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Sea Limited (SE) is trading sharply higher after reporting its Q1 results this morning. The Singapore-based tech company behind e-commerce platform Shopee, digital finance business Monee, and gaming arm Garena missed EPS expectations, while revenue growth accelerated, increasing 46.6% yr/yr to $7.10 bln, nicely above expectations.

• Strength was broad based across its three businesses, with Shopee revenue increasing 45.1% yr/yr to $5.11 bln, Monee revenue increasing 57.8% yr/yr to $1.24 bln, and Garena revenue increasing 40.6% yr/yr to $696.6 mln.
• Shopee had another record-setting quarter across revenue, GMV, and gross order volume. GMV increased 30.2% yr/yr to $37.3 bln, accelerating from Q4, while gross orders increased 29.3% yr/yr to 4.0 bln. Core marketplace revenue, mainly transaction-based fees and advertising revenue, jumped 61.0% yr/yr to $3.8 bln.
• Monee continued to grow at a healthy rate while maintaining stable asset quality. Loans outstanding increased 71.3% yr/yr to $9.9 bln, while 90+ day NPLs remained stable qtr/qtr at 1.1%. Expansion into more user segments, off-Shopee use cases, and early markets like Brazil also gives Monee a larger long-term opportunity.
• Garena was another bright spot, delivering its best quarter since 2021, driven by strength in Free Fire and a record contribution from Arena of Valor. Bookings increased 20.1% yr/yr to $931.4 mln and adjusted EBITDA increased 25.2% to $573.6 mln.
• SE has been investing to deepen its competitive moats and better withstand competitive pressure, but those investments are weighing on near-term profitability. Cost of revenue increased 51.7% yr/yr, outpacing revenue growth and driving gross margin down to 44.3% from 46.2%. Sales and marketing expense also increased 52.1%, and Shopee adjusted EBITDA fell 15.6% to $223.2 mln.

Briefing.com Analyst Insight

This was a good start to the year for SE, with strength broad-based across its three core businesses. Particularly encouraging was the strength in Shopee, its largest business, as that has been a key focus amid competitive pressure from platforms like TikTok Shop. The business delivered another record quarter, while GMV growth accelerated and core marketplace revenue surged, reinforcing that SE's investments are supporting the business. Garena was also a bright spot, delivering its best quarter since 2021, and Monee continued to scale at a healthy rate. The caveat is that investment spending continues to weigh on profitability, with gross margin narrowing and Shopee adjusted EBITDA declining yr/yr. Still, the positive reaction appears to reflect relief that SE is delivering broad-based growth despite competitive pressure. It will be important to see whether this growth can translate into stronger earnings, but SE's reaffirmed Shopee targets, including full-year adjusted EBITDA no lower than 2025, could help ease concerns.