Sea Limited's Shipping Subsidies Boost GMV: Is Growth Sustainable?

Sea Limited’s SE heavy reliance on shipping subsidies has been a key catalyst behind Shopee’s strong GMV expansion, but it also raises concerns about how sustainable that momentum is. In the third quarter of 2025, Shopee delivered strong growth, with GMV rising more than 28% year over year to $32.2 billion, highlighting its solid market position across Southeast Asia, Taiwan and Brazil.

This growth, however, comes at a clear cost. To increase order volume and customer engagement, Sea Limited continues to invest heavily in logistics incentives, including free or discounted shipping. These subsidies significantly increase operating costs. As a result, Shopee’s value-added services revenues declined 5.7% year over year, even as order volumes climbed. In the same quarter, SE’s cost of services increased 38.8% due to higher logistics spending.

Shipping subsidies remain an effective competitive lever, helping Shopee defend market share against Lazada, TikTok Shop and MercadoLibre in intensely competitive markets. Still, the pressure on profitability is evident. Despite improving take rates and solid advertising growth, Shopee’s adjusted EBITDA margin fell to 0.6% of GMV, reflecting continued pressure from shipping and fulfillment costs.

SE is attempting to regain cost control by scaling its in-house logistics arm, SPX Express, which now handles most deliveries in key regions. Looking ahead, the Zacks Consensus Estimate projects revenue growth of 37.43% in 2025 and 26.21% in 2026, suggesting meaningful top-line potential. To sustain this momentum, Shopee must gradually reduce subsidy intensity without slowing GMV growth — a critical test for the long-term sustainability of its e-commerce model.

SE Faces Strong Rivals in E-Commerce

SE’s closest competitors in e-commerce are Alibaba BABA and MercadoLibre MELI.

Alibaba is a dominant global e-commerce leader with platforms like Taobao, Tmall, Lazada and AliExpress, directly competing with SE’s Shopee in Southeast Asia. Backed by strong logistics via Cainiao and a broad tech ecosystem, Alibaba leverages scale and efficiency. In the first quarter of fiscal 2026, Alibaba’s core e-commerce revenues rose 9% year over year to RMB 118.6 billion, with AI investments strengthening competitiveness.

MercadoLibre competes with SE’s Shopee across Brazil and other Latin American markets, leveraging its integrated ecosystem of Mercado Envios logistics and Mercado Pago fintech. Its massive scale, dense network and financial services create high barriers to entry for rivals. In the third quarter of 2025, MercadoLibre delivered GMV of $16.5 billion, up 28% year over year, highlighting strong regional momentum despite intensifying competition.

SE’s Price Performance, Valuation & Estimates

Sea Limited’s shares have gained 6.6% in the past year compared with the broader Zacks Computer & Technology sector’s growth of 24.1% and the Zacks Internet - Software industry’s return of 6.3%.

SE’s One-Year Price Performance

From a valuation perspective, SE stock is currently trading at a forward 12-month price-to-earnings ratio of 21.38, lower than the sector’s 27.76X. SE carries a Value Score of F.

SE’s Valuation

The Zacks Consensus Estimate for SE’s 2025 and 2026 earnings is pegged at $3.60 and $5.64 per share, respectively, both unchanged over the past 30 days. These estimates imply strong year-over-year growth of 114.29% and 56.67%, respectively.

SE stock currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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