Meituan's inflection: efficiency over subsidies, an open-weight frontier model, and a grocery omnichannel bet
Q2 2026 flips to adjusted profit as the delivery war cools; LongCat 2.0 and Happy Monkey headline a new playbook
3690.HK · Earnings Call · 2026-08-28
A quarter of inflection
Meituan's Q2 2026 print is the clearest sign yet that the year-long subsidy war has cooled. Revenue rose 14.4% year-over-year to RMB 104.6 billion, and after a bruising 2025 in which management openly braced investors for pain, the tone has flipped dramatically. “We turned profitable this quarter with total segment operating profit and adjusted net profit reaching RMB 3.9 billion and RMB 2.5 billion, respectively.” — Shaohui Chen, Senior Vice President and CFO · 2026-08-28 The CFO's framing was that the whole on-demand industry is "gradually shifting toward efficiency improvements," and Meituan's own keyword trajectory captures the pivot: a year ago the company's dominant keywords were "high subsidies," "irrational competition" and "competitive environment"; today the top of the list belongs to quality growth, "operating efficiency" and "efficiency gains." The contrast with the August 2025 call, when Chen warned “we do expect the core local commerce to incur substantial loss in Q3, driven by strategic investments” — Shaohui Chen, Senior Vice President and CFO · 2025-08-27, could hardly be starker. Management had predicted this normalization a year earlier: “the current industry kind of irrational subsidy competition characterized by low quality and low price is probably not sustainable in longer term.” — Xing Wang, Chairman and CEO · 2025-05-26 It played out. Core local commerce swung to RMB 5.7 billion of segment operating profit, food delivery returned to positive year-over-year revenue growth, and on-demand unit economics turned positive across both food and non-food categories. The fuel was discipline, not demand: the selling & marketing expense ratio fell to 23.6% while the cost of revenue ratio eased to 66.5% — even as the R&D expense ratio climbed to 7.3% on AI investment.The frontier-model gambit
The most distinctive move this quarter is LongCat 2.0. “we are one of the first, if not the first trillion-parameter model [ trained ] entirely on Chinese infrastructure.” — Xing Wang, Chairman and CEO · 2026-08-28 That a food-delivery-and-local-services platform — not a model lab — is fielding an open-weight frontier model is the season's most unusual signal. It also lands in a week when the global tape is already trading Open weight model alongside "Frontier AI" as live themes (a same-week cohort including NVDA, PD and RBRK is discussing open and frontier/agentic AI). Xing is careful to frame LongCat as infrastructure rather than ambition:The strategy runs on three pillars — building the LLM, "AI at work" and "AI in products" — with AI-generated code as a share of total output climbing, the AI agent Xiao Tuan embedded in the Meituan app, and CatPaw specialized AI agents being rolled out to restaurant, retail, medicine and hotel merchants. Management also cited a "full stack domestic infrastructure for training and inference" as a structural cost advantage, tying the AI bet to China's compute supply chain.we are not going to compete to be a token factory. Our focus is on using our models and AI products to strengthen our core businesses.
Omnichannel grocery and a disciplined overseas machine
Grocery retail is the other fresh strategic theme. Xiaoxiang Supermarket now operates across 68 cities, Happy Monkey reached 40 neighborhood stores, and the fifth offline flagship (this one in Shenzhen) opened on the day of the call. The "offline store," "Happy Monkey" and "omnichannel strategy" keywords are all brand-new to Meituan's 12-quarter trajectory — a signal that this is a genuine new direction rather than boilerplate. Xing frames the bet in mission terms:Underneath lies a deepening Grocery Retail thesis: online dark stores scale fast across cities, while a select number of flagship offline stores build sensory trust and expose shoppers to far broader assortments — private-label products now account for a growing share of GTV. Overseas, KeeTa's economics are inflecting faster than expected. “Saudi Arabia, we entered the market in September '24... it has already turned profitable in July this year. That means it took us 22 months to get to that milestone, so even faster than Hong Kong.” — Xing Wang, Chairman and CEO · 2026-08-28 Management set a hard guardrail that 2026 new-initiative losses will not exceed 2025's, and signaled openness to monetizing an investment book: “our stakes in these companies are worth more than RMB 70 billion.” — Shaohui Chen, Senior Vice President and CFO · 2026-08-28The mission of Meituan has always been to help people eat better and live better.