Alibaba's Food-Delivery Woes: A $100 Billion Appetite for Disaster?

Let me tell you, folks—Alibaba's food-delivery saga is a cautionary tale for investors. The company's $100 billion market cap loss over the past year isn't just about losing money; it's about losing faith. And when investors lose faith in a tech giant, it's not coming back easily. Let's break down why Alibaba's struggle in China's food-delivery wars is a red flag—and why you might want to think twice before jumping into this stock.

The Elephant in the Room: Meituan's Dominance

First, the competition. Meituan isn't just a player—it's a colossus. With a 70% market share and 90 million daily orders (up from 70 million a year ago), Meituan's grip on China's food delivery is unshakable. Even as Alibaba's Eleme and JD.com's new service clawed their way to 40 million and 25 million orders respectively, Meituan's scale keeps it light-years ahead.

The numbers speak for themselves. In Q1 2025, Meituan's net profit jumped 46% to $1.5 billion, while revenue rose 18% to $12.8 billion. Meanwhile, Alibaba's food-delivery unit is bleeding cash. Analysts at Goldman Sachs now project a $5.7 billion loss over the next 12 months for Alibaba's food-delivery division—equivalent to a third of its fiscal 2024 net income.

Valuation Erosion: When Subsidies Become a Lifeline

Alibaba's shares have cratered 28% since March 2024, nearly double the drop of its tech peers. Why? The company's desperate $6.8 billion subsidy war to prop up Eleme and Taobao Flash has investors running for the exits.

Here's the math: For every order, Eleme is losing $2 after subsidies. Even with combined daily orders hitting 60 million, the burn rate is unsustainable. Nomura estimates rivals spent $4 billion on discounts alone in the June quarter—a staggering sum for what should be a mature industry.

And it's not just cash that's evaporating. The subsidy frenzy has distracted Alibaba from its AI moonshot. Remember when DeepSeek and Qwen sent shares soaring 80% in two months? Now, investors are asking: Is this a food-delivery company or a tech giant? The answer is hauntingly clear.

Strategic Missteps: Betting on a Losing Hand

Alibaba's pivot to food delivery feels like a Hail Mary pass to a receiver who's already tackled. The merger of its delivery unit into the core business, while bold, ignores a basic truth: Meituan isn't going anywhere.

The company's $100 billion valuation hit isn't just about losing to Meituan—it's about losing control of its own destiny. Regulatory headwinds are another minefield. China's antitrust authorities are drafting rules to rein in platform fees, which could squeeze Meituan's margins—and force Alibaba to dig deeper into its pockets to stay competitive.

Worse, the “coupon war” is a zero-sum game. Every yuan spent on discounts is a yuan not invested in cloud infrastructure, AI, or its core e-commerce engine. HSBC analysts cut their price target by 15%, warning that aggressive subsidies will “meaningfully damp” earnings for years.

The Bottom Line: Is This a Buy or a Bail?

Let's be clear: Alibaba isn't dead. Its cloud business is firing on all cylinders—20% revenue growth in fiscal 2026—and its cash pile is still formidable. But the food-delivery hemorrhage is a strategic misfire that's eroding investor trust.

For now, stay on the sidelines. The stock trades at 11x forward P/E, which might look cheap—but that's after a 28% plunge. Until Alibaba halts the subsidy free-for-all, proves it can monetize its delivery network, or finds a new growth lever beyond discounts, this is a value trap.

Investors should instead ask: Why bet on a losing battle when Meituan is crushing it? Or better yet, focus on Alibaba's cloud division—a hidden gem that's flying under the radar of the delivery drama.

Final Takeaway

Alibaba's food-delivery saga isn't just about losing money—it's about losing focus, losing credibility, and losing the plot on what made it great. Until the company stops throwing good money after bad and gets back to its core strengths, this stock is a cautionary tale for growth investors.

Action Alert: Avoid the siren song of a “cheap” P/E here. Stick with companies that win, not those that subsidize their way to oblivion.

Data sources: Alibaba Q2 2025 earnings, Goldman Sachs reports, Meituan Q1 2025 results, Nomura Holdings estimates.