Meituan-W (3690:HKEX) Q2 2026 earnings call transcript

Thank you, operator. Good evening and good morning, everyone. Welcome to our second quarter of 2026 earnings conference call. Joining us today are Mr. Xun Wang, Chairman and CEO, and Mr. Shao Hui Chen, Senior Vice President and CFO of . For today's call, management will first provide a review of our second quarter of 2026 results and then conduct a Q&A session.

Before we start, we would like to remind you that our presentation contains four looking statements which include a number of risks and uncertainties and may differ from actual results in the future. This presentation also contains an audited non-IFIS accounting standards financial measures that should be considered in addition to and not as a substitute for measures of the company's financial performance prepared in accordance with IFIS accounting standards. For a detailed discussion of risk factors and non-IFI's accounting standard measures, please refer to the disclosure documents in the IIS section of our website. Now I will turn the call over to Mr. Xin Wang. Please go ahead, Xin.

Thank you, Scarlett, and hello, everyone. In the second quarter, our total revenue grew 14.4% year over year, and net profit turned positive. Both core local commerce and new initiatives delivered solid results. We remain focused on our retail plus technology strategy, improving business quality and driving high-quality growth across the industry.

As they go to local services platform for consumers and merchants, our ecosystem continues to strengthen. We pushed forward with product and business innovations while stepping up investment in our ecosystem and technology to build a long-term value. We also expanded our grocery retail and overseas businesses with continued gains in operating efficiency. On the AI front, we made further progress in foundation models as well as in AI agent applications.

Now, let me walk you through the details. In the second quarter, the quick commerce industry shifted its focus to improving marketing and operating efficiencies.

Again, this backdrop, our strong consumer mindset and core competitive advantages translated into healthier financial results. Order makes user quality continue to improve steadily.

For food delivery, core user sickness strengthened further, with purchase frequency, retention, and average order value all trending up. Maytime Instashopping maintained healthy new user acquisition, with the post-2005 generation growing particularly fast, while existing users also increased their order frequency.

Despite a high base from last year and evolving consumption trends, we actively pursued new growth opportunities, improving our supply offerings, strengthening product competitiveness, and deepening our understanding of user needs for different consumption scenarios. For food delivery, Ping Hao Fan improved its ability to identify consumer demand and accelerated rollout of hit products from chain merchants. Shen Changso continued to raise the bar on supply quality, catering to mid- to high-end consumers seeking quality upgrades. We also steadily expanded innovative store formats, such as branded satellite stores , creating incremental value for merchants. For Insta-Shopping, Insta-Mars maintained rapid growth and remained a key growth engine. Weimar Songzhou expanded quickly across the majority of provinces in China. It also launched more private-label products.

In June, it rolled out an anti-counterfeiting verification system to safeguard the product authenticity for high-end alcohol. Songshu Bianli also accelerated its market penetration, leveraging customized product development and factory partnership to enhance product competitiveness and better serve users in night-time and travel scenarios.

We also took more proactive steps to strengthen our platform ecosystem. deepening merchant support and empowerment we continue to lead the industry in food safety governance improve career welfare in Q2 we fully roll out the 10 key initiatives and the trusted food delivery from xing wami establishing an end-to-end food safety system spanning four pillars pre-onboarding screening in process monitoring crackdown on fraud and elicit activities and collaborative public oversight to address evolving industry need we launched the first comprehensive AI solution beautiful the quick commerce industry we also scaled up AI powered tools helping merchants optimize their online operation efficiency around the peak holiday seasons we supported 220,000 small and medium-sized restaurant merchants with funding operational supplies equipment upgrades AI tools and store renovations in Q2 we also launched a special program to boost the demand in lower-tier markets and energized and county level economies in the second half of the year this program will expand to nearly 400 counties nationwide helping over half a million small and medium-sized merchants digitize their operations on career welfare we have expanded the the occupational injury insurance program nationwide covering every order and every courier in addition we continue to refine our algorithms and just recently we pioneered pause the clock and red light then don't ting bill during other this feature first in Beijing going forward occupational injury insurance pension insurance subsidies and our critical illness care program for curious and their families will together form a robust and comprehensive welfare framework this quarter we further strengthened our position at the preferred platform for local services sustaining a high-quality growth across our in-store hotel and travel business.

Despite a changing consumer consumption environment and intensifying industry competition, we continued to enrich our supply with more diverse, high-quality offerings while elevating the overall user experience. Meanwhile, we pushed the industry further from choosing the right merchants to choosing the right artisans and the right experiences. We saw a clear shift in local services consumption from standardized spending towards more personalized, experiential, and emotion-driven experiences. experiences and deep engagement are playing an increasingly important role in consumers decision-making this quarter we released the new must-eat list piece bomb curated from 1.5 billion authentic user reviews in our covers 164 cities and regions globally with 120 newly added cities through genuine user recommendations more long-standing local restaurants special design is sports and hidden culinary gems are being discovered the master based list B1 also continue to expand into more immersive interactive and interest driven scenarios we believe that in the AI era authentic experiences authentic reviews and authentic trust will continue to be the most vital infrastructure for the local services industry and we will continue to to strengthen our unique advantages in this area in addition we are leveraging AI to enhance those consumer experience or merchant operations for complex local services decisions consumers increasingly turn to shout on our assistant built-in a Meitlan app as adoptions grows we are seeing a meaningful lift in user engagement on Meitlan we also continue to elevate the consumer experience with integrated services I could pick up now me out key or online reservations advanced online ordering smart queuing and install smart ordering These features give consumers a more seamless experience across a wider range of scenarios.

Our partnership with Tencent is progressing rapidly, with both teams refining the product to deliver faster, more convenient services. beyond serving consumers we are extending maintenance operational expertise across industries through AI agents on the catapult platform we are rolling out specialized AI agents across restaurants services retail medicines and health and hotels and travels these AI agents to help emergence in improving daily operations and driving tangible efficiency gains this marked our evolving role for merchants online channel to their AI business partner looking ahead we want to be more than a platform that connects consumers emergence we aim to become a digital copilot for merchants on our platform Now let's move on to new initiatives. In the second quarter, both grocery retail and Keta maintained a very rapid growth while further improving operating efficiency.

For grocery retail, Shaoshan Supermarkets accelerated its expansion and now operates across 68 cities. we continue to strengthen our supply chain and enhance our merchandising capabilities with private label products accounting for a growing share of our GTV we also extended our offline footprint in July we opened our third and Chaocian supermarket offline store in Hangzhou We scale the Happy Monkey model to serve community scenarios with 40 stores in operation as of Q2 And for Ketan we sustained strong growth of momentum alongside continued efficiency gains by market.

Hong Kong has reached stable profitability. The Middle East delivered further sequential improvement in operating efficiency. In Brazil, we focused on Sao Paulo market.

Going forward, we will continue to leverage our strengths in product technology and operations to deliver a superior consumption and delivery experience to KETA users.

Reflecting on the second quarter, our focus was on building four operational capabilities. capabilities we continue to enhance supply quality expand consumption scenarios and deliver high quality growth while steadily improving efficiencies looking ahead we see boardroom for growth across the industry many niche local service needs remained underserved and there is still significant potential to elevate both service experience and operating efficiency we'll move decisively to capture these growth opportunities continuously iterating all our products and services and actively deploying AI in real-world consumption scenarios our goal is to further extend our our competitive edge in supply diversity user experience and operational efficiency at the same time we remain committed to our social responsibilities strengthening food safety governance improving career welfare and empowering small and medium sized merchants we will continue to drive the industry toward a higher quality and more sustainable development with that I will turn the call over to so we want update to our latest financial results thank you Xin hello everyone with the on-demand industry gradually shifting to ball efficiency improvements our focus on operational execution and the structural advantages translated into meaningful financial improvements.

Revenue growth accelerated and the business turned profitable in Q2. Now let's look at our financial results in details. All comparisons are on a year-over-year basis unless otherwise noted. Total revenue grew by 14.4% to RMB $104.6 billion this quarter. Cost of revenue ratio edged down to 66.5%. The accelerated revenue growth and better control cost ratio were both primarily driven by the improvement marketing efficiency. This reflected our continued focus on quality growth amid the dynamic and competitive environment. Selling and marketing expenses ratio also went down to 23.6%, mainly due to more disciplined marketing spending.

R&D expenses ratio increased to 7.3% as we increased investment in AI, while the G&A expenses ratio remaining stable at 3.1%. We turned profitable this quarter with total segment operating profit and adjusted net profit, reaching R&B 3.9 billion and R&B 2.5 billion, respectively.

As of end of June, we held cash and cash equivalents in the short-term treasury investments totaling R&B 168.3 billion. As of June 30th, our investment portfolio was nearly R&B 77.3 billion. Separately, fair value changes in certain of our investments resulted in an RMB 22.2 billion gain recognized in other comprehensive income rather than P&L this quarter. We will be thoughtful and disciplined about evaluating exit opportunity for our investment portfolio along the way to provide more capital resources for our business and for shareholder return.

Now, let's look at the segment result. Starting with the core local commerce segment. Revenue reached RMB $71.5 billion in Q2. with year-over-year growth accelerating to 10.1%. Delivery service revenue and merchant service revenue both pick up growth pace during this quarter, while product sales delivering a solid year-over-year growth of 78.9%. We are pleased to see our food delivery turn to positive year-over-year revenue growth this quarter. Our strategic focus on higher AOV order segment for user base and operational efficiency continues to bear fruit.

We improved our leadership in both order volume and GTV this quarter. A healthier order mix has driven year-over-year recovery in our food delivery net AOV. We also improved our marketing efficiency. However, the industry subsidy levels are still well above where they were in 2024, and we expect normalization will take time as markets evolve.

On May 20th and shopping, it continued to deliver steady growth, with revenue growing faster than order volume on a year-over-year basis. This was primarily driven by two factors, the rapid expansion of our 1P business and strong advertising traction as small retail brands allocate marketing budget to our platform. Revenue of our in-store, hotel, and travel business also grew steadily, and we continue to lead in four categories.

Turning to profitability, segment operating profit turned profitable to RMB 5.7 billion this quarter. On-demand delivery, unique economics turned positive, with our UE across both food and non-food categories staying far ahead of the industry. The significant sequential improvements in UE was driven by seasonal tailwinds and meaningful subsidy reduction. With our strategic focus on high-quality growth and ROI-driven resources allocation, our end-store hotel travel business also improved its operating profit margin sequentially despite intensified industry competition. All of these gains more than offset our increased investments in brand marketing and promotional expenses.

Now, turning to our new initial test segment. Revenue in Q2 was up 25% to R&B $33.1 billion. Segment operating loss narrowed sequentially to R&B $1.7 billion. The rapid expansion of our grocery retail business contributes meaningfully into the segment's revenue growth, while losses from grocery retail increased quarter over quarter on a fast-growing business scale. We continue to see steady operational efficiency gains across the board, and its margin also improved. On Quito, growth momentum across Hong Kong and the Middle East remains strong.

The loss has narrowed quarter-on-quarter as operational efficiency improved across Hong Kong and the Middle East market. Hong Kong is now profitable on a sustained basis, and the economics in the Middle East continue to trade in the right direction. After navigating an intense competitive environment over the past year, the results we are seeing today through our execution capability on quality growth and operational efficiency improvement. The path forward is about compounding our advantages in product, services, technology, and ecosystem so that we can deliver more value to all stakeholders.

We remain deeply committed in our long-term potential. With that, we are now open for Q&A.

Thank you, Thomas, for the question. Let me first share some thoughts on where we see the food delivery industry is heading. First of all, we are seeing a shift across the industry toward greater focus on marketing and operational efficiency. We believe competition will gradually shift back to what really matters, quality, service, and innovation, as regulators provide further guidance on subsidy practice.

That will drive healthier industry development and create a fair feel for companies with genuine core competence. And we are already seeing that play out. Over the past few months, our advantage across user mix, order mix, and operational efficiency has continued to strengthen. We've extended our lead in both order volume and GTV on sequential basis. Particularly in a mid to high AOV segment, our focus on enhancing membership benefits, expanding premium supply, and elevating service quality are playing off. We are seeing deeper engagement and stronger mindshare among premium users for our brand. For Meitra and Instant Shopping, we also maintain our industry leading position.

Quick commerce has fundamentally reshaped consumer expectations around convenience and reliability. It is an irreversible lifestyle shift. With adoption still at an early stage across different consumer groups, we see a significant long-term opportunity ahead. While we recognize the pressure from a high base last year and a broader macro environment, we focus on strengthening our operational capability to build a solid foundation for high quality sustainable growth in the long term. Over the years, we've built a diversified quick commerce supply network spanning a wide range of offline retailers and dark stores. that's the solid foundation for us to meet evolving consumer needs and drive broader adoption of on-demand consumption over time. Going forward, we will keep investing in product competitiveness, supply chain integration, and supply diversity to deepen our consumer mindshare across different categories.

On QSAN outlook, we expect food delivery unique to improve meaningfully year over year but it will still be impacted by seasonality on a sequential basis Even so we expect UE to stay positive in Q3 as we continue to optimize operational efficiency Specifically, the industry success level is still much higher than 2024 level, and it will take a few quarters to normalize. At the same time, seasonal headwinds will wait meaningfully on our UE.

As we mentioned before, Q3 is the peak season for on-demand delivery driven by summer activity. It's also when we ramp up our marketing spending sequentially to capture the highest demand window of the year. We will also provide additional subsidy to our queries to ensure our delivery service quality through the peak season and on extreme hot weather conditions.

As such, delivery costs per order in Q3 will be higher than that in Q2. On top of that, the occupational injury insurance began its nationwide rule out on July 1st, which adds another cost layer.

However, I want to highlight that the near-term UE fluctuations are primarily driven by seasonality and our proactive strategic decisions to balance scale, profitability, and ecosystem. We are very confident to sustain our market leadership and stay far ahead on UE across both food and non-food categories. and that confidence is grounded in our improving user mix and operational efficiency.

Our ongoing investment in the ecosystem is also deepening our mode. In fact, under the current market environment, we are in a good position to focus on our strategic priorities that matter most over the long term. Our UE recovery has clear visibility, and it will gradually get back to a reasonable level in the immediate to long term.

Thank you.

Thank you, Ronald. and I would begin with long cap 2.0 is an important foundation for our strategy but what we are really focusing on is evolving our AI to bridge the digital and physical words and doing so deeply made as competitive mode in local services over the long term so for us AI is less about competing on the models it's more about leveraging AI to reshape our organization product and workflow as we have explained in the past and maintenance AI strategy has three pillars building LLM and at work and AI in products and long-term 2.0 is our next generation in-house foundation model and it's one of the first if not their first children parameter model and change entirely on Chinese infrastructure so it's open wait and we have roll out roll out across our own core internal needs including our software and developing and operations customer service and AI agents and long 2.0 has made significant progress in core agentic capabilities particularly encoding reasoning and to calling and complex test execution and he has gained positive feedbacks across the global developer community and we believe AI creates a lasting value where it's deeply embedded in real workflow and where you can solve real problems as a reliable infrastructure and our full stack domestic infrastructure for training and inference give us a structural advantage in cost infrastructure control over the long run on the product side we continue to upgrade our AI product offerings including our AI assistant shot on and built inside of mei-tran app the direction is very clear from understanding complex multi constraint queries to full organic task execution ultimately we want to deliver a seamless closed-loop experience that takes the users from discovery and decision-making all the way through to transaction and fulfillment the key is making this deeply integrated with the real-world local services scenarios and on the organ organizational side AI adoption is deepening and driving productivity across the board more of our employees are now using AI to study and AI generated code as a share of the total output continues to climb at this stage our priority is to keep building our AI capability driving real AI adoption across our business operations and as I said in the past we are not going to compete to be a token factory our focus is on using our models and AI products to strengthen our core businesses we hope to provide a better experience for both users merchants while also improving our internal operating efficiency we will access and our will assess our strategy with an ROI oriented approach and stay disciplined for capital education thank you thank you sing The next question comes from Kenneth Fong with UBS.

and looking into the second half how is management balancing growth and margin and is there a clear path to margin recovery from here thank you thank you tenis for the question on install business the competitive landscape in the install sector looks very different today versus a few years ago the market is much bigger there are new players, more players, and different players. We are seeing market players increasingly differentiate across user groups, consumption scenarios, and merchant segments.

For us, our one-stop local service offering and authentic review system are well-positioned and consistently deliver value to both users and merchants. Our operating priority is very clear. We are not going after subsidy-driven, low-quality orders. What we are focused on is strengthening our competitive position in core categories and deliver better services to our core users and merchants and to pursue high-quality growth and allocate our resources more ROI-driven. Over the past few quarters, we've seen competitors stepping up investment in local service space through a dedicated shelf-based app. They have been subsidizing heavily to redirect the traffic from their content-driven model to accelerate the adoption of the new app. Aggressive subsidies did bring in many price-sensitive users, particularly in lower-tier cities, but these users typically show weaker repurchase behavior.

We haven't seen meaningful impact on our core users or our core merchants, and our NSTOT GTV quality and redemption rates continue to run meaningfully ahead of key competitors.

While macro has weighed on LV in certain categories, the local service sector has proven to be quite resilient overall compared to the e-commerce sector. Online penetration across service retail category is still relatively low, so there's a long runway ahead. We now serve over 8 million merchants across 200-plus categories, and we are still seeing new demand emerging. Whether that's new consumption scenarios, new service offerings, or more merchants looking to go digital.

For example, we are recently seeing categories like sports and wellness and immersive entertainment services accelerated their shift online. So we are still confident about the long-term growth trajectory of the in-stock business.

At the same time, heading into the second half, we are investing further to capture the growth opportunity. We will continue to strengthen our competitive positioning in core categories, in core user groups, and core merchant segments. Beyond that, we will help more local merchants to digitize operations. Our goal is to go beyond being a track source for merchants. We want to be the platform they run their business on, and over time, an AI-powered partner that helps them operate smarter and grow faster. At the same time, continue to cut low ROI spending and improve our resources allocation efficiency. We will continue to realize the synergy between our end-stop business and our quick commerce business. On margin side, it's likely the operating margin will come down from Q2 due to our increased investment in Q3 and Q4 for our end-stop business.

As competition gradually normalizes in the future, we believe our focus on ROI-driven investment and operational efficiency will translate into graduate margin improvement over the median to long term. Thank you.

Thank you, Charlie. First, let's be clear. The mission of MadeTine has always been to help people eat better and live better. We believe more and more people will order food online. But if you still want to cook for yourself, you need to buy grocery. So that's why we consider both Xiaoxan Supermarket and Happy Monkey to be a very important part of our grocery retail.

And grocery retail is deeply aligned with our mission. And therefore, they are one of our key strategic priorities. In the past decade and over the next decade, it will take a long time to do it right. Online penetration here is too low. We see significant growth opportunity ahead. But we believe the right approach is to do omnichannel, bringing both online and offline stores on the same platform.

And on-demand retail is gradually changing how consumers shop groceries. In the past people used to visit wet markets in the morning or stocked up at a very large supermarket or warehouse members membership warehouse and every week or every few days and now more and more consumers adopting and on demand delivery services they just by order what they need when they need it and because they are competent they can get it within 30 minutes so once this habit is established their purchase frequency goes up significantly over time and we believe the long-term consumption potential per user will be very huge very substantial and talking about Shashan supermarket we continue to accelerate our coverage expansion in Q2 now she operates in 68 cities the GTV growth remains very strong and we are seeing a steady improvement in operating efficiencies as we are committed to executing our omni-channel strategy we are also actively exploring Shao Shao offline store and we opened our first offline store in Beijing last December and we opened our second in Ningbo in April and the third in Hangzhou in July and in this August we know we opened the fourth store in Ningbo and the fifth one in Shenzhen exactly today.

We believe the online dark store allows us to scale up across cities quickly and cover most of our targeted consumers. Meanwhile, a select number of offline flagship stores will also play a very important role in the overall ecosystem. Walking into our offline stores, consumers can see, they can smell and they can touch the products and that sensory experience is something they cannot get from a digital screen it builds strong trust in both our products and brands and in-store shopping naturally exposes consumers to a much broader range of products over time we hope this omni-channel strategy will help Xiaoxian become one of the most trusted and recognized grocery brands in China and next let's talk about a happy monkey and that our neighborhood grocery format as of Q2 we have opened 40 happy monkey stores unlike a Shao chance of a flagship storm happy monkey is built around a different value proposition it has a much smaller more flexible store format with a high private label mix and curated SKU selection focused on delivering strong value for money products within local communities we see these two businesses as differentiated a complementary models however happy monkey is to add in the very early stage and we will continue to refine our operational merchandising capability as we move forward regarding our long-term investment plans we believe the true mode in grocery retail organizational and suppression capabilities.

These take time to build, but once in place, they unlock a very large adjustable market. What gives us confidence is that consumer demand for high-quality grocery products is far beyond top-tier cities. Many consumers in mid-sized cities and even counties in more developed regions have good consumption power. They also have a strong demand for better products, especially for groceries.

This is also why we are exploring different grocery models to better serve different cities and different consumer needs. Going forward, we will continue to strengthen our merchandising capability and deepen our supply chain collaboration across our grocery retail businesses to build a more differentiated advantage.

There are significant long-term opportunities for us in this space, and we will grow these businesses in a disciplined and sustainable way. Thank you.

Thank you, Gary. Before getting into Brazil, I think we can take a review of the markets we entered earlier.

Because the progress we have seen there has proven our operational approaches in overseas markets. In Hong Kong, we launched the QEDA in May 23.

UE turned profitable in October 25. So it took us about 29 months to reach that milestone. In our second market, Saudi Arabia, we entered the market in September 24. and I'm very glad to report that it has already turned profitable in July this year that that means it took us 22 months to get to that milestone so even faster than Hong Kong and what's more important here is that Saudi Arabia is a much bigger market than Hong Kong and we are unfamiliar with the local market at beginning but we are able to run up even faster and get to profitability faster and against all kind of headwinds this shows that our operational approach can scale well across different overseas markets I think the key here is to stay focus on the fundamentals consumers emergence needs actually quite a consistent across different markets in every market consumer care about better selections better price more reliable fast delivery while merchants care about incremental order volumes their commission rates and reliable fulfillment services our goal has always been on creating incremental value for both sides and that's how we can ultimately build trust and a real edge in this market for Brazil I believe it's a very attractive market to explore over the long term because Brazil is one of the top five food debris markets globally and the market is still growing rapidly and it's still significantly under penetrated however this market is quite different from the other markets we have entered we will stay flexible and iterate our strategy as we gain more experience on the ground for now we will stay focused on Sao Paulo which already make up 25% of produce overall for the market we want to improve our operation there and to build a differentiated competitive edge before a broader expansion regarding the investment pace in the second half of this year the focus will be on operation optimization and efficiency gains in our existing market factory in our investment in both Keta and grocery retail businesses we expect the loss of our new initiative segment in 2023 or 26 we not exceeded that in 25 thank you thank you The next question comes from Yaa Jian with CITIX.

Thank you for the question on capital allocation. We have always been ROI-driven and anchored in long-term value creation. Core business comes first. We are committed to sustaining their high-quality growth and leading market position. From there, we dynamically evaluate the investment for other initiatives and direct resources toward areas that matter most to our long-term development. We don't think irrational competition is sustainable. For local commerce, we will stay focused on high-quality growth and operating efficiency improvements.

For overseas expansion, KITA has already shifted focus toward operational optimization in Hong Kong and Saudi. We will continue to pace our expansion in each country based on ROI. On grocery retailing, we are excited about Xiaoxiang supermarket's long-term potential, and we are confident to drive its continuous efficiency gains.

AI is a very important strategic opportunity, but we are being very deliberate about well and how we invest. Our focus is on embedding AI into real business scenarios to improve user experience, merchant operating efficiency, and organizational productivity. We have no plan to compete aggressively for token factory business.

On shareholder returns, share buyback has always been our main approach to return capital to our shareholders. We have executed meaningful buybacks over the past few years, and we will continue to do so. Based on the competitive environment, cash flow, and offshore capital availability.

On the investment assets, we will evaluate monetization of our high-quality investment portfolios on a regular basis. We hold stakes in some truly outstanding companies. At current valuations, our stakes in these companies are worth more than R&B 70 billion. Beyond the financial returns, some of our investments also offer meaningful strategic value. They give us deeper insight and allow us to stay close to frontier technology development.

Going forward, we will wait market conditions, valuation, funding needs, and our broader capital allocation priorities. When time is right, we are very open to exit or monetizing selected positions to free up capital. This will give us greater flexibility to reinvest in our own business and return value to shareholders. Thank you.

Okay, thank you everyone for joining our call. We look forward to speaking with you next quarter. Thank you very much for your support.