The food delivery war cools down, Meituan returns to the right track: losses narrow significantly beyond expectations, with an uptick in per-order value and market share in food delivery.

The food delivery war cools down, Meituan returns to the right track: losses narrow significantly beyond expectations, with an uptick in per-order value and market share in food delivery.

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Meituan's first-quarter results completely shattered Wall Street's pessimistic expectations, becoming an important signal that the company is emerging from the quagmire of price wars and returning to normalized profitability.

According to a WallstreetCN article, Meituan released its latest financial report on June 1, showing Q1 2026 revenue of 91 billion yuan and an adjusted net loss of 4.97 billion yuan (Q4 2025 loss was 15.1 billion yuan). Due to intensified competition, core local commerce swung from profit to loss, with marketing expenditures surging 51.1% to 23 billion yuan. New business revenue increased 21.3%, and losses narrowed.

On June 2, according to Wind Trading Desk reports, Morgan Stanley and UBS noted in their latest research reports that the core financial data sends a clear signal: the brutal food delivery price war is cooling, and the company's profitability is recovering at a speed well above expectations.

Meanwhile, in Q1, Meituan's overall loss narrowed significantly, the unit economics (UE) of instant delivery improved markedly, and both average order value (AOV) and market share for food delivery stabilized. This means Meituan is withdrawing from the "burning cash for growth" quagmire, with its core logic shifting from cash flow consumption concerns to margin expansion and new business efficiency improvement.

Based on this strong performance, both Morgan Stanley and UBS reiterated a bullish stance: Morgan Stanley maintained an "Overweight" rating and a target price of HK$120, while UBS kept a "Buy" rating with a target price of HK$128. Both investment banks agree that Meituan’s food delivery business is expected to achieve breakeven in Q2, marking the full opening of the path to normalized profitability.

Morgan Stanley: Loss narrowing at a faster-than-expected rate, raises CLC profit forecast, target price maintained at HK$120

In its latest research report, Morgan Stanley maintains its Overweight rating for Meituan, with a target price of HK$120 (corresponding to 18x 2027E P/E), and raised its 2026 operating profit forecast for the core local commerce (CLC) segment by 12% to reflect faster-than-expected UE loss narrowing in food delivery.

  • Key drivers of Q1 beat

Morgan Stanley points out that the biggest positive surprise in Q1 came from the narrowing loss of the instant delivery business. CLC operating loss was 2.03 billion yuan, much better than Morgan Stanley's estimated loss of 4.268 billion yuan and the market consensus of 4.376 billion yuan—a 33.3% beat. Overall CLC operating margin was -3.2%, narrowing by 24 percentage points year-over-year.

  • Food delivery UE: Expected to break even in Q2

Morgan Stanley expects CLC operating profit to turn positive to about 3 billion yuan in Q2 (including membership investments), with overall instant delivery losses narrowing further to about 437 million yuan (food delivery profit about 313 million yuan, Swift Mart loss about 750 million yuan).

Management revealed that food delivery UE was profitable in April and May, with June depending on the intensity of the 618 promotion. Morgan Stanley believes Meituan further enlarged its UE advantage per order vs. Alibaba food delivery to about 3 yuan in Q1 (vs. 2 yuan in Q4). The competitive landscape is essentially stabilized. Meituan’s market share for orders over 30 yuan AOV remains at 70%, with total GTV share estimated at around 60%.

  • In-store, Hotel & Travel (IHT): Competition remains, margins stable

Morgan Stanley expects Q2 IHT GTV and revenue growth to be similar to Q1 at around 11% and 9%, with operating profit of about 4.3 billion yuan and margin stable at 25% quarter-on-quarter. At the regulatory level, stronger policy support is expected to help Meituan increase high-end hotel share, but in-store dining remains under competitive pressure from Douyin's persistent subsidies. Morgan Stanley expects margins to remain generally stable in H2 but will keep monitoring competitive changes.

  • New business: Loss slightly widens, Keeta's internationalization focused on profitability

Morgan Stanley forecasts that Q2 new business operating loss will slightly widen to about 2.4 billion yuan (Q1: 2.1 billion yuan), mainly from the expansion of Xiaoxiang Supermarket (now in 55 cities) and continued Keeta investment. The Hong Kong business is already profitable, and UE in Saudi Arabia has improved much faster, likely to break even in 2026 and reach full profitability in FY2027. Morgan Stanley notes Meituan will continue prioritizing Keeta’s international profitability over market expansion.

UBS: Clear path to normalized profitability, raises 2027-2028 earnings forecasts, target price HK$128

In its latest report, UBS maintains a Buy rating for Meituan, target price HK$128 (based on SOTP valuation), with a slight revision for 2026 forecast after Q1 results, and raises 2027-2028 EPS forecasts by 15%-19%.

  • Q1 results: Adjusted operating loss much better than expected

UBS notes that Q1 total revenue rose 5.6% year-on-year to 91.039 billion yuan, in line with expectations. Adjusted operating loss was 4.146 billion yuan, far better than the market consensus loss of 7.047 billion yuan, mainly due to significant improvement in instant retail (Swift Mart) UE. Non-IFRS net loss was 4.968 billion yuan, better than the consensus loss of 6.719 billion yuan, a beat of 26.1%.

  • Food delivery: AOV rebounds, share stabilizes, faster UE recovery

UBS is positive on the food delivery business. Q1 delivery order volume grew about 8% YoY, revenue fell 7% YoY but improved from Q4’s -10%, mainly due to narrowing subsidies.

On competition, management said Meituan’s share in both order volume and GTV relative to Alibaba continues to improve, with food delivery order/GTV share staying above 55%/60%, and orders over 30 yuan AOV holding a 70% share.

UBS especially notes that since March, AOV rebounded more noticeably, attributed to Meituan’s strong user stickiness and reduced user sensitivity to subsidies, boosting profits in April and May; but June may soften due to the 618 promotion.

UBS expects food delivery close to breakeven in Q2 (Q1 loss of about 0.9 yuan per order), benefiting from favorable seasonality; but in H2, rider subsidies may rise slightly, pressuring UE. UBS forecasts full-year 2026 food delivery UE at a loss of 0.3 yuan per order. In addition, if competitive regulatory constraints loosen further, reducing subsidies, UE has further upside.

  • In-store business: Competition differentiating, margin stable

UBS takes a neutral view on in-store business. Q1 in-store GTV grew 12% YoY, revenue about 8% YoY (Q4: +10%), operating margin stable at about 25%. Weak macro environment and greater Douyin subsidies were partly offset by Meituan reducing non-core category subsidies. UBS believes Meituan and Douyin’s differences in category competition are becoming more distinct, with both sides focusing more on profitability than fierce competition. For Q2, UBS expects GTV/revenue growth at about +12%/+8% and margins steady at 25%.

  • CLC overall: Q2 operating profit expected to turn positive

UBS expects CLC revenue growth to accelerate to about +5% YoY in Q2 (Q1: +0.1%), with operating profit swinging from Q1’s 2.03 billion yuan loss to around 3.2 billion yuan profit. This includes about 800 million yuan in brand advertising and membership privileges investment (Q1: 500 million yuan) to retain core users.

  • New business: Keeta efficiency improves, loss narrows

UBS points out Q1 new business operating losses narrowed sharply quarter-on-quarter to 2.116 billion yuan (Q4: 4.65 billion yuan), mainly due to improved Keeta operating efficiency. For Q2, UBS expects new business losses to slightly widen to about 2.4 billion yuan, driven by early-stage losses from entry into new markets.

 

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