The Chinese delivery giant outperformed forecasts after making headway in quick commerce.

Earnings season is winding down, closing on a high note with Meituan surpassing revenue and profit expectations for the third quarter.

The company reported a 22% year-on-year (YoY) revenue increase to RMB 93.6 billion (USD 13.1 billion) and a 124% YoY jump in adjusted net profit to RMB 12.83 billion (USD 1.8 billion). Meituan’s local commerce segment, its most critical business, recorded a 44.4% YoY rise in operating profit, reaching RMB 14.6 billion (USD 2 billion).

This quarter coincided with Meituan’s annual promotion season and internal restructuring efforts aimed at streamlining its local commerce operations. A key change was the consolidation of fragmented travel and hospitality services into a new hotel and travel division, now led by Li Jinhui, formerly head of Meituan’s pharmacy unit. Li Xiaohui now oversees the healthcare division, and both report directly to Wang Puzhong. Tao Xuexuan, who was named head of the platform product department earlier this year, was also promoted to vice president.

Meituan’s core food delivery and in-store dining services maintained steady growth. The company prioritized order volume over gross merchandise value (GMV) in its food delivery strategy, using competitive pricing to increase user engagement. Initiatives such as Pinhaofan and Shenqiangshou exemplify this approach. In the third quarter, food delivery orders grew approximately 12% YoY, aligning with second-quarter performance, while average order value declines began to stabilize.

In-store dining and travel showed marked improvements. The earnings report highlighted a more than 50% YoY surge in orders, with annual transaction users and active merchants hitting record levels. Meituan’s membership system likely bolstered these results by fostering user loyalty and synergy across services.

Advertising and commission revenue, however, revealed an interesting contrast. During heightened competition with Douyin, advertising revenue growth lagged behind commissions, but as competition eased earlier this year, advertising revenue began to outpace commissions. In Q3, commission revenue rose 24.3% YoY, while advertising revenue increased by 18.1%. While this divergence may be tied to broader market conditions and advertiser budget tightening, analysts like Goldman Sachs have noted strong performance in in-store dining and travel orders in Q4, reducing immediate concerns.

China’s e-commerce sector faces fierce competition as retail traffic fragments between online and offline channels. In this shifting landscape, Meituan’s challenges seem relatively contained compared to its peers. Notably, Meituan Youxuan, once seen as a key driver for adding 300–400 million users, is being deprioritized. Instead, Meituan Shangou, its quick commerce business, has emerged as a new growth engine.

During the Q3 earnings call, CFO Chen Shaohui highlighted Shangou’s robust expansion. The quick commerce business reported double-digit growth in both user numbers and transaction frequency. Shangou now operates 30,000 warehouses, handling over 10 million daily orders—a growth rate triple that of food delivery. With higher average order values, Shangou has become a significant contributor to Meituan’s delivery revenue.

Shangou’s push into lower-tier markets is another highlight. At an October industry conference, Xiao Kun, head of Shangou, described a case in Xichang where a merchant achieved seven-figure RMB monthly profits by targeting underserved segments. Expansion into rural areas, however, remains outside Shangou’s immediate focus.

Another significant development is the integration of key account merchants alongside small and medium businesses into quick commerce warehouses. Xiao highlighted Miniso as a standout example, noting that the retailer opened over 500 warehouse stores within a year and plans to launch online-exclusive products. He emphasized that even a network of thousands of physical stores cannot meet the needs of China’s expansive consumer base, making warehouse operations a more efficient means of bridging supply gaps.

The industry is witnessing an influx of players, a surge that can aptly be described as a gold rush. Meituan projects that by 2027, quick commerce warehouses will exceed 100,000 in number.

This growth has fueled internal competition on Shangou’s platform. Merchants vie fiercely for prime locations and traffic. A warehouse operator shared with 36Kr that warehouses cater to diverse categories, including general merchandise, pharmaceuticals, and pet supplies. Initial investments for small warehouses typically range from RMB 50,000–80,000 (USD 6,700–10,700), while larger operations surpass RMB 300,000 (USD 40,000). One merchant, who began with a RMB 80,000 investment, achieved breakeven only after expanding their stockkeeping units (SKUs) beyond 3,000.

Operating small warehouses is increasingly challenging. “The platform is fundamentally steering traffic toward comprehensive warehouses to boost average order values,” one merchant explained. The influx of new competitors adds another layer of difficulty. “Inventory selection and professional operations are now crucial. Without these, investments can easily fail.”

Beyond Shangou, rivals like JD.com, Taobao, and Douyin are intensifying their instant retail efforts. JD.com, for instance, recently restructured its leadership in the sector, appointing Yang Wenjie, formerly of Meituan, to lead Dada Express. Brands such as Sam’s Club, Yonghui Superstores, and Luckin Coffee have established flagship stores on the Dada platform. While JD.com offers broader category coverage, it trails Shangou in merchant numbers.

Despite fierce competition, Shangou remains the frontrunner in the instant retail market. A Morgan Stanley report forecasts that China’s instant retail market will grow at a 20% compound annual growth rate (CAGR), reaching RMB 2 trillion (USD 280 billion) by 2030, with Meituan expected to secure 50% of the market and achieve long-term unit economics (UE) of RMB 1.7 (USD 0.20) per order. Such dominance would extend Meituan’s competitive advantage beyond food delivery and in-store services.

In its latest earnings report, Meituan announced that its new businesses—excluding Youxuan—achieved profitability as a whole. Morgan Stanley previously identified new business losses as a key performance indicator for Meituan this year, alongside food delivery order growth and profitability for in-store dining and travel services.

Among Meituan’s new ventures, Kuailv has shown the most maturity, with Xiaoxiang Supermarket also gaining traction. However, monetization for Xiaoxiang remains secondary to strategic growth. Meanwhile, competition in the home delivery space is heating up as JD.com’s 7Fresh unit launches aggressive price wars.

Loss reduction for Youxuan continues to be a critical focus. Goldman Sachs reported that Youxuan incurred approximately RMB 1.7 billion (USD 238 million) in losses during the third quarter, a slight improvement from the previous quarter. However, the pace of improvement is decelerating. In a bid to cut losses, Meituan has raised prices, withdrawn generic brands, and closed warehouses, despite the resulting contraction in user numbers. The company also consolidated its operations into nine regions, down from 17 provinces.

Internationally, Meituan’s progress is under watch. Its October launch of Keeta in Riyadh, Saudi Arabia, was accompanied by cautious statements about global expansion plans. Local merchants in Riyadh have observed that Meituan’s mature subsidy mechanisms and methodical approach set it apart from established platforms.

Amid these dynamics, Meituan is navigating a competitive landscape with calculated composure. Its rivalry with Douyin has stabilized, allowing it to focus on consolidating its market presence and advancing its strategy. Balancing growth with ambition, Meituan has carved out a position of stability and innovation in a challenging economic climate.

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