Yum China Reports 4% Q2 Revenue Growth to $2.79 Billion

Yum China Holdings Inc. achieved a revenue increase of 4% year-on-year for the second quarter of 2025, reaching $2.79 billion. This growth occurred despite significant competition in the food delivery market, which has become increasingly aggressive. Executives noted positive same-store sales growth, marking the tenth consecutive quarter of increasing transactions, as outlined in the company’s earnings call reported by Insider Monkey.

Despite the revenue growth, investor sentiment appears cautious. Following the earnings release on Tuesday, shares on the Hong Kong exchange fell approximately 3%. Concerns center around an ongoing price war among major food delivery companies, which is affecting profit margins across the industry. A recent analysis from Fortune Asia highlighted that this intense competition, primarily instigated by Meituan, Alibaba, and JD.com, is driving down prices while simultaneously increasing consumer access to affordable meals.

Intensifying Competition in Food Delivery

The food delivery sector in China has transformed into a high-stakes battleground where e-commerce giants are investing heavily in subsidies to secure market share. Meituan, which holds over 70% of the market, faces stiff competition from JD.com and Alibaba, which have entered the instant retail space, promising deliveries within 30 to 60 minutes. A report from Reuters in May detailed how these companies are betting on rapid service to reshape consumer preferences, thereby exerting pressure on traditional operators like Yum China.

This environment has led to pricing strategies, such as 30-cent coffee deals, that have prompted CNBC to label the situation a “billion-dollar burn.” Executives at Meituan have referred to the current boom as “mostly a bubble,” as discussed in a July article by TechNode. For Yum China, delivery sales now account for 45% of its total business, up from 38% last year, indicating the company’s active involvement in this highly competitive landscape.

Strategic Adaptations and Financial Performance

In response to these market pressures, Yum China has focused on enhancing operational efficiency. The company reported a record-high operating profit margin of 10.9% for the second quarter, an increase of 100 basis points compared to the previous year. Additionally, operating profit rose by 14%, with diluted earnings per share (EPS) reported at $0.58, meeting analyst expectations according to Morningstar.

The company has announced plans for significant expansion, projecting the opening of between 1,600 to 1,800 net new stores and capital expenditures ranging from $600 million to $700 million. These initiatives reflect a confidence in continued growth, despite the competitive challenges.

Investor reactions on social media platform X, formerly Twitter, showcase a mix of optimism and caution. Some investors view Yum China’s margin expansion and stable EPS as indicators of resilience, while others remain wary of the long-term implications of the ongoing delivery wars. Discussions have emerged around JD.com’s strategic moves as a defensive response to Meituan’s market dominance, potentially prolonging the subsidy battle.

The parent company, Yum! Brands Inc., also experienced slight growth, reporting a net income of $374 million for Q2. However, same-store sales for Pizza Hut and KFC in the U.S. showed declines, as noted in a summary by CNBC. In China, Yum’s emphasis on value-driven menus and digital initiatives has positioned the company to navigate through the competitive turbulence.

Looking ahead, the fierce rivalry among food delivery services could lead to industry consolidation or increased regulatory scrutiny, particularly as subsidies continue to pressure profitability. A May article from Fortune Asia highlighted JD.com’s significant advancements in delivery services, despite the costs involved.

Investor Sentiment and Future Outlook

Analysts are closely monitoring Yum China’s performance. Some interpret the recent share price decline as a potential buying opportunity, especially in light of the company’s dividend announcement of $0.24 per share, as reported by AInvest. Nonetheless, the sustainability of the price war remains uncertain, with discussions on X questioning whether this scenario mirrors past e-commerce conflicts that ultimately resulted in market consolidation.

Yum China’s second-quarter results illustrate a challenging balance: leveraging delivery growth while mitigating the effects of intense competition. As the food service sector continues to evolve, stakeholders will be keenly observing how these dynamics will influence Yum China’s long-term profitability and its position within China’s vast consumer market.