Regarding the impact of JD.com’s “10 Billion Subsidy” campaign on Meituan’s food delivery business, Meituan CEO Wang Xing responded that the company “will spare no cost to win the competition.” Due to uncertainty about “how long the irrational competition from new entrants will last,” Meituan “cannot provide accurate financial guidance for Q2 and the remainder of the year, but will continue to defend its market share.”
On May 26, Meituan held its Q1 2025 earnings call. The company’s Q1 2025 financial report showed strong growth in revenue and net profit. Total revenue reached RMB 86.6 billion, up 18.1% year-on-year, while operating profit surged 102.8%. Core business margins improved significantly, and losses in new businesses narrowed notably. Wang Xing stated that Meituan has weathered intense competition in the past and is confident in its ability to prevail again. While welcoming new players and acknowledging the industry’s potential, he noted that some subsidies in the current market are irrational, coupled with low quality and low prices. Meituan expects slower year-on-year growth in core local commerce revenue in Q2 and a significant decline in operating profit for the segment. Ahead of the 618 shopping festival, Meituan executives revealed updates on its flash delivery brand upgrade. CFO Chen Shaohui reported that post-95 users now account for over half of the flash delivery user base. Meituan will also participate in 618 promotions, offering discounts on food delivery and flash delivery services. Since piloting a new occupational injury insurance program in July 2022, Meituan has paid RMB 1.5 billion in premiums for nearly 7 million riders across seven provinces. The program is expected to expand nationwide by the end of next year. In April 2024, Meituan introduced a pension subsidy tailored for riders, with pilot participants receiving cash subsidies by early May.Wang Xing stated during the earnings call that the specific plan is as follows: For riders whose monthly income reached the local social security contribution base threshold for three months in the past six months, Meituan will provide a 50% subsidy. This plan fully respects the flexibility of the new economy, allowing riders to freely decide their working hours and workload. By lowering the participation threshold, it can cover a broader range of riders, with no prerequisites—whether riders are registered for social security, no requirements on working hours or delivery volume, and no distinctions based on delivery type.
Progress on Meituan’s AI Large Model Development: Business Decision Assistant to Launch in June. Wang Xing also shared updates on Meituan’s AI large model development. He mentioned that Meituan plans to launch a Business Decision Assistant in June to help merchants capitalize on AI trends and achieve digital transformation. He noted that last quarter, Meituan provided internal engineers with an automatic code generation tool, and 52% of the code is now AI-generated internally. Additionally, Wang Xing stated that Meituan’s foundational large model capabilities are approaching GPT-4O levels. He further revealed that around 52% of new code is AI-generated, over 90% of engineering team members widely use AI coding tools, and the company will continue to increase investment in large language model development. According to Wang Xing, Meituan is allocating resources to infrastructure and recruiting top AI talent to “ensure the best team in China in this regard. “ Full Transcript of the Earnings Call: Moderator: Welcome to our Q1 2025 earnings call. Joining us today are Mr. Wang Xing, Chairman and CEO of Meituan, and Mr. Chen Shaohui, Senior Vice President and CFO. During today’s call, management will first review Q1 2025 performance, followed by a Q&A session. I will now turn the call over to Mr. Wang Xing. Wang Xing: Hello, everyone. In Q1, our business maintained steady growth, with revenue increasing 18.1% year-over-year to RMB 86.6 billion. Annual transacting users and annual active merchants both reached new highs. We are pleased that more consumers and merchants are choosing Meituan as their preferred platform for local services. Beyond our ongoing efforts to enhance products and services to improve their experience, we continue to expand investments in ecosystem development, actively promote healthy industry growth, and unlock greater consumption potential in China’s local services through improved supply and service innovation. Over the 11 years since we launched our food delivery business, we have diversified our product offerings, broadened our price ranges, and optimized our 30-minute delivery network to provide better services and choices for hundreds of millions of consumers.Over the years, we have supported millions of merchants, especially small and medium-sized ones, helping them reach new customers, achieve business growth, and navigate industry cycles. To facilitate the industry’s transition toward a phase focused on healthy development, we aim to further drive industry transformation, improve the online business operating environment, and create greater value for the entire service sector through our innovative and refined supply models.
We continue to assist restaurants and merchants in discovering new growth opportunities. For instance, we actively promote brand satellite stores, enabling chain restaurants to rapidly expand their geographic coverage at a significantly lower cost compared to traditional dining establishments. By the end of the first quarter, over 480 brands had successfully launched more than 3,000 high-quality brand satellite stores on our platform. Even more impressive is the average revenue per store, which is several times higher than that of typical restaurants. In addition to brand satellite stores, we have designed other innovative offline business formats, each offering customized growth strategies and operational solutions for chain restaurant merchants. Furthermore, we have introduced our self-operated cloud kitchens, exclusively tailored for chain restaurant brands. At the same time, we fully recognize that small and medium-sized merchants are the cornerstone of China’s catering service industry. These businesses also play a vital role in local employment and community economies. We remain steadfast in our commitment to providing more support to small and medium-sized merchants. Our goal is to ensure that diligent small and medium-sized merchants on our platform gain consumer recognition and trust, gradually becoming preferred choices for consumers. In the first quarter, we implemented a series of comprehensive measures to support high-quality small and medium-sized merchants. These measures include financial assistance, traffic support, free digital tools, and online services. Through these efforts, we have effectively helped these merchants improve their supply, enhance service quality, and offer a wider selection. Additionally, recognizing the importance of food safety and product quality, we launched the “Transparent Kitchen” initiative and other food safety measures to elevate the supply quality on our platform. We believe greater transparency makes it easier for consumers to discover high-quality restaurants. To support micro-merchants, including family-run and community restaurants, we provide targeted subsidies to cover hardware procurement and installation costs for joining our “Transparent Kitchen” program. Looking ahead, we plan to invest RMB 100 billion over the next three years to drive high-quality growth across the entire catering service industry. These resources will be used to support various types of merchants. Over the past decade, we have consistently worked to improve rider rights protection and enhance their work experience.Since July 2022, we have provided over 1.5 billion yuan in occupational injury insurance for all riders on our platform. Currently, this insurance is implemented in seven pilot provinces, with plans to expand to more provinces this year and achieve nationwide coverage by the end of next year. In April this year, we also launched a pilot pension program for riders, which will be gradually rolled out nationwide in the future.
Meanwhile, we offer comprehensive talent development programs and career advancement paths for riders. Notably, 86% of management positions in our delivery network are filled by frontline riders who have been promoted. We also provide diverse job transfer opportunities within our platform and have sponsored hundreds of riders to pursue higher education at universities. Beyond work support, we offer life and medical assistance to riders and their families. For example, through our “Kangaroo Baby Charity Program,” we have allocated over 100 million yuan to assist more than 6,000 riders and their families with critical illnesses. Additionally, we have provided tens of millions of yuan in medical aid and educational support for riders’ children. We place great emphasis on supporting the career development of female riders. In 2024, over 700,000 female riders earned income through our platform. In March this year, we offered free one-year coverage for critical illness insurance specifically for female riders. Looking ahead, we will gather more feedback and suggestions from riders to further enhance their welfare and ensure their hard work is fully recognized and rewarded. In the first quarter, Meituan Instashopping maintained strong growth, tapping into the vast potential of instant retail. In April, we officially launched our own instant retail brand, “Meituan Instashopping.” Consumers can easily access the instant shopping page directly from the Meituan app homepage, browse, and purchase a variety of daily essentials, enabling 24/7 shopping. This next-generation shopping platform collaborates with millions of retailers, brands, and local small and medium-sized merchants to meet the daily shopping needs of over 300 million consumers nationwide, delivering high-quality products within 30 minutes for an unparalleled experience. The launch of this public brand directly addresses the growing popularity of instant retail. Our goal is to provide higher-quality products while enhancing convenience and reliability for every consumer. We also aim to collaborate with millions of merchants on our platform to leverage opportunities from industry transformation and supply chain upgrades, offering retailers and brand owners significant new sales channels.Meituan Instashopping will continue to introduce more online tools to support merchants across all categories in expanding their businesses on the platform. Adapting to demand trends and the new macroeconomic environment, Meituan Flash Warehouses are actively expanding product categories and services to cater to diverse consumer preferences. For instance, in response to evolving consumption trends, initiatives like “Peace of Mind Learning” have been launched to offer consumers greater flexibility and restore confidence in prepaid services.
“Peace of Mind Learning” has already attracted over 20,000 educational institutions nationwide, covering a wide range of educational scenarios, including sports and arts. Consumers can seamlessly place orders, redeem services in installments, and request refunds with a single click when needed. Building on this success, we recently introduced “Peace of Mind Practice” and “New Link,” extending this worry-free consumption model to fitness training and broader installation categories. Leveraging efficient, user-friendly online tools and extensive marketing programs, we also help merchants reach larger customer bases, improve conversion rates, and benefit from digital transformation, driving business growth across various consumption scenarios. In Q1, the number of annual active in-store merchants grew by over 25% year-on-year. Beyond offline merchants, our platform hosts numerous independent artisans, such as photographers, hairstylists, and masseurs. As a platform connecting artisans, merchants, and consumers, we provide a suite of services spanning onboarding, review management, content display, operational support, and consulting. These services enable over 1 million active artisans to develop their personal brands online. We have also streamlined collaboration between merchants and artisans while making it easier for consumers to access their preferred artisans, offering wider choices, better value, and unique service experiences. Since integrating medical aesthetics and health services into the healthcare division, we further strengthened cross-selling in Q1, deepened penetration into the industry supply chain, and provided comprehensive healthcare solutions during the peak flu season. By partnering directly with pharmaceutical companies, we ensured ample drug supply while solidifying our leadership in instant drug delivery. We expanded offerings to meet demand for chronic disease medications and medical equipment, further increasing user purchase frequency. Additionally, we broadened collaborations with medical aesthetics providers, dental clinics, and traditional Chinese medicine clinics. Targeting existing user groups, we cross-sell more medical and health services. For example, in dental aesthetics, we focus on considered purchases like dental implants, enhancing price comparison and decision-making processes for consumers.We have introduced the ‘Safety Implementation Zone’ to provide assurances that alleviate consumer concerns and mitigate risks. Moving forward, we will continue to innovate our products and services to meet the evolving one-stop healthcare and wellness needs of consumers.
At the end of March, we launched the Meituan Membership Program, which covers all our business categories. Centered around the universal benefit of ‘New Selections,’ it encompasses every aspect of consumers’ daily lives. Our goal is to offer members broader benefits, enhanced experiences, and a comprehensive membership framework. Users can accumulate growth points, advance their membership tiers, and unlock additional privileges. Currently, these privileges primarily include hotel bookings, travel, and various other local service categories. In the future, we plan to extend membership benefits to more categories. Additionally, we will introduce tier-specific privileges such as prioritized food delivery, complimentary bundled gifts, beverages, or installation services, while continuously improving the user experience for Meituan members. By providing benefits that span all categories and scenarios, we aim to capture consumers’ mindshare within Meituan and establish our platform as the preferred destination for discovering local stores and exclusive deals. This strategy is designed to boost user retention, increase transaction frequency, and optimize cross-selling efficiency. Now, let’s turn to our new business segments. In the first quarter, we further refined our operations, achieving significant efficiency improvements in grocery retail software and hardware services, marking notable progress compared to the same period last year. Through grocery retail businesses like ‘Xiaoxiang Supermarket’ and Meituan Youxuan, we have begun offering comprehensive support to export-oriented enterprises, covering marketing, channel expansion, and branch collaboration to help them distribute high-quality export products in the domestic market. Our overseas operations have also achieved a significant breakthrough in Saudi Arabia. Kitah has effectively demonstrated our product capabilities and technological advantages by delivering an enhanced consumption experience in transactions and deliveries. We have gained widespread recognition from local consumers and quickly become one of the region’s most popular food delivery apps. Looking ahead to the remainder of 2025, we are committed to fostering the healthy development of our ecosystem. For merchants, we will introduce more support measures to improve the online operating environment and assist them in iterating innovative supply formats. For delivery riders, we will implement broader measures to safeguard their rights, enhance their welfare, and promote societal recognition of their contributions. For consumers, we are dedicated to providing more comprehensive services, products, and membership benefits, particularly for those who have long supported us.By leveraging artificial intelligence technology, we will continuously improve user experience and enhance merchant operational efficiency. Additionally, we will actively align with national strategies aimed at promoting consumption and expanding domestic demand. By focusing on emerging consumption trends and identifying new markets and opportunities, we will drive consumption growth and industry transformation, contributing to the broader economic landscape. With that, I will now hand the meeting over to Chen Shaohui to update our financial results.
Chen Shaohui: Next, I will present our financial performance for the first quarter. During this quarter, our business maintained healthy growth, with total revenue increasing by 18.1% year-over-year to RMB 86.6 billion. The cost of revenue ratio decreased by 2 percentage points year-over-year to 62.6%, primarily due to improved gross margins in our grocery retail business and enhanced operating leverage, although this was partially offset by increased costs related to overseas operations. Thanks to improved marketing efficiency, the sales and marketing expense ratio decreased by 1 percentage point year-over-year to 18%. The R&D expense ratio and general and administrative expense ratio remained stable at 6.7% and 3%, respectively. Our strategic focus on quality, growth, and operational efficiency continued to deliver strong results this quarter. Total segment operating profit grew to RMB 11. 2 billion, up from RMB 6.9 billion last year. The total segment operating margin improved from 9.5% to 13%. On a consolidated basis, our adjusted net profit increased year-over-year, reaching RMB 10.9 billion this quarter. As of March 31, 2025, we maintained a strong net cash position, with cash and cash equivalents and short-term treasury investments totaling RMB 180.4 billion. Cash flow from operating activities increased year-over-year, reaching RMB 10. 1 billion this quarter. Now, let’s review the performance of each segment, starting with our core local commerce. During this quarter, our food delivery business achieved sequential recovery in year-over-year order growth, with daily order growth in Q1 exceeding that of Q4 despite headwinds from reduced subsidies. Engagement among medium- and high-frequency users continued to improve significantly. This is a direct result of our focused execution, supply-side optimization, product iteration, and operational enhancements. Meanwhile, we continued to iterate on our new supply formats this quarter. Notably, Xinhaofan maintained a strong growth trajectory, with core consumer retention rates steadily climbing year-over-year. During this quarter, Meituan Instashopping maintained robust growth momentum. Multiple consumption categories, including beverages, snacks, 3C, home appliances, beauty and personal care, and other non-food categories, performed exceptionally well.The performance during Valentine’s Day was particularly remarkable, with daily order volume nearly doubling year-over-year. Beyond flowers and gifts, we observed significant demand expansion in non-gifting categories such as small appliances, jewelry, and beauty products. This reflects our platform’s evolution in serving a broader consumer base, especially among younger generations and across more categories.
Additionally, Meituan Dongshiji demonstrated our continuous progress on the supply side. The number of Meituan Dongshiji and their order contributions continued to grow, particularly in lower-tier markets. Our installation business effectively capitalized on increased consumer spending during key holidays, with order volume rising approximately 50% year-over-year. This quarter, we enhanced our special offers program. It not only gained traction in high-frequency categories like light meals, fast food, and beverages but also stimulated demand in seasonal consumption categories during holidays. In lower-tier markets, we maintained strong growth momentum in Q1, with expanding merchant coverage, user engagement, and transaction volume. Importantly, we further improved profitability in these markets. The optimized Shen Membership program emerged as another powerful growth accelerator this quarter, effectively supporting the installation, hotel, and travel businesses. It not only re-engaged new users but also increased transaction frequency among inactive users. Our core local commerce segment continued to achieve robust year-over-year growth of 17.8%, generating revenue of RMB 64.3 billion. Both operating profit and operating margin for this segment improved year-over-year, reaching RMB 13.5 billion and 21%, respectively. We achieved higher operational efficiency and greater operating leverage in our core local commerce business. Turning to the new initiatives segment, revenue grew 19.2% year-over-year to RMB 22.2 billion, driven primarily by our grocery retail and overseas businesses. Thanks to improved operational and marketing efficiency in grocery retail, the segment’s operating loss and loss margin narrowed year-over-year to RMB 2.3 billion and 10.2%, respectively. The sequential increase in operating loss was mainly due to heightened investment in overseas operations. Finally, it is worth emphasizing that over the years, our core local commerce business has demonstrated resilient performance amid complex and volatile market conditions. Every challenge has made us stronger, sharpened our competitive edge, driven operational excellence, and delivered sustained financial improvement.Looking ahead, we remain confident in the significant growth potential of all businesses within our core local commerce segment. Increasing synergies will further amplify our advantages. We are confident in our long-term ability to achieve healthy, high-quality growth. With that, we now open the floor for questions. Thank you.
Question from Goldman Sachs: I’d like to ask about the food delivery sector. JD.com announced a 10-billion-yuan subsidy plan to enter the food delivery space and has made some progress. Has this move already impacted our order growth? How does management assess the changing competitive landscape? Additionally, given that Meituan has also announced a similar 10-billion-yuan subsidy plan, will we adjust our subsidy strategy to maintain competitiveness? What specific measures will we take to address this new competitive environment? How might these market changes affect Meituan’s overall profit growth this year? Apologies for the lengthy question. Thank you. Wang Xing: Thank you. This is a very important question. The short answer is: we will spare no effort to win this competition. Now, for the longer version. It may sound amusing—10 billion versus 10 billion. It seems every internet player wants to throw their 10 billion into this game. This implies the winner will be highly valuable, and we plan to be that winner. Currently, we are the largest player in this business. We’ve operated in this space for over a decade and have weathered several rounds of intense competition in the past 10 years. Now, we believe we are in the best position to win again. Let me elaborate. First, I want to emphasize that we welcome new entrants to the food delivery and instant retail markets. Their moves highlight the immense growth potential in food delivery and the broader instant retail sector. We believe competition will drive the entire industry forward, particularly for our Meituan Instashopping business, which has significant upside potential. However, I must note that the current irrational subsidy competition, characterized by low quality and low prices, may not be sustainable in the long run. Ultimately, competition should realign with business fundamentals. Only platforms that can effectively activate the three key flywheels—consumers, merchants, and the delivery network—will achieve sustainable growth. We are confident in our scale advantages and the competitiveness of our demand-driven network. We remain optimistic about the future growth potential of our food delivery business and the broader Meituan instant retail sector.In the food delivery sector, recent industry-wide subsidies have effectively stimulated additional demand, particularly for elastic consumption categories such as milk tea or coffee. Our platform experienced exceptionally strong growth in the beverage category during April and May, while other food categories maintained steady growth. We also observed an increase in order frequency among medium-frequency users, who have transitioned into higher-frequency users. Retention rates for these core users remain at a very high level.
Due to intensified competition, consumers on other platforms may compromise on system failures and delivery delays, coupled with high refund rates. However, our platform consistently delivers a stable experience through our reliable delivery network and advanced systems. With over 11 years of operation, we have built a sophisticated service capability that meets consumers’ daily needs across a wide price range and diverse consumption scenarios. Our platform hosts a large number of high-quality small and medium-sized merchants, who form the backbone of our food delivery supply and the Chinese catering industry. Through continuous product and service iterations, we help these merchants acquire customers and increase revenue. Simultaneously, we assist branded restaurants in innovating their supply models, including brand satellite stores, community restaurants, group buying, and flash sales. These innovations not only meet consumer demand for cost-effective options but also help merchants boost order volume and revenue. Collectively, these efforts have diversified and elevated our supply quality. Combined with our industry-leading delivery network and ongoing operational improvements, we are well-positioned to provide consumers with predictable service and enhanced experiences. We believe that once the phase of irrational industry subsidies ends, consumers will choose platforms offering the widest selection, best experience, and most reliable service. Therefore, we are prepared to face competition. In the short term, we will make necessary investments to solidify consumer mindshare, confident in maintaining our long-term industry leadership. At the same time, we prioritize the health and sustainable development of the entire industry and ecosystem. We believe China’s food delivery industry should enter a new development phase. Neither platforms nor merchants should revert to previous competition models. Increasingly, merchants are embracing new supply formats, seeking growth through improved product quality and service offerings. They also face industry challenges such as excessive marketing, promotions, and food safety issues. We recognize these deep-rooted industry problems require immediate attention.To directly address competition, we will actively drive supply-side innovation and explore new growth opportunities this year. Additionally, we will take proactive measures to enhance overall industry quality and optimize the online business environment for merchants. We also advocate against unnecessary and excessive competition within the industry.
We remain committed to helping merchants streamline their marketing efforts and reduce operational burdens. Simultaneously, we will focus on improving marketing efficiency, increasing purchase frequency among core users, and enhancing user loyalty. Our goal is to create tangible value for all stakeholders, including merchants, riders, and consumers, thereby steering the industry toward a more rational, quality-service-oriented growth trajectory. From a financial perspective, we anticipate volatility due to intensified competition. Short-term fluctuations in financial results should not come as a surprise. In regions where high subsidy ratios persist, we will continue to increase investments. Our investment philosophy is rooted in promoting healthy industry development and defending our market position, while also bolstering the ecosystem. Most of our investments will offset revenue. We expect the year-over-year growth rate of core local commerce revenue in Q2 to slow compared to Q1, with a significant year-over-year decline in operating profit for the same period. The duration of irrational competition from new entrants remains uncertain, making it difficult to provide precise financial guidance for Q2 and the remainder of the year. However, we are confident in defending our market share and consolidating our leadership position. Over the past decade, we have played a pivotal role in the development of China’s food delivery industry. We are uniquely positioned to continue creating value for all stakeholders. We urge stakeholders to look beyond short-term volatility and focus on our long-term competitive advantages and sustainable growth potential. In the long run, local commerce offers opportunities to unlock revenue and cost synergies across different businesses. As our operations expand, economies of scale will become more pronounced. We anticipate that after this phase of intense competition, the food delivery industry will return to a more rational and sustainable growth path, fostering a healthier ecosystem. Consequently, we are confident that the GTV margin of core local commerce will steadily improve to a reasonable level. Regulators are also monitoring this issue. Having operated in China’s internet sector for over a decade, we believe regulatory efforts aim to curb irrational and unhealthy subsidy competition. Our role is to win this battle within the bounds of what is permissible.Therefore, we are prepared to spare no effort to win this battle and consolidate our market leadership. Thank you.
Question from Citi: Thank you, management. We can see that instant retail has become a lifestyle for an increasing number of young people. With our repositioning of Meituan Flash, what strategies do we have for expanding category selection? How is the progress of our instant convenience stores? Additionally, what progress have we made in expanding into higher average order value (AOV) product categories? For example, since we incorporated electronics and home appliances into our business. Chen Shaohui: Thank you for your question. Yes, I’m glad you asked about Meituan Flash, which we launched in 2018. Since then, it has expanded into many categories, covering almost every aspect of daily life. Products like flowers, fruits, and fresh produce are inherently well-suited for the instant retail model. By integrating innovative product formats, we can stimulate new consumer demand and redefine the boundaries of the instant retail industry. At the same time, more importantly, Flash has maintained strong growth momentum across non-food categories, such as 3C appliances, beauty and personal care, maternal and child products, pet care, daily necessities, and apparel. Although these categories are often considered low-frequency due to their non-urgent nature, they have achieved significant growth as we continue to expand product coverage and improve quality standards. In Q1, order growth for non-food categories exceeded 60%. Our extensive and diverse daily necessities and long-tail products effectively meet consumers’ urgent needs. Categories like beauty and personal care, toys and video games, pet care, and maternal and child products also cater to consumers’ aspirations for quality living and emotional consumption. Growth in 3C products and home appliances has also been remarkable, with portable small appliances, kitchen appliances, photography equipment, smart devices, and gaming equipment all showing significant growth on our platform. Notably, some consumers have even purchased large appliances like refrigerators and washing machines through our instant retail platform. Additionally, the volume of apparel orders from young consumers has far exceeded our initial expectations. These developments demonstrate that instant retail has become a vital channel for meeting diverse consumer needs and a trusted lifestyle choice for the younger generation. Meituan Flash currently operates over 30,000 instant convenience stores, of which more than 10,000 are convenience stores. The remaining stores cover nearly all the categories mentioned earlier. We continue to strengthen the coverage density of convenience stores in categories like fruits, pet care, and beauty products.Our network has reached a considerable scale and is in a phase of rapid development. Meanwhile, categories such as trendy beverages and food have entered an accelerated growth stage after their initial development. Additionally, an increasing number of leading KA brands from sectors like supermarkets, convenience stores, small appliances, and daily necessities are accelerating their embrace of Meituan Instashopping. We remain committed to providing merchants with comprehensive support.
In the first quarter, Meituan Instashopping’s total transacting users exceeded 500 million, with young consumers—those born in the 1990s—accounting for two-thirds of the total. User purchase frequency has also increased. We officially launched our own instant retail brand, ‘Meituan Instashopping,’ and building on this solid foundation, we are striving to deliver everything to your doorstep within 30 minutes. During the brand’s initial phase, our strategic marketing campaigns drove Meituan Instashopping’s peak daily active users to nearly 66.5 million, with young users born in the 1990s and 1995s representing over half of the total. In May, we introduced the first service guarantee program covering the entire instant retail process. Collaborating with hundreds of renowned brands and a wide range of local merchants, we upgraded our service experience, fulfillment, and after-sales support. Our goal is to establish instant retail as the premier shopping experience in terms of service and guarantees. For example, we partnered with appliance brands to offer half-day delivery and installation services for appliances, exclusive delivery and customer service for high-value products, and enabled product exchange programs with delivery within 30 minutes from hundreds of thousands of local stores. We also provide a 7-day return guarantee for millions of inventory items and introduced compensation guarantees for damaged or improperly preserved fruits and fresh products, as well as beverages that fail to meet freshness promises. We firmly believe that Meituan Instashopping will become the leading consumption platform for more consumers, especially the younger generation. With the rebranding and the launch of the service guarantee program, we anticipate capturing an increasing share in high-average-order-value categories and fostering closer collaborations with more brands. For instance, in the first quarter, we successfully onboarded five renowned brands, such as Super Mario and Philips, to establish a presence on our platform. These partnerships not only provide consumers with high-quality electronics but also generate significant incremental revenue for brand owners, effectively creating a win-win ecosystem. Furthermore, to better meet consumers’ strong demand for instant retail, our food delivery business and Meituan Instashopping will launch a 618 marketing campaign on May 28.We will collaborate with and retail brands to provide consumers with more cost-effective products and services. In conclusion, we are confident in the long-term巨大 potential of Meituan. Thank you.
UBS Analyst: Good evening, management. Thank you for taking my question. Could you elaborate on the recently announced 100 billion yuan subsidy promotion plan for the next three years? Additionally, Meituan has launched a pilot project for riders’ pension insurance. Could you share the latest progress and plans for its? Thank you. Wang Xing: Thank you for your attention to our announcement. Yes, we have announced a 100 billion yuan investment plan to drive industry growth over the next three years. Our goal is to help the industry identify new growth opportunities, improve supply quality, and create a more favorable business environment for merchants. This plan focuses on four key areas: 1. Empowering Merchants: Last year, we launched the first 1 billion yuan merchant support fund. As of April this year, the program has covered 180,000 merchants, including, community shops, brand flagship stores, high-quality brands entering new supply formats, and low-tier markets, as well as brands. Merchants have used our support funds for online operations improvement, product innovation, and equipment upgrades. 2. Enhancing Supply Quality: Over the past year, Brand Satellite Stores have helped more than 480 brands open 3,000 high-quality satellite stores. Leveraging AI-driven services such as location selection, product planning, and targeted traffic positioning, these stores generate 2-3 times the average revenue of traditional stores. Beyond expanding Brand Satellite Stores, we also allocate resources to high-performing merchants, including, while offering various subsidies to other. 3. Promoting the Initiative: This initiative encourages more high-quality urban merchants to establish high-standard kitchens, thereby strengthening the industry’s food safety infrastructure. With increased hardware subsidies and traffic support, we expect over 100,000 merchants to participate by year-end. We will invite more to join the program, as it allows consumers to observe food preparation in real time, enhancing public confidence in food safety. 4. Stimulating Consumption: We will utilize diversified products like Meituan Membership and to incentivize users. Our aim is to revitalize consumption, enabling merchants to increase and expand their businesses.Regarding the pension issue for riders, on April 3rd, we launched a new pension insurance pilot program in Nantong and Quanzhou, covering all riders in these two cities. Over the years, we have maintained regular communication with relevant authorities to deepen our understanding of social security policy guidance for flexible employment workers and better address riders’ needs. This enables us to actively explore effective solutions to enhance the rights of flexible employment workers.
Previously, we implemented an occupational injury insurance pilot, providing 1.5 billion RMB in coverage for approximately 7 million riders across seven pilot provinces. The newly launched pension insurance pilot is designed in accordance with national social security policies for flexible employment, offering riders specially tailored subsidies. The specific plan is as follows: For riders whose monthly income meets the local social security contribution base threshold for at least three months in the past six months, Meituan will subsidize 50%. This plan fully respects the flexibility of the new economy, allowing riders to freely decide their working hours and workload. By lowering participation thresholds, it can cover a broader range of riders without prerequisites—regardless of whether riders are registered for social security, working hours, delivery volume, or delivery type. In early May, the first batch of riders enrolled in our pension insurance pilot received cash subsidies. We are pleased to see the program receiving positive feedback from the Human Resources and Social Security Bureaus in pilot cities. Moving forward, we will continue to address rider inquiries about the pension plan, strengthen policy promotion, and encourage rider participation. We plan to expand the pilot to more cities this year and refine it during implementation. Simultaneously, we are confident that increased efficiency and order density in our network will generate cost-saving benefits to offset the additional costs of this insurance. Thank you. Question from Morgan Stanley: Hello. Thank you, management, for this opportunity. Could management share the latest progress of Keeta in Hong Kong and Saudi Arabia? What are the company’s core competitive advantages in these regions? The company previously mentioned focusing on the Middle East in the short term but recently announced entry into Brazil’s food delivery market. Why is the company preparing to expand beyond the Middle East? Aside from timing, what are the key criteria for regional expansion plans and selecting new markets? Given that overseas markets are smaller than China’s, could management share the company’s overall plan and long-term goals for these overseas businesses? Wang Xing: Thank you. Keeta has made good progress in both Hong Kong and Saudi Arabia.Last week, we celebrated Keeta’s second anniversary in Hong Kong. It was officially launched two years ago on May 20. Over the past two years, we have become the largest food delivery platform in Hong Kong. Moreover, we continue to grow in terms of order volume, average order value, market share, and the number of restaurants and riders. This is the situation in Hong Kong.
In Saudi Arabia, we launched last September, so we have been operating for just over half a year. However, TikTok is now operational in all nine cities, covering all Saudi Arabian cities with a population exceeding one million. This is our current market, and we plan to expand to more cities in Saudi Arabia. You are correct that we announced plans to enter Brazil and committed to investing $1 billion over the next five years. I will explain why and how we plan to win this competition. We entered the food delivery business in late 2016. Over the past decade, we have invested heavily to build a globally leading food delivery operation. Currently, we handle over 20 million orders daily. In building this business, we developed a world-leading system that required significant software engineering expertise and extensive machine learning to optimize the order dispatch system. Creating a basic online food delivery app is easy, but scaling it to meet the demands of growing users, restaurants, and riders requires machine learning to optimize the system. Otherwise, it cannot handle the increasing demand. Through Meituan, we have built such a system and believe we have one of the best. We plan to apply all our knowledge and operational experience to Keeta and bring these capabilities to other markets. By leveraging our competitive products, services, and operational expertise, we are confident in delivering fast delivery speeds and excellent user experiences to consumers, restaurants, and riders in other markets. Additionally, we believe this process will create numerous job opportunities in these markets. In the coming years, Keeta will become the preferred food delivery platform in more overseas markets. Regarding our progress, as we have stated before, Meituan is destined to become a global company in the long term, but we are not in a hurry. We will carefully evaluate every opportunity, and decisions to enter new markets are based on comprehensive analyses that consider factors such as current and potential market size, growth potential, and market structure.When entering a market, it is essential to ensure that you can become the first or second player. Otherwise, the effort may not be worthwhile. Therefore, we pay close attention to market size, structure, regulatory frameworks, and the overall business environment, as we collaborate with numerous local partners.
Regarding Brazil, we recognize the enduring strategic partnership between our two countries, which underscores the strength of this relationship. We believe Chinese companies’ investments in Brazil will be welcomed by local consumers and businesses. Earlier this year, I visited Brazil and observed a vibrant economy with a large population. Brazil is a country with immense potential—ranking fifth in terms of territory, seventh in population, and ninth in GDP. However, in the food delivery sector, Brazil ranks among the top five globally, highlighting its current scale and potential. It would be unfair to claim that other markets are smaller than China. While China and the U.S. are the two largest markets globally, combining many other countries could surpass either. However, each market is unique, requiring tailored evaluations. Our current plan includes operations in Saudi Arabia and preparations to launch Keeta in Brazil. We are excited about this, as Keeta has performed well in Hong Kong and Saudi Arabia, and Brazil presents a significant long-term opportunity. I am confident in the growth potential of global food delivery and on-demand services. Currently, in many markets, food delivery is an occasional convenience for specific demographics. However, penetration and frequency will increase over time, as witnessed in China. With our expertise and world-leading software systems, we aim to bring value to these markets for all stakeholders. This expansion may impact short-term profitability, but it represents a promising long-term growth opportunity. This is our plan. Thank you.Jefferies Analyst: Good evening. Thank you, management, for addressing my question. Could management provide an update on the company’s large language model (LLM) advancements, as well as the R&D expenses and timeline for related applications? Thank you.
Wang Xing: Certainly. A earnings call without AI questions would be incomplete. This quarter, we continued to strengthen our capabilities across all three dimensions of AI: AI infrastructure, AI in products, and AI at work. This is how we approach AI. During the quarter, we iterated on our foundational LLM, launched new AI applications and services for external users, and enhanced a suite of employee productivity tools to improve efficiency and work experience. We made solid progress in all three areas. First, regarding AI infrastructure. We increased investment in our LLM, allocating resources not only to infrastructure capital expenditures but also to recruiting top AI talent to ensure our foundational language model remains among China’s best. This quarter, we upgraded our LongCat LLM. The enhanced model now seamlessly switches between reasoning and non-reasoning modes, achieving performance levels comparable to China’s leading models in both modes. We also updated our end-to-end voice interaction model, LongCat, which demonstrates advanced capabilities in understanding nuanced information, including emotions or contextual cues, and engages in natural voice conversations. Its performance approaches GPT-4.0. Regarding AI in products, AI’s value extends beyond efficiency—it empowers our platform’s merchants. By leveraging AI, we can better assist merchants in accelerating digital transformation and optimizing costs. On May 18, the Meituan Catering Advisory Committee hosted an AI evolution seminar for the catering industry in Shanghai. Based on feedback from the committee, we plan to launch a new LLM next month (June). This AI-powered business decision assistant for the catering industry will serve as an intelligent operations tool for merchants and professionals, covering four key scenarios: dish selection, new store location, menu development, and store operations. This innovation marks a shift from experience-driven to AI+data-driven decision-making, effectively reducing operational risks while fostering business growth. The third point was arguably the most exciting development last quarter.We believe in developing internal AI tools, or AI at work, to enhance employee productivity and work experience. This remains a key priority in our AI initiatives. Last quarter, we continued to improve engineers’ AI coding capabilities and actively promoted the adoption of internal AI coding. Currently, approximately 52% of new code in our company is generated by AI. In some R&D teams, over 90% of members extensively use AI coding tools. Our goal is to achieve 100% adoption among all engineers gradually.
We have our own no-code platform, which is available to all employees and widely adopted internally. The no-code platform allows users to quickly generate applications through natural language conversations without prior coding experience. Now, all professional roles in our company use the no-code platform, including product managers, UX designers, business analysts, HR, and finance personnel. They leverage the platform to create product prototypes, interactive pages, and efficiency tools, with 62% of product managers and 28% of business analysts using it internally. Last week, we launched the no-code platform for free to the public. Users can turn various ideas into reality without any coding skills. We believe this application will support the digital transformation of small and medium-sized businesses in the AI era. So far, users have created 9,410 applications, with over 16 published and actively used. In the long run, we believe Meituan’s unique advantage lies in our diverse consumer scenarios. We offer a rich portfolio of offline services and possess strong fulfillment capabilities. Therefore, we will continue to build our AI capabilities in foundational R&D and applications, leveraging AI to help people eat better and live better in the physical world. Question from Citigroup: Good evening, management. Thank you for answering my question. Congratulations on the robust performance. My question relates to investment and capital allocation. Given the significant investment in overseas expansion and domestic food delivery competition, will the company revise the business strategy and investment scale of Meituan Preferred to balance overall profitability and cash flow? What are the capital allocation priorities and strategies? Will increased overseas investment lead to a suspension of the share repurchase program? Wang Xing: Thank you. Yes, we consistently review our capital allocation strategy holistically and strive to balance cash flow from core local commerce, the priorities and resource needs of new businesses, and shareholder returns to determine the optimal capital deployment strategy each year.When it comes to competition, we have faced it from the very beginning and grown stronger through it. We believe healthy competition serves as a catalyst for the broader development of the industry and fosters long-term growth. Although competition may lead to short-term profit fluctuations, we are confident that our core local commerce segment will continue to generate robust cash flow, providing a solid financial foundation for our overseas expansion and fresh retail business.
Our new businesses are in a phase of rapid growth. We have tailored different key performance indicators (KPIs) for each business unit and carefully evaluate their performance, dynamically adjusting our strategies accordingly. As for Meituan Select, it is part of our overall fresh retail strategy. We remain firmly committed to capturing opportunities in China’s fresh food market. We believe this industry holds significant digital potential to deliver better user experiences and improve infrastructure efficiency across the sector. At the same time, we recognize the vast geographical diversity and fragmented nature of China’s fresh food market. We need to offer different solutions for different markets. For instance, in high-tier cities, we operate Ele.me Fresh supermarkets, leveraging the front-end warehouse model with excellent performance. We also have Meituan Instant Retail, a platform model connecting local retailers and consumers. These two businesses play a pivotal role in building our fresh retail brand image. For lower-tier markets and more daily consumption needs, we believe a different approach is required to serve this highly challenging and fragmented market. Meituan Select is our tool to test the potential of these markets and validate their business models. Although it has proven more challenging than anticipated, we still see potential in enhancing supply chain capabilities and improving the experience for lower-tier cities. We will continue to focus on testing Meituan Select’s model and validating its economic viability rather than scaling it up. Therefore, its total losses remain controllable. That said, we have observed continuous operational improvements since Q4 last year. Specifically, we have enhanced the efficiency and service quality of pickup points, upgraded product quality, and improved delivery timeliness. This year, we will further consolidate our core competitiveness and operational efficiency. Regarding shareholder returns, we will continue to assess our cash reserves and potential cash flow to make flexible arrangements. We will maintain our share repurchase program as the primary channel for shareholder returns, with the basic goal of offsetting annual share dilution caused by our Employee Stock Ownership Plan (ESOP).In addition, we will seek appropriate market opportunities to further reduce the number of outstanding shares when we deem the timing is right. Thank you.
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