Sea Limited (SE) Earnings

Management highlights

- E-Commerce (Shopee) - Maintained strong growth momentum, with 8 consecutive quarters of sequential GMV growth and new all-time highs in gross order volume and revenue. Average monthly new active buyers grew over 35% YoY (accelerated from prior quarters), total average monthly active buyers rose 18% YoY, and purchase frequency increased 8% YoY. - Monetization improved strongly: ad revenue grew over 70% YoY, ad take rate rose over 90 basis points YoY. 45% of sellers pay for ads, with average ad spend per seller up over 15% YoY, driven by product improvements like personalized ad-voucher pairing that boosted conversion efficiency. - Expanded and optimized logistics and fulfillment: instant/same-day delivery order volume grew 80% YoY in Indonesia with cost per order down 20% YoY; total fulfillment order volume grew over 20% QoQ. Over 60% of fulfilled orders arrive next-day, and converted listings saw an average 20% order uplift in Southeast Asia. Fulfillment penetration is still low with room for expansion, and the business is run with a light capex model. - Scaled Shopee VIP: total membership exceeded 15 million at end-Q2 (up 45% QoQ), with 1 million members in Brazil just 2 months after launch. VIP members contributed 24% of GMV in Asia, with 80% monthly retention; more third-party sellers and partners co-fund benefits, improving program economics. - Grew content ecosystem: orders from live streaming and short-form video grew over 50% YoY, accounting for over 25% of physical goods orders in Southeast Asia. Affiliate orders from Meta platforms grew over 85% QoQ, with Instagram collaboration rolled out to all core markets. - Brazil is the fastest-growing market, outpacing broader market GMV growth, with delivery speed improved 15% YoY and fulfillment order penetration doubled YoY. Nearly 500 new official brands were onboarded in Q2. - Fintech (Sea Money) - Expanded AI-powered risk underwriting: new large language model-based underwriting lifted approval rates ~10% while maintaining stable risk; AI-powered document verification cut review time by 95% while retaining high accuracy. External data partnerships with mobile operators and open finance providers improved underwriting for new ecosystem users. - Drove strong new user growth: added 5.3 million first-time borrowers in Q2, active credit users grew 34% YoY to over 40 million, and average loans outstanding per user grew 20% YoY, supported by promotional offers like interest-free one-month SPayLater loans. - Expanded off-Shopee usage: off-Shopee SPayLater now accounts for over 20% of total SPayLater portfolio (35% in some markets), supported by QR payment infrastructure integration. A new card-linked SPayLater product is being tested in Thailand to expand use cases to any card-accepting merchant. - The standalone Shopee Pay app (for full financial services) saw monthly transaction users more than double QoQ, and will launch in Brazil soon. Only a fraction of ecosystem users currently use Money products, leaving large long-term growth headroom. - Gaming (Garena) - Flagship title Free Fire maintained its evergreen performance, with over 100 million average daily active users in its 9th year. Regular content and gameplay updates (including the Undersea Mystery and World Cup-themed Fire Kickoff campaigns) sustained strong user engagement. - Announced two new high-IP mobile games to diversify the portfolio: *Power World Online* (open-world survival, licensed from PocketPair, self-developed by Garena) and *Monster Hunter Outlanders* (survival-hunting action, developed by Tencent with Capcom IP), expanding into new genres and strengthening global publishing partnerships.

Guidance

- Shopee full-year 2026 GMV growth guidance is maintained at ~25%, despite anticipated forex headwinds from weakening emerging market currencies against the US dollar and a higher second-half GMV base from 2025. - Management reaffirmed the full-year 2026 adjusted EBITDA milestone of $1 billion for Shopee, which implies that second-half 2026 absolute EBITDA will be higher than first-half 2026 (a reversal of 2025's trend, where second-half EBITDA was lower than first-half). - Management reaffirmed the long-term e-commerce adjusted EBITDA margin target of 2% to 3%, noting that multiple regional markets are already above this range and the target remains achievable for the full business. - *Power World Online* is planned for a gradual global market-by-market launch, and *Monster Hunter Outlanders* is targeted for launch this year in core Garena markets (Southeast Asia, Latin America, Taiwan, with potential expansion to additional markets like the Middle East).

Segment performance

Sea Limited overall: Total GAAP revenue increased 48% YoY to $7.8 billion, with total adjusted EBITDA of $917 million, up 11% YoY, and net income of $458 million, up 11% YoY. - Shopee: Revenue was $4.2 billion, up 27% YoY. GMV grew 28% YoY to $38.3 billion. GAAP revenue totaled $5.6 billion, with $4.9 billion in GAAP marketplace revenue (up 49% YoY) and $0.7 billion in product revenue. Core marketplace revenue (transaction fees + advertising) was $4.3 billion, up 66% YoY, and value-added logistics services revenue was $0.7 billion. Adjusted EBITDA was $255 million, up 12% YoY, accounting for 32.8% of total consolidated adjusted EBITDA. - Money: GAAP revenue was $1.4 billion, up 59% YoY. Adjusted EBITDA was $288 million, up 13% YoY, accounting for 31.4% of total consolidated adjusted EBITDA. Total loan book reached $11.1 billion at end-Q2, up 62% YoY, with a 90-day NPL ratio of 1.0%. - Garena: Bookings grew 15% YoY to $764 million. GAAP revenue was $747 million, up 34% YoY. Adjusted EBITDA was $430 million, up 17% YoY, accounting for 46.9% of total consolidated adjusted EBITDA.

Risks & headwinds

- Foreign exchange headwinds from emerging market currency depreciation against the US dollar could negatively impact consolidated results. - Credit risk is managed at the segment, product, and country level, but higher provisioning is currently required for faster-growing segments including off-Shopee SPayLater lending and the Brazil credit market, which carry inherently higher risk profiles. - Fulfillment network expansion is still in an investment phase, with operational optimization and scale benefits expected to improve economics gradually over time, rather than immediately.

Analyst Q&A

• Q: Piyush Chowdhury (HSBC) asked for Shopee's GMV growth outlook, whether peak investment has passed, if unit economics are improving across new initiatives, and for an update on AI initiatives for buyers and sellers. /

  A: Management maintained full-year 25% GMV growth guidance, noting growth remains solid across all markets. Unit economics for new initiatives (VIP, fulfillment, logistics) are improving quarter-over-quarter, with most mature new initiatives already matching core platform economics, and all investments are capex-light. For AI, a 24/7 digital assistant is rolled out for sellers to answer questions and run store analytics. AI-powered generative recommendation and search algorithms have meaningfully improved conversion rates, and AI tools also improve ad conversion and enable AI-generated content for the platform. (339 characters)

• Q: Alicia Yap (Citigroup) asked for regional Shopee profitability performance and competitive landscape, if EBITDA has upside if GMV exceeds guidance, and where the business stands in the fulfillment investment cycle. /

  A: Growth and profitability are solid across Southeast Asia, Taiwan, and Brazil, with stable competition, maintained market share (and gains in some markets), and Brazil outpacing both overall market and competitor growth. The balance between growth investment and EBITDA depends on market growth and efficiency gains, with stable competition leaving room for upside if growth outperforms. Fulfillment is still in the ramp-up phase with lots of penetration room, but economics are improving as scale grows, operations optimize, and synergies with in-house logistics are realized, all on a light capex base. (468 characters)

• Q: Divya Kathiyal (Morgan Stanley) asked about take rate upside in ASEAN, if ASEAN e-commerce is already profitable, and when and at what level Money's margins will stabilize, plus NPL risk guidance. /

  A: Management notes there is still further overall take rate upside, mostly from growing ad penetration rather than fast commission increases, and price competitiveness remains strong relative to peers and offline retail even after recent take rate increases. Money's absolute EBITDA grows quarter-over-quarter, with lower ROA from mix shifts (newer markets, off-platform lending, prime user segments) that are intentional long-term growth investments. NPL levels remain stable at the segment/product/country level, with clear guardrails to maintain stable risk as growth continues. (431 characters)

• Q: Ranjan Sharma (JP Morgan) asked about geographic coverage for Garena's new announced games, a timeline for the Naruto collaboration, and what is driving higher credit provisions this quarter. /

  A: *Power World Online* will be published globally with gradual market-by-market launches. *Monster Hunter Outlanders* will launch this year focused on Garena's core markets: Southeast Asia, Latin America, Taiwan, with potential expansion to the Middle East and other markets. Higher credit provisions are driven entirely by loan mix shifts: a higher share of off-Shopee SPayLater and Brazil lending, both of which naturally require higher provisions due to their inherent risk profiles. (355 characters)