Earnings call transcript: Sea Limited's Q3 2025 earnings miss EPS forecast, stock rises

Sea Limited reported its Q3 2025 earnings, revealing a mixed performance that led to an unexpected rise in its stock price. The company posted an earnings per share (EPS) of $0.59, falling short of the forecasted $1.02, marking a 42.16% miss. Despite this, Sea's revenue exceeded expectations, reaching $6 billion against a forecast of $5.69 billion, a 5.45% surprise. In pre-market trading, Sea's stock rose by 2.68%, reflecting investor optimism.

Key Takeaways

• Sea Limited's EPS missed expectations by 42.16%.
• Revenue surpassed forecasts, achieving a 38% year-over-year increase.
• Pre-market stock price increased by 2.68%.
• Shopee's gross merchandise value (GMV) grew 28% year-over-year.
• SeaMoney's loan book expanded by 70% year-over-year.

Company Performance

Sea Limited demonstrated robust growth in several areas despite missing EPS forecasts. The company's total GAAP revenue increased by 38% year-over-year to $6 billion in Q3 2025. Key drivers included a 28% year-over-year increase in Shopee's GMV to $32.2 billion, and a 70% expansion in SeaMoney's loan book to $7.9 billion. Additionally, Garena's bookings rose by 51% year-over-year to $841 million, underscoring the company's strong position in the digital entertainment sector.

Financial Highlights

• Revenue: $6 billion, up 38% year-over-year.
• Earnings per share: $0.59, compared to a forecast of $1.02.
• Adjusted EBITDA: $874 million, up from $521 million in Q3 2024.
• Net income: $375 million, up from $153 million in Q3 2022.

Earnings vs. Forecast

Sea Limited's Q3 2025 EPS of $0.59 fell short of the $1.02 forecast, resulting in a negative surprise of 42.16%. This miss contrasts with the company's historical performance of meeting or exceeding EPS expectations in previous quarters. However, the revenue beat of 5.45% indicates strong operational execution despite the earnings miss.

Market Reaction

Following the earnings announcement, Sea Limited's stock price increased by 2.68% in pre-market trading, reaching $159.21. This positive movement occurred despite the EPS miss, potentially driven by the revenue beat and strong operational metrics. The stock remains within its 52-week range of $99.5 to $199.3, reflecting broader market confidence in the company's long-term growth prospects.

Outlook & Guidance

Looking ahead, Sea Limited expects Shopee's GMV to grow by more than 25% in 2025, with a targeted EBITDA margin of 2-3%. The company plans continued investment in logistics and fulfillment, alongside exploring AI applications across its business lines. Potential market expansion into Argentina is also on the horizon.

Executive Commentary

CEO Forrest Li highlighted the transformative potential of AI, stating, "We believe AI represents a fundamental technological revolution which will create massive new opportunities." He also emphasized improvements in delivery capabilities, noting, "Our delivery capability has now developed to the point where we can identify and deploy service quality improvements."

Risks and Challenges

• E-commerce penetration remains low in some target markets, posing growth challenges.
• Competitive pressures in Southeast Asia could impact market share.
• Economic instability in key markets like Brazil may affect consumer spending.
• Potential regulatory changes in digital finance could impact SeaMoney's growth.
• Currency fluctuations could affect profitability in international markets.

Q&A

During the Q&A session, analysts focused on the economics of the VIP membership program, the company's AI strategy, and competitive dynamics in Southeast Asia. Sea Limited addressed these concerns by emphasizing its focus on practical AI applications and strategic market expansions.

Full transcript - Sea Ltd (SE) Q3 2025:

Conference Operator: Good morning and good evening to all and welcome to the Sea Limited Third Quarter 2025 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question, press STAR one again. For operator assistance throughout the call, please press STAR zero. Finally, I would like to advise all participants that this call is being recorded. Thank you. I would now like to welcome Ms. Rebecca Lee to begin the conference. Please go ahead.

Rebecca Lee, Investor Relations, Sea Limited: Thank you. Hello everyone and welcome to Sea's 2025 Third Quarter Earnings Conference Call. I am Rebecca from Sea's Investor Relations Team. On this call we may make forward-looking statements which are inherently subject to risks and uncertainties and may not be realized in the future for various reasons as stated in our press release. Also, this call includes the discussion of certain non-GAAP financial measures such as adjusted EBITDA. We believe these measures can enhance our investors' understanding of the actual cash flows of our major businesses when used as a complement to our GAAP disclosures. For a discussion of the use of non-GAAP financial measures and reconciliation with the closest GAAP measures, please refer to the section on non-GAAP financial measures in our press release.

I have with me Sea's Chairman and Chief Executive Officer Forrest Li, President Chris Wang, and Chief Financial Officer Tony Ho. Our management will share strategy and business updates, operating highlights, and financial performance for the third quarter of 2025. This will be followed by a Q and A session in which we welcome any questions you have. With that, let me turn the call over to Boris.

Forrest Li, Chairman and Chief Executive Officer, Sea Limited: Hello everyone and thank you for joining today's call. After a very strong first half of the year, our momentum has continued into the third quarter. We achieved a total revenue of $6 billion and adjusted EBITDA of $874 million, representing 38% and 68% year on year growth respectively. Shopee's GMV grew by over 28% year on year. Money's loan book expanded 70% year on year while maintaining a stable risk profile and Garena delivered its best quarter since 2021 with quarterly bookings up over 50% year on year. Our focus remains the same, continuing to deliver high and profitable growth across all three of our businesses. With e-commerce and digital finance penetration in our market still low, but increasing, strong growth lays the best foundation to maximize our long term profitability.

I'm very pleased with the profitable growth we have consistently delivered and we will keep on this path. With that, let me take you through each business's performance. Starting with E-commerce. Shopee delivered another record-setting quarter, achieving new highs in quarterly GMV, gross order volume, and revenue. We have now achieved five consecutive quarters of sequential GMV growth driven by more active buyers and higher purchase frequency, and we have improved our year-on-year profitability across Asia and Brazil. Our monetization continued its upward trend into the third quarter. Take rates increased both year-on-year and quarter-on-quarter. Ads were a big contributor. Our efforts to make ad services both simpler and smarter drove broader adoption and higher ad spend by our sellers. Ad revenue increased over 70% and ad take rate rose by more than 80 basis points.

Year on year, the number of sellers using our ad products increased by more than 25% and their average ad spend increased by over 40% year on year. Our monetization gains, strong growth momentum, and a healthy balance sheet have positioned us well to capture even more growth opportunities. Our three operational priorities, enhancing price competitiveness, improving service quality, and strengthening our content ecosystem, have proven to be a winning formula and they remain consistent. Within these priorities, let me highlight some of the areas we have been investing into that we believe are critical for our long-term competitiveness and profitability. First, we continue to improve our logistics capability, a highly strategic competitive moat that has differentiated us from our peers.

We launched SPX Express in 2018 when we recognized that reliable and cost-effective delivery was the most urgent logistics demand in our market due to wide differences in geography and in structure. Over the years we have learned how to deliver packages by truck, plane, boat, motorbike, and more. We deliver well in dense, congested, and high-rise cities. We also deliver well in rural areas where we need to cross rivers, navigate rice fields, and locate homes without formal addresses or postal codes. This experience has given us a very deep understanding of every region in our market. Our delivery capability has now developed to the point where we can identify and deploy service quality improvements addressing specific user needs in different markets. This helps us to serve more user baskets better while improving our operational efficiency even further.

For example, in Indonesia we saw growing demand from urban buyers for very fast delivery and willingness to pay a premium for it. We rolled out same day and instant delivery with the delivery times as fast as under two hours. The response was excellent. Orders using these faster options in the greater Jakarta area increased by more than 35% year on year in the third quarter, but for rural regions we saw a preference for economical delivery. We came up with a delivery solution that reduced the cost per order by 20% compared to our standard delivery, allowing rural buyers to enjoy free shipping with much lower minimum spend. This boosted Shopee's popularity among rural buyers. Orders delivered outside Java increased by more than 45% year on year in the third quarter. In Taiwan, we noticed a very different customer demand.

Many buyers preferred self pickup options, so we expanded our automated locker store network to over 2,500 locations in less than three years, making us the only e-commerce player in Taiwan with a locker network at such scale. Today it is a key logistics channel accounting for more than 70% of all our deliveries in Taiwan. This move has paid off in more than one way. The lockers run at over 30% lower cost per order than traditional pickup location. On top of that, the local locations double up as last mile hubs for home delivery at a lower cost compared to traditional last mile models. In other words, we are making our buyers happier while reducing our cost.

In the third quarter, our GMV in Taiwan showed double-digit growth year on year and we still see a lot of room to deepen our penetration further in this highly attractive market. Today we have built SPX Express into a clear leader in scale, coverage, and cost in our Asian market. Our deep local insights have enabled us to customize ground strategies to create the most efficient and effective solutions in every market, reinforcing our cost advantage. Our logistics capability underpins the strong growth we have seen from Shopee this year, playing a big role in making us the platform of choice for both buyers and sellers. With our delivery capability well scaled, our next goal to further deepen our logistics competitive moat is to enhance our fulfillment capability.

This addresses a more upstream need for our sellers, ensuring fast, accurate order handling in addition to speedy and reliable delivery. We aim to make fulfillment a second core pillar of our overall logistics capability, another way for us to strengthen our reputation among buyers and sellers and ensure high levels of customer satisfaction just as we did with delivery. These efforts are already underway. In previous calls, I have shared updates on initiatives such as Intelligent Demand Forecasting where we pre ship commonly ordered products closer to where we anticipate buyer demand will be. This helps us reduce buyer waiting time and fulfill orders more cost efficiently. For instance, in Indonesia, if we wait until an order comes in from a remote island before shipping the item out from Java, we must rely on more expensive forms of transport such as airplanes to get it there quickly.

If we have already anticipated this demand, we can use cheaper forms of transport to pre-ship it to the area, letting us deliver it quickly and cost effectively once the order is placed. We have made further headway in fulfillment by starting to offer warehouse solutions in some of our markets. Offering fulfillment services benefits everyone. It takes the burden of packaging and shipment off sellers, it gives the buyers more consistent service, and it allows Shopee to better optimize end-to-end logistics while serving more buyers and sellers. We are investing in this capability in a capital efficient way, for instance by mostly leasing rather than buying land and warehouses. The most intense investment comes not in the form of money, but in time and effort.

It would be very difficult to build a fulfillment capability without a deep understanding of logistics needs in our market and a tightly integrated delivery network to pair it with. After seven years of experience with SPX Express, we have both seconds. We continue to find new and exciting ways to deepen user engagement. Our subscription-based Shopee VIP membership program is a great example and it has continued to gain strong traction. By the end of September, VIP members across Indonesia, Thailand, Vietnam surpassed 3.5 million, up more than 75% from the previous quarter. Given the price sensitivity of many customers in our market, the success of our VIP program shows the high value we are delivering to our customers. VIP members are demonstrating higher engagement in Indonesia. These members spend around 40% more after subscribing to the program.

Shopee VIP members also bulk three times more frequently and spent five times more than non subscribers in the third quarter, accounting for about 10% of total GMV in Indonesia. We have also deepened user engagement by enhancing Shopee's content ecosystem. Our partnership with YouTube continues to gain strong traction in the third quarter. Shopee orders, driven by YouTube content across our Southeast Asian market, grew by more than 30% quarter on quarter. With this strong result, we are now extending this partnership to Brazil. Late last month, we also announced a collaboration with Meta to launch new tools allowing seamless product promotion and checkout between Facebook and Shopee accounts. We are excited to see how the partnership will enrich our buyer community further. Third, we are committed to embracing AI as a powerful way to improve the whole consumer retail experience.

Our AI efforts have already begun to bear fruit, contributing meaningfully to our monetization gains in the third quarter. Smarter search, better recommendations, and more personalized content have made shopping easier and more enjoyable to shop on. We have also used AI to enhance product discovery beyond search, helping buyers find relevant and interesting items even when they arrive without a specific purchase in mind. We empowered sellers with AI tools, enabling them to generate images, videos, text descriptions, and virtual showrooms to make their product listings more appealing. These initiatives have increased buyer engagement, improving our purchase conversion rate by 10% year on year in the third quarter. Taken together, all these efforts have resonated with our customers. Buyer purchase frequency across our market continues to improve, going up a further 12% year on year in the third quarter.

Average monthly active buyers also increased 15% year on year in the third quarter and Shopee remains consistently regarded as the e-commerce platform offering the most price competitive product in both our Asian market and Brazil, based on Qualtrics surveys.

Management Representative, Sea Limited: I would also.

Forrest Li, Chairman and Chief Executive Officer, Sea Limited: Like to highlight our progress in Brazil where Shopee continued to deliver exceptional growth while maintaining positive adjusted EBITDA. Our GMV growth there has been outpacing the market, driven by sustained increases in monthly active buyers, purchase frequency, and average basket sizes over the past several quarters. Our wide product assortment, highly competitive pricing, and structural cost leadership are enabling us to scale rapidly and profitably. Our continuous improvements in delivery speed and reliability have enabled us to expand into more upmarket product categories. Delivery speed improved sequentially in the third quarter, with average delivery time improving by about 2 days compared to a year ago. In the greater Sao Paulo area, one in three parcels were delivered the next day and nearly half within two days.

With these improvements, we are seeing more merchants listing higher value products and the new buyer cohorts showing higher spending patterns in the third quarter. GMV for Shopee Mall, our premium shopping section, more than doubled year on year in Brazil. In conclusion, Shopee has delivered another quarter of strong and profitable growth with our strong performance year to date. We now expect Shopee's full year 2025 GMV growth to be more than 25%. Next, moving to digital financial services, SeaMoney has delivered another very strong quarter with revenue growing by 61% and adjusted EBITDA growing more than 35% year on year, while our 90 day NPL ratio remained stable at 1.1%. This strong growth was broad based, driven by both user growth and the product expansion across multiple markets.

Our loan book expanded by around $1 billion during the quarter to reach $7.9 billion at the end of September, solidifying our position as one of the largest unsecured consumer lenders in Southeast Asia. Thailand has reached another major milestone, surpassing $2 billion in loans outstanding at the end of September. In Brazil, our loan book more than tripled year on year in the third quarter with improving portfolio quality and a stronger user performance. Our significant credit history with a very large base of users across many markets allows us to roll out products more widely while maintaining the health of our portfolio. We used to take a wide approach to onboarding new users. Now any Shopee user in most of our markets can apply for SP later credit and we can make credit approval decisions very quickly, in many cases almost instantly.

Moving to this all camp apply approach enabled us to add more than 5 million first time borrowers in the third quarter. New user cohorts scaled well with generally positive unit economics, a testament to our increasingly advanced risk underwriting capability. At the end of the quarter, active users across our consumer and SME loan products reached 34 million, up nearly 45% year on year. Meanwhile, loan disbursements to new users still accounted for less than 10% of total disbursement in the third quarter. As we continue to assess credit quality before cross selling more products.

We are.

Also making our credit products on Shopee Pay Later, offshore SP Later and personal cash loans easier to use in a wider set of use cases. In many of our markets where credit card penetration remains low, we are steadily establishing SP Later as a trusted and convenient payment method of choice for all kinds of purchases both online and offline. On Shopee Pay Later has grown steadily as penetration continues to deepen across all our markets. GMV penetration now ranges from single digits in early markets to over 30% in more mature ones, reflecting our discipline in scaling. Only when incremental disbursements are profitable, we see meaningful room to continue increasing SP Later's on Shopee penetration across our markets. Offshore SP Later showed strong traction this quarter, growing over 300% year on year and over 40% quarter on quarter.

It still only accounts for less than 10% of our total loan books as of the end of September. Large upside remains for future growth. This product segment represents a significant opportunity to unlock access to offline spend, a very large part of consumer expenditure in many of our markets. The standalone ShopeePay app, supporting both.

Online and offline payments across a wide.

Range of merchants is a key pillar of our strategy to grow our money businesses off Shopee in payments. It offers users a faster and more seamless experience, giving them direct access without having to go through the Shopee app. Beyond payments, it helps us unlock more use cases, positioning ShopeePay as a one stop platform for users, broader financial needs of Shopee credit, insurance, wealth management and more. The app has launched in Indonesia, Thailand, Vietnam and Malaysia and is showing strong traction. More than 20% of our ShopeePay monthly transacting users are using the standalone app. Personal cash loans also grew strongly this quarter. In Indonesia, we have been offering higher limits and longer tenures to attract more prime users who demonstrate strong repayment behavior.

Loan sizes can typically range from a few hundred dollars to over $1,000, allowing us to serve users with larger financial needs. Building on this, we have similarly expanded access to prime users in Thailand and Malaysia, where user adoption is going up quickly. In Brazil, personal cash loans grew close to 50% quarter on quarter, driven by the continued popularity of the combined credit limit we offer to SP Later users. In conclusion, Money has delivered another excellent quarter, feeling well while diversifying our credit portfolio across market users and products. Our portfolio quality and our unit economics have remained healthy and we are extending at Pay Later's reach beyond e-commerce and embedding it into users' everyday financial use cases. This will build a pathway for strong offshore key growth for many years to come. Finally, moving to digital entertainment, Garena has delivered another stellar quarter.

Bookings were up 51% and adjusted EBITDA grew 48% year on year, making it our best quarter since 2021. Free Fire anchored this strong performance with two high impact campaigns, Squid Game and Naruto Shippuden Chapter 2. The campaigns received a huge positive response, accelerating our growth momentum from the previous quarter. Our Squid Game collaboration incorporated iconic challenges from the blockbuster Netflix TV series such as Red Light, Green Light and the Glass Bridge. The event drove strong participation with the Red Light Green Light Challenge being played more than 300 million times in the quarter. Our Naruto Shippuden Chapter 2 event expanded on the resounding success of Chapter 1 in the first quarter of this year.

Based on gamer feedback and performance insights, we identified new fan favorite ninja characters, new attack mechanics, highly sought after collectible items, and a new one on one mode letting players use signature abilities from the series. Chapter two went on to surpass Chapter one in both engagement and revenue. We saw an extremely high social media share rate for Chapter two, double the already high bar set by our eighth anniversary event. Both Naruto chapters have achieved the highest satisfaction scores of any campaign launched over the past two years. Our Naruto content was very successful because it focused on what players value most, authenticity through attention to detail. This strong focus underpins how we take IP collaboration to the next level, and it is driven by Garena's core creative culture.

First, we require every major IT partnership to be led by a team of genuine super fans of Dart IT within Garena to ensure authenticity and respect for the original work. Naruto fans loved how closely the gameplay mirrored small but important details from the anime. For instance, one key storyline from the original anime was about rogue ninja returning to desecrate the ninja village they had been exiled from. In Chapter one, we had built this ninja village into our map and introduced iconic attack skills from the main anime characters. In Chapter two, we introduced attack skills that were specifically from the rogue ninja characters like fireballs, black fire and exploding birds, and redesigned the map to feature a destroyed version of the ninja village.

Continuing the narrative between the chapters in a way that was true to the original anime created a highly immersive experience and brought fans excitement to the next level. These are details only superfans would care about and understand how to incorporate into gameplay. Second, we take a global yet local approach, bringing global IPs to our market in highly localized ways. For instance, we took advantage of the huge traction of our Naruto campaign to hold ninja themed offline events in eight markets across Asia and the Americas, attracting tens of thousands of fans. The largest of these events was a two day International All Stars Ninja Clash Esports Tournament in Bangkok with teams of Free Fire players flying in from across Asia and Latin America to compete. The Bangkok tournament was a huge success, becoming a top trending event on YouTube Gaming and on social media across key markets.

In addition to such events, our teams stay closely connected to players through creators, programs, and fan groups, tapping into a constant stream of feedback and ideas that shape game design decisions. These efforts build very strong community connection and loyalty across our markets. Beyond Free Fire, we continue to expand our publishing portfolio with the launch of EA Sports FC Mobile in Vietnam last month, strengthening our long-standing partnership with Electronic Arts. The game quickly became the country's most downloaded mobile game in October based on Sensor Tower. By combining EA's world-class football franchise with Garena's local know-how, we are deepening our expertise in sports games and reinforcing our position as a trusted publishing partner for global titles. With this very strong quarter, Garena remains on track to achieve more than 30% year-on-year growth in bookings for 2025.

Our creative depth, disciplined execution, and close connection with players will continue to drive Garena's growth. In conclusion, all three businesses have built on the strong momentum from the first half of the year and delivered another quarter of exceptional growth. We will continue to make our digital ecosystem even more vibrant, strengthen our leadership position, and deliver sustainable and profitable growth to our shareholders. With that, I invite Tony to discuss our financials.

Tony Ho, Chief Financial Officer, Sea Limited: Thank you Forrest and thanks to everyone for joining the call for Sea. Overall, total GAAP revenue increased 38% year on year to $6 billion in the third quarter of 2025. This was primarily driven by GMV growth of our e-commerce business and the growth of our digital financial services business. Our total adjusted EBITDA was $874 million in the third quarter of 2025 compared to an adjusted EBITDA of $521 million in the third quarter of 2024. On e-commerce, Shopee's gross orders increased 28% year on year to $3.6 billion in the third quarter of 2025 and GMV increased by 28% year on year to $32.2 billion in the third quarter of 2025. Our third quarter GAAP revenue of $4.3 billion included GAAP marketplace revenue of $3.8 billion, up 37% year on year, and GAAP product revenue of $0.5 billion.

Within GAAP Marketplace revenue, core marketplace revenue mainly consisting of transaction-based fees and advertising revenues was $3.1 billion, up 53% year on year. Value-added services revenue, mainly consisting of revenues related to logistics services, was $0.7 billion, down 6% year on year due to increased shipping subsidies. E-commerce adjusted EBITDA was $186 million in the third quarter of 2025 compared to an adjusted EBITDA of $34 million in the third quarter of 2024. Digital financial services GAAP revenue was up by 61% year on year to $990 million. Adjusted EBITDA was up by 37% year on year to $258 million.

Management Representative, Sea Limited: As of the end of September.

Tony Ho, Chief Financial Officer, Sea Limited: Our consumer and SME loans principal outstanding reached $7.9 billion, up 70% year on year. This consists of $6.9 billion on book and $0.9 billion off book loan receivable outstanding. Non-performing loans past due by more than 90 days as a percentage of total consumer and SME loans was 1.1% at the end of the quarter. Digital Entertainment bookings grew 51% year on year to $841 million. GAAP revenue was up 31% year on year to $653 million. The growth was primarily due to the increase in our active user base as well as the deepened paying user penetration. Digital Entertainment adjusted EBITDA was $466 million, up 48% year on year. Returning to our consolidated numbers, we recognized a net non-operating income of $61 million in the third quarter of 2025 compared to a net non-operating income of $50 million in the third quarter of 2024.

We had a net income tax expense of $161 million in the third quarter of 2025, compared to net income tax expense of $93 million in the third quarter of 2024. As a result, net income was $375 million in third quarter of 2025 as compared to a net income of $153 million in the third quarter of 2022.

Rebecca Lee, Investor Relations, Sea Limited: Thank you Forrest and Tony. We are now ready to open the call to questions, Operator.

Conference Operator: We will now begin the question and answer session. If you would like to ask a question during this time, simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press Star one. Again, in the interest of time, we'll take a maximum of two questions at a time from each caller. If you wish to ask more questions, please request to join the question queue again after your first questions have been addressed. At this time, we'll pause momentarily to assemble our roster. Your first question comes from Pangvit with Goldman Sachs. Hi Management.

Thank you very much for the opportunity. Congrats for the great set of results. Two questions from me both on the E-commerce side. Number one on your growth guidance of more than 25% year on year for 2025, what do you bake in in terms of the driver and competitive landscape? What will it mean for your margin trend and how should we think about these trends carry into 2026? That's question number one. Question number two just to have a good understanding of the margins. So margin trend for E-commerce came down to 0.6% in the quarter despite higher take rate. Can you help us understand where is the investment area? Whether this is in the fulfillment as you mentioned or is there also something else that we should be aware of?

Are these more fixed or variable, and how long and how much should we expect this investment cycle to be?

Management Representative, Sea Limited: Yes, in terms of the growth assumption of more than 25% I think we are kind of half into the quarter already. It is basically based on what we see so far in the market on the momentums and competitive landscapes. It is pretty much reflective of what we see so far as we come into the quarter. Regarding the margin questions, if you look at the previous year versus this year, we do see consistent improvement of margin. If you look at year to year basis as we shared before, we will obviously see quarter to quarter fluctuation sometimes for seasonality reasons or some of the investment cycle of the initiatives and could also be a particular market status in terms of where we are pushing some of these initiatives.

I think if you look at a bit sort of year to year trend even going forward, I think we believe that we are able to deliver the 2-3% EBITDA margin as we shared before and also have an improvement year to year. If you look at the yearly basis in terms of where we are investing, one of the things is we mentioned in the opening further investment into the logistics capabilities and fulfillment capabilities and beyond that we are also deepening our buyer engagement and winning shares through for example our Shopee VIP program that we shared in the opening as well and all those efforts have been showing pretty good results.

Our buy frequency improved 12% year to year and average monthly active buyers increased 15% year to year as well, which contribute to our great growth this quarter, which is way above the guidance we gave in the early of the year, which is 20%. Most of these investments are less fixed per se. We take relatively asset-light approach even coming to our logistics and fulfillment businesses. We do not own land. Most of our CapEx is just improvement of building the warehouses or sorting facilities, etc. For our buy engagement and what is share program onshore, VIP is also less fixed. Obviously, you will see a little bit investment in the early days to get everybody understand the program and join the program, but as time goes it should be a quite profitable program as you probably have seen in other e-commerce platforms across the globe.

Conference Operator: Your next question comes from Divya Kodayo with Morgan Stanley.

Thank you very much. My first question is on your new market entry strategy and framework. Could you explain the rationale behind closing some of the cross border operations in Latin America and the re-entry into Argentina? What milestones will you monitor for Argentina before making it a localized business and is this part of your 2026 priorities? My second question is on market shares. If you can comment on the market shares in ASEAN, how have they moved in the third quarter? Also, if you could comment on Taiwan, do you foresee increasing marketing spends and investments in Taiwan next year? We are also seeing a bigger contribution from cross border with Taobao getting more popular there. If you can comment on the market shares on ASEAN and Taiwan that would be helpful.

Thank you.

Management Representative, Sea Limited: I think regarding the new market, we take a very highly selective approach on any new geographic expansions. Many of the initiatives will be very early stage, testing the market in nature. The reason we look at Argentina is essentially expansion of our capability that built in Brazil, leveraging on our existing cross-border infrastructure and the operational experiences we.

Forrest Li, Chairman and Chief Executive Officer, Sea Limited: Had already built.

Management Representative, Sea Limited: In Brazil, the objective is more to capture the operational synergies across the adjacent regions and open additional channel for our sellers, with the minimum increased mental investment.

Tony Ho, Chief Financial Officer, Sea Limited: I.

Management Representative, Sea Limited: Think we will take some time to learn about the market without sort of have a heavy investment into the market at this point of time for Chile and Colombia. We decided to wind down our cross border operation in Chile and Colombia as part of our ongoing review of our global business priorities to ensure our resources are focused on the key business priorities in line with our long term strategy in the region. Latin America is still an important market for us. We will continue to explore the opportunities to serve the consumers and business well there. If you look at the absolute size in Latin America, obviously Brazil is the largest one where we have a very large presence there. Argentina as we mentioned and Colombia actually a relatively smaller market and also relatively more distant from Brazil.

I guess that's thinking around the first question regarding the market share in South Asia in quarter three. As we shared, our growth has been above kind of the expectations we shared before. Across the region, we actually do believe that we are gaining market shares in South Asia, growing faster than the market in South Asia. For Taiwan in particular, the cross border to Taiwan has been in general a smaller part of the businesses, giving the complexity for the buyer experience on cross border side. We are less concerned about the cross border players selling from overseas to Taiwan as a potential impact to our businesses. Actually, if you look at the recent quarters, we grow very well in Taiwan. We grow double digit, which is faster than the overall market in Taiwan.

We are pretty confident that given we are the largest e-commerce platform with the largest assortment with the best pricing and also we have the best delivery infrastructure, which is much lower shipping and fulfillment cost compared to anyone in the market, we are able to defend our market share well. We are able to grow even faster in Taiwan with our infrastructure much better built than previous years.

Conference Operator: Your next question comes from Alicia Yap of Citigroup.

Hi, good evening management. Thanks for taking my questions and congrats on the folate results. Two questions. One is if you can elaborate a little bit more overall competitive landscape in Southeast Asia. Are there any countries that we are seeing more intense competition lately?

Tony Ho, Chief Financial Officer, Sea Limited: Also.

Any countries where you see peers are growing faster than Shopee and do you anticipate the live streaming peers to start shift more of the traffic and also the purchase frequency to the shelf face the marketplace model in addition to the live streaming? If that is happening, what could be the potential threat to Shopee? The second question is should we assume the investment cycle this time around similar to maybe like a couple years ago where there could be some step up investment that are more front end loaded with GMV growth and market share growth to follow through later. Especially for example like you need to ramp up your fulfillment capability in some of the markets which will yield better results later on. Could you clarify if this time the investment cycle could be similar to what we saw last, I mean two years ago.

Thank you.

Management Representative, Sea Limited: On the competitive landscapes, what we see is relatively stable competitive landscapes. I think as you can probably observe as well from your own sources.

We.

Didn't see any particular market different from another. I think it has been a general trend across the South Asia market in terms of the intensities or the behavior of the competitors. Regarding whether the live stream peers focus more on shelf-based model, I think it's not something new. I think it's something they try to do for quite a long time, as you probably see from China as well, et cetera. We do see that the nature of the platform is different. I think the percentage of share of commerce is relatively consistent, let's say, from what we.

Tony Ho, Chief Financial Officer, Sea Limited: Observed.

Management Representative, Sea Limited: Also if they are much more traffic pushing towards that, that is a potential of impacting how the overall app behavior and the user retention as well. Anyway, I think that's kind of similar behavior you will see in China and South Asia. We wouldn't see that a new thing impacting the compared to in a meaningful way on the investment cycles. I think the short answer is probably not. It's probably quite different from what you see two years ago in terms of the investment to the continence ecosystem if you remember that. I think what we are doing now is more as a continuous investment to our business to strengthen our competitive mode, pretty aligned with what we shared continuously every quarter. We would like to invest into our infrastructure to have better logistics and now we are extending logistics fulfillment networks.

Actually, in a way, it's not completely new. It's a capability we have been trying to build for a period of time, and now we felt it's a good time to scale it even more. As I shared just now, it's less a CapEx intensive business as you probably imagine, and also as we grow the business, it will help our growth as well because this will help us to lower down the overall cost to serve as an ecosystem and also reduce the delivery time to the user, so help us to penetrate the user more. Many of this contributes to our growth faster than we expected earlier in the year as well.

If you take a look at the VIP programs, yes it's a little bit sort of investment in the early days, but we also see that with the investment the users are willing to spend more with the platform as well. I think Forrest shared that the users purchase 40% more than before they joined the VIP program. In a way it's less a big front load investment than the return comes later. I think this time you will see it's more ongoing investment program to strengthen our competitive moat as I shared earlier and this will impact on the general growth as we invest.

Conference Operator: Your next question comes from Piyush Chowdhury with HSBC.

Yeah, thanks for the opportunity. Congratulations for great set of numbers. Two questions. Firstly for Shopee Logistics, what percentage of orders are now fulfilled by SPX within Asia and Brazil? How has it changed over the last one year or so? How much of increase in your cost of services is driven by this logistics investment and the outlook for this cost item, that is first. Secondly on Garena, can you share the outlook for Free Fire for 2026 after successful 2025? Any planned IP collaborations? Any new game launches? Thanks a lot.

Management Representative, Sea Limited: On the SPX, I do believe we shared before more than half our orders are delivered through our SPX, and the percentage has been increasing, let's say, overall over the last year. As we scale our network, our cost per order has been continuously improving year to year, and I think that's part of what contributes to our growth as well because this lowers down the cost buyers have to pay to receive the orders. I also want to highlight not only do we reduce the cost of our SPX delivery cost, but we also increase the speed for our SPX costs. For us to mention, in Brazil we reduced the buyer waiting time by two days.

If you look at the year to year in Asia, we also reduce the delivery time quite meaningfully year to year and quarter to quarter as well by both introducing the faster shipping channel. If you look at many countries, we have the instant delivery now, we also have same day deliveries, but also reducing the normal delivery channel's speed. I think this all helps to contribute to our growth as you see.

Tony Ho, Chief Financial Officer, Sea Limited: For.

Forrest Li, Chairman and Chief Executive Officer, Sea Limited: The green outlook, we are very.

Excited to observe the momentum. I think this is extremely valuable since the turnaround like two years after the post Covid headwind and in 2024 we have a very, very high growth and that is the strong momentum continuing to 2025. Actually the growth is even accelerated this year compared to last year, so the momentum is still very, very strong. We remain very optimistic.

Positive.

Like for 2006 we believe the user base will continue to grow, the content that the offerings will be more like the experience. User experience is more immersive and I think like specifically this year through the very very successful IP collaborations and I think Garena as an organization we unlocked a very important capability, so how to continually work with the global IPs and.

Deliver the best of content, very unique.

Experience to our large user base. Right. Whatever we put on the platform, put into the game, like on a single.

Day more than 100 million gamers from.

All over the world will be able to experience that.

That is a very, very such very.

Very powerful distribution platform, distribution channels. We'll continue to work with more.

IPs but of course we'll be also.

Very very selective as well and we also quite excited to kind of see what like the AI can do. In terms of boosting the both the creative side, production side, and also the user experience side, we think that is a potential boost for the future growth as well. At this moment we are in the process of like for the detailed planning of next year. I think probably we'll have a better sense when we're ready to share to the market what will be the specific outlook we see for Garena in 2026 next quarter. We always have some new games in our pipeline. We have a very very strong and dedicated experience developers to especially focus on.

The new games, and we have several.

Games already in the pipeline or like in some markets already.

Live in the trial period where learning.

Experiences and at this moment I think it's a bit premature to project what is the impact. I think considering the.

Size of the scale of a Free Fire in terms of the user base and revenue and perfect.

I don't think like at this moment like even if we have any new games at an early stage will make significant impact in terms of the user numbers and the revenue and the financial side. We're going to continually put a lot of effort and I think through the new games development we also learn about the different genres and we're also learning the different difference about some new market we haven't been to. I think this remains at a very very good opportunity for future growth. When we have like we feel it's the right time to share. We'll also keep all our shareholders and investors inform.

Conference Operator: Your next question comes from Jiang Xiao with Barclays.

Thank you very much for taking my questions. My first question is on the VIP membership. I'm trying to get a better understanding of that program. That's clearly a great thing to do longer term. I suspect in the near term, I was wondering what the unit economics look like for the members and what do you think the eventual VIP member penetration should be in the region? The reason I obviously ask that is because your gross margins for e-commerce came down a bit quarter over quarter. I suspect it's kind of negative initially. Is there a time frame to reach breakeven for the members? My second question is about AI. I think Forrest recently did some media interviews talking about AI may power the company to be one of the first trillion dollar company in the region.

I was hoping you can talk about what are some of the things potentially you may do or you want to because some investors are worried about some massive AI CapEx that may be affiliated or associated with any kind of new venture. Thank you.

Management Representative, Sea Limited: On the VIP program we are still in a very early stage of rolling out the program. As you probably can see it's only a few months but we see a very good growth on the users sign up. If you look at sort of quarter to quarter we see a 75% growth on the members. In terms of the GMV penetrations we're seeing in the early stage, we're still in the teens and we believe this can be a lot higher. Probably similar to the percentage you observe in other part of the world in terms of the penetrations. I think the important thing for us to look at the economics is that we would like to make sure the VIP members not only receive better benefit from the platform because they are paid members and they are the important core users.

We also want to make sure that we work with our partners to bring the benefit to them as well. If you look at Indonesia with videos in Vietnam, we work with FPT Play. We also work with ChatGPT as well, offer a free program to the VIP members. I think all those will help us to have a good economics for this program. You are right, in the early days it does require some sort of investment to bring the user over. One thing that we monitor very closely is the retention rate.

We would like to make sure that the user we bring to the program has good retentions and in our early market we see the retention improve almost double from the last quarter to this quarter period of time, which is a big breakthrough for us given that in our market credit card is not a common payment method. In many other markets people use credit card to make sure that it's continuous payment. We are working on multiple ways to ensure that the retention goes well with the program, especially together with our digital finance side through SPayLater as well.

Tony Ho, Chief Financial Officer, Sea Limited: Sure.

Forrest Li, Chairman and Chief Executive Officer, Sea Limited: John, on the AI question. Yeah. I mean as I shared during the interview you mentioned we are deeply excited about this new technology. I think it represents a fundamental technological revolution which will create massive new opportunities and the supercharged technology's ability to unlock.

Values for people everywhere.

I think it's extremely exciting for the market we are in, which still, like, hundreds of millions of people is underserved. Right. We have seen that uplift in the past 10 years through the mobile Internet revolution. We have observed how much the smartphone, like mobile Internet, transformed people's lives, helped bring how much, like, a joyous convenience to people's lives.

Of course we are part of.

This transformation and that is what we are really as a company.

What is this?

It's about our mission. We try to focus on the applications and how to connect those fantastic technology to people's daily life. From every corner of the world. We believe we'll see some similar pattern of AI revolution. Probably we believe this impact and the value creation will be much, much bigger at this moment. We're like the things you mentioned. Okay. We probably were not going to do what the big tech is going to do. We're not going to like develop the trying to make some fundamental large language model breakthrough. We're not going to build data centers. I think for that part we are very much open to work with all the big tech like who are kind of.

We have a lot of admiration and respect to how much effort and how much they can do to continually have the breakthrough of the technology and making technology.

More powerful and more useful.

We are going to more focus on applications and how that technology.

Build Silicon Valley or anywhere in the.

World transform to a consumer's daily life. Small businesses like in Indonesia, in Vietnam, in Brazil. That is a speculative what we are good at. We have a lot of back practice that we learned in the past decade. I think that is also kind of like make us really, really excited. We are going to have a very, very practical and the bottom up approach. We are very much focused on the seeing the immediate return the result as I shared in my opening. Right. We are very excited to see some of very practical use say in Shopee.

Management Representative, Sea Limited: Right.

Forrest Li, Chairman and Chief Executive Officer, Sea Limited: How much this can help on the advertising conversion, how to make the product discovery easier, and it's like more discovery and beyond traditional search, how to.

Help sellers improve the product listing quality.

To improve the balance retention and the conversion rate. I think I probably shared in the previous quarter, and also this is.

We see the improvement in terms of.

The customer service capability and now majority of our customer service is handled by AI like a chatbot and the satisfaction rate is very, very high. That is all the things like we have seen the result and the progress of bottom up. We believe with the continuing improvement capability built enabled by the more advanced larger language model and other part of the AI development, there will be more and more things we can apply into the day to day business, which make a positive impact into people's daily life.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Ms. Rebecca Lee for any closing remarks.

Rebecca Lee, Investor Relations, Sea Limited: Thank you all for joining today's call. We look forward to speaking to all of you again next quarter.

Conference Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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