Chongqing - China’s food delivery industry is facing its fiercest competition in years. Meituan, JD.com, Alibaba’s Ele.me, and Taobao Shangou all saw profits squeezed in the second quarter of 2025, as aggressive subsidies boosted orders but eroded margins.

A Meituan delivery rider picks up an order from a CHAGEE tea shop in Yubei District, Chongqing. (Photo/Zheng Ran)

Meituan reported second-quarter revenue of 91.8 billion yuan ($12.87 billion), up 11.7% from a year earlier. However, operating profit collapsed 98% to 226 million yuan, while adjusted net profit fell 89% to 1.49 billion yuan.

The company attributed the decline to heavy promotional spending. Sales and marketing expenses surged 51.8% year-on-year to 22.5 billion yuan, as Meituan stepped up user subsidies and advertising to defend its dominant position.

"We firmly oppose irrational competition," CEO Wang Xing said on the company's earnings call. "Meituan grew up in competition, and we achieved our leading position through ongoing competition. We will continue to defend our market position."

Wang added that the company's food delivery business can generate one yuan of profit per order, roughly equivalent to a 3% margin, which he described as a reasonable long-term target. He also warned that the core local commerce segment could face "significant losses" in the third quarter due to strategic investments.

CFO Chen Shaohui emphasized the focus on efficiency: "As competition remains intense, it is important to stay focused on ROI (return on investment). We will invest where it strengthens our long-term capabilities, but avoid unsustainable spending."

Revenue from Meituan's core local commerce operations rose 7.7% to 65.3 billion yuan. Yet operating profit in this segment dropped 75.6% to 3.7 billion yuan, with margins falling sharply from 25.1% to 5.7%.

New initiatives, including grocery retail and international expansion, generated 26.5 billion yuan in revenue, up 22.8%. However, losses widened by 43.1% to 1.9 billion yuan, mainly due to investments in Keeta. In July, Keeta expanded to 20 cities in Saudi Arabia and launched in Qatar.

JD.com's second-quarter revenue rose 22.4% to 356.7 billion yuan. Revenue in its new business division, JD Food Delivery, increased nearly 200%. However, the unit's operating losses deepened to 14.8 billion yuan from 700 million yuan a year earlier, resulting in a negative margin of 106.7%.

The losses dragged the group's overall results into the red, with JD.com reporting an operating loss of nearly 900 million yuan compared with a profit of 10.5 billion yuan in the same period last year.

However, JD.com's quarterly active users and purchase frequency each rose more than 40% year-on-year. JD.com's CEO Sandy Ran Xu said user growth was driven by JD Retail's expanding natural user base and contributions from food delivery and Jingxi, JD.com's discount shopping brand. Management added that food delivery is a key catalyst for cross-selling across JD's broader e-commerce ecosystem.

On August 29, Alibaba Group released results for the second quarter of 2025, covering the three months to June 30. Revenue rose 2% year-on-year to 247.65 billion yuan.

Operating profit fell 3% to 34.99 billion yuan, while adjusted EBITA dropped 14%, reflecting increased investment in Taobao (Shangou), user experience, and technology. Free cash flow swung to a net outflow of 18.8 billion yuan from an inflow of 17.4 billion yuan a year earlier, largely due to cloud infrastructure spending and heavy investment in Taobao (Shangou).

Instant retail revenue, which includes Ele.me and Taobao (Shangou), reached 14.8 billion yuan in the quarter, up 12% year-on-year, driven by order growth after Taobao (Shangou)'s April launch.

Alibaba's CEO Eddie Wu said in August that the business had nearly 300 million monthly active consumers, which helped increase Taobao's overall monthly users by 25%.

Jiang Fan, CEO of Alibaba's e-commerce division, said: "Instant retail, as a higher-frequency scenario, has increased the number of days users are active on the Taobao platform." The company also reported that its Freshippo grocery chain, when integrated into Taobao's delivery platform, saw online orders exceed 2 million, up 70% year-on-year.

According to UBS's latest report, total delivery orders grew 17% in the second quarter, accelerating from 7% in the first quarter, and rose further to 33% in July and 39% in August.

The competitive landscape has shifted significantly. UBS estimated Meituan's market share has fallen from 85% before the current subsidy war to 65%. Ele.me's share jumped from 11% to 28%, while JD.com, after briefly reaching 13% in the second quarter, has retreated to 7%.

The report also noted rising merchant overlap across platforms. For example, popular beverage chain Heytea recently joined Ele.me after years of exclusivity with Meituan. Analysts warned this trend could weaken Meituan's negotiating leverage with vendors, as rivals offer lower commission rates.

Despite this, UBS said Meituan's fulfillment network, the backbone of its delivery operations, remains intact. "Overall, Meituan's capacity to execute deliveries has not been challenged," the report said.

UBS said that while it expects subsidy intensity to ease after the summer peak, competition may remain elevated into the fourth quarter, particularly during the "Double 11" shopping festival.