The Financial Record

The Financial Record

Three audited years show a genuine but fragile turnaround. Revenue recovered from a 2023 retrenchment to a record RMB24,359.9 million in 2025, and Dingdong reached GAAP profit for the first time [1]. But the net margin is about 1%, gross margin is drifting down, and almost all of the reported profit comes from government subsidies and interest on the cash pile rather than from selling groceries [2]. Consensus rests on two analysts — and a pending sale to Meituan changes what these numbers mean.

The revenue arc: retrenchment, then a decelerating recovery

Dingdong's top line is not a smooth growth story. After the 2021 strategic pivot to "efficiency first with due consideration of scale," the company exited cities and cut back, and revenue fell 17.5% in 2023 to RMB19,971.2 million. It then recovered to RMB23,066.3 million in 2024 (+15.5%) and edged to a record RMB24,359.9 million in 2025, but growth had decelerated to 5.6% [3].

Source: FY2025 Annual Report (Form 20-F), Operating Results — 2023–2025 figures [4]; 2022 from the FY2024 Annual Report income statement [5].

The recovery is real but shallow, and the mix underneath it is softening. Average order value slipped from RMB72.1 in 2023 to RMB71.4 in 2024 and RMB70.1 in 2025, which management attributes to "declining consumer prices for certain commodities" [6]. In other words, order counts are carrying growth while price per basket falls — the footprint of deflation and competition in China's grocery market, not pricing power.

Where the profit actually comes from

The three-year record establishes where the profit actually comes from. In 2025, total revenues of RMB24,359.9 million minus total operating costs and expenses of RMB24,373.2 million left the core grocery operation at a loss of roughly RMB13 million — before any other income [7]. The reported RMB131.7 million of operating income exists because of "other operating income, net" of RMB145.0 million — which the company says rose mainly on RMB26.4 million more in government subsidies [8]. Government subsidies alone were RMB87.4 million in 2025, up from RMB61.0 million in 2024 and RMB18.1 million in 2023 [9].

Below the operating line, RMB125.6 million of interest income — earned on the cash and short-term investments — net of RMB16.8 million interest expense, lifted pre-tax income to RMB240.9 million [10]. Split the profit into its three drivers across the three years and the pattern is clear: the grocery operation hovers around breakeven, while subsidies and interest on the balance sheet do the work.

Source: derived from the FY2025 income statement — core operations = total revenues less total operating costs; other operating income, net; interest income less interest expense [11].

Read down the FY2025 column and the arithmetic is stark: of RMB231.7 million net income, RMB145.0 million came from other operating income (chiefly subsidies) and about RMB109 million from net interest, against a small operating loss on the core business and RMB9.2 million of tax [12]. The strongest fact on the other side is that this is not accounting sleight of hand: the subsidies have recurred and grown for three straight years, and fulfillment efficiency is genuinely improving (below), so the core operation is at breakeven rather than deeply loss-making — a real achievement for a model that lost RMB6.4 billion in 2021. But two of the three profit engines are policy-dependent and balance-sheet-dependent, and the interest engine is shrinking on its own: interest income fell 18.7% in 2025 as the company drew down cash and repaid borrowings [13]. What would change this read is the core line turning durably positive — revenue growing faster than the cost base rather than the two moving in lockstep. The quarter-by-quarter path of that core line — its crest and the reversal that followed — is traced in Margin Trajectory.

Margin structure: compression offset by fulfillment leverage

The cost stack explains why the core barely breaks even. Cost of goods sold has risen as a share of revenue every year — 69.3% in 2023, 69.9% in 2024, 70.8% in 2025 — so gross margin has compressed from 30.7% to 29.2% [14]. Working against that, fulfillment expense — the delivery riders, station leases and couriers that make 30-minute grocery possible — has fallen from 23.5% to 21.9% of revenue as order density improved [15]. The net of falling gross margin and improving fulfillment leverage is an operation that lands, three years running, within a percentage point of breakeven.

Source: FY2025 Annual Report (Form 20-F), operating costs and expenses as a percentage of revenues [16].

Add-backs are modest and honest. The only reconciling item between GAAP and non-GAAP profit is share-based compensation, which fell to RMB78.4 million in 2025; on that basis non-GAAP net income was RMB310.1 million (1.3% margin), down from RMB422.9 million in 2024 [17]. Non-GAAP profitability fell year-over-year just as GAAP profit did — the adjustments do not paper over a decline.

Cash conversion: strong, but flattered by working capital

On cash, the record looks better than the income statement — with a caveat. Operating cash flow swung from RMB(234.6) million in 2023 to RMB929.0 million in 2024, then RMB535.5 million in 2025 — comfortably above net income in both profitable years [18]. Capital intensity is low — capex was RMB177.8 million in 2025, about 0.7% of revenue, since the fulfillment stations are leased rather than owned — leaving free cash flow of roughly RMB358 million [19].

Source: FY2025 Annual Report (Form 20-F), Consolidated Statements of Cash Flows; free cash flow = operating cash flow less capital expenditure [20].

The caveat is what drives the cash. In 2025, accounts payable grew by RMB259.9 million — a working-capital inflow — and the mechanics of lease accounting add back RMB717.5 million of non-cash lease expense against RMB691.0 million of lease payments [21]. This is a supplier-financed model: it converts thin profit into real cash while payables keep expanding, but that tailwind is finite and both operating and free cash flow already fell by more than a third in 2025. The cash conversion is genuine; it is not a growth engine.

The balance sheet: the strongest part of the story

The turnaround has rebuilt a fortress balance sheet, which is where the investment case in Fresh Grocery, Net Cash begins. At end-2025 the company held RMB1,106.8 million of cash, RMB0.3 million of restricted cash and RMB2,869.7 million of short-term investments — RMB3,976.8 million (US$568.7 million) in all — against short-term borrowings of RMB871.5 million, for net cash near RMB3,105 million [22] [23].

Source: FY2025 Annual Report (Form 20-F), Consolidated Balance Sheets and Statements of Changes in Shareholders' Equity [24] [25].

Two footnotes temper the fortress. First, RMB429.1 million of the short-term deposits is pledged as collateral for borrowings, so not every yuan of the reported cash is freely deployable [26]. Second, shareholders' equity of RMB1,040.8 million sits on top of an accumulated deficit of RMB13,163.2 million — the record of the blitzscale losses that a decade of paid-in capital funded [27]. Capital return has so far been token: the company repurchased just RMB8.8 million of stock in 2025 and has never paid a dividend [28].

Forward estimates: a thin consensus looking the wrong way

The published forward view is sparse and should be weighted accordingly: two analysts cover the revenue line and expect the recovery to reaccelerate — to roughly RMB26,965 million in 2026 (+10.7%) and RMB29,038 million in 2027 (+7.7%), with earnings revisions running one up and none down over the past 30 days.

Source: FY2025 actuals per the FY2025 Annual Report [29]; 2026–2027 are consensus estimates from two analysts, as reported.

Two things blunt the usefulness of these numbers. The coverage is too thin to triangulate — a single revision moves the "consensus" — and, more fundamentally, the estimates describe the standalone grocery business as if it will keep running. It will not in its current form. On February 5, 2026, Dingdong signed a definitive agreement to sell that business.

What the numbers now describe: a business being sold

Everything above is the audited record of a company that has agreed to dispose of substantially all of it. Under a share purchase agreement dated February 5, 2026, Dingdong will sell Dingdong Fresh BVI — which holds substantially all of its China operations — to Two Hearts Investments Limited, a wholly-owned subsidiary of Meituan (HKEX: 3690), for cash consideration of US$717 million, plus the right to draw up to US$280 million more in cash from the business before closing, for expected total proceeds of up to US$997 million [30]. That figure alone is nearly twice the company's entire market value discussed in Fresh Grocery, Net Cash. Ninety percent is payable at closing, ten percent after tax settlement, and the deal is conditional on anti-monopoly clearance from China's SAMR and had not closed as of the latest filings [31]. On February 10, 2026, the company said it intends to use a substantial majority of the proceeds for share repurchases and/or dividends upon closing [32].

Two consequences follow for anyone reading the trailing numbers. The China business is now reported as discontinued operations and its assets as held-for-sale, which means depreciation and amortization on those assets has stopped — a change that inflated reported net income by roughly RMB138 million in the first quarter of 2026 alone, and will keep flattering quarterly profit until the deal completes [33]. And the forward estimates above describe an entity the company is exiting; what remains at Dingdong (Cayman) after closing is the sale proceeds, a fast-growing but loss-making overseas business — up 195% year-over-year but still losing RMB71.4 million in the first quarter of 2026 — and a stated plan to return most of the cash [34]. The three-year record measures the earning power of what Meituan is buying; it is a weak proxy for what an investor in the ADS now owns.