– JD.com’s profits plummeted over 50% year-over-year despite 22.4% revenue growth
– Meituan’s adjusted net profit crashed 89% amid intense food delivery competition
– Alibaba’s late entry shielded its Q2 results but Q3 impact remains uncertain
– Combined marketing expenses surged by billions as platforms fought for market share
– Stock prices declined significantly despite temporary mid-August rebounds
The second quarter of 2025 witnessed an unprecedented food delivery platform subsidy battle that reshaped China’s on-demand delivery landscape. What began as aggressive customer acquisition tactics evolved into a full-scale war among JD.com, Meituan, and Alibaba’s Ele.me, triggering regulatory intervention and fundamentally altering market dynamics. Recent earnings reports provide the first comprehensive look at how this subsidy battle affected the major platforms financially, operationally, and strategically.
The Financial Toll: Profitability Sacrificed for Market Share
The food delivery platform subsidy battle created a classic prisoner’s dilemma where all participants suffered financially despite initial expectations of potential winners. The Q2 2025 earnings reports revealed staggering profit declines across the board as platforms prioritized customer acquisition over profitability.
JD.com’s Strategic Pivot and Its Costs
JD.com reported a devastating 50.8% year-over-year decline in net profit attributable to ordinary shareholders, dropping from RMB 12.6 billion in Q2 2024 to RMB 6.2 billion in Q2 2025. This occurred despite impressive 22.4% revenue growth that reached RMB 356.7 billion. The company’s operating margin turned negative at -0.2%, a significant deterioration from the 3.6% margin recorded in the same quarter last year.
JD’s management attributed this decline to “increased strategic investment in new businesses,” specifically referencing their food delivery operations. The company poured substantial resources into building out delivery infrastructure, recruiting merchants, and offering aggressive consumer discounts to establish a foothold in the competitive market.
Meituan’s Profit Collapse
Meituan suffered the most severe profit impact among the three major players. Their adjusted net profit plummeted 89% year-over-year from RMB 13.6 billion to just RMB 1.49 billion. Operating profit declined 75.6% to RMB 3.7 billion, while operating margin contracted by 19.4 percentage points to 5.7%.
The company explicitly cited “irrational competition in the food delivery industry” as the primary cause of this deterioration. As the established market leader, Meituan faced the difficult choice of either defending its territory through matching subsidies or risking significant market share loss to deep-pocketed newcomers.
Alibaba’s Delayed Impact
Alibaba experienced a more modest 18% decline in non-GAAP net profit to RMB 33.51 billion, with revenue growing 2% to RMB 247.65 billion. However, this relatively stronger performance primarily resulted from timing—their major subsidy push began in July, after the Q2 reporting period ended.
The company’s real-time retail business (including Taobo Flash Delivery and Ele.me) generated RMB 14.8 billion in revenue, representing 12% year-over-year growth driven largely by the late April launch of Taobo Flash Delivery. The full impact of their subsidy activities will only become visible in Q3 results.
Marketing Expenditure Explosion
The food delivery platform subsidy battle triggered an unprecedented surge in marketing and customer acquisition costs across all three companies. Each platform deployed massive resources to attract and retain both consumers and merchants through discounts, promotions, and advertising campaigns.
JD.com’s Marketing Blitz
JD.com’s marketing expenses skyrocketed 127.6% year-over-year from RMB 11.9 billion to RMB 27 billion. As a percentage of revenue, marketing costs increased from 4.1% to 7.6%, representing one of the most significant quarterly expenditure increases in the company’s history. Management specifically attributed this surge to “increased spending on promotion activities for new businesses.”
Meituan’s Defensive Spending
Meituan increased sales and marketing expenses by 51.8% to RMB 22.5 billion, with these costs growing from 18% to 24.5% of revenue. The company acknowledged that these increases resulted from “business development and continuously adjusted business strategies to cope with intense competition in food delivery and real-time retail businesses,” including elevated spending on “promotion, advertising, and user incentives.”
Alibaba’s Strategic Investment
Alibaba’s sales and marketing expenses (excluding share-based compensation) increased from 13.3% to 21.3% of revenue. This significant jump reflected substantial investments in “Taobo Flash Delivery and user experience and user acquisition for Alibaba China Commerce Business Group.” The company positioned this spending as necessary to establish “consumer mindset in real-time retail and expand business scale.”
Strategic Outcomes Beyond the Financials
Despite the financial pain, each platform claimed strategic victories from the food delivery platform subsidy battle. These claims reveal how companies rationalized massive expenditures and positioned themselves for future competition.
JD.com’s Ecosystem Integration
JD.com framed its subsidy campaign as successfully achieving “initial strategic objectives,” emphasizing how their food delivery business achieved “healthy development” in order volume growth, merchant expansion, and full-time rider recruitment. Most importantly, they highlighted how the new service created “effective synergies with JD Retail and other existing businesses,” potentially driving cross-platform purchasing behavior.
Meituan’s User Engagement Improvements
Meituan reported that their marketing activities “accelerated new user conversion” while membership programs “enhanced user stickiness.” These efforts reportedly drove annual transacting users’ average purchase frequency to record highs while promoting cross-selling opportunities across their various services.
Alibaba’s Platform Enhancement
Alibaba claimed that Taobo Flash Delivery “strengthened Taobo app’s leading position in China’s e-commerce industry” and drove a 25% year-over-year increase in monthly active consumers during the first three weeks of August. This suggests their subsidy strategy aimed primarily at strengthening their core platform rather than merely capturing delivery market share.
Market Reaction and Investor Sentiment
The financial markets delivered a harsh verdict on the food delivery platform subsidy battle. On August 28th, following earnings releases, Meituan’s stock price plummeted 12.55%, while JD.com declined over 5% and Alibaba fell more than 4%. Although all three stocks rebounded slightly on August 29th, their performance since April reveals deeper concerns.
From April through late August, JD.com’s stock declined approximately 25%, Meituan dropped about 34%, and Alibaba decreased nearly 8%. This significantly underperformed the Hang Seng Tech Index, which gained over 5% during the same period. This divergence suggests investors question the long-term value creation potential of subsidy-driven competition.
Analyst Perspectives and Future Outlook
Financial analysts expressed concern about the sustainability of current competition levels and projected continued challenges in the coming quarters.
Jiao Tong International’s Meituan Assessment
Jiao Tong International predicted that third-quarter competition would intensify further, projecting that Meituan’s instant delivery order volume might grow 16% year-over-year daily. However, they anticipated that instant delivery revenue would decline 6% due to subsidy impacts and strategic adjustments in merchant investments, potentially generating over RMB 15 billion in losses.
Oriental Securities’ JD.com Analysis
Oriental Securities noted that JD.com’s Q2 revenue “clearly accelerated” with food delivery driving traffic to their main platform and logistics business. However, profits were “significantly below expectations due to food delivery subsidies.” They projected that JD.com would reduce subsidy intensity in Q3 despite intensified competition from Alibaba’s entry, potentially shortening the duration of significant losses.
The Path Forward After the Food Delivery Platform Subsidy Battle
The Q2 2025 earnings season provided stark evidence that the food delivery platform subsidy battle created significant value destruction in the short term. All three major players experienced substantial profit compression while increasing marketing expenditures dramatically. The key question now becomes whether these investments will generate sufficient long-term returns through customer loyalty, ecosystem enhancement, and market position strengthening.
Industry observers should monitor several developing trends: potential regulatory interventions to prevent further irrational competition, possible consolidation among smaller players unable to sustain subsidy levels, and innovation in service differentiation beyond price competition. The coming quarters will reveal whether this expensive battle created lasting competitive advantages or merely temporary market share fluctuations.
For investors and industry participants, the lesson is clear: even deep-pocketed tech giants cannot defy economic fundamentals indefinitely. Sustainable business models must eventually emerge from the current subsidy-driven competition. Those interested in this evolving landscape should track Q3 earnings closely for signs of either moderation or escalation in this costly food delivery platform subsidy battle.