Meituan's earnings report is finally out! Are tech stocks still worth buying?

業績會第一現場

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美團2025Q4及全年業績直播

Key Takeaways (AI-Generated)

Financial Performance

- Q4 total revenue was RMB 92.1 billion, up 4.1% year-over-year

- Cost of revenue ratio increased by 11.6 percentage points to 33.8%

- Total segment operating loss narrowed sequentially to RMB 14.7 billion

- Cash and cash equivalents totaled RMB 166.8 billion as of December 31st

Business Highlights

- Platform GTV and transaction volume achieved double-digit growth with new user highs

- Fully upgraded Meituan membership program covering nearly all categories

- Launched AI assistants Xiaomi and Xiao Tuan integrating AI with consumption use cases

- Announced plan to acquire Ding Dong Grocery's domestic assets for US$717 million

Financial Guidance

- Expect more meaningful sequential improvement in food delivery per order loss in Q1

- Keeta expected to hit first profitable month in Saudi Arabia before end of 2026

- Overall loss in new initiatives segment in 2026 will not exceed 2025

- Keeta's 2026 loss remains significant due to new market entries

Opportunities

- Keeta expanding globally with operations in Hong Kong, Saudi Arabia, Qatar, Kuwait, UAE and Brazil

- AI transformation through Xiao Tuan assistant and Longmao model development

- Strategic partnerships with merchants on supply side innovations and omni-channel strategies

- Acquiring Ding Dong Grocery to enhance on-demand grocery retailing capabilities

Risks

- Unprecedented fierce competition with intensified subsidies in food delivery and in-store business

- State Council investigation into food delivery market competition starting in early January

- External risks affecting Middle East operations due to regional conflicts

Full Transcript (AI-Generated)

Operator

Standing by and welcome to the Meituan fourth quarter and full year 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 Tzu, VP and Head of Capital Markets. Please go ahead.

Scarlett Tzu

Thank you, operator. Good evening and good morning, everyone. Welcome to our fourth quarter and fiscal year 2025 earnings conference call. Joining us today are Mr. Xin Wang, Chairman and CEO, and Mr. Xiao Hui Chen, Senior Vice President and CFO of Meituan. For today's call, management will first provide a review of our fourth quarter and fiscal year 2025 results and then conduct a Q&A session.

Before we start, we would like to remind you that our presentation contains forward-looking statements which include a number of risks and uncertainties and may differ from actual results in the future. This presentation also contains unaudited non-IFRS 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 IFRS accounting standards. For a detailed discussion of risk factors and non-IFRS accounting standards measures, please refer to the disclosure documents in the IR section of our website. Now I will turn the call over to Mr. Xin Wang. Please go ahead, Xin.

Xin Wang

Thank you, Scarlett, and hello everyone. 2025 was a year of both opportunities and challenges for Meituan. Facing unprecedentedly intense competition, we stayed focused on serving our consumers, merchants, couriers and all ecosystem partners. We were committed to creating long term value in 2025. Our platform GTV and transaction volume both achieved double digit growth, and new transacting users and user transaction frequencies and AOV all reached a new high.

These key metrics reaffirmed our solid position as the preferred local service platform for Chinese consumers. In 2025, we fully upgraded our Meituan membership program. This was our first consumer loyalty program covering nearly all categories. It helped us drive cross selling and enhance core user stickiness. Meanwhile, leveraging our comprehensive advantages in local services, we launched our own AI assistant Xiaomi and Xiao Tuan. We brought AI technology into real consumption use cases.

Going forward, Meituan membership and AI will continue to be the key tools for us to deliver differentiated and enhanced local experience. No matter how the market environment evolves, we remain focused on strengthening our long term moats and promoting the healthy and sustainable development of the whole industry. We also actively pursued new growth opportunities. During 2025, we made a series of key progress.

First, we accelerated our deeper penetration into the supply side and built a comprehensive cost effective supply system spanning a full price range and diverse categories through supply side innovation. This allowed us to precisely meet users' comprehensive needs across food delivery, quick commerce and services retail. It also strengthened our positioning as a one stop local service platform. In food delivery, we focused on products, store formats and channels in collaboration with merchants.

Innovative formats such as branded satellite stores and Raccoon Kitchen have helped a large number of restaurant brands and small and medium sized merchants improve operational efficiency and expand business. Through Pin Hao Fan, Shen Qiang Shou and other formats, we worked with merchants and launched high quality value for money products across different price ranges, serving a broader consumer base. In quick commerce, we deepened our presence in local supply, becoming an important partner for many leading brands in their omni-channel strategies.

We continued to extend our reach in the supply chain. Our innovative supply formats including Meituan Instmart, Meituan San Dian Chang and branded flagship Instmart, as well as our self-operated Xiaoxiang supermarket micro fulfillment centre, have become important supply for quick commerce. We also achieved rapid growth as we worked closely with top liquor brands. In healthcare and pharmaceuticals, we continued to strengthen local supplies of common household medicines and medical devices, and supported the online launch of many innovative drugs.

We further expanded coverage of 24 hour pharmacies, online consultations and home testing services. Xiaoxiang Supermarket accelerated its city expansion in the fourth quarter. Over the past few years, Xiaoxiang Supermarket has built a strong supply chain, upgraded fresh produce quality and developed industry leading product capabilities. Our private label products now cover broader categories, contributing higher GTV shares.

In our in-store, hotel and travel business, we featured our high quality merchant recommendation list and expanded our service programs to more categories such as education, fitness, healthcare and elderly care. Based on our deep insights into consumption trends, we further enriched offerings in sports events, cultural and other ticketing, home services and more. In addition, we supported over 1 million independent artisans in digitizing their profiles on our platform, enhancing our unique service ecosystem and connectivity.

Second, we focused on enhancing our comprehensive service capabilities. Through product iteration and Meituan membership upgrades, we delivered a superior consumption experience for consumers. In fulfillment, we upgraded home time guaranteed to Su Bao and one-on-one express delivery into premium zones, significantly expanding their coverage in 2025. This provided consumers with more reliable and higher quality fulfillment protection and strengthened our competitive edge in fulfillment.

In quick commerce, we launched the industry's first full cycle service assurance program with millions of merchants and brands. It offers free return shipping for high tier Meituan members and selected brand products. It lifts industry service standards across experience, fulfillment, delivery and after sales support. In healthcare, we expanded online consultation with Grade 3A hospital doctors. We upgraded the verification and service protection for dental care and medical aesthetics and other services.

These efforts comprehensively improved the reliability of online healthcare services, and we deeply integrated these high quality services with our fully upgraded Meituan membership. We launched a series of exclusive benefits for our members covering various consumption scenarios such as food delivery, hotel booking, lifestyle services, mobility, healthcare and more. Richer member exclusive benefits and activities significantly improved consumer mind share and transaction frequency, allowing us to better serve our core user base.

As a result, a large number of mid tier members advanced to higher membership tiers. Our high value member base continued to grow steadily amid very intense competition. Their transaction frequency and spending rose notably. They also made purchases across a broader range of categories. Our continuously enhanced Meituan membership program delivered strong multi-dimensional support. It boosted traffic, operations and transaction growth. It also drives cross selling among different categories and different scenarios within our core local commerce business.

Overall, we have strengthened our leading position in user structure and consumer mindshare even in a very highly competitive market. Third, we stayed focused on cultivating a sustainable ecosystem, and we are taking very concrete actions to drive high frequency, high quality growth for the whole local services industry. We continued to empower small and medium sized merchants. For example, we increased financial support, promoted the Bright Kitchen program and used AI tools to improve merchant operational efficiency.

We aim to foster the healthy development of the food service industry and address structural challenges such as marketing involution and food safety governance. We also made progress in courier welfare. In 2025, we led the industry in providing pension insurance subsidy programs for all types of couriers across the country. Our occupational injury insurance program has now expanded to 17 provinces and cities, covering more than 16 million couriers. This protection is provided at no financial cost to the couriers.

Additionally, we continued to enhance the multi-tier welfare system for couriers across healthcare, education, housing and other areas. Fourth, in our overseas market, Keeta accelerated its global footprint and delivered good growth momentum in 2025. In Hong Kong, Keeta further solidified its leading position and achieved positive unit economics in the fourth quarter. In Saudi Arabia, Keeta's order volume kept growing throughout 2025, and it has become one of the top platforms for local consumers with higher quality services.

In the second half of 2025, we launched operations in Qatar, Kuwait, UAE and Brazil. All these new markets recorded strong growth momentum since business launch. Going forward, we expect Keeta to continue leveraging its strength in products, technology and operational know-how. We will work closely with merchants and couriers in all markets around the world, jointly driving the digital transformation of the industry and enabling consumers in more countries and regions to enjoy our high quality and efficient services.

Moreover, in 2025, we embraced the opportunity brought by AI. We are committed to driving the AI transformation of the physical world by integrating AI innovation with our proven service advantages in the physical world. Over the years, we have made significant investment in AI technology. We combined the strength of our in-house multi-modal Longmao model and a series of large language models. At the same time, we also used state-of-the-art third party models.

We also leveraged Meituan's unique digital assets, including extensive merchant information and high quality, diverse offerings and real consumption behavior and user reviews. We first tested Xiaomi, a smart life assistant as a standalone app. More importantly, we have rolled out Xiao Tuan, our AI assistant embedded in the Meituan app to all users. We have integrated AI technology with use cases on Meituan covering all categories in local services on our platform.

Xiao Tuan's AI features in the Meituan app will fundamentally change how consumers use our app. Searching will evolve into simply making requests in natural language, not just keywords. Then Xiao Tuan leverages Meituan's richest supply and strong fulfillment capabilities. Combined with our mature native interface in the Meituan app, it brings consumers a brand new, easy to use and superior experience. In 2025, we will continue to refine Xiao Tuan's user experience.

Our goal is to make Xiao Tuan the most consumer-centric AI agent for local services. Looking back on 2025, we faced a complex external environment and unprecedented fierce competition, but we remained committed to our mission to help people eat better, live better, and we worked hard to deliver real value for consumers, merchants, couriers and all ecosystem partners. Looking ahead, we believe our core local commerce still has strong growth potential and very strong business resilience.

We will continue to deepen our supply penetration into the supply side, enhance service quality, improve our Meituan membership program and invest in the ecosystem. We will further strengthen our position as the preferred local services platform for most consumers and drive the high quality development of the industry. Meanwhile, grocery retail and overseas markets are long term growth trends with clear strategy and potential. We'll actively explore these areas with investment discipline.

More importantly, as we enter the AI era, we'll firmly implement our retail plus technology strategy, utilizing AI to deeply empower the local services industry and deliver better experience for both consumers and merchants. With that, I will turn the call over to Xiaohui for an update on our latest financial results.

Xiaohui Chen

Thanks, Xin. Hello, everyone. Now let's begin with our fourth quarter financial results. Please note that all comparisons are on a year over year basis unless otherwise noted. In Q4, our total revenue was RMB 92.1 billion, up 4.1%. Cost of revenue ratio increased by 11.6 percentage points to 33.8%. This was primarily driven by three factors: more consumer incentives deducted from revenue, higher rider incentives to maintain leading service quality, and increased overseas operational costs.

Selling and marketing expenses ratio rose by 14.8 percentage points to 34.4%, largely due to our increased investment in promotion, advertising and user incentives to enhance our brand awareness and core user engagement. R&D expenses ratio increased to 7.6%, reflecting our increased investment in AI, while G&A expenses ratio saw a slight increase to 4%. Fourth quarter total segment operating loss and adjusted net loss narrowed sequentially to RMB 14.7 billion and RMB 15.1 billion respectively.

These sequential improvements reflect our focus on quality growth and execution efficiency amid intense competition. As of December 31st, 2025, we have cash and cash equivalents and short term treasury investments totaling RMB 166.8 billion. While operating cash flow was still negative, we achieved sequential improvement with operating cash outflow narrowing to RMB 6.6 billion. Now let's look at the segment results, starting with the local commerce segment.

This quarter, we continued to see healthy growth in both order volume and GTV. Our leadership in both food delivery and Meituan Instashopping stayed strong, while our market position in core local service categories remained stable. Our core user base continued to show healthy growth and higher engagement on our platform. These users aren't just transacting more often, they are exploring more services across our platform. During this quarter, their retention rate further improved in the fourth quarter compared with the third quarter.

Multiple consumption categories including medicine and health, leisure and entertainment, sports and fitness, pet services and most categories in Meituan Instashopping maintained double digit growth across both order volume and GTV. On the financial side, segment revenue was RMB 64.8 billion in Q4, down 1.1%. While food delivery industry-wide subsidies slightly moderated from Q3, they were still at historical high levels in Q4. We stayed focused on quality growth and further pulled back resources from low AOV and low quality orders.

This drove a sequential recovery in our food delivery average order value. Although our food delivery net AOV is still well above the industry average, intensified competition did lead to a significant year over year drop in food delivery AOV, which weighed on our commission revenue growth. The impact of consumer subsidies on delivery service revenue also continued. Our online marketing revenue maintained stable growth. We continued to see merchants across categories, from small and medium sized restaurants to offline retailers and other local service providers, treat Meituan as a key marketing channel.

Our advertiser base continued to expand steadily. On the cost and expenses side, we increased marketing spending and promotions to enhance brand positioning and price competitiveness while driving engagement among all users. We allocated more resources to enhance our membership program. We also provided more incentives for our riders to ensure delivery service quality and user experience, alongside continued investment in ecosystem development. Overall, local commerce segment operating loss was RMB 10 billion in Q4, with operating loss narrowing significantly from last quarter.

This improvement was largely driven by meaningful loss reduction from our food delivery business. Turning to our new initiatives segment, in Q4, revenue reached RMB 27.3 billion, up 18.9% year over year, primarily driven by the expansion of Keeta and grocery retail business. However, segment operating loss widened to RMB 4.6 billion, reflecting both seasonal headwinds in businesses like bike sharing as well as strategic investment in overseas expansion and grocery retailing.

During this quarter, we expanded Keeta into four new markets, which required meaningful upfront investment. However, we are encouraged that in established markets like Hong Kong and Saudi Arabia, unit economics are already showing healthy improvements driven by order density growth and operational efficiency. We are optimistic that Keeta in new markets will follow this positive trajectory. For grocery retail, it remains a key long term priority for Meituan.

Xiaoxiang Supermarket has made solid progress over the past few years with key metrics trending positively. In Q4, we accelerated its expansion into new cities and expanded warehouse network to capture growing online grocery demand. We also grew our physical presence with the launch of our first Xiaoxiang Supermarket offline store in Beijing and the opening of multiple new Happy Monkey stores. In addition, we recently announced our plan to acquire the domestic assets of Ding Dong Grocery, which we expect to further enhance Meituan's overall capability in on-demand grocery retailing.

We are confident that these strategic investments will solidify our competitive advantage and create long term value in the grocery sector. Looking ahead, we are still confident in the company's long term sustainable growth trajectory. We are firmly against industry involution and we believe competition will gradually be normalized. With regulatory guidance, we will focus more on driving greater efficiency and higher quality growth and continue to invest in technology, service quality and ecosystem development. With that, we are now open for Q&A. Thank you.

Operator

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 comes from Ronald Keung with Goldman Sachs. Please go ahead.

Ronald Keung

Thanks Xin, Xiaohui, Scarlett and team. I want to ask about the battle on AI as gateways or entry points as this new era has begun. How does the company think about this trend and the future development? On the risk side, will this lead to a loss of position as the main traffic gateway in the app era? What strategies or plans does management have to address the risk? Could you also share the latest progress on your AI agent and Longmao model? Thank you.

Xin Wang

Thank you, Ronald. In past earnings calls, I have made it clear that while AI is going to revolutionize everything, in this AI revolution, the only strategy that makes sense is to play offense instead of just defense. But that doesn't mean we are going to rush to try to become one of the token factories, not at all. We view AI as a strategic opportunity to improve and strengthen or even revolutionize our product offerings in local services. That's our core business.

First, AI takes big investment. Since early 2023, we have been investing a lot in both CapEx and AI talent to build our in-house model. Other than cloud companies, we probably made the largest investment in AI among all Chinese companies other than those cloud companies. While we have been doing this for more than three years, it hasn't obviously had an impact on our balance sheet and cash flow. We will remain committed to developing our in-house large language models from Longmao because we believe in order to better understand the physical world in a more precise way and based on our own massive proprietary data, we need to have the capability to build an in-house model.

At the same time, we are also working with third party models and we are striving to take the lead in upgrading our Meituan app into an AI-powered app in order to better fulfill the end-to-end needs of our consumers in local services and quick commerce. In our view, the battle for the so-called super gateway is fundamentally about the capability to accurately understand user needs and then efficiently execute the task. But here it is much more complicated than clever chatbots.

The local service industry features highly complex use cases and there's a massive amount of very fragmented information and a lot of real-time information from small or medium sized merchants. Those merchants are not fully digitized. A lot of the data on the merchant side and some on the consumer side has not been effectively digitized. In order to benefit from AI, it has to be first digitized. That's what we have been doing for many years. A lot of merchants run on our digital system, so we have unparalleled access to their data.

Moreover, local service platforms also need to be able to deeply involve in the management of fulfillment services. Otherwise it's just a clever chatbot. Here I don't think general AI can reliably manage and guarantee the real physical world service experience. Meituan has built up extensive physical world data including merchant POI data and dynamic and real-time merchant operation data and the most comprehensive and authentic user reviews for local services.

I believe our deep expertise in food delivery network, on-demand delivery network, and our business development operation, retail supply as well as our future drone and unmanned driverless vehicles and other embodied AI technology will give us significant advantages in connecting AI with the physical world. Our in-house model is catching up with those open source models and our agents are evolving rapidly. This will help us seamlessly integrate digital and physical world information.

To give you some examples, we have recently made our AI assistant Xiao Tuan available to all users within our Meituan app. Before that we released a standalone AI app called Xiaomi. But with Xiao Tuan, all existing hundreds of millions of Meituan app users will benefit from these new AI features. Xiao Tuan covers all local service categories on our platform. Users can express their needs in a more natural way. In the past, most people have gotten used to search through a few keywords.

But now with enhanced AI capability, Xiao Tuan can understand longer queries in natural language and Xiao Tuan can access all data within the Meituan app. I'll give you one example. It's very common for a user to use Meituan app to find restaurants. But sometimes you need to be able to better understand the use case. For example, I would like to ask Meituan: I'm in the office in Wangjing, that's the northeastern corner of Beijing. I have a friend who's working in Zhongguancun, that's on the west side of Beijing.

We plan to have lunch together. We only have two hours time. Could you help us find a restaurant with good spicy food in the middle? And it needs to have convenient parking space. I think that's a very natural real need. But in the past, with very limited keyword search, the user would not be able to ask these kinds of questions. Now with enhanced capability, it has become possible. It's a very real use case.

But in order to really answer that question, you need to understand mapping information, POI information or even traffic information. You also need to know more than just that there are restaurants. You also need to understand the offering of the restaurant or the real-time capacity of the restaurant, otherwise you will recommend a very popular restaurant, but the user will not be able to reserve a table or private room. That's not what users need.

To really fulfill this need, our system needs to have access to a lot of information in the physical world. AI is helping us to bring all that physical world data together and offer a much better user experience to our users. Leveraging Meituan's comprehensive and authentic merchant database, Xiao Tuan can now quite accurately answer specific questions about merchant location, business hours, store facilities and more. Xiao Tuan can also utilize our authentic user reviews and recommendations to deliver valuable insights.

With this enhanced reasoning capability, Xiao Tuan can fulfill more personalized queries and generate one-stop guides for dining, entertainment, travel and more. We are pleased to see that Xiao Tuan effectively addressed users' requests during Spring Festival, but that's just the beginning. It received positive feedback and further strengthened user engagement. In the future, the model will become better and we will continue to deepen the integration of Xiao Tuan features in the Meituan app.

We want to use new AI technology to make Meituan app the go-to destination for local services needs of all users. We'll enhance the AI search capability and execution capability. We strive to upgrade Meituan to make it a leading AI-powered app and the AI gateway for local services needs in the future. Thank you very much.

Operator

Thank you. Your next question comes from Yao Jiang with CITIC Securities. Please go ahead.

Yao Jiang

Thank you and good evening. Thank you for taking my question. Regarding the State Council's investigation into the food delivery market competition, which started in early January, has our business strategy changed? What changes are we seeing in the competitive environment recently? Looking ahead, how do we plan to sustain or expand our competitive advantages in the current regulatory environment? Can food delivery continue its loss narrowing trend from quarter 4 into quarter 1? That's my question. Thank you.

Xin Wang

Thank you, Yao Jiang. We believe the regulatory guidance is already quite clear. The authorities are firmly against the so-called involution and want to foster a healthy and orderly market. Subsidy-driven or price-driven competition in the food delivery sector is very typical irrational competition and is very typical involution. We take this issue very seriously and want to reiterate our position. We are firmly against involution.

We will actively work with regulatory investigations and meanwhile we are pulling back resources on low quality orders while striving to defend our market leadership. In 2026, no matter how the market environment evolves, our strategy for food delivery stays clear and consistent. First, we will stay focused on doing the right thing to enhance our core strengths: expanding high quality selections, ensuring fast and reliable deliveries, offering consistently affordable prices.

Second, like I said before, we will maintain our leadership while focusing our resources on driving quality growth and improving operational efficiency. Third, we will keep creating value for the whole industry. Beyond our ongoing work in supply side innovations, courier support and welfare improvement, food safety, we are also pushing product and service upgrades, innovation in AI and other technologies to drive efficiency and experience improvement across the industry.

Looking ahead, we believe competition will shift toward deepening user lifetime value, improving supply quality and varieties, and delivering a seamless end-to-end user experience. During recent months, even with continued intense competition and irrational subsidies, Meituan is still the top choice for high value consumers when it comes to food services because we deliver a better overall experience. We have held our competitive advantages in mid to high AOV orders with average order value consistently well above industry peers.

Driven by our focus on quality growth and improved order mix, we are on track to see more meaningful sequential improvement in our food delivery per order loss in Q1 versus Q4 last year. We believe a more regulated market can help shift competition from pure subsidy wars toward innovation, service experience and efficiency. These are areas in which we are better positioned. We will keep sharpening our core strengths through better operation, product innovation and iteration.

This will help us reinforce our structural advantages in mid to high AOV orders and high value users and efficient delivery network. We remain confident in the competitiveness and long term potential of our food delivery business. Thank you.

Operator

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

Kenneth Fong

Hi, good evening management. Thanks for taking my question. We noticed that competitors have substantially increased subsidies for in-store business since fourth quarter last year and subsidies are expected to remain high in 2026. Just want to see what's your view about the current competitive landscape in local services? Compared to the competition cycle back in 2022 to 23, how does Meituan's current strategy differ? Thank you.

Xin Wang

Thank you, Kenneth for the question. The short answer from the short term perspective to your question is that yes, we see competitors' recent ramp up in investment. This may negatively impact our short term profitability. That's something we are facing and we would like the market to understand. But I would spend more words on our long term strategy for this business. It's key to understand that the competitive landscape now is evolving quite a lot.

The whole in-store industry has seen significant changes in the last few years. On the competition side, industry participants now have quite differentiated focus on categories, merchants and consumption scenarios. Leading players are now focusing more on efficient operational strategy. For us, our priority has always been the sustainable long term development of the industry rather than short term tactical battles. We truly believe that in-store business still has high potential but still needs lots of investment and more innovation across the whole value chain.

No matter how the landscape shifts, providing efficient high quality service to consumers and merchants and driving robust offline consumption growth is the key to success. Over the last few years, we have seen that customer demand has evolved. They require more personalized experience and value for money dining and services. Demand for enhanced services such as online queuing, reservation and online ordering with offline pickup continues to grow.

On the supply side, offerings have continued to evolve in line with consumption trends, with new supply formats and service categories emerging. This ongoing momentum is also a key driving force for digital transformation. On the technology front, both consumers and merchants have growing expectations and demand for AI-powered products. Under these trends, Meituan has always been very alert and continues to bring our extensive experience and outstanding industry insights into continued innovation.

We have built and further enhanced differentiated advantages in areas such as category mix, merchant ecosystem and operational efficiency. For example, thanks to years of expertise and insights from Meituan and Dianping in the dining sector, we have noticed a shift in the business logic of fine dining. We proactively share these insights with our fine dining partners and help them stay ahead of the curve and quickly adapt to changing consumer demands.

We also continue to track industry trends and explore new supplies in areas such as self-service models, leisure and entertainment, sports, cultural and art activity ticketing, self-operating home services and more. Our platform's years of accumulated authentic user reviews and integrated one-stop online services including group buying, online ordering, pickup, reservations and queue management have become our unique competitive advantages.

Additionally, more than 1 million skilled artisans have become a unique supplier on our platform. On the technology side, our AI agent smart operator helps merchants optimize their digital service. Merchants are able to deliver personalized service by leveraging AI to recall and analyze consumer preferences and can also intelligently analyze consumer feedback for operational improvement. In addition, our AI agents such as digital employees streamline merchant operations across inventory, daily operations and consumer acquisition.

We will continue to enable merchants with their own AI assistance in 2026. We will further differentiate our service and allocate more resources with higher ROI. We will strengthen our position in core categories and minimize innovation and efficient investment in non-core areas. Looking ahead, we will remain committed to providing consumers with a seamless service loop that offers quick, precise decisions and one-stop experience.

We aim to develop a full life cycle merchant empowerment system that covers customer acquisition, conversion and retention. We will continue to foster sustainable industry growth through digital transformation. 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. Why did Meituan plan to acquire Ding Dong and what synergies are expected with Meituan's grocery retail business? How has Meituan's strategy for self-operated grocery retail evolved? Thank you.

Xiaohui Chen

Thank you, Thomas for the question on Ding Dong and on Meituan's grocery strategy. We recently announced the acquisition of Ding Dong's mainland China business for US$717 million. Please note that this transaction is still subject to regulatory approval. Obviously the most important reason is we have true confidence in China's grocery retail business both online and offline. Besides that, there are two key reasons for this acquisition particularly.

First, it will enhance Meituan's overall capability in on-demand grocery retailing, particularly strengthening our supply chain capability. It will also contribute to further operational efficiency improvement of our grocery retail business. Secondly, Ding Dong has established itself as a strong player in the East China area. With this acquisition, we will significantly improve our coverage and service quality in this region.

Grocery retail aligns closely with our company's mission and represents one of our long term strategic priorities. As market dynamics evolve, we have observed that self-operating suppliers like Xiaoxiang Supermarket are becoming increasingly important in the on-demand delivery ecosystem. Xiaoxiang Supermarket represents guaranteed high quality supply on our platform, offering users a more reliable shopping experience. Given the industry's growth potential, we see substantial opportunities ahead.

Last year, we restructured our grocery retail portfolio, shifting to a more efficient way to drive sustainable growth. In the past few years, Xiaoxiang Supermarket has maintained strong growth momentum while continuously improving operational efficiency. We expanded our private brand merchandising offerings, covered nighttime consumption scenarios and maintained industry leading fulfillment speed and experience. We believe Xiaoxiang Supermarket represents a model where Meituan can leverage its strengths with a clear path to profitability.

Moving forward, we plan to expand this model to more cities and regions, bringing faster, fresher and more affordable on-demand grocery retail to more consumers. Thank you.

Operator

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

Gary Yu

Hi, thank you for the opportunity to ask a question. My question is related to Keeta. Keeta has made some progress in both Hong Kong and Saudi Arabia, but given the regulatory and competitive constraints, the road ahead looks quite challenging. Could management share if there are any updates to the company's overseas strategy for 2026? How much do you plan to invest in Brazil this year? Do you expect Saudi Arabia to reach breakeven in 2026? Thank you.

Xin Wang

Thank you, Gary. Before addressing the specifics of our 2026 international strategy, I want to take this moment to express my deepest gratitude to Keeta's employees, merchants, couriers and all ecosystem partners in the Middle East. Thank you for your unwavering dedication to provide essential services to our users during this difficult time. We are doing everything we can to safeguard your safety and livelihood to overcome these challenges together.

Now back to Gary's question. First I want to emphasize that our core philosophy in China has always been to create value for the whole ecosystem and drive long term industry growth, not just involution. That has never been what we want to do and our international operations through Keeta will follow the same playbook. We want to grow alongside local players. We want to help accelerate the digital transformation of local services industry there and we want to serve and grow a bigger market together.

Ultimately, we want to create new value for users, merchants, couriers and other partners in these markets. In 2026, Keeta will mostly focus on our current markets because each market has different dynamics. We will stay flexible. We will tailor strategies locally while balancing growth and profitability at every market and at every stage. It's very important that compliance will remain a top priority. We have been working very actively with local regulators.

In the long run we are committed to our global operation with a strategic focus on on-demand delivery and quick commerce which can leverage our core strengths. For the markets that you mentioned, as I said in the last quarter, Keeta has achieved its first profitable month in Hong Kong in October 2025. Allow me to remind you that Keeta launched in Hong Kong in May 2023 and it broke even in October 2025. So it took us 29 months to get to profitability and this year we will focus on further improving our operations there.

For Saudi Arabia, that's a very favorable market for food delivery business. For profitability there, we expect Keeta to hit its first profitable month in Saudi Arabia much faster than in Hong Kong and definitely before the end of this year. Actually, I would say we are very close to that in the near future. We are already profitable in some cities and I think other cities are following very fast. Since we have recently cut subsidies significantly in Saudi Arabia, but our order volumes stayed resilient.

That means users are choosing Keeta for our better services, not for subsidies or lower prices. In 2026, we will further refine our operations in other Middle East markets and our orders are also growing fast. With our Saudi Arabia experience and regional brand recognition, I'm confident that we can improve our operational efficiency quickly in those new markets. However, our growth in these markets in 2026 remains subject to external risks, for example, the current regional conflicts.

Regarding Brazil, we see tremendous long term value there and we remain firmly committed to Keeta's long term growth in this market. For now our operations are focused on São Paulo, the largest city. Rather than a full nationwide rollout, we are prioritizing and refining our business model in São Paulo before we do broader expansion. Meanwhile, we will actively pursue business strategies to build differentiated advantages.

Overall, Keeta's loss in 2026 will remain significant because we entered a lot of new markets in the second half of 2025 and orders in these markets are still scaling up. However, this will be offset by efficiency improvements in our domestic new initiatives. As a result, we expect that the overall loss in our new initiatives segment in 2026 will not be bigger than 2025. Thank you.

Operator

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

Scarlett Tzu

OK, thank you all for joining the call. We look forward to speaking with you next quarter. Thank you.

Operator

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

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