(Bloomberg) — Meituan unveiled plans for the first time to develop its own AI model after reporting a 20% jump in quarterly revenue, becoming the latest big Chinese tech player to join an accelerating global wave of development.
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China’s meal delivery leader is starting to integrate AI into work processes and across its range of consumer services, which include a travel site and e-commerce platform. It’s developing its own “LongCat” large language model, a platform that will compete with rivals such as ByteDance Ltd.’s Doubao and Alibaba Group Holding Ltd.’s Qwen.
Meituan is a surprise entry in a quickening race that spans OpenAI and Meta Platforms Inc. in the US to Baidu Inc. and DeepSeek in China. While the company has long relied on deep data analysis and algorithms to match merchants and consumers, it’s said little about its AI strategy. Meituan now intends to ramp up capital spending on AI to take on rivals directly, founder Wang Xing said. The company is investing billions in AI chips, Wang added without specifying amounts.
LongCat already performs well against domestic industry leaders and should form the basis of a broad-based AI strategy that includes bridging the online and physical markets, such as in food delivery, the billionaire founder said.
“Our strategy is offense, not defense,” Wang told analysts on a conference call. “When something as fundamentally revolutionary as AI is coming, the only strategy that makes sense is not trying to defend the way you already have.”
Wang’s pronouncement came after Meituan posted a 20% jump in revenue to sales of 88.5 billion yuan ($12.2 billion) in the December quarter, about 1% ahead of the average projection. Net income surged to 6.2 billion yuan. That suggested the Chinese meal delivery leader is successfully fending off new domestic competition while expanding abroad.
That’s also giving Meituan ammunition to stake out a place in the AI arena. The company benefits by having one of the more extensive real-world networks of people, merchants and users among its peers, Wang argued.
“To bring AI to the physical world you need more than just very smart app algorithms or models. You need infrastructure in the physical world and that’s our advantage,” Wang said.
Meituan’s outperformance suggests the restaurant delivery business remains resilient as Beijing rolls out stimulus to boost consumer confidence and revive spending power across the world’s second largest economy.
The Beijing-based company has been exploring overseas markets in part because of a slowdown at home. Last year, Wang took over the company’s overseas businesses, which for now are centered on the fledgling Keeta app. That division has shown initial success in Hong Kong, squeezing out Deliveroo Plc. On Friday, executives pledged to raise overseas investment significantly.
As the Chinese app expands further afield, it’s deploying similar tactics in other new markets. The company launched in Saudi Arabia last September and has been attacking the market through similar measures. It reached one million weekly active users in January, according to Sensor Tower data, matching Delivery Hero’s Hungerstation.
Executives have said it’s considering the feasibility of other markets from Europe to Southeast Asia.
What Bloomberg Intelligence Says
Meituan can offset the impact of new social security costs for couriers, due in 2Q, on its China-based core local commerce margins as the unit profits more from economies of scale. This led CLC operating profit to exceed consensus estimates by 11% in 4Q. Keeta’s growing presence in Saudi Arabia, which drew 85% as many monthly active users as on Hungerstation and Talabat by Delivery Hero as at Feb.28, could spur stronger-than-expected revenue from new initiatives.
– Catherine Lim and Trini Tan, analysts
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In China, Meituan is spending heavily to protect its user base from new entrants, potentially pressuring margins. JD.com Inc. launched its JD Takeaway platform in February, adding to an already crowded space.
Meituan has been relying on its traditionally subsidy-heavy strategy to draw in merchants and users despite the economic malaise. It’s also ramped up investments in past years in newer initiatives such as grocery retailing, group-buying and live-streaming.
It’s also experimenting with technology. Keeta Drones, a subsidiary of Meituan, received an operation license in the United Arab Emirates late last year. It’s exploring the feasibility of drone delivery in Hong Kong as well.
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