Meituan reports its first loss in three years! Can its stock price withstand the pressure?

業績會第一現場

joined discussion · ·

美團2025Q3業績直播（即時傳譯）

Key Takeaways (AI-Generated)

Financial Performance

- Total revenue increased 2% year-over-year to RMB 95.5 billion in Q3 2025

- Cost of revenue ratio increased 12.9 percentage points to 73.6% due to competitive investments

- Total segment operating loss of RMB 15.3 billion and adjusted net loss of RMB 16 billion

- New initiative segment revenue grew 15.9% year-over-year to RMB 28 billion

Business Highlights

- Meituan app DAU jumped over 20% year-over-year in Q3 2025

- Food delivery DAU and MTU reached all-time highs with strengthened user advantages

- Keeta achieved profitability in Hong Kong in October 2025, 29 months after launch

- Launched AI models in LongCat Flash series for merchants and consumers

Financial Guidance

- Food delivery business will still incur substantial loss in Q4 despite Q3 peak losses

- Operating loss for Meituan Instant Shopping may slightly widen in Q4 versus Q3

- New initiative segment losses not expected to be bigger next year compared to 2025

- Long-term target of 100 million high-quality daily orders for food delivery unchanged

Opportunities

- Market expansion through Keeta's global coverage in Middle East and Brazil markets

- Product innovation with AI integration across merchant tools and consumer applications

- Strategic partnerships through branded flagship Insta Mart with leading retail brands

- Operational efficiency improvements in grocery retail and overseas operations

Risks

- Irrational competition in food delivery sector causing sector-wide profitability distortion

- Economic fluctuations impacting average order values and commission revenue growth

Full Transcript (AI-Generated)

Operator

Thank you for standing by and welcome to the Meet One Third Quarter 2025 Earnings Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Scarlett Zoo, VP and the Head of Capital Markets. Please go ahead.

Scarlett Zoo

Thank you, Theresa. Good evening and good morning, everyone. Welcome to our third quarter of 2025 earnings conference call. Joining us today are Mr. Xin Wang, Chairman and CEO and Mr. Xiao Britton, Senior Vice President and CFO of Midtown. For today's call, management will first provide a review of our third quarter of 2025 results and then conduct AQ and a session.

Before we start, we would like to remind you that our plantation contains forward-looking statements which include a number of risks and uncertainties and may differ from actual results in the future. This plantation 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 accounting standards measures, please refer to the disclosure documents in the IIS section of our website. Now I will turn the call over to Mr. Xinhua.

Xin Wang

Thank you, Scarlett. Hello everyone. In the third quarter, we actively responded to the shift in the competitive landscape of food delivery and become. Meantime Maintains remains the go to platform of local services for Chinese consumers. Over 800 million consumers use our services covering everything from food and dining, quick commerce to services retail and more specifically the Maituan apps. DAU jumped over 20% year over year in the third quarter.

On average, users transact with us at least once a week, and our top tier and high quality users engage with the platform every day. Across all local commerce businesses. We have stepped up product and service iteration to enhance user mention and strengthen our competitive advantages. Thanks to our fully upgraded Meta membership Meta Huiyuan, we have effectively boosted for selling activities and enhanced the core user stickiness. We are also the primary platform for merchants long term growth, empowering them with the technology and supply innovations and helping them in to integrate AI into their operation to improve efficiency.

First, let's talk about our food delivery business. Here, we continue to leverage our competitive strength to deliver industry leading operational efficiency and the superior consumer experience. Our sustained focus on service quality and the healthy development of the industry has enabled us to navigate quite dynamic market, strengthen our consumer mining and reinforce our leadership in the food delivery sector. Amid intense competition, we stepped up supply side innovation and service upgrades for our innovative supply models like 拼好饭 or 神枪手 or 品牌卫星店 as branded satellites.

And we further deepened our collaborations with the quality merchants. It allows us to offer consumers A wider range of high quality products across all price bands. And we also selected top tier restaurant merchants on dozen game ping based on real and authentic data and matched these quality offerings precisely with our high quality food delivery users. Additionally, we have rolled out premium services like 准时报 on time guarantee, 一对一级 one to one express delivery. These measures have strengthened our core competitiveness in fulfillment and elevated the delivery experience for consumers and solidified our advantage in user structures.

We remain as the Chinese consumers go to food delivery platform. In the third quarter, both DAU and MTU as monthly transacting user for food delivery hit an all time highs. We further expanded our advantage in user structures. In addition, we stepped up our efforts to address ecosystem issues and invested in the ecosystem development development. Specifically for couriers welfare, we expanded the Courier pension insurance subsidy program to nationwide published beginning in November and extended occupational injury insurance to 17 provinces cities.

We have also implemented A comprehensive Courier welfare scheme which include critical illness support, educational funds for Courier's children and skill development and academic academic advancement opportunities for couriers, as well as benefits such as work meals, health check UPS and travel subsidies. Moreover, we have built Courier's homes. Chisos JA rest stations across the country to provide our couriers with convenient facilities and services. Going forward, we will keep enhancing couriers welfare and protection and as consumers preferred e-commerce platform Meituan Insta Shopping continues to lead the industry's rapid growth and service upgrade.

In Q3, both new user growth and core user purchase frequency further increased. As we continue to diversify supply, the proportion of user buying across the multiple categories has been steady on the rise. This shows our everything now in Supermansion is getting even stronger new supply formats like a major instant March Sunday and some expanded rapidly bringing this high certainty lifestyle to more regions across China. We also teamed up with the leading brands in the legal apparel categories, which will reflect these top brands recognition of quick commerce's value and their trust in Maituan.

In October, we officially launched a branded flagship Insta Mart, Pimpai, Guangxis and Dentang, providing retail brand with full quick commerce infrastructure, warehousing, on demand delivery and the digital system. By leveraging our strength in user traffic ecosystem and online capabilities, we empowered brands to drive user growth, boost sales and connect more deeply with the younger consumers. Beyond that, we are committed to continuously upgrading our quick commerce services. After rolling out the industry's first full cycle service. Assurance program and Xinxiang Go we recently introduced.

To end authentic product verification Process for Chinese Rico and launched the industry's first alliance for high quality fresh cut food brand. Watch it at the industry leaders. We will keep setting benchmarks that focus on premium quality and top tier service. Overall, we have built the world's largest and most efficient intra city on demand delivery network delivering better in class fulfilment experience to consumers. Our platform has accumulated a large base of high quality users with a very strong purchasing power.

We also provide the merchants with industry leading services and to rate the most diverse supply. These valuable assets built up over more than a decade will fuel the long term growth of our food delivery business. They will also serve as a solid foundation for our efficient expansion in the broader Quickcommerce space. Now let's turn to our in store business. In the third quarter, both our margin base and user base reached new highs with a nearly 20% year over year increase and user transaction frequency continued to grow robustly.

We further derefined our product and content ecosystem. Our goal is to give every consumer simple, more reliable reference for purchase decisions. To date, our platform has accumulated over 20 billion authentic user consumer reviews with nearly 3.5 billion new reviews added in the past 12 months. Additionally, we are now using AI to fill out low quality reviews and those manipulative contents. This way, we can ensure A comprehensive authentic review ecosystem that provides a truly useful decision making support for consumers.

We also expanded the reach and influence of our high quality list including the Blackpool guide, Hidden Zhu Zhenan and our must eat list, Bizhba. Currently, these two lists cover 34 and 144 cities respectively. Moving forward, we will expand to more regions and welcome more quality restaurant to join our list. Beyond that, we have iterated products like pick up, pick Up Now, now Tea, smart ordering and one Click payments, extending coverage to more merchants and making consumers more diverse and personalized needs.

Moreover, we further promoted our Safe Learning program and Xinxian in the broader education space and expanded our Safe series and Xinxian to more categories such as fitness. We offer flexible redemption options which has significantly boosted consumer trust in prepaid services for self-service format such as an arm and chess and cars, playing classrooms and self-service KTV. We upgraded our booking system to deliver a smoother hassle free experience for consumers from reservation all the way into service fulfillment in healthcare pharmaceuticals.

We expanded our video and phone consultation services to include more doctors from Grade 3A hospitals. Sanjay Yuan and offering we offered 24 by 7 instant consultations. Plus 30 minutes prescription drug delivery. We improved in store verification service for dental care and medical aesthetics and standardized supply chain management to build end to end consumer trust. During the third quarter, we launched the 2025 Polaris Medical Aesthetic Guide, Meiji Xing Emabang, which set industry standards and raises the bar for services quality.

These are just a few examples. Going forward, we will continue to leverage our deep industrial and consumer insights to turn more offline services transactions into trusted online transactions for consumers. And now let's turn to our new initiative segment. And this segment delivered another solid performance in the third quarter. Our grocery retail businesses, especially for Xiao Xiang Supermarkets and Kuai Lui, sustained strong growth momentum. We not only solidified our market position, but also achieved improvement in operational efficiency.

And additionally, Kita accelerated its global coverage. After launching in Qatar in August, we entered Kuwait and the UAE in September, deepening our presence in these key Middle Eastern markets. In October, Kita also kicked off pilot operation in Brazil. Going forward, we will continue to leverage our strength in product, technology and operation No house to deliver superior consumer and delivery experience for consumers in more parts of the world.

After six months of iterating our and promoting major membership, we have achieved good progress. We added new member benefits and exclusive offers across multiple local service categories. This has notably strengthened our user mindshare and boosted member transaction frequency. Specifically, a large number of our mid tier users have upgraded their membership tiers and the number of high value members kept growing steadily even in the recent very fierce competitive environment. It's a clear sign of our unique edge in serving high value users.

What's more, our enhanced major membership program is driving growth across businesses in key areas. It supports user acquisition and traffic, operation and transaction growth and marketing, while also effectively fueling process selling among various businesses and consumption scenarios. Moving forward, we will leverage our competitive advantages and broad coverage in local services, continue to refine the membership program and increase user engagement and transaction frequency.

During the third quarter, we continue to invest in AI and achieved multiple milestones. For example, we launched several models in our lawn CAD flash series or delivering leading performance. Then we rolled out a range of AI decision making and application tools tailored specifically for restaurant merchants. Then we also launched Xiaomi app, a smart life assistant for consumers and currently is in large scale testing. Going forward, we will make our AI tools more industry focused and services oriented.

We will provide effective solutions for merchants across all operational decision making scenarios and make consumers decision making process and consumption experience more intelligent, more convenient, and more personalized. Founded in 2010, Meituan has witnessed and LED the digital transformation for Chinas local service industry. Since 2010, we have built the online purchase offline consumption user mentioned in local services across through group purchase model.

And back in 2013, we stepped into the food delivery space and our intra city on demand degree network that made food delivery services more accessible than ever, turning it into a key food consumption habit for Chinese consumers. And as leading industrial and as the industry competition keeps evolving, we are confident in maintaining our leading position by continuing to strengthen our core competitiveness. Guided by our retail Plus Technology Strategy, we will continue to refine our products and services to better meet consumers very diverse local services need while empowering merchants through technology innovation and AI application all together to drive the sustainable and healthy development of the whole industry.

So we are as ever committed to helping people eat better, live better. And with that, I will turn the call.

Xiao Britton

Thank you, Shin. Hello, everyone. I will now go through our third quarter financial results. During this quarter, our total revenue increased by 2% year over year to RMB 95.5 billion. Cost of revenue ratio increased 12.9 percentage points year over year to 73.6%. This was primarily driven by, first, higher incentives for our quarries to maintain industry leading delivery service quality and experience. Second, the increased cost in our oversea operations. These factors were partially offset by the improved gross margin of our grocery retail business.

Selling and marketing expenses ratio increased 16.7 percentage points year over year to 35.9% driven by our increased investments in promotion, advertising and user incentives to enhance our brand awareness, user acquisition and core user engagement. R&D expenses ratio slightly increased to 7.3% as a result of our increased investment in AI, while G and A expenses ratio maintaining stable year over year at 3.1% this quarter.

Irrational competition within the on demand delivery industry significantly distorted sector wide profitability. Our deliberate strategy investments to sustain leadership and competitiveness resulted in the total segment operating loss of RMB 15.3 billion and an adjusted net loss of RMB 16 billion. However, we maintain uncompromised service standards while continuing to drive initiatives that forced the industry's sustainable development. As of September 30th, 2025, we held cash and cash equivalents and short term treasury investments totaling RMB 141.3 billion.

However, cash generated from operating activities turned to negative RMB 22.1 billion, primarily due to our investments in response to the intensified competition. Now turning first to our core local Commerce segment. Revenue declined year over year this quarter primarily driven by two factors. First, intensified competition caused a significant job in food delivery average order value, weakening Commission revenue growth. Second, delivery service revenue saw negative growth due to substantially higher incentives deducted from delivery service revenue.

Despite these headwinds, we strategically increase investment across our ecosystem to reinforce market leadership and drive sustainable growth for consumers. We strengthen marketing efforts to enhance brand positioning and price competitiveness while boosting user engagement for queries. We expanded incentives to guarantee deliver service quality and experience. Besides, supporting merchant partners remains a priority for us having empowered. Over 360,000 restaurant merchants nationwide, we recently commit an additional RMB 2 billion in merchant support funds.

We hope to enable more restaurant partners to achieve efficient and sustainable operations. While these investments waived on the segment profitability this quarter, they solidified our leadership in both food delivery and made to an instant shopping. Our market position in core in stock categories also remained stable throughout this. We sustain our role as consumers go to platform for local services, both order volume and GTV for core. Local commerce maintained healthy growth this quarter.

Notably, on demand delivery saw accelerating order growth. Core user base grew steadily year over year with more low to medium frequency users moving up to high frequency. These users are transitioning more often, staying more engaged and exploring more consumption scenarios. I mean the recent demand boost from the intensified industry competition, we secure the highest quality incremental orders. Moving forward, we will keep focusing on consumption frequency and engagement of core users through better supply and fulfillment capabilities.

And store business also sustained its strong growth momentum with continued outperforms in lower tier markets. Turning to our new initiative segment. During this quarter, segment revenue grew by 15.9% year over year to RMB 28 billion. This quarter. Despite the impact of the strategic transformation of May 20 Select, our revenue remains solid growth driven by the expansion of our grocery retail business and overseas business.

The segment's operating loss and operating loss ratio both narrowed on quarter over quarter basis to RMB 1.3 billion and 4.6% respectively. Thanks to our efforts in improving operating and marketing efficiency in our grocery retail business and other new initiatives. The year over year increase in the operating loss was mainly due to our increased investment in oversea business. As we look ahead, we remain confident in our ability to navigate a dynamic and competitive environment.

We are making deliberate investments in technology, service quality and our ecosystem. These investments will strengthen our competitive position and unlock new growth opportunity for the industry over time. We have full confidence in our ability to deliver healthy, high quality growth over the long run when competition normalize. With that, we are now open for Q&A.

Operator

Thank you. If you wish to ask a question, please press *1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press *2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question that comes from Ronald Young from Goldman Sachs. Please go ahead.

Ronald Young

Thank you English always, Scarlett and Wind. So I want to ask, can can management comment on any notable changes in the competitive landscape of the food delivery sector, particularly as we head into the fourth quarter? Have we seen any industry subsidies that is starting to scale back and we've noticed your competition has stepped up investments in membership programs like 88 VIPs and these membership programs. So how how's the engagement every trending for your core customers?

And sorry for a long question, but from from a financial standpoint, I want to also ask how should we expect fourth quarter performance for the food delivery and has there been any change in the long term outlook for growth and profitability of the business? Thank you.

Xin Wang

Well, thank you for your questions. Before I get into the question, let me restate where we have said very clearly over the last two quarters. First, I think the food delivery price war is an example of Evolution Nation. Hello. Low price and low quality and essentially a race to the bottom and we are firmly against it and the last six months have proved one thing and it doesn't create any real value for the industry and it cannot be sustainable.

And 2nd, we are doubling down on curious rice and protections and on supporting for small and mid sized merchants. That's the only way to keep the industry healthy in the long run. And the third, we will focus on doing the right things that's serving consumers, merchants and great as well. And we are fully confident in defending our leadership in on demand delivery and creating real long term value in October and November.

And in the industry and subsidy level temporarily went down versus the summer peak season and especially after the double 11 promotion. And we are still closely monitoring the market dynamics and we'll adjust our strategy accordingly. And recently, we have seen a rebound in our market share in order volume. We maintained A consistent leading position in GTB market share for mid to high AOB orders, for example, I think it's very important to focus on higher AOB sector.

Our GTB market share for orders with a net AOB above 15 RMB is more than 2/3. Well, our GTV market share for orders with a net AOB about 30 RMB is about 70%. I think those are more valuable sectors we want to focus on. And our net AOB per order remained much higher, higher than other platforms. And our core users continue to show high retention rate with their consumption frequency stickiness still growing steadily.

And I think this clearly reflects the strong user mindshare we have built in the food delivery sectors and as well as our competitive edge in serving our core users. It's common for consumers to have a multiple local service app installed on their phone. However, Maitland remains the go to platform of full services for hundreds of millions of consumers and this is especially true among our core users. Their consumption frequency has been several times higher than that of the average consumers.

Even in such a highly competitive market, they show strong brand recognition and deeper consumer royalty. This is because high frequency or higher AOB consumers value the delivery experience and the supply, quality and service reliability far more than just lower price. Our faster and more reliable delivery provides greater certainty, particularly during extreme weathers and holiday periods. Our diverse and value for money offerings across all price ranges allow us to precisely match consumers needs.

Through our May Time membership program, we offer more attractive deals and exclusive service upgrades to our core users and we are confident in our ability to deliver higher quality and more comprehensive services to our core users. This will help us further strengthen their stickiness and engagement in the long run. In addition, the investment by industry peers in the premium user segment will expand the overall addressable market, benefiting us as well. We will leverage our strength in service quality and breadth to further strengthen our position among a broader base of premium users in terms of financial datas.

And although I believe food delivery losses has peaked in Q3 and our food delivery business will still incur substantial loss in Q4. We will make a necessary investment to maintain our leadership, but we are not interested in. Engaging price war, so we would adjust our investment dynamically based on the competitive landscape. We will continue to strengthen our advantage in service experience and operational efficiency in the medium to long term.

The competitive landscape will remain dynamic how the business or industry revolution or typically follows a clear trajectory if from capital driven to efficiency driven and ultimately to innovation driven. China's food service has now entered a stage where supplies at the innovation and service upgrade and technological solutions are critical for sustainable growth and traffic gain and and scale expansion purely driven by very aggressive subsidy will not be sustainable.

And we believe the current irrational competition in food delivery will will inevitably transit to a more rational and mature phase. Ultimately, the platform with deeper industrial insights and proven operational excellence and the ability to sustain high quality growth will be the the industry leader. Therefore, as I mentioned last quarter, Meitan will stay focused on doing the right things to expand the high quality selections to ensure a fast and reliable delivery and offer consistently affordable prices.

We will defend our market position while continuing to create greater value for the whole industry. Food delivery has become a high certainty lifestyle for more and more consumers with a clear long term growth prospect. Our long term target of reaching 100 million high quality daily order remains unchanged. We remain confident in maintaining industrial leading unit economics with proven operational efficiency advantages. Long term, even with higher in a dynamic market, we expect full delivery profit to return to a reasonable level. Thank you.

Operator

Thank you. Your next question comes from Gary Yu from Morgan Stanley. Please go ahead.

Gary Yu

Hi, thank you for the opportunity. I have a question regarding instant shopping. The other e-commerce platforms are doubling down on quick commerce and bringing more traditional e-commerce brands to this space. How does management field our competitive ads? And after our own Double 11 event, could you share it? Maybe one instant shopping strategy going forward, Will you scaled up investment in the fourth quarter? Thank you.

Xin Wang

Thank you, Gary for your question. First of all, I would like to highlight that we have a particularly strong competitive advantage in our Quickcommerce native supply that is even stronger than that of our food delivery business in which we are already a leader. From our perspective, Quickcommerce operates on a fundamentally different logic than traditional e-commerce as well as half day delivery or next day delivery. Quick commerce means no stockpiling, you get what you see right way platform needs to identify real consumer needs and get the right supply imply in place.

Leveraging years of outstanding of the market demand and merchants pay points, we have digitized offline supply and deployed our extra Mars to better address the Quickcommerce demand. Simply shifting traditional e-commerce supply to the quick commerce channels creates no incremental value for either merchants or consumers. To better serve the lifestyle shaped by quick commerce, we are also driving industry wide upgrades in infrastructure and service experience.

For example, we expended 20 + 7 Meituan Insta mods and pharmacies roll out chilling facility for alcohol and beverages and introduce quality guarantee services for fruit cart such as Bright Kitchen, Ming Chu, Liangzhou and Damage guarantee. Why B pay? More importantly, our food delivery business has already cultivated a group of users who highly rely on 30 minute certainty. Our platform is the best fit for quick commerce. We deliver the highest conversion rates and incremental sales for merchants.

As such, we managed to solidify my share among our core user group and defend our leadership across categories despite intensified competition. Under the new competitive landscape, we are deepening Omni share no partnerships with brands beyond physical stores and Meituan Insta Mart. We also launched branded flagship Insta Mart. 品牌，关旗闪电仓 Which operates 24 + 7 operations for 30 minute delivery of diversified and quality brand products through the native quick commerce channel.

We provide brands with full quick coms, infrastructure, warehousing, delivery and digital systems. Hundreds of brands have already joined during Double 11. We also stepped up user education for this initiative. On the first day of the Double 11 event, Fungus brands saw three 100% sales growth in their branded flagship in Smart. We hope to help brands move beyond the evolution in traditional e-commerce and tap into new growth opportunities in quick commerce.

Our branded flagship Insta Mart enables lower operating cost, faster turnover, stronger brand awareness and the more sustainable repurchase for brands. We are also enhancing our brand service tools. For instance, we offer Smart distribution tool and AI power decision hub for our FMCG partners. We will keep working to remain the go to platform for brands to unlock growth in quick commerce. In Q4. We will keep investing in supply side operations while ensuring best in class user experience.

We also step up our investment in user education around Double 11 and other campaigns. Operating loss for maintenance and shopping in Q4 may slightly widen versus Q3. That said, our competitive modes across supply, user base and fulfillment will allow us to sustain leadership with higher subsidy and operational efficiency. We are confident in restoring profitability and achieving a reasonable and sustainable margin in the mid to long term. Thank you.

Operator

Thank you. Your next question comes from Kenneth Song with UBS. Please go ahead.

Kenneth Song

Hi, good evening management. Thanks for taking my question. Recently a map has introduced a three star initiative. Taobao also launched a goodbye deals. So how do management do the impact for this move on the competitive landscape to our install business? And under this new competitive environment, what specific measure will the company to address these challenges? Thank you.

Xin Wang

Thank you, Kenneth for the question about our in stop business. Our in stop business model and operational strategy differ from roles of competitors across category mix, merchant scale and type and marketing of ROI. By building authentic, accurate and easily accessible POI data over time, we have established A dominant consumer mindshare as the go to platform for local services. Consumers complete most of their local service transactions on our platform.

On the other hand, M app has a very clear consumer image as a navigation tool. It's a navigation tool that make it difficult to cultivate consumer mindset for searching for local services. We have built a comprehensive user review ecosystem based on our operation in the past decade, accumulating over 25 billion authenticated reviews. This constitute one of the key reasons why consumers trust and consistently choose Mate One is their go to platform for local services.

We also have the broadest category coverage and selections in the local service space. We offer consumers one stop service and seamless experience including table reservation, diverse group ideals, coupons and store ordering, payment and membership benefits. Moreover, we maintain industry leading merchant coverage leveraging our experience, offline business developed team and deep industry insights. We believe best in class service to merchants. These are all the core competence that we believe other people cannot be quickly replicate.

In response to the evolving and dynamic competition, we continually iterate our product and operational capabilities to provide more diversified and personalized services to. Quality merchants and Consumers. First, we continue to captivate an ecosystem conductive to quality merchants by expanding the coverage of our must eat list must visit list Black Pale Guide and by introducing more specialized leads, we are able to provide merchants with more targeted tragic, tragic traffic promotion and better transaction conversion.

2nd, we have also refined our rating criteria to encourage merchants to focus on product and service quality rather than just a number of consumer reviews. We utilize big data to intelligently identify and help merchants automatically block abnormal reviews, significantly optimizing both merchant and user experience. We believe with the AI technology further penetrate into our business, we are be able to further improve the system.

Additionally, we roll out more consumer friendly products such as VR Merchant tool for reservation, pre-order while curing and Smart in store ordering. This digital solution further enhance consumer experience and improve merchant operational efficiency. The above are just a few examples. In the future, we will continue to focus on three key directions, econsistence optimization, service innovation and operation upgrade. We will drive to provide consumers with a seamless merchants for life cycle empowerment across customer acquisition, conversion and retention.

We will continue to focus sustainable industry growth through digital transformation. Competition may temporarily impact margins for our in store business, but we expect long term competitive landscape for in store business remain unchanged. With full confidence, we believe we can maintain our leading market position and continue to lead the evolution of the industry ecosystem. Thank you.

Operator

Thank you. Your next question comes from Thomas Chong with Jefferies. Please go ahead.

Thomas Chong

Hi, good evening. Thanks management for taking my question. Company has rolled out AI agent Saumay for testing. What's the current progress and future plan for Saumay? Additionally, we'll make one app integrate in app AI agents directly in the future. Could management share more about our future plans and investment strategy in AI? Thank you.

Xin Wang

Thank you, Thomas. In this quarter, we continue to iterate our capability across 3 core dimensions. The 1st is training our in house LLM and the second is AI in products and the third is AI at work. So we have rolled out multiple open source long cat flash series model. So we we trained that long cat and large damage model in house. So these models continue to get quite favorable feedback from the broad developer communities.

So I think that's the beauty of open source model and now I am deeply integrated with our core application use cases. He drives effective innovation based on our real world needs to support our long term strategic growth and the online to offline convergence for AI applications. We have upgraded a bunch of AI tools for local services and offering smarter, more tailored services to our merchants.

And for example, our kangaroo advisors Daisu Tamil can help register merchants with product selections and location planning. And another application, our smart smart operator Zhenan Zhangui integrates multifunctional capabilities such as an AI reception, AI operational analysis and AI review responses, enabling intelligent and efficient store operations for merchants. And we also launched our smart app assistant Xiaomi app for users, which now in quite a large scale testing period, we also introduced our AI agent Wen Xiao Tuan in our. Matre app,

So that answers your question. We are testing both an stand alone AI agent app, but at the same time we are going to integrate AI agent function in our main Matre app. And these two agents now cover various aspects of local services, including dining, accommodation and transportation, travel, entertainment and shopping. And they can complete the process from searching to a price comparison and to order placement and which can provide the users with more intelligent and more personalized service.

And we'll also continue to develop tools like AI coding and we have an an app, an application that no code to help employees and improve their work efficiency. And looking further forward, we will further enhance our competitiveness in our in house foundational model and explore more AI agent applications in local services. We will also iterate our AI agent strategy based on operational insights and user feedback and driving deeper AI enabled empowerment in our ecosystem. Thank you.

Operator

Thank you. Your next question comes from Yao Jiang from Citix. Please go ahead.

Yao Jiang

Hey, thank you for taking my question. And my question is about the new initiative and related businesses and for your people in Hong Kong, it is on track to reach and additionally for the Middle East following our Q3 expansion into several new countries, how is performance? In this market and also with recent reports about Peter. In Brazil, even when there are strong existing players like ice food and DD, which will change the difference in Brazil play, both to take share there and mostly given the particularly intact competition with the nationality, what strategic right now supports.

Expansion at this monster and how this is aligned with our. And capital allocation, but more and how should we project? Losses for new initiative segment next year. Lots of questions. Thanks.

Xin Wang

Thank you, Zhangyang. Thank you for your interest in our new initiatives regarding Kita in Hong Kong. I have a very good news to Shen in this October and Kita in Hong Kong has an profitable. So I think that's a major milestone for us. Remember that we launched a Kita in May 2023 and it become profitable in October 2025. So it took us 29 months to get to that milestone. So it's actually ahead of our original three years plan.

So I think that proves. And what really works in this industry is a customer centric. Approach and it improves our deep operational know how and strong technology capability can bring to better unit economics in and we are going to keep improving on that basis. It will bring more meaningful quarter over quarter improvement. So and also we expect to for the the similar parts in other markets, for example in Saudi Arabia and other GCC markets.

Regarding the GCC region building on our foundation in Saudi Arabia, we launched in several additional market in GCC for example, right now they are still in very early stage. It's important to point out, we launched in Qatar in August and launched in Kuwait and UAE in September. Yeah, again, still in very early stage. So I think it's premature to share more details, but given the common market structure, user behaviour across the Gulf region and I think it's reasonable to believe it remains one of the most attractive markets for food.

And also compared to Saudi Arabia and consumers in some other to city countries. And not only have more matured food habits, penetration there is already higher, but they also benefit from more diverse, more richer restaurant supply. So that's suggest there's a lot of untapped penetration potential in this market. And regarding our latest market, Brazil have already issued some sort. In previous and learning earning course then.

Brazil ranks among the top five foot foot delivery markets internal GMB globally and it's just still growing at over 20% annually. But when we do the when we did the market research in Brazil, we noticed that the transaction fulfilled through more traditional channels such as through WhatsApp or very old way phone calls or web sites and they are still a very big portion maybe even exceeding the online food delivery platforms.

This indicates immense potential for online penetration over the next few years and I think it provides an opportunity for Qatar to enter this market in spite of already they are already some incumbents. So in the past, our food re operation in China have established. The world's most efficient pack platforms. Green algorithms and the whole tax system so. That can that system can support an over 150 million. Peak daily orders for very organized and very fast on demand delivery and

furthermore Kita's early success growth in Hong Kong and Saudi Arabia over the past two years that further proved our capability to localize our operation for different market. So I think we are confident in bringing better experience for the service to those market because I believe in this industry it it's always important to go back to the basics because there are different stakeholders in the industry.

What do consumers want? Maybe they have different preference for different cuisines, but I think in any markets, the consumers always want a big selection, a good selection and they want affordable prices and they want to have reliable and faster deliveries. I think that's the common need across different markets, no matter it's in China, mainland China or Hong Kong or Saudi Arabia or other GCC countries or Brazil or in other markets. That's what consumers want and for merchants and they won't, they won't have more businesses and they want to have a reasonable Commission rate and they want to have a good delivery experience.

And also we need to think about what regulators want or the general society won't. So there I think they are interested in more job creation. Regulators want to see happy consumers, want to see happy merchants. They want to see more job creation and want to see more talent development. I think we are going to do all that in those markets where we do business. And regarding capital allocation, we should emphasize that QITA is part of our new initiatives, our other new initiatives.

New initiatives and also includes grocery retail. Which is another long term strategy for for us and we scaled back the main time select in by the end of Q2. But we will can expand our Shaoxiang supermarket and that's doing very well. And we will try at the offline retail format like a happy monkey, quite a home in 2026 to further improve our supply quality in growth way.

So Kita and. Grocery retail, I think these two represent a high conviction long term opportunity for us given this proven model and our transferable expertise from China's to some other markets. But near term, our expansion into GCC markets and Brazil requires substantial providing investment in Q4. But and given our early success in of course Qatar in Hong Kong, I think we are confident we can see quite a good trajectory in those market including Saudi Arabia.

And in other just as the market there, we already see a rapid improving unit economics and I think those markets are big enough to have multiple players. Yeah. Overall, we expect Kita in GCC countries and Brazil to follow a similar unit economic improvement trajectory as we have as we have seen in Hong Kong. And overall, we don't expect to see a bigger loss in for new initiative segment in next year compared to 2035. Thank you.

Operator

Thank you. There are no further questions at this time. I'll now hand back to Scarlett Zhu for closing remarks.

Scarlett Zhu

OK, thank you for joining our call. We look forward to speaking with everyone next quarter. Thank you so much for the support. Thank you.

Operator

That does conclude our conference for today. Thank you for participating. You may now disconnect.

Details at MEITUAN-W IR

Tips: The content presented above were generated by AI language model with publicly available information and auto-generated subtitles from third-party. The above material does not represent the position of Futu and shall not constitute any investment advice. Futu makes no express or implied warranties or representations regarding the accuracy, timeliness, or completeness of the information shown in the above content.

101

503K Views