Why Meituan’s Profit Surge Proves Dominance in China’s On-Demand Delivery Sector

Meituan’s Q1 2025 earnings delivered a stark rebuttal to its critics. Amid a brutal subsidy war waged by rivals like JD.com and Alibaba, the company reported a 18.1% revenue surge to 86.56 billion yuan and a near-doubling of net profit to 10.06 billion yuan—a 87.3% year-over-year jump. These figures aren’t just numbers; they’re proof that Meituan’s moat in China’s on-demand economy is widening, not shrinking. For investors, this is a rare opportunity to buy a profitable, market-dominant tech giant at a discounted price.

The Numbers Tell a Story of Resilience

Let’s start with the basics: Meituan’s profit margins are exploding. Net profit rose to 10.6% of revenue, up from 5% in 2024, while operating profit hit 10.57 billion yuan, nearly double estimates. This isn’t luck—it’s strategy. The company has leaned into high-margin Instashopping services, which prioritize premium meals, fresh groceries, and on-demand convenience. These segments now account for over 60% of food-delivery revenue, driving gross margins higher than competitors’ loss-making efforts.

Meanwhile, JD.com’s aggressive hiring of 100,000 delivery riders to combat Meituan has backfired. The e-commerce giant reported a 2.3 billion yuan operating loss in its new initiatives segment, a stark contrast to Meituan’s narrowing losses in its own expansion areas. The lesson? Subsidy wars are a race to the bottom—only Meituan has the scale and efficiency to win it.

The Unfair Advantage: Ecosystem, Scale, and Loyalty

Meituan’s dominance isn’t just about delivery. It’s a full-stack ecosystem that integrates food, travel, retail, and services into a single platform. Over 500 million annual active users trust Meituan for everything from dinner orders to hotel bookings, creating a network effect that rivals can’t match. When Alibaba or JD try to poach users with discounts, they’re fighting against a 20-year habit of consumers choosing Meituan as their default app.

This loyalty is quantifiable. Meituan’s transaction frequency per user hit 50 times annually, up 15% year-over-year, while its average order value rose 8%, signaling a move upmarket into premium services. Competitors are stuck in a low-margin race to the bottom—Meituan’s focus on high-margin Instashopping and brand partnerships ensures it stays profitable while they burn cash.

Regulatory Headwinds? They’ve Seen This Before

Critics point to China’s antitrust guidelines, which could cap platform fees. But Meituan isn’t flinching. The company has already rolled out fee-waiver programs for small merchants, using its cash reserves of 138.6 billion yuan to preempt regulatory pressure. In a market where 70% of delivery revenue comes from merchants, this isn’t just compliance—it’s strategic goodwill.

Compare this to JD’s reckless hiring binge, which has no such safety net. Meituan’s playbook is clear: defend profit margins, expand into high-value niches, and let rivals self-destruct.

A Contrarian Opportunity in a Discounted Stock

Investors are pricing in fear, not fundamentals. Meituan’s shares have fallen 15% year-to-date, even as profits hit record highs. The disconnect is staggering. Analysts still see value: a Buy consensus with a 20% upside to HK$130, while technical traders focus on short-term volatility.

Why This Isn’t a Passing Phase

China’s on-demand economy isn’t peaking—it’s evolving. Urbanization, rising incomes, and the post-pandemic shift to convenience mean food delivery and Instashopping are secular growth markets. Meituan’s 42.5% annual earnings growth rate outpaces even the Hospitality industry’s 29.2% average.

The company’s $1 billion bet on Brazil’s Keeta isn’t a distraction—it’s a template for global expansion. In Saudi Arabia and Hong Kong, Meituan’s model already works. Why? Because its algorithm-driven logistics and merchant partnerships are exportable.

The Bottom Line: Buy the Dip

Meituan is a cash-generating machine in a market where competitors are losing money. Its Q1 results prove it can grow profitably even as rivals slash prices. The stock’s dip is a gift for long-term investors—a chance to own a tech titan at a 15% discount to peers.

The question isn’t whether Meituan can sustain its lead—it’s already doing so. The real question is: When will the market wake up to this reality? For now, the answer is clear: act before it does.