By Megan Cheah

Chinese food-delivery giant Meituan's profit cratered in the second quarter as intense competition snapped a long run of growth, underlining concerns about its ability to defend market share.

Net profit plunged 97% from a year earlier to 365.3 million yuan, equivalent to $51.1 million, the Beijing-based company said Wednesday. Revenue climbed 12% to 91.84 billion yuan.

Both figures fell short of expectations. Analysts had forecast profit of 7.07 billion yuan on revenue of about 93.6 billion yuan, according to an LSEG-compiled estimate.

Meituan, a longtime leader in China's food-delivery industry, has been under increasing pressure from rivals such as Alibaba Group and e-commerce platform JD.com. The downbeat results put a halt to the shopping-and-delivery platform's strong earnings since it became profitable about three years ago.

The company said "irrational competition" in the food-delivery sector caused operating profit for its core local commerce segment to slide 76% even as revenue rose during the quarter. Still, it said it solidified its position in the on-demand delivery space.

The food-delivery war is a battle that Meituan can't afford to lose, Third Bridge analyst Jamie Chen said, quoting experts. That is because its rivals see food delivery as less of a core business and more of an entry point to transform their platforms, Chen said.

Delivery companies in China have been aggressively offering discounts to attract customers, a move seen as necessary to claim market share, but which is eating into profits.

JD.com's profit slumped 51% in the latest quarter, partly due to its costly push into food delivery. Alibaba is set to report earnings on Friday.

Chinese regulators have since cracked down on the price wars, and the three companies have vowed to scale back discounting. Despite the pledges, the food-delivery competition appears to be moderating slowly and could keep hurting future results, analysts say.

Looking for new sources of growth outside its home turf, Meituan has continued its expansion overseas. Its Keeta food-delivery brand made its debut in Qatar earlier this month, which could open the door for Meituan to enter new Arab countries soon, analysts at Citi said.

It also plans to invest $1 billion to launch Keeta in Brazil, where it could go up against another Chinese company--DiDi Global, which owns the platform 99Food.

But the efforts are coming at a cost.

Meituan said Wednesday that the overseas push widened the operating loss at its new initiatives segment in the second quarter, although revenue increased by 23%.

The operating loss in the new initiatives division wasn't as bad as expected, according to Citi analysts. However, it wasn't enough to offset the worse-than-expected decline in operating profit for the core local commerce segment, they said.

Meituan is likely to forge ahead with expansion plans even as it wages a food-delivery price war at home, the analysts wrote.

Meituan shares ended 3.1% lower in Hong Kong ahead of the earnings release, bringing year-to-date losses to more than 20%. That compared with the Hang Seng Index's gain of around 26% over the same period.

Write to Megan Cheah at megan.cheah@wsj.com

(END) Dow Jones Newswires

August 27, 2025 07:09 ET (11:09 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.