Meituan's 1Q26 losses beat expectations, with improved food delivery profitability creating room for near-term earnings upgrades

Overview

This report is Nomura's quick take on Meituan's 1Q26 results. It notes that Meituan's revenue was broadly in line with expectations, but losses were significantly better than market expectations, mainly due to better execution in food delivery and better-than-expected loss control in new businesses. Improved food delivery profitability is the biggest recent positive variable, but 2H26 is still affected by summer subsidies, Xiaoxiang Supermarket investment, and Keeta's overseas expansion.

Core views

The core view is that improved food delivery profitability has made the near-term risk-reward more favorable and could drive upward revisions to market consensus expectations; the in-store business has resilient revenue and stable margins; and losses in new businesses are better than expected in the short term, but they remain the main area of medium-term investment. Nomura maintains a Neutral rating on Meituan, believing that rationalization of food delivery competition is the key upside driver, while subsidy wars and investment in new businesses are the main downside risks.

Analysis framework

The report breaks down 1Q26 performance and the 2Q26/2H26 outlook by business segment, focusing on food delivery unit economics, subsidy intensity, order volume base effects, in-store margins, Xiaoxiang Supermarket expansion efficiency, and Keeta's overseas breakeven timeline, and uses the SOTP method to estimate the target price.

Methodology notes

• Valuation methodsSum-of-the-parts valuation (SOTP)

  Different businesses are valued using P/E or P/S multiples and discounted to FY26.

  The food delivery business is valued at USD10bn at 10x FY28F P/E; Instashopping at USD6bn at 18x FY27F P/E; in-store, hotels and travel at USD22bn at 8x FY27F P/E; and new businesses at USD17bn at 1x FY26F P/S, resulting in a target price of HKD92.

• Earnings forecastSegment operating profit and unit economics analysis

  Profitability trends are assessed through revenue, operating profit, operating margin, loss per order, and changes in subsidies.

  The report models food delivery, Instashopping, in-store, and new businesses separately, with particular focus on food delivery loss per order improving from about CNY1.94 in 4Q25 to about CNY0.94 in 1Q26, and whether breakeven can be achieved in 2Q26.

Asset mapping & comparison

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

• Meituan (03690.HK)

  Covered stock; Nomura maintains a Neutral rating and HKD92 target price.

  Strengths

  Food delivery profitability has improved significantly, the in-store business is relatively resilient, the hotel business stands out positively, and Xiaoxiang Supermarket in mature cities is already close to or has reached city-level profitability.

  Weaknesses

  Food delivery subsidies and a high order base in 2H26 reduce visibility, while new businesses remain in the investment phase, and overall profitability is still dragged down by Keeta and Xiaoxiang expansion.

  Comparison

  Currently at about 34x FY27F P/E, while the target price implies about 40x FY27F P/E; Nomura prefers Alibaba, Tencent, and NetEase within the China internet sector.

  Risks

  Intensifying competition in food delivery or in-store segments, weaker-than-expected performance in new businesses, and larger-than-expected losses from overseas expansion.

• Alibaba (BABA US)

  A competitive variable for Meituan's food delivery and instant retail; the report mentions Alibaba with a Buy rating.

  Strengths

  If its fast commerce business achieves monthly breakeven by year-end as guided by management, it may imply that subsidy competition remains rational.

  Weaknesses

  If it ramps up subsidies again, it could once again compress Meituan's food delivery unit economics.

  Comparison

  The report views Alibaba's competitive behavior as the key external variable in judging the sustainability of Meituan's food delivery profitability.

  Risks

  Changes in competitive strategy could alter Meituan's 2H26 food delivery profitability trajectory.

• Tencent (700 HK)

  One of Nomura's relatively preferred names in the China internet sector.

  Strengths

  Nomura prefers Tencent within the sector.

  Weaknesses

  This report does not provide detailed fundamental analysis of Tencent, mentioning it only in the context of valuation and sector preference.

  Comparison

  Relative to Meituan, Nomura expresses a higher preference.

  Risks

  This report does not provide a detailed risk assessment for Tencent.

• NetEase (NTES US)

  One of Nomura's relatively preferred names in the China internet sector.

  Strengths

  Nomura prefers NetEase within the sector.

  Weaknesses

  This report does not provide detailed fundamental analysis of NetEase, mentioning it only in the context of valuation and sector preference.

  Comparison

  Relative to Meituan, Nomura expresses a higher preference.

  Risks

  The appendix of this report mentions downside risks including greater gross margin contraction from incubation businesses and lower-than-expected legacy game revenue.

Key data

• 1Q26 revenueCNY91bnUp 5.6% YoY, broadly in line with Bloomberg consensus expectations.
• 1Q26 non-IFRS operating lossCNY4.1bnSignificantly better than the consensus-expected CNY7bn loss, with the loss result about 41% better.
• Food delivery revenue change约-7% y-yNomura estimates 1Q26 food delivery revenue declined YoY, mainly due to lower net AOV caused by subsidies.
• Food delivery loss per order约CNY0.94/orderMarkedly improved from about CNY1.94/order in 4Q25.
• Instashopping 1Q26 revenue growth23.6% y-yOperating loss narrowed from CNY1.0bn in 4Q25 to about CNY500mn.
• In-store 1Q26 revenueCNY16.0bnUp 8.4% YoY; operating profit was CNY4.0bn, with an operating margin of 25%.
• New business 1Q26 revenueCNY27.0bnUp 21.3% YoY, with operating loss narrowing to CNY2.1bn, better than Nomura's forecast loss of CNY2.9bn.
• Target priceHKD92Based on SOTP valuation, implying about 40x FY27F P/E.

Impact & implications

If Alibaba maintains rational competition, Meituan's food delivery unit economics may continue to improve, bringing near-term upward revisions to earnings forecasts; however, order volume may turn to a YoY decline in 2H26 due to a high base and more rational subsidies. For new businesses, Xiaoxiang Supermarket and Keeta have long-term optionality value, but losses during expansion will still weigh on medium-term profit release.

Risks

• Intensifying competition in food delivery or in-store consumption verticals.
• New business performance weaker than expected, especially losses from Keeta's overseas expansion and Xiaoxiang Supermarket's new-city expansion.
• Subsidies during 618 and the summer peak season could cause volatility in food delivery unit economics in 2Q26 or 2H26.
• Douyin's continued investment in the in-store business remains a drag on valuation and margins.
• If Alibaba resumes aggressive subsidy strategies, Meituan's path of improving food delivery profitability may be hindered.

What to watch

• Whether food delivery can achieve breakeven in 2Q26 as management expects.
• The impact of June 618 and summer peak-season subsidies on food delivery unit economics.
• Whether Alibaba's fast commerce business continues progressing toward monthly breakeven by year-end.
• Whether in-store business revenue growth and operating margins can remain stable.
• The pace of Xiaoxiang Supermarket's expansion into new cities, the replicability of profitability in mature cities, and the path toward narrower overall losses.
• Keeta's profit and loss progress in Saudi Arabia, other Middle East markets, and Sao Paulo, Brazil.