The red ink is piling up at China’s emerging technology champions, as these companies spend heavily in a bid to spur new market segments.
Sales are soaring at companies such as food-delivery company Meituan , e-commerce group Pinduoduo Inc. and short-video specialist Kuaishou Technology , after the pandemic helped turbocharge demand for online services. At the same time, these companies are sustaining substantial losses as they prioritize long-term opportunities over immediate profitability—and their shares are sliding.
“We’ll stay patient for long-term results. We will not simply adjust our long-term-oriented strategy or investment pace based on short-term volatility,” Meituan Chief Executive Wang Xing said on the company’s earnings call May 28.
Revenue at the Hong Kong-listed company more than doubled in the first three months of this year compared with the same period in 2020, but losses rose even faster, to 4.8 billion yuan, equivalent to $750.7 million, or a loss of more than 13 cents for every dollar the company took in.
Many American tech companies, from Amazon.com Inc. to newer businesses like DoorDash Inc., have used a similar playbook of spending heavily to grow new businesses. Chinese tech companies—including both publicly traded ones and unlisted startups such as ride-hailing giant Didi Chuxing Technology Co.—often try to outspend rivals, subsidizing their offerings in pursuit of market dominance.