JD.com's Food Delivery Gambit: A High-Stakes Bet on Growth or a Recipe for Financial Strain?

In 2025, JD.com made a bold move into the food delivery sector, launching JD Takeaway with a 10 billion yuan ($1.38 billion) subsidy war. The company's founder, Richard Liu, even donned a delivery uniform to signal his commitment. This aggressive entry into a saturated, low-margin industry has sparked a fierce price war with Meituan and Alibaba's Ele.me, raising critical questions: Can JD.com's strategy create long-term shareholder value, or will it deepen financial strain in a market already plagued by razor-thin margins and regulatory scrutiny?

The Allure of Scale and Synergy

JD.com's food delivery ambitions are rooted in its logistics prowess. The company aims to leverage its existing supply chain to capture 10% of China's food delivery market by 2030, a target that could generate cross-selling opportunities with its core e-commerce business. Daily orders for JD Takeaway have already reached 20 million, and the segment now accounts for 7.5% of the market. This growth is not just about food—it's about data. By expanding into delivery, JD.com gains insights into consumer behavior, which could enhance its ability to upsell electronics, groceries, and other products.

However, the path to scale is costly. JD.com's New Businesses segment, which includes food delivery, posted a 1.3 billion yuan loss in Q1 2025, with annualized losses estimated at 18 billion yuan. The company's free cash flow plummeted to -RMB21.6 billion in the same period, as it funnels profits from its core e-commerce business into subsidies. Morgan Stanley analysts have cut their earnings forecasts for JD.com by 39% for 2025, 32% for 2026, and 30% for 2027, reflecting skepticism about the sustainability of this model.

The Subsidy Trap: A Historical Lesson

China's food delivery market has a history of subsidy-driven chaos. In 2017, Meituan and Ele.me engaged in a similar price war, offering 2-yuan coffee deals and free delivery. When subsidies were withdrawn in 2018, sales collapsed, and smaller players like Yum China's Pizza Hut saw revenue plummet. Today, Yum China is again caught in the crossfire. While its delivery sales grew 17% in H1 2025, its shares fell 6% after earnings, as investors worried about margin compression from rising rider costs and unsustainable subsidies.

JD.com's current strategy mirrors this pattern. The company's “Double Hundred Plan” includes doubling subsidies to 20 billion yuan, but this has led to logistical overreach. System crashes during the 618 shopping festival and unrealistic delivery targets (200 orders per rider daily) highlight operational fragility. Meanwhile, Meituan's disciplined approach—using AI to optimize logistics and reforming rider algorithms—has allowed it to maintain positive margins despite the price war.

Regulatory Headwinds and Investor Skepticism

The Chinese government has taken notice. In July 2025, the State Administration for Market Regulation (SAMR) summoned JD.com, Meituan, and Alibaba to address anti-competitive practices, including predatory pricing and labor exploitation. All three companies agreed to a truce, but the damage is done. JD.com's shares have fallen 18.5% in three months, while Alibaba's dropped 27% since March 2025.

Investors are now weighing the risks of JD.com's strategy. The company has repurchased 2.8% of its shares and paid a $1.44 billion dividend in 2025, signaling confidence in its long-term vision. However, these measures may not offset the drag from food delivery losses. Morgan Stanley's price target for JD.com was slashed from $39 to $28, reflecting an 11x projected non-GAAP P/E ratio for 2025—a valuation closer to Alibaba's e-commerce business than its high-growth peers.

The Path to Profitability: A 2026 Timeline?

Analysts project that JD.com's food delivery segment will remain unprofitable through 2026. Benchmark forecasts losses of RMB34 billion for 2025, with non-GAAP net margins in the food delivery segment expected to hit 1.5% in Q2 2025. While the company's logistics network offers a competitive edge, scaling this infrastructure profitably will require significant cost optimization.

The key question is whether JD.com can transition from a volume-driven strategy to a value-driven one. Meituan's expansion into groceries and electronics offers a blueprint, but JD.com's reliance on core retail profits to fund losses creates a precarious balance. If the company can reduce per-unit delivery costs and improve merchant retention, it may eventually unlock profitability. However, this timeline is uncertain, with analysts suggesting 2026 as the earliest horizon.

Investment Implications

For investors, JD.com's food delivery pivot presents a high-risk, high-reward scenario. The company's core e-commerce business remains robust, with non-GAAP net profit growing 43% in Q1 2025. However, the food delivery segment's losses could erode these gains in the short term.

Recommendations for Investors:
1. Monitor Regulatory Developments: The SAMR's crackdown on subsidies and labor practices could force JD.com to scale back aggressive tactics, impacting growth.
2. Assess Operational Efficiency: Track metrics like delivery costs per order and merchant retention rates. A 10% reduction in logistics costs could significantly improve margins.
3. Diversify Exposure: Given the sector's volatility, consider hedging with Meituan or Alibaba, which have more balanced approaches to instant commerce.
4. Long-Term Horizon: If JD.com can achieve 10% market share by 2030, the segment could become a profit driver. However, patience is required—this is a multi-year bet.

Conclusion

JD.com's food delivery gambit is a double-edged sword. While the company's logistics infrastructure and financial firepower position it to compete, the saturated market, regulatory risks, and financial strain of subsidies pose significant challenges. For now, the strategy appears to prioritize market share over profitability—a path that has worked for Meituan but may prove unsustainable for JD.com. Investors must weigh the long-term potential of cross-selling and data-driven insights against the immediate risks of margin compression and regulatory intervention. In a market where “involution” is the norm, only the most adaptable players will survive.