On February 13, Meituan made public what many in China’s tech and investment community had feared: a dramatic swing from robust profit to deep red ink. The company warned that 2025 net results would show a loss of about RMB 233–243 billion (roughly $3.2–3.4 billion), a striking reversal from a RMB 358 billion profit a year earlier. Rather than retrenching, Meituan has doubled down—buying Dingdong’s China business for about $717 million and upgrading its consumer-facing AI assistant—signalling a deliberate choice to trade short-term profitability for market position.
The losses reflect an industry-wide escalation. Meituan told investors the hit comes from beefed-up marketing, richer incentives for delivery riders, and greater merchant support, as well as higher overseas investment. Its local commerce arm alone converted from a RMB 52.4 billion profit to an expected RMB 7 billion loss, while third-quarter metrics already showed margin erosion: revenue growth slowed to 2% year-on-year and adjusted net loss widened to RMB 16.0 billion. Sales-and-marketing expenses surged nearly 91% as platforms fought to defend share.
Competitors’ moves help explain Meituan’s defensive posture. Alibaba has mobilised hard behind Taobao Flash Sale, deployed its AI assistant and injected heavy subsidies into the market; JD, Douyin (ByteDance) and Tencent have likewise pushed into on-demand and neighbourhood retail, blurring the lines between discovery, social commerce and fulfilment. Analysts estimate industry subsidies for the quarter ran into the tens of billions of RMB, forcing players with deep pockets to match each other to avoid losing network effects.
The Dingdong acquisition illustrates Meituan’s strategic priorities. Dingdong operates a dense fresh‑goods fulfilment network promising ultra‑fast delivery—often under 30 minutes—and a monthly active purchaser base in the millions. For Meituan, the deal is less about immediate earnings and more about plugging supply‑chain gaps, improving perishable goods handling and raising rivals’ entry costs. In short, it buys Meituan warehouse density, supplier relationships and time‑sensitive fulfilment capability.
AI is the other front where Meituan is investing. The company upgraded its “Wen Xiaotuan” assistant and rolled out research agents designed to increase user conversion and make ordering more efficient. The AI play is designed to deepen user engagement across food delivery, instant retail and dine‑in bookings while optimising logistics and pricing—areas where operational gains could eventually offset subsidy spending.
These choices reflect a longer battle for the “last mile” and for consumer habit formation. Industry observers expect 2026 to move beyond indiscriminate subsidy wars to a contest focused on logistics networks, fulfilment efficiency, AI‑driven personalization and capital endurance. That favours platforms that can convert cash reserves into durable infrastructure and services that are hard for newcomers to replicate.
The risks are material. Prolonged losses will test investor tolerance and valuation, especially if integration of Dingdong’s assets proves costly or if rivals’ AI‑led promotions pull consumers away. Regulators are also watching intensifying competition: demands to curb “involutionary” subsidy practices and protect worker rights could raise costs or limit tactics once deployed freely. Still, Meituan’s balance sheet remains a key variable; its public warning stressed sufficient liquidity to sustain operations while it “defends the fortress.”
For global observers, Meituan’s manoeuvres are a case study in modern platform warfare: vast capital, operational complexity and productized AI converge in a fight that prizes logistics depth as much as app hooks. The outcome will shape not only which Chinese company dominates local life services, but also how quickly the sector moves from scale‑chasing subsidies to efficiency and infrastructure as the main barriers to entry.