---
title: "Meituan (Trans): 2Q on-demand delivery UE to keep improving, may turn positive"
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/41342988.md"
description: "Below are Dolphin Research's notes from the FY1Q26 earnings call for $MEITUAN(03690.HK). For our earnings take, please see 'Meituan: As AI draws the fire, finally room to breathe?'.I. Key highlights from the print. 1) Shareholder returns: no dividend or buyback plans were mentioned this quarter.2) Outlook: management did not provide specific revenue or profit guidance, but offered directional color. If industry competition remains rational, Q2 on-demand delivery UE (unit economics) should improve meaningfully vs. Q1 ..."
datetime: "2026-06-01T15:33:00.000Z"
locales:
  - [en](https://longbridge.com/en/topics/41342988.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/41342988.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/41342988.md)
author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)"
---

# Meituan (Trans): 2Q on-demand delivery UE to keep improving, may turn positive

**Below is Dolphin Research’s takeaways from**$MEITUAN(03690.HK) **FY1Q26 earnings call. For our earnings read-through, see '**[**Meituan: AI draws fire away — time to finally stop the bleeding?**](https://longbridge.com/zh-CN/topics/41342254)**'.**

**I. Key takeaways from the print**

1) Shareholder returns: No dividend or buyback plan was discussed this quarter. The company did not outline any capital return framework.

2) Outlook: Management did not provide numeric revenue or profit guidance, but offered directional color. If competition remains rational, **Q2 on-demand delivery UE (unit economics) should improve meaningfully vs. Q1 on seasonality, with Meituan’s per-order UE advantage widening**. **H2 will depend on how competition evolves, and delivery cost per order is seasonally higher in Q3/Q4 than in Q2**. Because of the high base, **order growth could turn negative YoY in H2**, but a richer mix (higher AOV share) should make **GTV growth more resilient than order growth**. **In-store margin should stay stable near term, with room to recover long term**. **For Xiaoxiang Supermarket, the long-term goal is a sustainable low single-digit net margin; Keeta will prioritize efficiency over new market rollouts in 2026.**

3) Key financials: Total revenue RMB 91.0bn (+5.6% YoY).  
COGS as % of revenue rose 870bps to 71.5%, driven by higher consumer subsidies and increased rider incentives to preserve service quality; S&M ratio up 760bps to 25.2% on heavier brand, ads and core user subsidies; R&D ratio climbed to 7.7% on stepped-up AI spend; G&A held steady at 3.2%.

Profit improved sharply, with QoQ loss reduction of over RMB 10.0bn. Segment OP loss totaled RMB 4.1bn, and adj. net loss was RMB 5.0bn. Cash, cash equivalents and ST treasuries stood at RMB 180.0bn at Mar-end; the investment portfolio was ~RMB 53.0bn. FV changes from investments including AI of RMB 7.6bn were booked in OCI, not P&L.

Core Local Commerce: revenue RMB 64.0bn, back to YoY growth. Segment OP loss narrowed QoQ to RMB 2.0bn. On-demand delivery orders and GTV posted resilient YoY growth, and UE improved notably QoQ. New Initiatives: revenue +23% YoY to RMB 27.0bn, with segment OP loss narrowing QoQ to RMB 2.1bn. Starting this quarter, product sales are disclosed separately, largely from Xiaoxiang Supermarket, with product sales +41% YoY.

**II. Details from the call**

**2.1 Management commentary highlights**

**1) Strategy & org.**

a) In Q1, Meituan continued to execute on the long-term 'Retail + Tech' strategy to drive high-quality growth, evolving in step with the industry. Despite a complex market backdrop, it is doubling down on product and service innovation, investing in ecosystem and technology, and accelerating AI deployment in real-world use cases.

b) Full-year focus rests on two tracks. For Core Local Commerce, deepen moats and improve efficiency; for New Initiatives, focus on instant retail with Xiaoxiang Supermarket and the Keeta overseas biz., pursuing quality growth with ROI discipline. Continue investing in AI that bridges the physical and digital worlds to upgrade retail.

**2) On-demand delivery (food delivery)**

a) Industry’s irrational subsidies cooled in Q1, yet on-demand delivery kept attracting a large number of new users. This suggests users choose Meituan for reliable, holistic service rather than just price. Stable fulfillment during holidays and extreme weather, plus a richer, high-quality supply, further boosted stickiness.

b) Mid-to-high-frequency users became more active, lifting ARPU and loyalty, with many mid-frequency users upgrading to high-frequency. These users are more diverse in needs and care more about service and supply quality. Meituan Flash users also increased order frequency, with 'post-2000s' driving growth.

c) Supported by user-mix advantages, the self-operated delivery unit saw operating losses narrow sharply QoQ. To better serve core users, Meituan keeps refining high-quality delivery, with more users opting for one-to-one premium delivery and paying for faster SLAs. During holiday shopping, high-quality delivery was extended to Flash across time-sensitive and premium categories such as mother & baby, daily goods, electronics, and high-end gifts.

d) Supply chain: satellite kitchens expanded quickly with end-to-end support, achieving higher conversion and repurchase than traditional dine-in stores. Meituan co-develops with merchants, using local preference insights to optimize menus. It upgraded supply chain services for all Flash 'lightning warehouses' to improve assortment, procurement efficiency and CX, while branded flagship warehouses scaled steadily to enrich supply.

**3) Merchant enablement & platform governance**

a) In Q1, support for SMEs increased, offering targeted ops help to quality local F&B merchants. Several practical measures were rolled out to improve merchant experience, including curbing malicious reviews, order damage protection, and AI-based ops tools.

b) Food safety: In Apr, Meituan introduced 10 measures covering merchant onboarding, transparent operations, and cross-party oversight. The goal is to build a safer, more trusted food consumption environment for users.

**4) In-store, hotel & travel**

a) Core categories maintained steady growth in Q1, supported by Meituan’s positioning as a one-stop local services platform. On the supply side, it is building an all-category, all-price-point assortment that emphasizes high-quality value-for-money options and expanding the influence of authoritative lists (e.g., must-eat/must-stay) to channel traffic to quality merchants and guide user decisions.

b) On product, a new points system connects platform points with merchants’ membership systems, helping merchants execute data-driven, granular ops. The focus is shifting from one-off acquisition to long-term retention and CRM.

c) Meituan keeps upgrading industry standards and consumer protection. It expanded prepaid protection in categories such as fitness and others, and introduced equipment/drug/credential verification for dental, medical aesthetics and other health services. This reduces information asymmetry and builds a standardized trust system, lowering conversion barriers for non-standardized local services and supporting long-term, sustainable growth for the platform and merchants.

**5) New Initiatives — Xiaoxiang Supermarket**

a) Xiaoxiang delivered steady GTV growth while accelerating city coverage to 55 by Q1-end. It continued to strengthen supply chain capabilities to offer wider, higher-quality and value-for-money assortments. The share of private label (PB) in GTV kept rising.

b) In more mature cities such as Beijing and Shanghai, AOV has risen notably over recent quarters. Offline expansion is also accelerating: after the first physical store in Haidian in Dec-2025, a second location opened in another city in Apr-2026 to broaden reach and let users experience quality physical goods firsthand.

**6) New Initiatives — Keeta (overseas)**

a) Scale benefits and refined ops drove clear efficiency gains in Hong Kong and Saudi Arabia in Q1. Other Middle East markets and Brazil have grown steadily post-launch, with some new markets ramping faster than prior cohorts as learnings compound.

b) For 2026, priority is to improve operations in existing markets rather than accelerate entry into new ones. The focus remains on disciplined scaling and efficiency.

**7) AI & technology**

a) The AI assistant entry in the Meituan app has been upgraded to the center of the bottom nav bar. It is still early days, but initial results are encouraging, as users start using it for more complex cross-scenario tasks such as recommending restaurants between two locations for guests who cannot book, or arranging on-site repair.

b) Differentiation comes from the 'infrastructure': authentic consumer reviews, comprehensive POI data, and in-house models trained for local services. This lets the AI assistant retain context and personalize recommendations when users adjust price or location. During the May Day holiday, conversations rose sharply vs. Spring Festival, and users not only redeemed coupons but also discovered services and destinations and completed purchases.

c) AI is being embedded more deeply in verticals. In healthcare, a dedicated AI product built with real pharmacy transaction and online consultation data and co-developed with medical professionals integrates health Q&A, medication guidance, and medical report interpretation into a one-stop experience in-app, allowing consultation, pharmacy purchase, and appointment in one flow.

d) Meituan will integrate with Xiaomi and Tencent AI chatbots. When users submit local service requests in Tencent’s AI assistant, agent-to-agent collaboration will seamlessly route them into Meituan for a one-stop local transaction experience.

e) Merchant side: the in-store dining AI steward has served 700k+ merchants, expanding this quarter from single stores to chains. The 'digital employee' for retail has served 300k+ merchants. Meituan aims to evolve from point AI enablement to human-AI collaboration, where AI supports complex decision-making and automates end-to-end repetitive tasks.

**2.2 Q&A**

**Q: As subsidies normalize, what changes are you seeing in food delivery competition? Can Q2 turn UE positive on seasonality tailwinds, and how will UE trend in H2? Given last year’s high base, what is the outlook for order growth over the next few quarters? Longer term, how do you see TAM and structural UE drivers?**

A (Wang Xing): As industry subsidies rationalize, competition is shifting back to fundamentals—operational efficiency and user experience—which plays to our strengths. Even as we dial back subsidies, we still see healthy user growth and higher engagement among core users, and we are solidifying our lead in mid-to-high AOV orders as a natural result of stronger brand, supply and service quality.

Our structural edge in operating efficiency is becoming more evident and is driving steady financial improvement. If competition stays rational, **we expect Q2 UE to improve significantly vs. Q1 thanks to seasonality, and our market leadership in recent months has widened our UE gap**. We will monitor the market closely and respond prudently, focusing on maintaining leadership and lifting efficiency for ourselves and merchants, though **the degree of improvement in H2 will still depend on competition, and per-order delivery costs are seasonally higher in Q3/Q4 than in Q2**.

**On orders, H2 could see negative YoY growth due to the high base**. **But the mix is healthier**—consumers are increasingly willing to pay for quality, which is a strong signal for merchants investing in premium supply. Therefore, **we expect net GTV growth to be more resilient than order growth, underpinned by our lead in mid-to-high AOV and a user structure that supports AOV recovery**.

Long term, China’s food delivery market still has headroom. Delivery is becoming a high-frequency daily necessity for a broader population, with demographic and consumption shifts driving deeper penetration. While delivery continues to penetrate lower price tiers, we are also serving consumers seeking higher quality and variety, expanding the user base with strong potential in frequency and retention. Our advantages in service and supply position us well to capture this upside.

This latest round of internationalized competition proved that subsidy-fueled order spikes are unsustainable. Durable growth comes from supply-side innovation, better matching across diverse scenarios, and technologies like AI that lift industry-wide efficiency and experience. These are the foundations of healthy growth and where we will keep investing. We remain confident in the market’s long-term potential, with a goal of 'high-quality 100mn daily orders'.

On long-term UE, guided by regulators, we expect more rational competition and are confident in sustaining a lead in operating efficiency, which underpins our competitiveness. Per-order economics should normalize over time. There is also untapped synergy across Core Local Commerce formats, and we will actively cross-sell food delivery with other services to compound value for the segment.

**Q: Against ongoing competition from channels like Douyin, how is the in-store business trending? Will revenue and margins remain under pressure, and how do you view long-term growth and margin trajectory, particularly given traffic disadvantages?**

A: We have long believed in-store local services are not simply a traffic business; they are grounded in physical-world fulfillment and consumer trust, and traffic does not automatically convert to transactions. Our moat cannot be replicated by traffic alone. First is brand—deep consumer mindshare for 'finding venues and deals', underpinned by trusted information and reviews, rich high-quality value-for-money supply, verified merchant info, online reservation and other integrated services, and billions of authentic user reviews.

Second is innovation across the value chain that delivers superior experiences. We have invested in medical aesthetics, elderly care, home repair and more, supporting millions of skilled workers on-platform. Prepaid consumer protection has rebuilt trust in prepaid services. We have standardized long, offline, non-standard services into reliable online SKUs, creating a highly differentiated supply ecosystem.

These efforts form a self-reinforcing loop that delivers best-in-class experiences at scale. We are also using AI to reshape value delivery in local services, upgrading Meituan from a user acquisition channel to an 'all-around AI business partner' in the local ecosystem. Competition brings short-term noise, but players must differentiate by category, merchant segment, and scenario. Our one-stop positioning remains solid— in-store revenue is growing steadily with core categories leading, while we expand new service-retail verticals and go deeper into lower-tier markets.

Our investment approach will flex with industry dynamics, but our top priority is the sector’s long-term health. **This year we will focus on two things: strengthening our edge in core categories, and building better digital infrastructure for local merchants**. As subsidies normalize, the value we deliver to merchants will matter more in day-to-day operations. **Near-term in-store margins should stay stable with room to recover long term. We have the conviction and patience to keep leading the sector’s evolution.**

**Q: How is the new AI assistant on the Meituan app homepage progressing? What else is underway to integrate AI on the product side, what capabilities do you want to build, and what is the long-term goal?**

A: **We placed the AI assistant at the very center of the bottom nav bar for easy access, and it is still very early**, but initial results are positive. More users are using it not only for simple queries but also for complex cross-scenario tasks, such as 'recommending restaurants between two locations for guests who cannot book' or 'scheduling on-site repairs'.

Our differentiation lies in the foundation—authentic consumer reviews, comprehensive POI data, and self-developed models trained specifically for local services. This enables a full understanding of context and personalized recommendations, and when users change their mind on price or location, the assistant can seamlessly re-plan while retaining prior instructions. The May Day holiday saw a clear step-up in conversations vs. the Spring Festival; importantly, users not only redeemed coupons but also discovered services and destinations, planned, and transacted on-platform.

We are also embedding AI deeper into verticals. A prime example is a dedicated AI product for healthcare that leverages years of real pharmacy transactions and online consultation data and is co-built with medical experts, given the zero-tolerance for error. It integrates consultation, medication guidance and medical report interpretation into a one-stop in-app flow for consultation, purchase and appointment. Looking ahead, this will be one of our core consumer-facing AI products with deeper in-app integration. Beyond improving agent recommendations, we will progressively deploy 'task execution' capabilities across verticals.

Our partnerships with Xiaomi and Tencent AI chatbots will launch soon. When users submit local service requests in Tencent’s AI assistant, agent-to-agent communication will seamlessly route them into Meituan to complete a one-stop local transaction experience. In my view, beyond 2C and 2B, '2-Agent' capabilities will become increasingly important.

As noted, we take a proactive stance on AI as an opportunity to deepen our moat and unlock new value. We continue to build in-house LLMs and enhance model capabilities, but what truly sets us apart is the infrastructure—full-spectrum local services, verified merchant data, authentic user reviews, and a fulfillment network. Layered on these structural advantages, we will deliver a superior AI-driven local services experience.

**Q: In light of industry and regulatory shifts, how is the hotel & travel business performing and what is the strategy for the year? (UBS, Kenneth Fong)**

A: The sector has entered a new phase in regulation and competition, with preferences tilting to value-for-money, local/short trips, and lower-tier markets. Our hotel & travel business delivered steady growth in Q1 and further cemented leadership in low-star hotels. During the Spring Festival, demand for visiting family and leisure travel was strong, and our high-quality, well-priced stays and strong UX drove higher conversion.

We are deepening the travel supply chain and offering differentiated end-to-end solutions for merchants at different stages, covering branding, targeted marketing, revenue management, room renovation, and PMS support. This helps merchants improve online ops and achieve sustainable growth.

For high-end, as the regulatory environment evolves, we are expanding high-star supply. In Apr, we launched the 2026 Meituan list that covers thousands of boutique hotels across 200+ cities, which has become a trusted guide for quality stays. We also co-launched vacation pre-sale products with listed hotels to offer exclusive benefits and one-stop premium vacation services. On membership, we are strengthening cross-sell between stays and other businesses for high-tier Meituan members, offering room upgrades, late checkout, early check-in and exclusive discounts, while expanding co-branded tiers and benefits with global premium brands such as Marriott.

Looking ahead to the full year, **higher airline fuel surcharges could cause short-term disruption, weighing on long-distance travel and high-star hotels**. Local stays and short trips in low-star hotels should remain resilient, and we are well positioned with structural advantages in these resilient segments.

At the same time, **we will capture opportunities from regulatory changes: (1) further consolidate leadership in low-star core markets; (2) expand coverage in mid-to-high-end, deepen strategic partnerships and enrich supply to strengthen ecosystem synergy; and (3) leverage Meituan’s membership system to precisely serve high-value users and drive further progress in high-star**. We are confident in delivering healthy, sustainable, high-quality growth in hotel & travel.

**Q: How has the Middle East situation affected Keeta’s operations? Are UE improvements in Hong Kong and Saudi still on track? How do you think about expansion and investment pace amid rising geopolitical uncertainty?**

A: The Middle East situation has caused some short-term volatility in growth metrics, but the overall impact is manageable, and our long-term conviction remains intact. The Middle East is among the most attractive on-demand markets globally—still early, fast-growing, with low penetration and strong willingness to pay. Even amid challenges, offline-to-online migration is accelerating, consumer mindshare for instant retail is strengthening, and online penetration is rising across the board, with delivery becoming infrastructure-like, underscoring the model’s structural resilience.

From a broader lens, going global is our long-term goal, and navigating geopolitical complexity is a capability we must build. We will keep honing risk management, building a more globally capable org, and growing alongside local partners to create value for users, merchants and riders. Operationally, Q1 growth was steady across markets. **On top of Hong Kong’s UE turning positive in Q4 last year, both Hong Kong and Saudi improved UE further in Q1, while other Middle East markets and Brazil ramped efficiency faster thanks to learnings from existing markets**. **This year we will focus on improving operations in existing markets rather than accelerating new market entries.**

Longer term, we are confident Keeta can scale revenue and profit together. In many global markets, food delivery is still used occasionally by a minority rather than being a daily staple, implying substantial room to grow. We will evaluate new market opportunities cautiously and maintain financial discipline. The delivery model has been proven globally, and Keeta’s steady efficiency gains validate our operating playbook. With scale and ongoing optimization, we are confident in achieving sustainable profitability at scale.

**Q: How is Xiaoxiang Supermarket performing amid intense instant retail competition? What is the strategic value of the 1P model within Meituan’s on-demand ecosystem, and what is the long-term target?**

A: Competition online is intense, and we must ensure the platform has the best supply. From a consumer perspective, they do not care about 1P vs. 3P; they care about what they can buy and whether merchants and stores deliver quality with the same reliability. On the main platform, Xiaoxiang competes on a level playing field with others.

The key is that as this becomes a daily norm for more users, expectations on category breadth, quality and value are rising. Users know fast delivery is available from any supermarket or store, but they now expect more from the seller itself. **We believe instant retail growth will be driven by a hybrid model—3P businesses like Meituan Flash together with 1P like Xiaoxiang**. Xiaoxiang can consistently provide high-quality supply and highly competitive fulfillment, allowing us to capture this opportunity. The model builds directly on our core capabilities and has a clear path to profitability, though we recognize there is much to learn in fresh grocery retail.

Operationally, Xiaoxiang delivered broad-based, steady growth in 2025, outpacing the industry and carrying momentum into Q1. **It has accelerated expansion, covering 55 cities by Q1-end and entering more in coming quarters. It continues to strengthen product competitiveness and go deeper into the supply chain—PB products are gaining stronger consumer recognition with a rising sales mix**. In more **mature cities such as Beijing and Shanghai, AOV has risen notably over recent quarters**, reflecting incremental demand captured by expanding high-quality value-for-money assortments.

To build omnichannel capabilities, we are actively opening more physical stores. Xiaoxiang started as a dark-store front-warehouse model, but we opened the first physical store in Haidian in Dec-2025 and a second in Apr-2026.

We believe offline stores broaden reach and let potential users experience our high-quality physical goods more directly. In-store, users can see, smell and touch, which is more compelling than any screen, and offline stores are an effective channel to build brand awareness over time. Meanwhile, even as we expand quickly, we stay disciplined—evidenced by YoY margin improvement in Q1. Fresh grocery is a long game, and **we aim to make Xiaoxiang a leader in online fresh and grocery with a long-term target of sustainable low single-digit net margin**.

More importantly, we want Xiaoxiang to become one of the most loved fresh brands. Our mission is to 'help people eat better'. Beyond delivery, those who cook at home need fresh ingredients, and we hope Xiaoxiang will become one of the most loved fresh brands.

<End of text\>

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