Meituan (3690) Q4 FY2025 Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Meituan Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Scarlett Xu, VP and Head of Capital Markets. Please go ahead.

Thank you, operator. Good evening, and good morning, everyone. Welcome to our fourth quarter and fiscal year 2025 earnings conference call. Joining us today are Mr. Xing Wang, Chairman and CEO; and Mr. Shaohui Chen, Senior Vice President and CFO of Meituan. For today's call, management will first provide a review of our fourth quarter and fiscal year 2025 results and then conduct a Q&A session. Before we start, we would like to remind you that our presentation contains forward-looking statements, which include a number of risks and uncertainties and may differ from actual results in the future. This presentation also contains unaudited non-IFRS accounting standards, financial measures that should be considered in addition to and not as a substitute for measures of the company's financial performance prepared in accordance with IFRS accounting standards. For a detailed discussion of risk factors and non-IFRS accounting standards measures, please refer to the disclosure documents in the IR section of our website. Now I will turn the call over to Mr. Xing Wang. Please go ahead, Xing.

Thank you, Scarlett, and hello, everyone. 2025 was a year of both opportunities and challenges for Meituan. Facing unprecedented intense competition, we stayed focused on serving our consumers, merchants, couriers and all ecosystem partners. And we were committed to creating long-term value. In 2025, our platform GTV and transaction volume both achieved a double-digit growth, and annual transacting users -- user transaction frequencies and ARPU all reached a new high. And these key metrics reaffirmed our solid position as the preferred local service platform for Chinese consumers. In 2025, we fully upgraded our Meituan membership program. This was our first consumer loyalty program covering nearly all categories. It helped us drive cross-selling and enhance core user stickiness. Meanwhile, leveraging our comprehensive advantages in local services, we launched our own AI assistant We brought AI technology into real consumption use case. Going forward, Meituan membership and AI will continue to be the key tools for us to deliver differentiated and enhanced local experience. No matter how the market environment evolves, we remain focused on strengthening our long-term moat and promoting the healthy and sustainable development of the whole industry. We also actively pursued new growth opportunities. During 2025, we made a series of key progress. First, we accelerated our deeper penetration into the supply side and built a comprehensive cost-effective supply system, spanning a full price range and diverse categories through supply side innovation. This allows us to precisely meet users' comprehensive needs across food delivery, e-commerce and services retail. It also strengthened our positioning as a one-stop local service platform. In food delivery, we focused on innovation in products, store formats and channels in collaboration with the merchants. Innovative formats such as branded satellite stores in -- Kitchens have helped a large number of restaurant brands and small and medium-sized merchants improve operational efficiency and expand their businesses. Through Ping Hao Fan, and other formats, we work with the merchants and launched the high-quality value-for-money megahit products across different price ranges, serving a broader consumer base. In e-commerce, we deepened our presence in local supply, becoming an important partner for many leading brands in their omnichannel strategies. We continue to extend our reach in the supply chain. Our innovative supply format, including Meituan InstaMart, Shandiàn Sòng, and branded flagship InstaMart, as well as our self-operated Xiaoxiang Supermarket, a micro fulfillment center, have become important supply for quick commerce. achieved rapid growth as we worked closely with top liquor brands. In health care and pharmaceuticals, we continue to strengthen local supplies of common household medicines, medical devices and supported the online launch of many innovative drugs and further expanded coverage of 24-hour pharmacies, online consultations and home testing services. Xiaoxiang Supermarket accelerated its city expansion in the fourth quarter. Over the past few years, Xiaoxiang Supermarket has built a strong supply chain, upgraded fresh produce quality and developed industrial-leading product capabilities. And our private label products now cover broader categories, contributing higher GTV shares. In our in-store hotel and travel business, we featured our high-quality merchant recommendation list and expanded our 6 series programs to more categories such as education, fitness, health care and elderly care. Based on our deep insights into consumption trends, we further enriched offerings in sports events, cultural and other ticketing, home services and more. In addition, we supported over 1 million independent in digitizing their profiles on our platform, enhancing our unique service ecosystem and connectivities. Second, we focused on enhancing our comprehensive service capabilities. Through product iteration and Meituan membership upgrades, we delivered a superior consumption experience for consumers. In fulfillment, we upgraded on-time guaranteed and one-on-one express delivery significantly expanding their coverage in 2025. This provided consumers with a more reliable and higher quality fulfillment protection and strengthened our competitive edge in fulfillment. In quick commerce, we launched the industry's first full cycle service assurance program, with millions of merchants and brands. It offers free return shipping for high-tier Meituan members and selected brands products. It lift industry service standards across experience, fulfillment, delivery and aftersales support. In health care, we expanded online consultation with Grade 3A hospital doctors. We upgraded the verification and service protection for dental care and medical aesthetics and other services. These efforts comprehensively improved the reliability of online health care services, and we deeply integrated these high-quality services with our fully upgraded Meituan membership. We launched a series of exclusive benefits for our members, covering various consumption scenarios such as food delivery, hotel booking, lifestyle services, mobility, health care and more. Richer member exclusive benefits activities significantly improved consumer mind shares and transaction frequency, allowing us to better serve our core user base. As a result, a large number of mid-tier members advanced to higher membership tiers. Our high-value member base continued to grow steadily amid very intense competition with their transaction frequency and spending rising notably, they also make purchases across a broader range of categories. Our continuously enhanced Meituan membership program delivered strong multidimensional support. It boosted traffic operations and transactions and growth. It also drives cross-selling among different categories and different scenarios within our core local commerce business. Overall, we have strengthened our leading position in user structure and consumer mind share even in a very highly competitive market. Third, we stay focused on cultivating a sustainable ecosystem, and we are taking very concrete actions to drive high-quality growth for the whole local services industry. We continue to empower small and medium-sized merchants. For example, we increased the financial support, promoted the bright Kitchen program in and use AI tools improve merchant operational efficiency. We aim to foster the healthy development of the food service industry and address structural challenges such as the marketing evolution nature and food safety governance. We also made progress in courier welfare in 2025. We the industry in providing pension insurance subsidy program for all types of couriers across the country. Our occupational injury insurance program has now expanded to 17 provinces and cities, covering more than 16 million couriers. This protection is provided at no financial cost to the couriers. Additionally, we continue to enhance the multi-tier welfare system for couriers across health care, education, housing and other areas. Fourth, in our overseas market, Keeta accelerated its global footprint and delivered a good growth momentum in 2025. In Hong Kong, Keeta further solidified its leading position and achieved positive unit economics in the fourth quarter. In Saudi Arabia, Keeta's order volume keep growing throughout 2025, and it has become one of the top platforms for local consumers with higher-quality services. In the second half of 2025, we launched our operation in Qatar, Kuwait, UAE and Brazil. All these new markets recorded strong growth momentum since business is launched. Going forward, we expect Keeta to continue leveraging its strength in products, technology and operational know-hows. We will work closely with merchants and couriers in all markets around the world, jointly drive the digital transformation of the industry and enable consumers in more countries and regions to enjoy our high-quality and efficient services. And moreover, in 2025, we embraced the opportunity brought by AI. 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. Over the years, we have made significant investment in AI technology. We combined the strength of our in-house multimodel LongCat model and that's a series of large language models. And we -- at the same time, we also used state-of-the-art third-party models. We also leveraged Meituan's unique digital assets, including extensive merchant information and high-quality diverse offerings and real consumption behavior and user reviews. We first tested a smart live assistant as a stand-alone app. What's more important is that we have rolled out Xiaouan and our AI assistant embedded in the Meituan app to all users. We have integrated AI technology with use cases on Meituan, covering all categories in local services on our platform. Xiaouan, the AI feature in Meituan will fundamentally change how consumers use our apps. Searching will evolve into simply making requests in natural language, not just keywords. Then Xiaouan draws on Meituan's rich supply and strong fulfillment capabilities. Combined with our mature native interface in the Meituan app, it brings consumers a brand-new easy-to-use and superior experience. In 2025 -- in 2026, we will continue to refine Xiaouan user experience. Our goal is to make Xiaouan the most consumer-centric AI agent for local services. Looking back on 2025, we faced a complex external environment and unprecedented fierce competition, but we remain committed to our mission to help people eat better, live better. And we work hard to deliver real values for consumers, merchants, couriers and all ecosystem partners. Looking ahead, we believe our core local commerce still has strong growth potential and very strong business resilience. We'll continue to deepen our supply -- our penetration into the supply side, enhance service quality, improve our Meituan membership program and invest in the ecosystem. We will further strengthen our position as the preferred local services platform for most consumers and drive the high-quality development of the industry. Meanwhile, grocery retail and overseas market are long-term growth trend with a clear strategy and potential. We will actively explore these areas with investment discipline. More importantly, as we get into the AI era, we will firmly implement our retail plus technology strategy, utilizing AI to deeply empower the local services industry and deliver better experience for both consumers and merchants. With that, I will turn the call over to Shaohui for an update on our latest financial results.

Thanks, Xing. Hello, everyone. Now let's begin with our fourth quarter financial results. Please note that all comparisons are on a year-over-year basis unless otherwise noted. In Q4, our total revenue was RMB 92.1 billion, up 4.1%. Cost of revenue ratio increased by 11.6 percentage points to 33.8%. This is primarily driven by 3 factors: more consumer incentives deducted from revenue, higher rider incentives to maintain leading service quality and increased overseas operational costs. Selling and marketing expenses ratio rose by 14.8 percentage points to 34.4%, largely due to our increased investment in promotion, advertising and user incentives to enhance our brand awareness and the core user engagement. R&D expenses ratio increased to 7.6%, reflecting our increased investment in AI, while the G&A expenses ratio saw a slight increase to 4%. Fourth quarter total segment operating loss and adjusted net loss narrowed sequentially to RMB 14.7 billion and RMB 15.1 billion, respectively. This sequential improvement reflect our focus on quality growth and execution efficiency amid the intense competition. As of December 31, 2025, we held cash and cash equivalents and short-term treasury investments totaling RMB 166.8 billion. While operating cash flow was still negative, we achieved sequential improvement with operating cash outflow narrowing to RMB 6.6 billion. Now let's look at the segment results, starting with the core local commerce segment. This quarter, we continue to see healthy growth in both order volume and GTV. Our leadership in both food delivery and Meituan shopping stayed strong, while our market position in core local in-store categories remained stable. Our core user base continued to show healthy growth and higher engagement on our platform. These users aren't just transacting more often, they are exploring more services across our platform during this quarter. Their retention rate further improved in the fourth quarter compared with the third quarter. Multiple consumption categories, including medicine and health, leisure and entertainment, sports and fitness, pet services and most categories in the Meituan Instant Shopping maintained double-digit growth across both order volume and GTV. On the financial side, segment revenue was RMB 64.8 billion in Q4, down 1.1%, while food delivery industry-wide subsidy slightly moderate from Q3, they were still at historical high levels. In Q4, we stayed focused on quality growth and further pull back resources from those low AOV and low-quality orders. This drove a sequential recovery in our food delivery average order value. Although our food delivery net AOV is still well above the industry average, intensified competition did lead to a significant year-over-year drop in food delivery AOV, which weighted on our commission revenue growth. The impact of consumer subsidy on delivery service revenue also continued through Q4. Our online marketing revenue maintained stable growth. We continue to see merchants across categories from small- and medium-sized restaurants to offline retailers and other local service providers treat Meituan as a key marketing channel. Our advertiser base continued to expand steadily. On the cost and expenses side, we increased marketing spending and promotions to enhance brand positioning and price competitiveness, while driving engagement among core users. We allocated more resources to enhance our membership program. We also provide more incentives for our couriers to ensure deliver service quality and user experience alongside continued investment in ecosystem development. Core local commerce segment operating loss was RMB 10 billion in Q4, with operating loss narrowing significantly from last quarter. This improvement was largely driven by meaningful loss reduction from our food delivery business. Turning to our new initiatives segment. In Q4, revenue reached RMB 27.3 billion, up 18.9% year-over-year, primarily driven by the expansion of Keeta and grocery retail business. However, segment operating loss widened to RMB 4.6 billion, reflecting both seasonal headwinds in business like bike sharing as well as strategic investments in overseas expansion and grocery retailing. During this quarter, we expanded Keeta into 4 new markets, which required meaningful upfront investment. However, we are encouraged that in established markets like Hong Kong and Saudi Arabia, unit economics are already showing healthy improvement driven by order density growth and operational efficiency. We are optimistic that Keeta and new markets will follow this positive trajectory for grocery retail. It remains a key long-term priority for Meituan. Xiaoxiang Supermarket has made solid progress over the past few years with key metrics trending positively. In Q4, we accelerated its expansion into new cities and expanded warehouse network to capture growing online grocery demand. We also grew our physical presence with the launch of our first Xiaoxiang Supermarket offline store in Beijing and the opening of multiple new Happy Monkey stores. In addition, we recently announced our plan to acquire the domestic assets of Dingdong Grocery, which we expect to further enhance Meituan's overall capability in on-demand grocery retailing. We are confident that these strategic investments will solidify our competitive advantage and create long-term value in the grocery sector. Looking ahead, we are still confident that in the company's long-term sustainable growth trajectory will continue. We are firmly against industry evolution, and we believe the competition will gradually be normalized with the regulation guidance. We will focus more on driving greater efficiency and higher quality growth and continue to invest in technology, service quality and ecosystem development. With that, we are now open for Q&A.

[Operator Instructions] Your first question comes from Ronald Keung with Goldman Sachs.

So I want to ask about the battle on AI gateways or entry points as this kind of new era has begun. So how does the company think about this trend and the future development? On the risk side, will this lead to a loss of kind of position as the main traffic gateway in the app era? And what strategies or plans do management -- does management have to address the risk? And could you also share the latest progress on your AI agent and LongCat model?

Thank you, Ronald. So in the past earnings call, I have made it clear that I think while AI is going to revolutionize everything. And in this AI revolution, the only strategy that makes sense is to play instead of just defense. But that doesn't mean we are going to rush to try to become one of the token factories, not at all. We view AI as a strategic opportunity to improve and strengthen or even revolutionize our product offerings in local services as our core business. So I will elaborate a little bit. First, I think AI takes big investment. So since early 2023, we have been investing a lot in both the CapEx and also the AI talent to build our in-house model. So other than those cloud companies, we are we have probably made the largest investment in AI among all Chinese companies other than those cloud companies. And we -- while we have been doing this for more than 3 years, it hasn't -- obviously, it hasn't an impact on our balance sheet and cash flow. We will remain committed to developing our in-house large language models from because we believe in order to better understand the physical world, do it in a more precise way based on our own massive proprietary data, we need to have the capability to build an in-house model. But at the same time, we are also working with sort third-party model. And we are striving to take the lead in upgrading our Meituan app into an AI-powered app in order to better fulfill the end-to-end needs of our consumers in local services and quick commerce. So in our view, the battle for the so-called Super Gateway is fundamentally about the capability to accurately understand the user needs and then efficiently execute the task. But here, it is much more complicated than a chatbot. The local service industry features highly complex use cases. And there's a massive amount of very fragmented information and a lot of real-time information from small and medium-sized merchants. Those merchants are not fully digitized. So a lot of the data on the merchant side and some on the consumer side has not been effectively digitized. In order to benefit from AI, I think it has to be first digitized. So that's what we have been doing for many years. A lot of merchants run on our digital system. So we have the unparalleled access to their data. But moreover, local service platform also need to be able to deeply involved in the management of the fulfillment services. Otherwise, it's just a chatbot. And here, I don't think the general AI can reliably manage and guarantee the real physical world service experience. And we Meituan has been -- have built up tends be physical world data, including merchant POI data, dynamic and real-time merchant operation data and the most comprehensive authentic user reviews for local services. I believe our deep expertise in food delivery network, the on-demand delivery network and our business development operation, our retail supply as well as our -- in future, our drone and unmanned driverless vehicles and other embodied AI technology will give us significant advantages in connecting AI with the physical world. And our in-house model is catching up with those open source sort of models. And our agents are evolving rapidly that will help us seamless integrated digital and physical world information. So to give you some example, so we have recently made our AI assistant, Xiaotuan, available to all users within our Meituan app. Before that, we have released a stand-alone AI app that's Xiaomei. But with Xiaotuan, all existing hundreds of millions of Meituan app users will benefit from these new AI features. Xiaotuan covers all local service categories on our platform. The user can express their needs in a more natural way. In the past, most people have gotten used to search through a few keywords. But now with the enhanced AI capability, Xiaotuan can -- understand the query -- longer query in natural language and Xiaotuan can access all data within Meituan app. So I'll give you one example. It's very common for a user to use Meituan app to find a restaurant. But sometimes you need to be able to better understand the use case. For example, maybe one day -- I'll give you one very concrete example. So I would like to ask Meituan, okay, here, I'm in the office in Wangjing, that's the northeastern corner of Beijing. And I have a friend who is working in that's on the west side of Beijing. And we plan to have lunch together. We only have 2 hours' time. So could you help us find a restaurant with a good spicy food in the middle, and it needs to have a convenient parking space. I think that's a very natural real need. But in the past, with very limited keyword search, the user will not be able to ask these kind of questions. So now with enhanced AI capability, it has become possible. It's a very real use case. But in order to really answer that question, you need to understand -- you need to have the mapping information, the POI information or even the traffic information. And also you need to know there are -- you need to know more than just there are restaurants. You also need to understand the offering of the restaurant or the real-time capacity of the restaurant. Otherwise, you will recommend a very popular restaurant, but the user will not be able to reserve a table or a private room. So that's not what user need. So to really fulfill this need, we need -- our system need to have access to a lot of information in the physical world. And AI is helping us to bring all those data, physical world data together and offer a much better user experience to our users. So leveraging Meituan's comprehensive and authentic merchant database, Xiaotuan can now quite actually answer those specific questions about not only merchant location, business hours, the store facilities and more. And Xiaotuan can also utilize our authentic user reviews and recommendations to deliver valuable insights. So with this enhanced reasoning capability, Xiaotuan can fulfill more personalized queries and generate the one-stop guides for dining, entertainment, travel and more. We are pleased to see the Xiaotuan feature effectively addressed users requests during spring festival, but that's just the beginning. It received a positive feedback and further strengthened user engagement. In the future, I think the model will become better, and we will continue to deepen the integration of Xiaotuan feature in the Meituan app. So we want to use the new AI technology to make Meituan app, the go-to destination for the local needs, local services needs of all users. we'll enhance the AI search capability, and we will enhance the execution capability, and we strive to upgrade Meituan to make it a leading AI-powered app and AI gateway for local services needs in the future. Thank you.

Your next question comes from Ya Jiang with Citic Securities.

And regarding the State Council's investigation into the food delivery market competition, which started in early January, has our business strategy changed. And what changes are we seeing in the competitive environment recently? And looking ahead, how do we plan to sustain or expand our competitive advantages on the current regulatory environment? And can food delivery continue to loss narrowing trend from quarter 4 into quarter 1? That's my question.

Thank you, Jiang Ya. We believe the regulatory guidance is already quite clear. The authorities are firmly against the so-called evolution nation and want to foster a healthy and orderly market. Subsidy-driven or price-driven competition in the food delivery sector is a very typical -- the so-called irrational competition is a very typical evolution. And so we take this issue very seriously and want to reiterate our position. We are firmly against evolution. We will actively work with the regulatory investigations. And meanwhile, we are putting back resources on the low-quality orders while striving to defend our market leadership. So in 2026, no matter how the market environment evolves, our strategy for food delivery stays clear and consistent. First, we will stay focused on doing the right thing to enhance our core strength as expanding high-quality selections, ensuring fast and reliable deliveries and offering consistently affordable prices. Second, like I said before, we will maintain our leadership while focusing our resources on driving quality growth and improving operational efficiency. And third, we will keep creating value for the whole industry. Beyond our ongoing work in supply side innovations, fuller support and welfare improvement, food safety, and we are also pushing product and services upgrades, innovation in AI and all other technologies to drive efficiency and experience improvement across the industry. So looking ahead, we believe competition will shift toward deepening users' lifetime value, improving supply quality varieties and delivering a seamless end-to-end user experience. During recent months, 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. We have held our competitive advantages in mid- to high average order value orders with average order value consistently well above industry peers. And driven by our focus on quality growth and an improved order mix, we are on track to see a more meaningful sequential improvement in our food delivery per order loss in Q1 versus Q4 last year. And we believe a more regulated market can help shift competition from pure subsidy wars toward innovation, service experience and efficiency. These are the areas in which we are better positioned. But we will keep sharpening our core strengths through better operation, product innovation and iteration. This will help us reinforce our structural advantages in mid- to high AOV orders and high-value users and efficient delivery network. We remain confident in the competence and long-term potential of our food delivery business. Thank you.

Your next question comes from Kenneth Fong with UBS.

We noticed that has substantially increased the subsidies for in-store business since fourth quarter last year and its subsidies is expected to remain high in 2026. So I just want to see what's your view about the current competitive landscape in the local service? And compared to the competition cycle back in 2022 to '23, how does Meituan's current strategy differ this time?

Thank you, Kenneth, for the question. The short answer from a short-term perspective to your question is that, yes, we see the competitors' recent ramp up in investment, this may negatively impact our short-term profitability. That's something we are facing, and we would like the market to understand. But I would spend more words on our long-term strategy for this business. I think it's key to understand that the competitive landscape now is evolving quite a lot. The whole in-store industry has seen significant changes in the last few years. On the competition side, the industry participants are now having quite differentiated focus on categories, merchants and consumption scenarios. Leading players are now focusing more on efficient operational strategy. And for us, our priority has always been the sustainable long-term development of the industry rather than short-term winning at traffical battle. We truly believe that in-store business still has high potential, but still need lots of investment and more innovation across the whole value chain. No matter how the landscape shifts, provide efficient and high-quality service to consumers and merchants and driving robust offline consumption growth is the key to succeed. Over the last few years, we have seen that customers' demand has evolved. They require more personalized experience and value for money dining and services. Demand also for extended services such as online touring, reservation and online ordering with offline pickup continues to grow. On the supply side, offerings have continued to evolve in line with consumption trends with new supply formats and service categories emerging. This ongoing momentum is also a key driving force for digital transformation. On the technology front, both consumers and merchants have growing expectations and demand for AI-powered products. Under these trends, Meituan has always been very alert and continue to bring our extensive experience and understanding of the industry and to continue the innovation. We have built and further enhanced differentiated advantage in areas such as category mix, merchant ecosystem and operational efficiency. For example, thanks to years of expertise and insights from Meituan and Dianping in dining sector, we have noticed a shift in the business logic of fine dining. We proactively share these insights with our fine dining partners and help them stay ahead of the curve and quickly adapt to changing consumer demands. We also continue to track the industry trend and explore new supplies in areas such as self-service models, leisure and entertainment, sports, culture and art activity ticketing, self-operating home services and more. Our platform's years of accumulated authentic user reviews and integrated one-stop online services, including the group buying, online ordering, pickup now, reservations and QR management have become our unique competitive advantages. Additionally, more than 1 million skilled artists have become a unique supplier on our platform. Our technology side, the AI agent smart operator, helps merchants optimize their digital service. Merchants are able to deliver personalized service by leveraging AI to record and analyze consumer preferences and can also intelligently analyze consumer feedback for operational improvements. In addition, our AI agents such as digital employees and AIBD streamline merchant operations across store opening, daily operations and consumer acquisition. We will continue to enable merchants with their own AI assistance. In '26, we will further differentiate our service and allocate more resources with higher ROI. We will strengthen our position in core categories and minimize inefficient investment in noncore areas. Looking ahead, we will remain committed to providing consumers with a seamless service loop that offers quick, precise decisions and one-stop experience. We aim to develop a full life cycle merchant empowerment system that covers customer acquisition, conversion and retention. We will continue to foster sustainable industry growth through digital transformation. Thank you.

Your next question comes from Thomas Chong with Jefferies.

Why did Meituan acquire Dingdong? And what synergies are expected with Meituan grocery retail business? How has Meituan strategy for self-operated grocery retail evolved?

Thank you, Thomas, for the question on Dingdong and on Meituan's grocery strategy. We recently announced the acquisition of Dingdong's Mainland China business for USD 717 million. But please note that this transaction is still subject to regulatory approval. The reason? Obviously, the most important reason is we have true confidence on China's grocery retail business, both online and offline. Besides that, there are 2 key reasons for this acquisition, particularly. First, it will enhance Meituan's overall capability in on-demand grocery retailing, particularly strengthening our supply chain capability. It will also contribute to further operational efficiency improvement of our grocery retail business. Secondly, Dingdong has established itself as a strong player in the East China area. With this acquisition, it will significantly improve our coverage and our service quality in this region. Broad retail aligns closely with our company's mission and represents one of our long-term strategic priorities. As market dynamics evolve, we have observed that self-operating supplies like Xiaoshan Supermarket are becoming increasingly important in the on-demand delivery ecosystem. Xiaoshan Supermarket represents guaranteed high-quality supply on our platform, offering users a more reliable shopping experience. Given the industry's growth potential, we see substantial opportunities ahead. Last year, we have already restructured our grocery retail portfolio, shifting to a more efficient way to drive sustainable growth. In the past few years, Xiaoshan Supermarket has maintained strong growth momentum while continuously improve operational efficiency. We expanded our private brand merchandising offerings, cover nighttime consumption scenarios and maintain industry-leading fulfillment speed and experience. We believe Xiaoshan Supermarket represents a model where Meituan can leverage its strength with a clear path to profitability. Moving forward, we plan to expand this model to more cities and regions, bringing faster, fresher and more affordable on-demand grocery retail to more consumers. Thank you.

Your next question comes from Gary Yu with Morgan Stanley.

My question is related to Keeta. Keeta has made some progress in both Hong Kong and Saudi Arabia. But given the regulatory and competitive constraints, the road ahead looks quite challenging. Could management share if there are any updates to the company's overseas strategy for 2026? How much do you plan to invest in Brazil this year? Do you expect Saudi Arabia to reach breakeven in 2026?

Thank you, Gary. Before addressing the specifics of our 2026 international strategy, I want to take this moment to express my deepest gratitude to Keeta's employees, merchants, couriers and all ecosystem partners in the Middle East. Thank you for your unwavering dedication to your work to provide essential services to our users during this difficult time. We are doing everything we can to safeguard your safety and livelihood to overcome these challenges together. And now back to Gary's question. So first, I want to emphasize that Meituan's core philosophy in China has always been to create value for the whole ecosystem and drive long-term industry growth, not just evolution. That has never been what we want to do. And our international operations through Keeta will follow the same playbook. We want to grow alongside with local players. We want to help accelerate the digital transformation of local services industry there, and we want to grow and serve a bigger market together. So ultimately, we want to create new value for users, merchants, couriers and other partners in these markets. In 2026, Keeta will mostly focus on our current markets because each market has a different dynamics. So we will stay flexible. We will tailor strategies locally while balancing growth and profitability at every market and at every stage. It's very important that compliance will remain a top priority. So we are working very actively with the local regulators. So in the long run, we are committed to our global operation with a strategic focus on the on-demand delivery, the quick commerce, which can leverage our core strength. And so for the market that you mentioned and as I said in the last quarter, so Keeta has achieved first profitable month in Hong Kong in October '25. Allow me to remind you that Keeta launched in Hong Kong in May '23, and it has broken even in October '25. So it took us 29 months to get to profitability. And this year, we will focus on further improving our operations there. For Saudi Arabia, and that's a very -- that market is very favorable for food delivery business and for the profitability there. Therefore, we expect Keeta to hit its first profitable month in Saudi Arabia much faster than in Hong Kong, and definitely before the end of this year. Actually, I would say we are very close to that in the near future. We are already profitable in some -- we have get to breakeven in some cities. And I think other cities are following very fast. So because since we have recently cut the subsidy significantly in Saudi Arabia, but our order volume stayed resilient. So that means users are choosing Keeta for our better services, not for subsidy or lower price. So in 2026, we will further refine our operations. In other Middle East markets and our orders are also growing fast. With our Saudi Arabia experience and regional brand recognition, I'm confident that we can improve our operational efficiency quickly in those new markets. However, our growth in this market in '26 remains subject to external risk, for example, the current regional conflicts. And regarding Brazil, we see tremendous long-term value there, and we remain firmly committed to Keeta's long-term growth in this market. For now, our operations are focused on Sao Paulo, the largest city. And rather than a full nationwide rollout, we are prioritizing refining our business model in South Sao Paulo before we do a broader expansion. Meanwhile, we will actively pursue business strategies to build differentiated advantages. So overall, Keeta's loss in 2026 will remain significant because we entered a lot of new markets, a lot of new countries in the second half of 2025. And orders in this market are still scaling up. And however, this will be offset by more efficient improvement in our domestic new initiatives. So as a result, we expect that the overall loss in our new initiative segment in 2026 will not be bigger than 2025. Thank you.

There are no further questions at this time. I'll now hand back to Scarlett Xu closing remarks.

Okay. Thank you all for joining the call. We look forward to speaking with you next quarter. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.