Meituan - Q1 FY2026 Earnings Analysis

Performance Highlights

Meituan reported Q1 FY2026 revenues of RMB91.0 billion, a 5.6% year-over-year increase that exceeded expectations for top-line resilience amid intensifying platform competition. However, the company swung to an adjusted net loss of RMB5.0 billion and adjusted EBITDA of negative RMB3.0 billion, against adjusted net profit of RMB10.9 billion and adjusted EBITDA of RMB12.3 billion in Q1 FY2025, as elevated incentive spending and courier costs compressed gross margin by 8.7 percentage points to 28.5%.

The sharpest operating deterioration came from the Core Local Commerce segment, which flipped from a RMB13.5 billion operating profit in Q1 FY2025 to a RMB2.0 billion operating loss, driven by a surge in selling and marketing expenses to RMB23.0 billion — up 51.1% year over year — as Meituan defended market share in on-demand delivery. New Initiatives provided partial relief, with segment revenue growing 21.3% to RMB27.0 billion, led by Xiaoxiang Supermarket's geographic expansion and Keeta's overseas efficiency gains, narrowing the segment operating loss to RMB2.1 billion from RMB2.3 billion.

Management Outlook and Forward Catalysts

Management framed the remainder of FY2026 around disciplined quality growth, full-stack merchant empowerment, and accelerated AI integration across physical and digital operations, signalling that the company views the current investment cycle as strategically necessary rather than reactive. The deployment of AI tools — including Smart Manager serving over 700,000 restaurant merchants and Digital Staff supporting over 300,000 in-store merchants — suggests Meituan is positioning AI-driven efficiency as a structural cost offset and long-term competitive differentiator.

Bulls will focus on the sequential improvement in Core Local Commerce operating margin, which recovered 12.3 percentage points quarter over quarter to negative 3.2%, as evidence that competitive intensity is moderating and subsidy discipline is being restored. Bears will monitor whether selling and marketing expenses can sustain their Q1 decline from Q4 FY2025's RMB31.7 billion, whether Keeta's overseas expansion can reach profitability, and whether the RMB745.7 million SAMR fine signals broader regulatory risk to the platform business.