Alibaba, JD.com and Meituan are waging war in China. Which one should an investor bet on?

September was extremely successful for the shares of Alibaba, one of the leaders of the Chinese e-commerce market. Quotes of the company's depositary receipts on the NYSE soared by more than 30%, and since the beginning of the year the company's capitalization has grown by more than 123%.

At first, investors reacted quite positively to the company's report for the quarter ended June 30, 2025 (it was released on August 29). On that day, quotations on the US stock exchange soared by almost 13%.

But these results cannot be called unambiguously positive. In particular, revenue was below expectations, and adjusted EBITA (earnings before interest, taxes, depreciation and amortization) fell by 14% year-on-year. Nevertheless, investors were able to find something in the reports that can now override any negativity - the cherished phrase "artificial intelligence" and impressive growth rates of indicators related to it. For example, revenue from the company's cloud computing division increased by 26%, and revenues from AI products continued to grow at triple-digit rates for the eighth consecutive quarter.

Another catalyst for the quotes growth was the speech of the company's head Eddie Wu at the technology conference in Hangzhou. He said the company has expanded its plans to invest in AI infrastructure and cloud technology to more than 380 billion yuan ($53 billion) over the next three years, which the company announced earlier this year.

Recently, there have been more and more warnings about the possible overvaluation of artificial intelligence, primarily from an investment point of view. For example, Sam Altman, head of OpenAI, does not rule out that a bubble is already forming in the AI market, MIT says that most initiatives in this area are ineffective, at least for the time being, and Bain & Co. expects a shortfall in revenues compared to expenses in this industry of $800 billion by 2030. Still, any mention of AI is still extremely positive for stock performance.

It should not be forgotten that Alibaba is also engaged in a price war in the fast food delivery market in 2025 - with its longtime competitor in the e-commerce market, JD.com, as well as with the undisputed leader of this segment, Meituan (it now has about 70% of the fast food delivery sector in China, according to JPMorgan).

This battle has already resulted in serious financial losses for each of the players. In particular, Meituan's adjusted net profit plummeted 89% for the second quarter of 2025, to 1.5 billion yuan, and its quotations have fallen more than 30% since the beginning of the year. JD.com's profit in the last reported quarter fell by half to 6.2 billion yuan. And the share price has fallen by almost 13% since the beginning of the year.

Alibaba's net profit fell 18% year-on-year to 40.7 billion yuan, while net cash flow turned negative for the first time in a long time to 18.8 billion yuan at the end of the second quarter of 2025.

And it no longer matters that the war was spearheaded by JD.com, which launched food delivery service JD Takeaway in early February this year, hoping to squeeze Alibaba's Meituan and Ele.me out of this market.

What is important is that all parties involved have to "burn cachet" at an impressive rate in the battle of subsidies to attract buyers, and that such wars are not won by one-off promotions.

Yes, consumers are excited, companies can release reports like "our daily orders exceeded 120 million (Alibaba's) or 150 million (Meituan's)" and so on, but the harsh reality is that Meituan will remain the undisputed leader of this market for at least the next few years, Alibaba will be its main pursuer, and JD.com can hardly expect anything much more than the 5% of the market it currently occupies, according to JPMorgan estimates.

Morgan Stanley assumes that in five years, the shares of Meituan and Alibaba in the fast delivery market (in terms of total transaction volume) will be equal, and the monopoly will turn into a duopoly - with shares of slightly less than 50% each. However, the investment bank believes that Meituan will retain its undisputed leadership in the fast food delivery market. In such a configuration, there is no room for JD.com on this market, despite all the costs incurred. According to S&P Global estimates, only in the next 1-1.5 years, the companies together may spend at least 160 billion yuan (or more than $22 billion) in the struggle for a place in the market of fast delivery.

How things will play out, time will tell, but it's hard to argue that Meituan's competitors - both JD.com and Alibaba - need to find new growth points that will require huge investments.

Indeed, China's e-commerce market accounts for about half of the global market, but the revenue of two of the top five companies has been growing very modestly recently. For example, over the past three years, Alibaba's average annual revenue growth rate was 5.3% (for the fiscal year ending March 31, 2025), while JD.com's growth rate was only slightly higher at 6.8% (for 2024). By comparison, Meituan's revenue has grown at an average annual rate of 23.5% over the past three years.

It is possible that we should not expect breakthrough growth in this market - according to the forecast of the analytical company Mordor Intelligence, the already very mature Chinese e-commerce market will grow at an average rate of only 10.4% in the next five years. In turn, the market for fast delivery, according to forecasts, may grow from 780 billion yuan by the end of 2024 to 2 trillion yuan by the end of 2030, adding an average of more than 20% each year.

No wonder both Alibaba and JD.com are so excited to invest so aggressively in growing their share of the fast delivery segment.

International expansion is unlikely to become a serious driver for Chinese heavyweights. Firstly, the volumes of most international markets are not comparable to the Celestial Empire's market. Secondly, most countries already have their own strong players, and it will not be possible to squeeze them out just like that. And in the case of such actions, the state will clearly be guided by national interests, especially since the trend towards globalization is no longer very relevant. Alibaba's international segment, which it started developing quite a long time ago, accounts for only 14% of its revenue.

But the development of cloud computing within the country looks promising at first glance. China lagged behind the US in this component and is now trying to make up for lost time. According to the forecast of the same Mordor Intelligence, in the next five years this market in China will grow at an average annual rate of 22%. Alibaba is the undisputed leader in this segment in terms of revenue in the country with a share of 36%. Its closest competitor, Huawei Cloud, has only 19%. Alibaba recently entered into a partnership agreement with Nvidia, which involves expanding its network of global data centers and creating new products in the field of AI.

Amazon is already successfully implementing a similar strategy, with almost 38% of the global cloud computing market by the end of 2024. Yes, there are many doubts about the profitability of investing in AI in the future, but it is clearly better for a mature company to look for new points of growth.

The whole question is whether Alibaba has enough resources for all these initiatives. Yes, compared to JD.com and Meituan, the company looks much more powerful, but the "enemies" in the instant delivery market are not spreading their efforts on other initiatives.

Thus, at the end of the second quarter of 2025, Alibaba had 585.7 billion yuan of cash and cash equivalents (including short-term investments) on its balance sheet. Operating cash flow, even after engaging in a war of subsidies and incentive promotions, was about 21 billion yuan.

Similar figures for JD.com are 223 billion yuan and 24.4 billion yuan, respectively. However, JD.com's net cash flow at the end of the second quarter, unlike Alibaba, was positive - 22 billion yuan. Meituan, on the other hand, had about 171 billion yuan of cash and cash equivalents on its balance sheet and an operating cash flow of 4.8 billion yuan.

As usual, it is quite difficult to compare operational efficiency indicators in this case. Firstly, the business models of all three companies are markedly different.

For example, Alibaba's 3P model(third party - the company acts as aplatform where sellers and buyers find each other - editor's note) is a priori more effective than JD.com 's 1P model(first party - the company itself purchases goods and sells them) by key operational metrics.

Second, the tariff war between China and the US is seriously distorting the current figures. How they will look like in 1-2 years depends on a lot of "ifs". Including whether companies will be able to fully realize their plans. For example, Alibaba is now actively moving towards a more capital-intensive business model (cloud technologies), which will eventually affect many of the company's operating metrics.

For the above-mentioned reasons, the comparison of multiples should also be approached with great caution. Nevertheless, it is safe to say that the cheapest company among the three is JD.com for obvious reasons - the company has a low-margin and weak-growth business, it is engaged in a trade war with major competitors, but has a rather low chance of winning something serious, and it has few other points of growth at the moment.

Accordingly, JD.com's forward-looking P/E multiple (share price to future earnings ratio) is at 10.54 and 10.03 for the past 12 months. In comparison, Alibaba has both ratios of 24.45 and 21.86, and Meituan has 21.14 and 20.7.

EV/EBITDA of Alibaba and Meituan are quite comparable - 15.65 and 14.12, respectively. But JD.com securities are undervalued by this multiple - 5.35 - and belong more to the category of value stocks.

On the other hand, as measured by the five-year PEG ratio (which shows how fairly investors value the stock price given a company's earnings growth rate), all three companies appear very expensive, noticeably above the frontier at 1.

If the choice was strictly between Alibaba and Meituan, which in terms of multiples are now trading at roughly the same level, it would make sense to choose Alibaba. This is a company with a strong and stable business that generates very strong operating cash flow, which is also trying to take market share from Meituan, and is well positioned to diversify into the fast-growing cloud computing market.

The presence of JD.com in this equation raises the age-old question of whether it is a growth or value stock. It's unclear how long JD.com will participate in the fast delivery market, how much share it will be able to take and at what price. It is possible that this money could be used for dividends with greater efficiency for shareholders.

Again, it is also not quite correct to consider these companies in isolation from the entire market. And here the comparison of, say, Alibaba and Meituan with Amazon will clearly not be in favor of the first two. Most of the multiples of these companies are comparable, and the Chinese market looks obviously riskier from the point of view of any investor. After all, the government and regulators there have much more influence, which they have already demonstrated many times, including in the very recent past.

And while sell-side analysts are almost unanimous that both Alibaba, Meituan and JD.com should be bought even now, the spread of target prices for each hints that this unanimity should be treated with a fair amount of skepticism.

And with current price levels, it makes sense to focus on other sectors or wait for more attractive entry points for these companies.

This article was AI-translated and verified by a human editor