(Yicai) June 2 -- Meituan’s shares surged after the Chinese on-demand services giant more than halved its loss in the first quarter from the previous three months, as the bruising price war in China’s food delivery market showed signs of easing.

Meituan [HKG: 3690] finished 9.3 percent higher at HKD85.50 (USD10.91) per share in Hong Kong today. The stock is still down more than 17 percent since the end of last year.

The net loss fell 55 percent to CNY6.8 billion (USD1 billion) in the three months ended March 31, versus a CNY15.1 billion (USD2.2 billion) loss in the December quarter and a net profit of CNY10.1 billion a year earlier, the Beijing-based firm said in an earnings report released yesterday.

Revenue rose 5.6 percent year on year to CNY91 billion, despite costs climbing 20 percent to CNY65.1 billion, mainly because Meituan boosted incentives and benefits for delivery riders and further expanded its retail grocery and overseas businesses.

“In the on-demand delivery industry, irrational subsidies moderated compared with last quarter,” Chairman and Chief Executive Wang Xing said on the firm’s earnings conference call, adding that as a result “we’re seeing competition shifting back to the fundamentals.

Competition ratcheted up after e-commerce giant JD.Com entered the food delivery business early last year, leading to a consumer subsidy war among platforms scrambling for market share. As a result, Meituan's profit plunged 97 percent in the second quarter of 2025 from a year ago, and the company went into the red in the third and final quarters.

“Looking back, this wave of irrational competition proved one thing: volume acceleration driven solely by subsidy is not sustainable,” Wang pointed out.

“Even as we gradually pull back subsidies, we continue to see healthy user growth and stronger engagement from our core users,” he said.

Regulators have moved to curb destructive price competition in the sector through meetings and new regulations. They brought out rules on regulating internet-platform pricing last year, which bar service providers from selling below cost to drive out rivals or monopolize the market. This April, they also told platforms to strictly regulate subsidy practices and avoid malicious price competition.

Subsidies “still need more time to go back to a reasonable level,” Chief Financial Officer Chen Shaohui said on the call.

As competition eased over the quarter, Meituan’s instant-delivery business delivered a solid performance, helping cut the operating loss of its core local commerce segment to CNY2 billion from CNY10 billion in the previous quarter.

Meituan’s new business segment also grew steadily, with revenue jumping 21 percent year on year to CNY27 billion. The retail grocery business, Xiaoxiang Supermarket, continued to expand its geographic reach and strengthen its supply chain capabilities. The overseas delivery business, Keeta, greatly improved its operational efficiency in mature markets.

Meituan also stepped up its artificial intelligence rollout in the quarter. AI assistant Xiaotuan upgraded its intelligent search function, and the company launched Xiaotuan Health Assistant, which supports online consultations, appointment bookings, and medicine purchases.

Due to increased investment in AI, Meituan's research and development costs climbed 22 percent to CNY7 billion from a year ago, with R&D spending as a share of revenue rising to 7.7 percent from 6.7 percent.

Editors: Dou Shicong, Futura Costaglione