This article first appeared on GuruFocus .
Mixue Group delivered a stronger-than-expected 2025 performance, with revenue rising 35% to 33.56 billion yuan and net profit increasing 33%, both coming in slightly ahead of consensus estimates. The results suggest the company has been able to sustain growth even as China's beverage market faced a prolonged price war, with scale and aggressive pricing potentially helping to drive traffic. Shares responded positively, jumping 8.5% in Hong Kong following the release, marking the steepest intraday gain in nearly three months.
The rally comes after a more challenging stretch for the stock, which remains down nearly half from its June 2025 high, reflecting ongoing investor concerns around profitability. Mixue leaned into subsidy-driven promotions over the past year, at times offering drinks for as little as 2 yuan to defend market share, a strategy that may have supported volumes but also raised questions about margin durability. UBS downgraded the company to neutral earlier this year and cut its price target, pointing to rising raw material costs, a higher mix of delivery sales, and intensifying competition, with expectations that gross margins in 2026 could narrow from last year's level.
Across the broader sector, conditions remain uneven. While there are indications the price war may be easing, with some chains raising delivery prices and regulators launching an investigation into competition practices involving major platforms such as Alibaba ( NYSE:BABA ), Meituan, and JD.com ( NASDAQ:JD ), operating pressure has persisted for many players. Luckin Coffee ( LKNCY ) reported weaker-than-expected revenue and declining margins, while dine-in operators including Haidilao and Tai Er posted same-store sales declines, and Shanghai XNG shut all its outlets in Shanghai. Against that backdrop, Mixue's footprint of more than 55,000 stores in China and about 4,500 overseas, along with new openings in Los Angeles and New York, could provide a pathway for expansion, though execution risks may remain as the industry adjusts.
