SE Q3 Deep Dive: E-Commerce and Gaming Growth Outpace Profit Expectations

E-commerce and gaming company Sea (NYSE:SE) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 36.5% year on year to $5.99 billion. Its GAAP profit of $0.58 per share was 22% below analysts’ consensus estimates.

Is now the time to buy SE? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Sea reported strong revenue growth in the third quarter, with management highlighting sustained momentum in e-commerce, digital finance, and gaming. While revenue and adjusted EBITDA surpassed Wall Street expectations, GAAP profit fell short, reflecting higher investments and shifting business mix. CEO Forrest Li emphasized, “Our focus remains the same: continuing to deliver high and profitable growth across all three of our businesses,” pointing to Shopee’s expanding market share, increased user engagement, and Garena’s robust bookings as primary drivers.

Looking forward, Sea’s management expects continued high growth across its core segments, driven by investments in logistics, AI-powered personalization, and the expansion of financial services. CFO Tony Hou noted that ongoing investments in fulfillment and user engagement, such as the Shopee VIP program, should support further user growth and improved unit economics. Management cautioned that these investments may lead to quarter-to-quarter margin fluctuations, but reiterated confidence in achieving year-over-year profitability improvements, stating, “We believe we are able to deliver the 2% to 3% EBITDA margin as we shared before.”

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to Shopee’s market share gains, deeper user engagement, and Garena’s successful content campaigns. Strategic investments in logistics and digital finance were key themes.

• Shopee’s logistics differentiation: The company reported significant advances in delivery speed and cost efficiency, particularly in Indonesia and Taiwan, where localized logistics options—like same-day urban delivery and low-cost rural shipping—boosted user growth and operational margins.
• VIP program traction: Shopee VIP membership subscriptions grew over 75% quarter on quarter, leading to higher buyer engagement. VIP members spent 40% more post-subscription and accounted for 10% of Indonesia’s GMV, supporting increased purchase frequency and loyalty.
• AI-powered platform enhancements: Management highlighted the impact of AI on product recommendations, search, and ad targeting, which increased purchase conversion rates by 10% year over year and raised average buyer activity across core markets.
• Garena’s content-driven resurgence: Free Fire delivered its best quarter since 2021, with major IP collaborations (e.g., Naruto Shippuden, Netflix tie-ins) driving high engagement and bookings. Localized events and community-building initiatives contributed to player retention.
• Expansion in digital finance: The Money segment’s loan book expanded 70% year on year, supported by wider adoption of pay-later and personal loan products, especially in Thailand and Brazil, while maintaining low non-performing loan ratios and healthy unit economics.

Drivers of Future Performance

Sea’s outlook is shaped by continued investment in logistics, AI integration, and new user engagement initiatives, balanced against competitive and cost pressures.

• Logistics and fulfillment expansion: Further investment in localized logistics and fulfillment is expected to reduce delivery times and costs, enhance user satisfaction, and deepen market penetration, especially in Southeast Asia and Brazil. Management believes this will strengthen Shopee’s competitive position.
• AI and content ecosystem growth: The company plans to expand AI-driven personalization and advertising tools, which management expects will improve user engagement, ad monetization, and seller adoption. Enhanced content partnerships, like those with YouTube and Meta, are also seen as key engagement levers.
• Digital finance scaling with risk discipline: Management aims to grow the Money segment by broadening pay-later and personal loan offerings while maintaining strict risk controls. The company views untapped offline and non-e-commerce use cases as significant growth opportunities, especially as credit card penetration remains low in core markets.

Catalysts in Upcoming Quarters

In the coming quarters, our analyst team will be monitoring (1) the pace of Shopee’s logistics and fulfillment rollout across key markets, (2) adoption rates and profitability of the Shopee VIP program and AI-driven platform features, and (3) sustained growth and engagement in Garena’s gaming portfolio, especially from new IP collaborations. Progress in expanding digital finance solutions and maintaining asset quality will also be critical signposts for Sea’s multi-segment growth ambitions.

Sea currently trades at $142.30, down from $155.10 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

High Quality Stocks for All Market Conditions

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.