(Yicai) March 27 -- Meituan founder Wang Xing has said the Chinese on-demand services giant will go on the offensive amid the rapid changes being wrought by artificial intelligence after losing CNY23.4 billion (USD3.4 billion) last year slugging it out in a delivery price war with rivals Alibaba Group Holding and JD.Com.

“AI is going to revolutionize everything,” Wang, who is also the Beijing-based firm’s chairman and chief executive, said on its earnings conference call yesterday. “In this AI revolution, the only strategy that makes sense is to play offense instead of just defense.

“That doesn't mean we are going to rush to try to become one of the token factories,” he pointed out. “We view AI as a strategic opportunity to improve and strengthen, or even revolutionize, our product offerings in local services.”

The food delivery and local services specialist has been investing heavily in AI since 2023, building LongCat, its own series of open-source AI models, and launching Xiaotuan, an AI-powered search assistant embedded in the Meituan app. Last year, the company’s research and development expenses jumped 24 percent to CNY26 billion, driven by AI investment.

“Other than those cloud companies, we have probably made the largest investment in AI among all Chinese companies,” Wang noted.

“We are committed to driving the AI transformation of the physical world by integrating AI innovation with our proven services advantages in the physical world,” Wang pointed out. “We have integrated AI technology with use cases on Meituan, covering all categories in local services on our platform.”

Wang said the battle for the so-called ‘super gateway’ is fundamentally about the capability to accurately understand users' needs and then efficiently execute the task, which is much more complicated than a clever chatbot.

He believes that Meituan's deep expertise in the food and on-demand delivery networks, its business development operations, retail supply, and other embodied AI technologies will give the firm significant advantages in connecting AI with the physical world.

Xiaotuan, launched last year, is expected to transform consumer interaction with mobile apps, evolving from search to making requests.

Full-Year Loss

For the 12 months ended Dec. 31, Meituan posted a net loss of CNY23.4 billion, versus a net profit of CNY35.8 billion the year before, largely as a result of the consumer subsidies and promotions to fend off competition from Alibaba and JD.Com. Revenue rose 8.1 percent to CNY364.9 billion (USD52.8 billion), its annual earnings report showed late yesterday.

“During recent months, and even with the continued intense competition and quite irrational subsidies, Meituan is still the top choice for high-value consumers when it comes to food services because we deliver a better overall experience,” Wang said.

Full-year sales and marketing expenses surged 61 percent to CNY102.9 billion (USD14.9 billion), mainly driven by enhanced marketing and promotional efforts to strengthen brand awareness and price competitiveness.

Meituan’s core business -- on-demand delivery and local lifestyle services -- had an operating loss of CNY6.9 billion (USD998.5 million), compared with an operating profit of CNY52.4 billion in 2024, with the margin shrinking to minus 2.6 percent from 21 percent. This was mainly because of higher spending related to user incentives, promotions, and advertising.

The company is on track to see a more meaningful sequential improvement in the loss from food delivery per order this quarter compared with the final three months of last year, as it pulled resources away from low-value orders and focused on customers placing mid-to-high-value orders, Wang noted.

“We see the competitors' recent ramp-up in investment,” Chief Financial Officer Chen Shaohui said in response to a question about subsidy-centered competition. "This may negatively impact our short-term profitability,” he noted.

In Hong Kong today, Meituan’s shares [HKG: 3690] ended 0.9 percent lower at HKD85.90 (USD10.97) each. The stock has nearly halved in value from a 52-week high of HKD165.80 on March 27 last year.

Keeta’s Saudi Break Even Goal

Keeta, Meituan’s overseas food delivery platform, entered Qatar, Kuwait, the United Arab Emirates, and Brazil in the second half of last year, adding to its existing markets of Hong Kong and Saudi Arabia.

In Hong Kong, Keeta turned profitable last October, 29 months after launching in May 2023. But for the Saudi market, Wang set a more ambitious target.

"We expect Keeta to record its first profitable month in Saudi Arabia much faster than in Hong Kong, and definitely before the end of this year," he said. "We are already profitable in some cities, and others are following very fast."

In Brazil, Meituan is focused on refining its model in São Paulo before launching it on a broader national scale, according to Wang. He cautioned that Keeta's overall losses this year will likely remain significant, given the number of new markets added in the second half of last year. But he does not expect this year’s overall loss at Meituan’s new initiatives business to exceed last year’s

Editor: Futura Costaglione