Alibaba Outperforms as Meituan Stumbles in China’s Competitive Landscape

Investors betting on the widening performance gap between Alibaba Group Holding Ltd. and Meituan have been handsomely rewarded this year, with the long Alibaba–short Meituan trade returning 130% year-to-date. The trade underscores the contrasting trajectories of two of China’s most influential internet firms — one benefiting from artificial intelligence optimism and strategic cash management, the other struggling under the weight of fierce competition and falling margins.

Alibaba’s stock, listed in Hong Kong, has doubled in 2025, powered by investor enthusiasm for its AI initiatives and a rebound in its cloud division. Meituan, on the other hand, has slumped 33%, marking it as the worst performer on the Hang Seng Tech Index. Analysts say this divergence is not accidental — it’s the product of structural shifts in China’s digital economy and a price war that continues to erode profitability across the consumer internet sector.

Price Wars Reshape the Food Delivery Market

China’s long-running discount battles have intensified since Alibaba reignited its food delivery ambitions in April. The company’s Ele.me platform has aggressively expanded in urban centers, offering in-store dining vouchers and localized promotions in three major cities — a strategy that analysts expect to scale nationwide.

“The offline, in-store segment is emerging as the next battleground,” said Willer Chen, analyst at Mizuho Securities Asia Ltd. “Alibaba has only launched in a handful of cities, but expansion appears inevitable as it integrates its food delivery push with local retail.”

In contrast, Meituan has been forced into a defensive position. The company plans to raise $3 billion in bonds to support its logistics and quick-commerce operations — initiatives that analysts warn are capital-intensive and low-margin. “Quick commerce requires huge investment and offers even thinner returns than food delivery,” said Julia Pan of UOB Kay Hian Holdings Ltd.

While Alibaba leverages its deep cash reserves to sustain subsidies and strategic flexibility, Meituan’s efforts to retain market share have come at a high cost. Analysts estimate Meituan will report a net loss of 14.5 billion yuan ($2 billion) for the September quarter, while Alibaba is expected to remain profitable with 9.5 billion yuan in earnings — albeit down 78% from a year earlier.

Investor Sentiment Splits as Meituan Loses Ground

Investor positioning mirrors the companies’ diverging fundamentals. Short interest in Meituan has surged to over 2% of free float, its highest in five years, while Alibaba’s short interest remains below 0.2%, according to S&P Global data. The sentiment gap reflects growing confidence in Alibaba’s ability to weather competitive pressures and skepticism over Meituan’s strategic clarity.

Still, Alibaba faces its own challenges. “Alibaba has been losing e-commerce market share for a long time, and the drag from reinvestment will outweigh cloud growth for some time,” warned Xin-Yao Ng, fund manager at Aberdeen Investments. Yet, Wall Street remains overwhelmingly bullish: 47 analysts rate Alibaba a “Buy”, projecting 23% upside over the next 12 months. Meituan’s “Buy” calls, by contrast, have dropped to their lowest level since 2020.

Outlook: Alibaba Holds the Initiative, but Risks Remain

Looking ahead, the coming weeks — particularly earnings releases and Singles’ Day sales results — could shape the next phase of this trade. Alibaba appears well-positioned to extend its lead, with AI integration and offline expansion fueling optimism. Meituan’s bond issuance may provide short-term liquidity, but investors remain wary of the company’s costly diversification and uncertain return on capital.

As Mizuho’s Chen summarized, “Meituan is largely in a defensive posture, while Alibaba currently holds the initiative.” For now, markets are betting that Alibaba’s financial strength and AI-driven momentum will keep it ahead in China’s increasingly fragmented internet landscape.