect Saudi Arabia to become profitable by 2026? Thank you.

Wang Xing
Thank you, Gary. Before we delve into the specifics of our 2026 international strategy, I would like to take this opportunity to express my deepest gratitude to our employees, merchants, riders, and all ecosystem partners in the Middle East. Thank you for your unwavering dedication in providing essential services to all users. During these challenging times, we are doing everything we can to ensure your safety and livelihood as we work together to overcome these challenges.

Now, returning to Gary's question. First, I want to emphasize that Meituan’s core philosophy outside of China has always been to create value for the entire ecosystem and promote long-term industry growth, rather than engaging in internal competition. That has never been what we aimed to do, and our international business through Keeta will follow the same principles. We aim to grow alongside local participants. We want to help accelerate the digital transformation of the local service industry, and we seek to jointly serve and expand into larger markets. Ultimately, we want to create new value for users, merchants, riders, and other partners in these markets.

In 2026, Keeta will primarily focus on our current markets, as each market has distinct product dynamics. Therefore, we will remain flexible and adjust our strategies according to local conditions. While balancing growth and profitability in each market and at every stage, compliance will always be a top priority. As such, we are actively collaborating with local regulatory authorities. In the long term, we are committed to global operations, with strategic emphasis on instant delivery and instant retail—areas where we can leverage our core strengths.

Regarding the market you mentioned, as I stated last quarter, Keeta achieved its first profitable month in Hong Kong in October 2025. Let me remind you that Keeta was launched in Hong Kong in May 2023 and reached breakeven in October 2025. So it took us 29 months to achieve profitability. This year, we will focus on further improving operations. For Saudi Arabia, it is a market highly conducive to achieving profitability in the delivery business. Therefore, we expect Keeta to reach profitability in Saudi Arabia much faster than in Hong Kong. It will definitely happen by the end of this year.

In fact, I would say we are very close, and it will happen in the near future. We have already achieved breakeven in some cities, and I believe other cities will follow soon. Recently, we significantly reduced subsidies in Saudi Arabia, but our order volume has remained resilient. This indicates that users choose Keeta because of our superior service, not because of subsidies or lower prices.

Thus, in 2026, we will further optimize our operations in other Middle Eastern markets, where our orders are also growing rapidly. With our experience in Saudi Arabia (Southern Rib) and regional brand recognition, I believe we can quickly enhance operational efficiency in these new markets. However, our growth in these markets in 2026 will still be subject to external risks, such as the complex situation in the region. Regarding Brazil, we see significant long-term value. Therefore, we remain firmly committed to long-term growth in this market.

Currently, our operations are concentrated in São Paulo, the largest city in Brazil. Prior to a broader nationwide rollout, we are focused on refining our business model in São Paulo. Meanwhile, we will actively explore strategies to establish a differentiated competitive advantage.

Overall, Keeta’s losses in 2026 will remain substantial due to our entry into numerous new markets and countries in the second half of 2025. Orders in these markets are still in the process of scaling. However, this will be offset by more efficient improvements in our domestic new businesses. Therefore, we expect that the overall loss of the new business segment in 2026 will not exceed that of 2025. Thank you.

Operator 2
Thank you. There are no further questions at this time. I will now turn the call back to Scarlett for closing remarks.

Xu Xiaowen
Okay. Thank you, everyone, for joining today's conference call. We look forward to speaking with you again next quarter. Thank you.

Operator 2
Thank you. This concludes today’s conference call. Thank you for your participation, and you may now disconnect.

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