MSCI China 4Q25 earnings diverge: food delivery drags on profits, while AI and non-bank financials remain resilient

Overview

This report reviews the mid-way point of 4Q25 earnings disclosures for MSCI China constituents. About half of the companies have reported, and overall revenue and profit both grew 1% YoY, suggesting stable top-line growth but pressure on earnings quality. The biggest drag came from competition in internet food delivery, especially the performance of Alibaba, JD and Meituan; excluding these three companies, 4Q25 profit growth would improve to 7.5% YoY. At the sector level, non-bank financials and technology maintained strong growth, new energy saw profit recovery helped by a low base and higher lithium prices, while autos and internet remained under pressure from competition.

Core views

The core view is that earnings trends for Chinese equities are not deteriorating across the board, but rather showing pronounced structural divergence. Competition in internet platforms' food-delivery businesses is depressing overall profit, yet AI-driven demand is keeping technology companies constructive, and insurance and brokers are benefiting from the improvement in the 2025 equity market. Some consumer companies, such as sportswear and restaurant names, have stronger confidence in meeting revenue targets. By contrast, auto OEMs still face price competition, fading stimulus, cost inflation and trade barriers, while consumer electronics may continue to suffer margin pressure from higher input costs over the next few quarters. UBS continues to prefer A-shares over H-shares in portfolio allocation.

Analysis framework

The report combines earnings disclosure tracking, sector-level YoY growth comparisons, consensus estimate revisions, management guidance synthesis and valuation-methodology explanation. The quantitative portion focuses on MSCI China revenue, earnings, margins, dividends and buybacks, capex and FY26 earnings forecast revisions; the qualitative portion summarizes themes such as internet regulation, AI investment, overseas expansion, auto price competition, consumer recovery and battery-demand outlook.

Methodology notes

• Earnings trackingMSCI China quarterly revenue and profit YoY analysis

  Use the reported company sample to observe 4Q25 revenue and profit growth, then break down contributions and drags by sector.

  This approach highlights marginal changes in the middle of the reporting season and is suitable for judging whether overall earnings pressure stems from broad weakness or from a few heavyweight sectors.

• Consensus estimate revisionsFY26 earnings estimate revisions

  Compare the direction of market FY26 earnings forecast upgrades or downgrades over the past month and the past three months.

  The report notes that FY26 consensus earnings were cut by about 2% over the past month, with the downgrades mainly concentrated in hogs, auto retail and internet, while the largest upgrades came from AI enablement, energy, materials, chemicals and EV batteries.

• Valuation methodologyDCF、Gordon growth model、PE、EV/EBITDA、P/BV

  Use discounted cash flow, Gordon growth and relative valuation multiples when covering Hong Kong and mainland China stocks.

  The report discloses that UBS uses multiple valuation methods across different stocks and sectors, but this strategy report does not give a single-stock target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• A-shares

  Relative preference

  Strengths

  Potential government buying provides downside support, liquidity is ample, correlation with global indices is lower, and policy support such as corporate-governance reform remains favorable.

  Weaknesses

  Still affected by China's macro demand, earnings divergence and sector regulation.

  Comparison

  UBS explicitly says it continues to prefer A-shares over H-shares.

  Risks

  Policy support is weaker than expected, earnings downgrades widen, and market liquidity softens.

• H-shares

  Relative underweight

  Strengths

  Exposes investors to core Chinese internet, financial and consumer assets, and valuations may be attractive.

  Weaknesses

  Higher correlation with global markets and more pronounced drag from overseas risk appetite and internet weighting.

  Comparison

  Compared with A-shares, it lacks the downside support and lower-correlation advantages emphasized in the report.

  Risks

  Global risk assets pull back, regulation disrupts sentiment, and internet earnings recover more slowly than expected.

• MSCI China

  Research universe

  Strengths

  Reported companies still delivered positive revenue growth, with non-bank financials, technology and some consumer names showing resilience.

  Weaknesses

  Overall profit grew only 1%, with internet and autos clearly dragging.

  Comparison

  Excluding Alibaba, JD and Meituan, profit growth improves materially to 7.5%, showing that the index is being dragged by a few large platforms.

  Risks

  Further FY26 earnings downgrades, continued food-delivery competition and higher cost inflation.

• Internet and food delivery platforms

  Main drag

  Strengths

  Food-delivery competition shows signs of stabilizing, and platforms continue to increase AI investment.

  Weaknesses

  4Q25 internet profit fell 40%, and subsidy competition plus regulatory requirements are pressuring margins.

  Comparison

  Weaker than hardware, AI enablement and non-bank financials.

  Risks

  Subsidy competition lasts longer, regulation tightens, and requirements around merchant pricing and content governance increase.

• AI enablement, semiconductors and data centers

  Positive theme

  Strengths

  AI demand is strong, technology sector profit grew 21% in 4Q25, and related earnings estimates were modestly revised up.

  Weaknesses

  Some consumer electronics are under pressure from higher input costs, and AI investment may also raise expenses.

  Comparison

  Earnings trends are better than those of internet platforms and autos.

  Risks

  AI demand falls short of expectations, capex efficiency declines, and supply-chain costs rise.

• Auto OEMs

  Under pressure sector

  Strengths

  Still has long-term electrification and export potential.

  Weaknesses

  Facing price competition, fading stimulus, cost inflation and trade barriers; 4Q25 profit fell 21%.

  Comparison

  Weaker than technology, financials and some consumer names.

  Risks

  Price wars continue, tariffs or trade barriers intensify, and raw-material or component costs rise.

• Consumer companies

  Selective improvement

  Strengths

  Some sportswear and restaurant companies issued stronger-than-expected revenue targets, signaling signs of improvement in the consumer segment.

  Weaknesses

  Overall consumer-sector profit fell 13% in 4Q25, and the recovery is uneven.

  Comparison

  Better than autos and internet on profit performance, but weaker than technology and non-bank financials.

  Risks

  Consumer demand recovery is unstable, cost pressure persists and competition intensifies.

Key data

• MSCI China disclosure coverageAbout 50%The report says about 50% of MSCI China companies have reported results.
• 4Q25 MSCI China revenue growth1% YoYOverall revenue growth among reported companies remained stable.
• 4Q25 MSCI China profit growth1% YoYOverall profit growth slowed modestly, mainly due to food-delivery competition.
• 4Q25 profit growth excluding Alibaba, JD and Meituan+7.5% YoYUsed to show the extent to which food-delivery-related platforms are weighing on overall profit.
• FY26 consensus earnings revisionabout -2%Cut over the past month, broadly in line with historical trends.
• 4Q25 technology sector profit growth21%Mainly driven by strong AI demand, though weak consumer electronics partially offset the strength.
• 4Q25 insurance profit growth33%Benefited from the improvement in 2025 equity market performance.
• 4Q25 brokers and other financials profit growth12%Non-bank financials maintained double-digit profit growth.
• 4Q25 internet sector profit growth-40%The table shows internet profits under pressure, making it a key drag overall.
• 4Q25 auto sector profit growth-21%Affected by price competition, cost pressures and demand pressure.

Impact & implications

For investors, the report supports shifting from top-down earnings assessment to structural selection. Competition in food delivery is still weighing on internet profits, but if competition stabilizes, the overall drag on earnings may ease; AI demand, data centers, semiconductors and parts of the energy-materials chain are seeing earnings estimates revised upward and may continue to attract relative attention. The case for A-shares over H-shares comes from policy support, liquidity and lower correlation, but auto, consumer electronics and internet regulation remain key risks to watch.

Risks

• Food-delivery subsidies and price competition last longer than expected, continuing to drag on internet profits.
• FY26 consensus earnings are revised down further, especially in hogs, auto retail and internet.
• Auto OEMs face price competition, policy stimulus fading, cost inflation and trade barriers.
• Consumer electronics may continue to suffer margin pressure from elevated input costs over the next few quarters.
• Internet regulation continues to advance, including merchant pricing, subsidy competition and AI-generated content governance.
• Different valuation assumptions could lead to major differences in target valuations and investment conclusions.
• The views in the report may change and do not constitute investment advice for any individual investor.

What to watch

• Whether food-delivery competition stabilizes further and whether the profit drag from Alibaba, JD and Meituan eases.
• The direction of FY26 earnings forecast revisions, especially for internet, auto retail, hogs, semiconductors and data centers.
• The impact of AI-related spending by internet platforms such as Tencent on revenue growth and margins.
• Execution of overseas expansion strategies at companies such as PDD and Pop Mart.
• Price wars in autos, changes in stimulus policy, cost inflation and trade barriers.
• Whether consumer companies such as Li Ning and Yum China can meet their revenue targets.
• The impact of lithium prices, oil prices and raw-material prices on profitability in new energy, chemicals, energy materials and EV batteries.
• Whether the policy support, liquidity and lower global-correlation advantages of A-shares over H-shares persist.