SEA Q2 2026 Earnings Report

SEA EPS Results

• Actual EPS: $0.70
• Consensus EPS: $0.86
• Beat/Miss: Missed by -$0.16
• One Year Ago EPS: $0.65

SEA Revenue Results

• Actual Revenue: $7.79 billion
• Expected Revenue: $7.12 billion
• Beat/Miss: Beat by +$670.69 million
• YoY Revenue Growth: +48.30%

SEA Announcement Details

• Quarter: Q2 2026
• Date: 8/11/2026
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 11, 2026
• Conference Call Time: 7:30AM ET

SEA (NYSE:SE) Limited (NYSE: SE) is a Singapore-based consumer internet company that operates a trio of interconnected businesses across digital entertainment, e-commerce and digital financial services. Founded in 2009 as Garena and later rebranded as Sea, the company is headquartered in Singapore and listed on the New York Stock Exchange. Sea positions itself as a technology platform focused on enabling online consumers, merchants and developers primarily across Southeast Asia and adjacent markets.

Sea’s digital entertainment arm, Garena, is a game developer and publisher that also organizes esports initiatives and operates online gaming platforms. Garena publishes popular mobile titles, most notably Free Fire, and supports a wider ecosystem of game distribution and community engagement. Shopee, Sea’s e-commerce business, is a mobile-first online marketplace that offers consumer-to-consumer and business-to-consumer sales along with logistics, marketing and seller services to facilitate cross-border and local commerce. SeaMoney provides digital financial services, including mobile wallet functionality, payments processing and consumer-facing financial products aimed at improving access to digital payments and credit for consumers and merchants.

Sea’s operations are concentrated in Southeast Asia, with notable presence in markets such as Indonesia, Vietnam, Thailand, Malaysia, the Philippines and Taiwan, and it has expanded into other regions including parts of Latin America. The company has pursued an integrated strategy of investing in logistics, payments infrastructure and localized services to support its marketplaces and gaming platforms. Forrest Li, who founded Garena, serves as Sea’s chairman and chief executive officer, guiding the company’s development as a multi-product internet platform aimed at serving emerging digital economies.

SEA Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Sea reported strong second-quarter growth, with revenue up 48% year over year to $7.8 billion and adjusted EBITDA up 11% to $917 million; net income rose 11% to $458 million despite a substantially higher tax expense.
• Positive Sentiment: Shopee’s GMV increased 28% to $38.3 billion, while new active buyers, engagement, advertising, VIP membership, and content-driven orders all accelerated. Management maintained its approximately 25% full-year GMV growth outlook and expects Shopee to exceed $1 billion in adjusted EBITDA in 2026.
• Positive Sentiment: Monee continued rapid expansion, with its loan book up 62% to $11.1 billion, revenue up 59%, and adjusted EBITDA reaching $288 million; active credit users surpassed 40 million while the 90-day NPL ratio remained stable at 1.0%.
• Positive Sentiment: Garena bookings grew 15% and adjusted EBITDA rose 17%, supported by Free Fire’s more than 100 million average daily active users. New titles Palworld Online and Monster Hunter Outlanders are expected to broaden the gaming portfolio, with Monster Hunter Outlanders targeted for launch this year in selected markets.
• Negative Sentiment: Monee’s higher loan growth is also producing increased credit-loss provisions, primarily due to the growing mix of off-Shopee lending and Brazil, which management describes as a higher-interest, higher-risk market. Shopee also flagged potential foreign-exchange headwinds and continued investment needs in fulfillment and logistics, even as unit economics improve.

Presentation

[Operator]

Good morning and good evening to all, and welcome to the Sea Limited Second Quarter 2026 Results Conference Call. All lines have been muted to prevent any background noise. After the speakers' 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 the 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 Mr. Casey Ong to begin the conference. Please go ahead.

[Casey Ong, Investor Relations Member at Sea Limited]

Hello everyone, and welcome to Sea's 2026 Second Quarter Earnings Conference Call. I am Casey 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.

[Casey Ong, Investor Relations Member at Sea Limited]

I have with me Sea's Chairman and Chief Executive Officer, Forrest Li, President Chris Feng, and Chief Financial Officer Tony Hou. Our management will share strategy and business updates, operating highlights, and financial performance for the second quarter of 2026. This will be followed by a Q&A session in which we welcome any questions you have. With that, let me turn the call over to Forrest.

[Forrest Li, Chairman and CEO at Sea Limited]

Hello, everyone, and thank you for joining today's call. Our strong momentum from the first quarter has continued into the second. Sea generated $7.8 billion in revenue at 48% year-on-year and over $917 million in adjusted EBITDA. Our investments have enabled Shopee and Monee to continue to strengthen our market leadership while improving our user penetration. Many of our initiatives' unit economics continue to improve, a testament to our strong financial discipline and operational efficiency. We will continue to invest prudently in serving more users and serving them better, broadening our foundation for profitable growth into the future. With that, let me take you through each business's performance. Starting with Shopee. Shopee continued its strong momentum into the second quarter. GMV grew 28% year-on-year, marking eight consecutive quarters of sequential growth.

[Forrest Li, Chairman and CEO at Sea Limited]

We again achieved a new high in cross-border volume and revenue. We generated an adjusted EBITDA of more than $250 million during the second quarter. Our improving operational efficiency and growing scale have strengthened our unit economics. We can now profitably serve a wider range of users, enabling us to lean further into user acquisition. We have engaged and re-engaged several user groups through brand awareness campaigns, expanding our content channels, and broadening our logistics offerings to cater to different purposes. This drove remarkable new buyer growth in the second quarter. Average monthly new active buyers grew more than 35% year-on-year, a significant acceleration from previous quarters. Average monthly active buyers increased 18% year-on-year, and overall buyer engagement also continued to improve, with purchase frequency increasing by 8% year-on-year. Our monetization strengthened further in the second quarter.

[Forrest Li, Chairman and CEO at Sea Limited]

Ad revenue was up more than 70%, and ad take rate improved by over 90 basis points year-on-year. We continued to make advertising simpler and smarter for sellers. For example, pairing ads with vouchers that are personalized to buyers to increase purchase conversion and improve the efficiency of sellers' ad spend. Ad adoption and spend continued to improve across our seller base. The number of ad-paying sellers rose around 45%, while average ad spend per seller increased more than 15% year-on-year. Our operational priorities remain consistent, improving price competitiveness, service quality, and our content ecosystem. To keep strengthening our execution across these priorities, we continued to deepen our structural moats across logistics, Shopee VIP, and content. Strong logistics capabilities continue to be a key contributor to Shopee's reputation for excellent service.

[Forrest Li, Chairman and CEO at Sea Limited]

We continued to make delivery faster and more reliable across a wider product assortment in the second quarter. Instant and same-day delivery gained strong traction as we captured more everyday purchases. Our instant service in Indonesia can now deliver in as fast as one hour in urban areas. We continue to extend our presence in high-frequency categories such as the groceries and the pharmacy items to serve our buyers better. Order volumes using instant delivery grew around 80% year-on-year in Indonesia, while cost per order fell by around 20%, driven by economies of scale and efficiency gains. Beyond delivery, we also made good progress in fulfillment, with order volumes up more than 20% quarter-on-quarter. Fulfillment benefits both sides of our marketplace. Sellers offload operational complexity and scale more efficiently, while buyers enjoy faster, more reliable delivery.

[Forrest Li, Chairman and CEO at Sea Limited]

In some markets, more than 50% of our fulfilled parcels arrive the next day, meaningfully higher than the platform average. The gains are especially noticeable in places where geography makes delivery challenging. For example, in Mindanao, a mountain region in the Philippines, fulfillment cuts buyer waiting time by one to three days. Buyers can feel the difference. Listings that converted to fulfillment saw more than a 20% quarter month uplift in orders on average in Southeast Asia. Second, our Shopee VIP program continues to scale strongly. Now live across Asia and Brazil, total membership exceeded 15 million at the end of June, up 45% from the previous quarter. Across Asia, VIP members contributed 24% of GMV in the quarter. Average monthly retention remains strong at around 80%, and members continue to show higher engagement, spending meaningfully more after subscribing.

[Forrest Li, Chairman and CEO at Sea Limited]

In Brazil, early adoption has been encouraging since our April launch, with membership already surpassing 1 million. Beyond buyers, we are seeing encouraging support among both Shopee sellers and external partners for our Shopee VIP program. We have broadened member benefits across travel, dining, and entertainment, improving the program's value proposition. More sellers and partners have come on board to co-fund benefits, demonstrating the value they see in engaging our Shopee VIP buyer base. This has helped improve the program's unique economics in Asia. Third, we have continued to improve our content ecosystem to make product discovery more engaging. Orders from live streaming and short-form video grew more than 50% year-on-year, accounting for more than 35% of physical goods orders in Southeast Asia. Unit economics also improved sequentially as we further optimized our marketing spend.

[Forrest Li, Chairman and CEO at Sea Limited]

We have deepened our relationships with YouTube and Meta to drive order growth. Shopee affiliate orders generated by these creators on Facebook increased by more than 85% quarter-on-quarter, with Facebook Reels proving to be a very popular channel to drive purchases. We have now extended our Instagram collaboration to all eight of our core markets, and we are seeing promising early results from Indonesia, the first market where we launched the partnership. I am particularly happy with our progress in Brazil, which remained our fastest-growing market in the second quarter. We once again outpaced the broader market on GMV growth, supported by increases in active buyers, purchase frequency, and average basket size. We continue to invest in and optimize our end-to-end logistics capabilities, expanding our network while ramping up utilization.

[Forrest Li, Chairman and CEO at Sea Limited]

We improved the delivery speed, reducing average buyer waiting time by 15% year-on-year, and doubled our penetration of fulfillment order year-on-year. These logistics improvements are also supporting our expansion at market. We onboarded nearly 500 new official brands during the quarter, while GMV from Shopee Mall sellers more than doubled year-on-year. We still see significant headroom for growth in Brazil, and we will continue to invest in this market in a disciplined and profitable manner. I am pleased that Shopee has delivered a strong first half of 2026. With this solid momentum, we are optimistic that Shopee will achieve the milestone of $1 billion in adjusted EBITDA for the full year. Next, moving to Monee. Monee delivered another great quarter with continued strong growth in both revenue and adjusted EBITDA. Credit remained the primary driver of growth.

[Forrest Li, Chairman and CEO at Sea Limited]

Our loan book reached $11.1 billion at the end of June, up 62% year-on-year. Asset quality remains stable with our 90-day NPL ratio at 1.0%. The Philippines has become our sixth market with a loan book exceeding $1 billion. We continue to expand our credit business on three fronts, acquiring new users, deepening our relationships with existing users, and expanding our credit use cases. One key enabler of our credit business growth has been the ongoing advances we have made in our credit risk capabilities. Our latest risk models are pre-trained on a broad set of behavioral and transactional data across our ecosystem using transformer architecture similar to those following today's large language models. The model learns from the full sequence of a user's actions over time, capturing richer context around how customers interact with our platform.

[Forrest Li, Chairman and CEO at Sea Limited]

Recent enhancements to our underwriting models have helped lift approval rates by around 10% when compared to previous models while maintaining a similar level of risk. This further reinforces the scale of our ecosystem as a durable advantage. To further strengthen this capability, we are also drawing on more external data sources to better assess users who are newer to our ecosystem. For instance, through partnerships with local mobile operators in Indonesia and open finance data in Brazil. We have also used AI to build tools to efficiently verify a diverse range of user-submitted income documents across markets, languages, and formats. Review time reduced by around 95% while maintaining a very high level of accuracy, letting us respond to credit limit requests from users almost instantly.

[Forrest Li, Chairman and CEO at Sea Limited]

Supported by this improvement in risk underwriting, we have been pushing harder on new user acquisition. We have found that many users begin using SPayLater for convenience, and subsequently generate more value through repeat transactions, installment conversion, and adoption of our other credit products. We have broadened the rollout of one-month interest-free SPayLater loans, giving borrowers the option to either settle their balances within the month or easily convert purchases into interest-bearing installments. Similarly, we have been more widely offering promotional interest rates for first-time personal cash loans. Taken together, these efforts contributed to strong new user growth during the quarter. We added around 5.3 million unique first-time borrowers, and our active credit users grew around 34% year-on-year to over 40 million at the end of the quarter. We also saw deeper user engagement.

[Forrest Li, Chairman and CEO at Sea Limited]

Average loans outstanding per user grew around 20% year-on-year. Off-Shopee SPayLater has continued to scale well, driven by integration with national QR payment infrastructure and continued merchant onboarding. By the end of the quarter, off-Shopee accounted for over 20% of our total SPayLater portfolio, with this figure as high as 35% in some markets. In Thailand, we are testing a new product, the ShopeePay Unlimited Card. It lets users pay with their SPayLater balance at any merchant that accepts card payments, further expanding SPayLater use cases. The standalone ShopeePay app remains a key pillar of our strategy to grow Monee beyond Shopee, serving as a one-stop platform for user payments, credit, insurance, and broader financial needs. In the second quarter, monthly transacting users on the app more than doubled.

[Forrest Li, Chairman and CEO at Sea Limited]

The ShopeePay app is currently live in Indonesia, Thailand, Malaysia, and Vietnam, and we will launch a similar standalone app in Brazil soon. In summary, Monee delivered another strong quarter with a broad base of growth across our products and markets. The advances in our risk capabilities are compounding. Each improvement helps us serve more users, serve them better, and reach further beyond Shopee. We are still at an early stage of growth. Only a fraction of the users across our ecosystem are using Monee financial products today, and the credit penetration remains low across our markets. This gives us great confidence in Monee's long-term growth and earnings potential. Next, turning to Garena. Garena delivered another strong quarter, with bookings growing 15% year-on-year, with profitability remaining healthy and growing well year-on-year.

[Forrest Li, Chairman and CEO at Sea Limited]

Free Fire anchors this strong performance, now in its ninth year. It is still expanding its reach and scale globally, continuing to drawing over 100 million average daily active users. Free Fire's longevity comes from a simple discipline. We keep the experience fresh with new gameplay and content, and we make it feel both local to the communities who play it and enjoyable for a global audience. A great example of this culture was Under Sea Mystery, an ocean-themed campaign inspired by Songkran, Thailand's water festival. We interpreted the theme into the map itself, creating a gateway into a new undersea realm. This expanded battleground gave players fresh territories to explore and fight over, and the opportunity to hunt for powerful gear hidden in the Hydro Zone and fishing ponds across the map.

[Forrest Li, Chairman and CEO at Sea Limited]

This continuous reinvention of the core gameplay keeps players engaged over time. We also know the workshop ways to build excitement and engagement with our players. Our Fire Kickoff campaign brought football into the map itself, turning part of it into a football field. Eliminated players were sent for a one-on-one football showdown for a chance at rejoining the match. The new football form lets players turn themselves into a football to speed across the map and pull off surprise plays. The campaign also resonated well beyond the game. The original campaign song, "Booyah Olé," became a standout organic driver of social engagement, generating over 350 million social media views. I am also very excited about what lies ahead for our portfolio. We announced two mobile games, both built on strong, globally recognized IP.

[Forrest Li, Chairman and CEO at Sea Limited]

Palworld Online is an open-world multiplayer survival-adventure game developed and published by Garena under license from Perfect World. Monster Hunter Outlanders is a survival hunting action game developed by Tencent based on Capcom's iconic franchise. Taken together, these titles show how Garena is expanding into new genres, strengthening our development and publishing capabilities, and deepening our relationships with top global partners. In summary, Garena delivered another strong quarter. Free Fire is still proving itself as an evergreen franchise, and we continue to work towards diversifying our portfolio. We remain committed to delivering the high-quality experiences our players know us for. In conclusion, this quarter's strong results underscore both our financial discipline and the strength of our business. This promising momentum gives us greater confidence for the rest of the year.

[Forrest Li, Chairman and CEO at Sea Limited]

With that, I invite Tony to discuss our financials.

[Tony Hou, CFO at Sea Limited]

Thank you, Forrest, and thanks to everyone for joining the call. For Sea overall, total GAAP revenue increased 48% year-on-year to $7.8 billion in the second quarter of 2026. This was primarily driven by growth in Shopee and Monee. Our total adjusted EBITDA was up by 11% year-on-year to $917 million in the second quarter of 2026. On Shopee, gross orders increased 27% year-on-year to $4.2 billion in the second quarter of 2026. GMV increased by 28% year-on-year to $38.3 billion in the second quarter of 2026. Our second quarter GAAP revenue of $5.6 billion included GAAP marketplace revenue of $4.9 billion, up 49% year-on-year, and GAAP cost of revenue of $0.7 billion. Within GAAP marketplace revenue, core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was $4.3 billion, up 66% year-on-year.

[Tony Hou, CFO at Sea Limited]

Value-added services revenue, mainly consisting of revenues related to logistic services, was $0.7 billion. Shopee adjusted EBITDA was up by 12% year-on-year to $255 million in the second quarter of 2026. Monee GAAP revenue was up by 59% year-on-year to $1.4 billion in the second quarter of 2026. Adjusted EBITDA was up by 13% year-on-year to $288 million in the second quarter of 2026. As of the end of June, our consumer and SME loans principal outstanding reached $11.1 billion, up 62% year-on-year. This consists of $10 billion on-book and $1.1 billion off-book loans principal outstanding. Non-performing loans past due by more than 90 days as a percentage of total consumer and SME loans was 1% at the end of the quarter. Garena bookings grew 15% year-on-year to $764 million.

[Tony Hou, CFO at Sea Limited]

GAAP revenue was up by 34% year-on-year to $747 million. The growth was primarily due to the increase in our active user base and deeper paying user penetration. Garena adjusted EBITDA was up by 17% year-on-year to $430 million. Returning to our consolidated numbers, we recognized a net non-operating income of $66 million in the second quarter of 2026, compared to a net non-operating income of $83 million in the second quarter of 2025. We had a net income tax expense of $451 million in the second quarter of 2026, compared to net income tax expense of $144 million in the second quarter of 2025. As a result, net income was up by 11% year-on-year to $458 million.

[Casey Ong, Investor Relations Member at Sea Limited]

Thank you, Forrest and Tony. We are now ready to open the call to questions. Operator?

[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 the star one again. In the interest of time, we will 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 will pause momentarily to address our roster. Our first question comes from the line of Piyush Choudhary with HSBC. Your line is open. Please go ahead.

[Piyush Choudhary, Director of Equity Research at HSBC]

Thank you. Congratulations, management, on a great set of results. Two questions. Firstly, on Shopee, your investments have delivering results on the growth. Can you talk a little bit about outlook for GMV growth, and are we behind the peak investments as margins have improved sequentially? Is the unit economics improving across VIP and content? Should we expect Shopee margins to improve, or there could be volatility in 2nd half due to seasonality? That is 1st question. Secondly, can you give us an update on AI initiatives? Last time you mentioned about AI shopping assistant for buyers. How have been the pilots and for sellers on your platform, what initiatives you have taken and benefits observed? Thank you.

[Tony Hou, CFO at Sea Limited]

I would take this question. If you look at the Shopee outlook for GMV growth, we still see quite good growth in Q2 as we shared in the openings. We still see the trend continues in the coming quarter. The growth has been doing well across our market, in Southeast Asia, Taiwan, and also Brazil. If we look forward for the full year, we remain well on track and confident of achieving our full year growth outlook of around 25%. That said, we want to make sure that we also anticipate the potential ForEx headwind as well. As you can observe that many of our market has a weaker currency against U.S. dollars. Q4 also have a higher GMV base. But again, we still believe that we are able to achieve the guidance we gave before of around 25%.

[Tony Hou, CFO at Sea Limited]

In term of investment we are doing for the few initiatives that we shared before on the VIPs, on the fulfillment, on our logistics, et cetera. In general, we see our unit economics have been improving quote unquote. I think for our content businesses, which we shared that we did an investment for a short time, if you look at the unit economic has been as good as the platform already. The new initiative, although we are still in the investment phase, but in general, we do see a positive trend on the economic improvement. Also in general, what we are doing is less a very CapEx-heavy investment, even with the fulfillment. We usually take a CapEx-light approach that we do not own the fulfillment centers.

[Tony Hou, CFO at Sea Limited]

But usually we rent a place with relatively light CapEx to enable the growth there. In term of the margins, I think we shared our full year ambition of achieving $1 billion in adjusted EBITDA. For the AI initiatives, we are doing quite a lot of work over the past few quarters, both on buyer and seller side, as you mentioned. We are launching the AI assistant for sellers in quite a few of market. Essentially, instead of the seller talk to a key account manager, the IM, as we call it, there is a digital IM that they can talk to, which can help them to answer many questions or many analysis they want to do with their shops.

[Tony Hou, CFO at Sea Limited]

This is also 24 hours available, of course, compared to key account manager usually are not available 24 hour by 7. This is one of the example that we are working with the sellers among many others. On the buyer side, we spend a lot of efforts on both helping the apps have better conversions, which reflecting our ad take rate improvement over times, but also just general conversion for our search recommendations. We've been rolling out our new GR algorithm, a generative algorithm for recommendation and search, which give us a meaningful improvement on the conversion rate that we observed. We're also doing follow-up work on AIGC on content.

[Tony Hou, CFO at Sea Limited]

If you look at our platforms, we have a lot more contents can be generated by AI now, which can be used to do a personalized targeting for our buyers to improve the conversion as well. Many other work we are doing. I'm just sharing few on top of my mind.

[Operator]

Your next question comes from the line of Alicia Yap with Citigroup. Your line is open. Please go ahead.

[Alicia Yap, Analyst at Citigroup]

Hi. Good evening. Thanks for taking my questions, and also congratulations on the strong set of results. I wanted to follow up a little bit on the e-commerce, the Shopee question. Can management elaborate a little bit the outperformance this quarter, and also the profitability trend, for Brazil, Taiwan, and Southeast Asia, and also the latest competitive landscape there? On your guidance, I know that you mentioned the 25% is unchanged for the GMV growth. In the case that if the GMV were to further exceed the guided growth rate, is that suggested that there is also further upside on the EBITDA for the second half? Lastly, on the fulfillment investment cycle, just wondering, where are we in the timeframe? Are we getting closer to what we wanted to invest?

[Alicia Yap, Analyst at Citigroup]

Are we still in the early stage of the investment cycle for the fulfillment center? Thank you.

[Tony Hou, CFO at Sea Limited]

Across the market, we see relatively good performance, both on growth and profitability. I don't think the single market trends, but relatively across the market. Regarding the competitive situations, we do observe that competitive situation to be relatively stable, at this point in time. We are able to maintain our market share. In certain markets, we are able to gain market shares as well, over the quarters, for Southeast Asia and Taiwan. For Brazil, we also observed that our growth is well above the market growth levels. We believe we're growing faster than our close competitors as well there. Regarding the balance between growth and EBITDA, it's always a question on what the best balance between the growth and EBITDA. I don't think there is a simple answer there.

[Tony Hou, CFO at Sea Limited]

I think something we always observe, both on how much we can optimize internally, and also look at how fast is the market growing. Of course, look at competitive landscapes to do this balancing. At this point in time, we have been seeing the competitive situation to be relatively stable, as I shared. The main driver of how the balancing work will lie on how we see the market growth rate look like in the rest of the year, and how much we can improve our efficiency internally for this. For the fulfillment, we believe there are still quite a lot of room for us to improve, to further penetrate on the fulfillment businesses. I think right now, both in Southeast Asia and Brazil and Taiwan, we're still ramping up the fulfillment sizes.

[Tony Hou, CFO at Sea Limited]

For example, I think we shared that our fulfillment grew more than 20% quarter-on-quarter. In quite a few markets, it's more than double digits already of our businesses. But still, if you compare the size of our fulfillment with some of the other players in our market, especially in Brazil, or compare with the sizes of the peers in other markets, if you look at the few players with fulfillment businesses and marketplace, we're still much smaller as a size compared to them. With the good benefits we see from the fulfillment, both on reducing the speed of deliveries, and enhance the buyer conversions, and also reduce the effort of sellers selling our platform, we do believe this is a good investment we're taking for our platform.

[Tony Hou, CFO at Sea Limited]

Also, as I shared in the earlier questions, our fulfillment economy has been improving, quarter-on-quarter, driven both by the fact we are able to optimize the cost structures. I think it's a learning process. Also just take time to optimize the operations just in general. That's one. As we grow the scale, with more and more sellers joining the fulfillment businesses, it's actually we have better scale advantage on that. Number three is also because there are more and more buyers recognizing the fulfillment businesses that we are offering. This give us a better economics over time. Another thing that's important to point out is that we are also doing a lot more integrations between fulfillment and SPX. Essentially to reduce the frictions between how the items in our warehouse moves across the entire value chain.

[Tony Hou, CFO at Sea Limited]

We can realize the cost synergies and cost benefits by running both the warehouse and logistics together. All these things help us to build the fulfillment businesses and helping us to gain the advantage of the overall platforms. Again, we run fulfillment business in relatively light CapEx fashions that we do not own the land, we do not own the warehouses. When we start a new fulfillment center, we do relatively light CapEx to enable that. We are also experimenting more automation with our fulfillment center recently, which actually reduce our cost to run as well. That is still in the early stage. We will share more when we scale more to our fulfillment centers over time.

[Operator]

Your next question comes from Divya Kothiyal with Morgan Stanley. Your line is open. Please go ahead.

[Divya Kothiyal, Executive Director at Morgan Stanley]

Thank you very much. My first question is on the e-commerce side. We have noticed that both Shopee and TikTok Shop have raised commissions in several Southeast Asia markets this year. Could you talk about how much more upside do you think there is for this? Can you confirm if Southeast Asia e-commerce is now profitable? Is that something that has specifically driven the guidance upgrade for e-commerce overall for this year? My second question is on FinTech. Where do you expect Monee's margins to really stabilize? We did see sales and marketing expenses continue to rise. When should we expect Monee's EBITDA growth to re-accelerate to more healthy levels? Could you maybe just talk about any guardrails we should be mindful of in terms of NPLs provisioning, especially as you are acquiring new users? Thank you.

[Tony Hou, CFO at Sea Limited]

When we look at the take rate, we look at take rate from multiple angles. I think one is how much the take rate is reinvesting to grow the ecosystems, which is very important for us to look at. That is number one. Number two is we look at how our price competitiveness is in our platforms. Essentially after take rate, do we still maintain a similar gap of price leadership or not compared to the other platforms? Number three is we also look at the price of e-commerce, especially on our platform versus the offline pricing. Number 4, we also look at what does it mean for sellers' profitability. I think we put all the things together in term of consideration for the take rate.

[Tony Hou, CFO at Sea Limited]

From what we observed so far, we have been seeing a very healthy ecosystems, even with the increase of take rate. The reason for that is that we reinvest a large part of the take rate to the ecosystem growth as well. Also, we are able to help the seller to operate online more efficiently over time. With the combination of all the things, our price is still very competitive, not only compared to the other marketplaces in our market, but also compared to the offline alternatives in the market. Going forward, we still see opportunities to increase our take rate, not only from commissions, but also from the pay ads that we have been able to penetrate more and more over time.

[Tony Hou, CFO at Sea Limited]

Although you can argue that the pace of the take commission increase probably will be less than we observed before, there is still room for us to increase the overall take rate by both helping the sellers to operate more efficient, but also helping the sellers grow their volumes by reinvesting part of the things to the ecosystem, and also increase the conversion potentials from the buyer side. With all the things together, I think we are able to grow this even more over time. On the Monee margin question, if you look at individual countries of the Monee businesses, if you look at the EBITDA over the outstanding ratios, it has been relatively consistent. Our NPL has been relatively stable as well over time.

[Tony Hou, CFO at Sea Limited]

I think typically when we operate, we look at by product, by country, by segment. The shift of the retail asset is somewhat driven by the mix of these things. For example, certain countries, for example, let's say in Thailand or in Malaysia, which is a later country that grows more than the previous countries, the overall ROA is slightly lower, so which kind of like, we mix together, it reflects to the overall number. For example, some of the off-Shopee SPL lending growth, which is quite meaningful, more than 20% of the total SPL already, as Forrest shared openly, has naturally a lower ROA compared to the other Shopee SPLs. For example, we have been trying to penetrate multiple price segment users, which naturally have slightly lower interest rates, et cetera.

[Tony Hou, CFO at Sea Limited]

All those growth are intentional, and as you observed from the numbers, that it does require some investment, sometimes when we grow into the segments, and sometimes it does mean that we are able to grow the outstanding a lot more, but with slightly lower ROA compared to the previous segment or countries or products we focused on. So we actually see this as a positive movement rather than the negative views out of this. Our guideline is very simple. We want to maintain a stable NPL for the segment, the product, the countries when we look at it. Then when we grow a new segment, new product, new countries, we want to make sure it brings a positive return of assets to us.

[Tony Hou, CFO at Sea Limited]

That is why, as a consequence, we always see that our absolute EBITDA group profit from Monee has been growing quarter on quarter.

[Operator]

Your next question comes from John Choi with Daiwa. Your line is open. Please go ahead.

[John Choi, Executive Director at Daiwa]

Thanks for taking my question, and congrats on a very strong quarter. I want to focus a little bit on Shopee's advertising take rate. I think Forrest also mentioned in his prepared remarks that ad take rate was pretty strong for a few reasons, but I think it was up by more than 90 basis points. How further upside do we see? I think that you guys also mentioned the advertisers seem to be more keen and taking up more of this. So what are the AI technologies that we're implementing to further improve this ad take rate? And how much more room do we see? My second question is on Monee, particularly for Brazil. I think, also in the slides, you also said you guys are going to launch something, a standalone app in Brazil.

[John Choi, Executive Director at Daiwa]

What will be the strategy? Should we be expecting somewhat similar to the Southeast Asian market? Thank you.

[Tony Hou, CFO at Sea Limited]

On the ads growth, we do see a pretty good growth on the ads, as we shared in the remarks. I think there are a few things helping the ad growth. I'm just listing some of the examples. One of the things, smart voucher, which is we combine a personalized voucher from a buyer together with ads, so we enhance the seller's ad traffic, increasing the purchase conversions. Another example is we have the Shopee GMV Max smart diagnostic tools. So essentially, this AI diagnosis report and tools to help the seller to analyze how can they have better return on the ads. It's leveraged on the AI capability to analyze the ad performance and drive improvement. We also have an in-depth audience insight for Brand Max.

[Tony Hou, CFO at Sea Limited]

This feature essentially allows more sellers to view the number of shoppers in each stage of their purchase journey. How does the shopper move between stages? This will give them a more robust and algorithm-driven branding solution to capture the buyers better across their life cycles with the seller. On top of that, there's also quite a fundamental improvement on the algorithm for the ads. Those on how can we match the buyer's intention to the ad for better. I think that's where the AI-based algorithm, the GR algorithm helps quite a lot when we come to the matching part. The other part is the content presentation. We're using fellow AI tools to create better personalized content for the user when they see the ads.

[Tony Hou, CFO at Sea Limited]

All this in combination helps our ad take rate to improve. In the coming quarters, we still see that meaningful potential to increase the ad take rate. Given that many of the tools, many of the algorithms we're implementing are still in progress, we can see a meaningful optimization potentials, while we are doing more experiments, while we are optimizing algorithms further in the coming quarters. For Brazil, on the Monee side, we do believe that Monee has a big potential in Brazil. We are seeing a very good growth in Brazil for our lending businesses in the past two quarters. We were launching an app which is similar to ShopeePay app in Brazil, but with the SCFI license, which means we will be similar to what Mercado Pago or other players in the market can offer in Brazil.

[Tony Hou, CFO at Sea Limited]

We believe that Brazil is quite a big market for financial services, which is proven by a few other players in the market. With our e-commerce user base, our e-commerce data, and also with our better credit scoring algorithm that's proven in Asia already, but of course, we customize for Brazilian flavor. We are able to broaden our product in Brazil over time. If you compare what we offer and what the other player offer, there are many low-hanging fruits that we believe that we can capture just by doing the right product structures, inputting the right data in our platforms to better credit scoring users, and just also with the license we applied, which is kind of as good as the others already in the market.

[Operator]

Your next question comes from Navin Killa with UBS. Your line is open. Please go ahead.

[Navin Killa, Managing Director at UBS]

Hi. Good evening, and thank you for the opportunity. Two questions from me. Firstly, on the e-commerce business. We have seen the margins kind of stabilize over the last couple of quarters, after inching down through the later part of last year. I just wanted to understand from here on, and back to your medium-term kind of aspiration of 2%-3%, if you could help us understand the path, the timeframe, and how you get there. That is, I guess, just a question on longer-term margin evolution for e-commerce. Secondly, on Monee, you did mention, for example, that the average loan size is up some 20% compared to last year. As your loan ticket size increases, does the credit risk also increase? If I could also just understand what the timeframe of these loans is, the duration of these loans is.

[Navin Killa, Managing Director at UBS]

To get a better sense of how the credit risk is being managed with a larger loan book per customer.

[Tony Hou, CFO at Sea Limited]

We still believe that 2%-3% is quite within our reach for the year. It is the percentage. I think, in fact, some of market are well above that. I think the balance between growth and profitability is something I shared in the previous answers. We do believe this is still a dynamic process on how do we make sure we capture the potential of the growth of the market versus taking more profit out of the ecosystem. I think this is something we will balance over time. But if you look at the numbers, the path from where we are to 2%-3% is relatively straightforward. Now we are 0.67% or so, and we are talking about 1% to get where we are. Part of that will come from over time.

[Tony Hou, CFO at Sea Limited]

We do not need to invest so much in many of the things we are investing in. Like many of the programs we are doing right now, it will get mature over time. I think we should invest less into it. Part of that comes from our cost improvement, fundamental cost structure improvements. For example, our logistics, our fulfillment cost structure improvements over time. Part of that comes from better take rates from either ads or other forms. I think if you put that number together, we are really not too far, and we have done this in some markets already for growth. We do see, as you mentioned, the outstanding per user increased year to year.

[Tony Hou, CFO at Sea Limited]

I think part of that is because we are reaching out to a new prime segment of users who naturally takes bigger ticket sizes. Part of that is also our country expansion. Some of the countries we grow more recently, faster than the others, has a higher income per capita in the market. With all that, we do see a stable credit risk within the country, within the segment, within the product. We did not see any correlation between the increase of the outstanding per user and the increase of credit risk here. The duration of the large loan, it slightly depends on the product country. Some can be as large as 18 months, some of them can be 12 months, et cetera.

[Tony Hou, CFO at Sea Limited]

But that is relatively small percentage for very good prime users or for some specific lending products like the offline motorcycles that require a longer period.

[Operator]

Your next question comes from Jiong Shao with Barclays. Your line is open. Please go ahead.

[Jiong Shao, Analyst at Barclays]

Thank you so much for taking my questions. Please let me add my congrats as well. I have two follow-up questions around e-commerce. The first one is that you talked about a full year of 2026 EBITDA to be over $1 billion. That would suggest a higher EBITDA for the second half than the first half, which is different from last year. I think last year, the second half EBITDA was lower than the first half. I was hoping you can talk about the drivers behind that phenomena this year compared to last year. Does that also imply that perhaps the margins may be a bit better in the second half than the first half as well? My second question is back to Brazil.

[Jiong Shao, Analyst at Barclays]

One of your key competitors in Brazil talked about the momentum they are seeing by lowering some of the take rates there and lowering the free shipping threshold. That clearly has not stopped you from growing very, very fast. Could you just talk about your profitability outlook in Brazil in the coming quarters and the years? Thank you.

[Tony Hou, CFO at Sea Limited]

As you rightly point out, we share the goal of more than $1 billion EBITDA this year. If you do the math, it does mean that in the absolute terms, our EBITDA for the second half of the year will be higher than the first of the year. Of course, partially because of the growth of the market, especially the overall GMV, we believe that we still see quarter-over-quarter growth. So the second half of the year GMV base will be better than the first half of the year. Part of that comes from the continued work of initiatives that we talked about.

[Tony Hou, CFO at Sea Limited]

The e-commerce is a business that we adjust the pace, adjust the optimizations based on many parameters, as I shared earlier, based on how we are optimizing the businesses, based on how the overall business growth of the country and also based on how the competitive business is. For Brazil, yes, I think your observation is absolutely correct. We still see that our growth is well above the market in the countries. If you look at the price competitiveness, we are still very price competitive, a lot stronger than the competitor in the region, even after there is change on the take rate and the free shipping threshold. So we believe that for e-commerce businesses, the fundamental still holds. It is the price competitiveness of our assortment.

[Tony Hou, CFO at Sea Limited]

It is the completeness of our assortment. It is the fundamental structure of cost to serve, and it is experience of how the buyers can discover the product on our platform. All those things help us to grow faster in the market in Brazil. If you look forward, we still believe that Brazil has a long way to go in term of e-commerce growth. We are hoping to grow in Brazil in a profitable fashion, with the growth rate outpace the market in the coming quarters.

[Operator]

Your next question comes from the line of Ranjan Sharma with JPMorgan. Your line is open. Please go ahead.

[Ranjan Sharma, Executive Director at JPMorgan]

Good day, Ranjan. Hi. Thank you so much for the opportunity and the presentation. Two questions from my side. Firstly, on the gaming. We discussed new publishing rights. Can you also help us understand which geographies do they cover? Also, earlier in the year, we talked about a possible Naruto collab coming back, if you can remind us when that's going to be. The second question is on FinTech. We noticed that the provisions for credit losses have increased quite a bit this quarter. What are the trends that you're seeing in delinquencies, and how does that affect your loan growth going forward? Thank you.

[Chris Feng, President at Sea Limited]

Hi, Ranjan. Thank you for your question. I think for the new publishing games, we specifically talk about two games this quarter. One is the Palworld Online, and since this game is our self-developed game, so we're going to publish it globally, and we probably were going to launch the game market by market and gradually. The plans, we're going to this will be a global publishing opportunity for us. For the Monster Hunter Outlanders, this is a great collaboration between Garena and Tencent. Tencent developed the game and also work together with this fantastic IP owned by Capcom. We're trying to launch in the market, being markets we're very familiar, like Southeast Asia, Latin America, Taiwan, and potentially, we're going also to launch the game in Middle East and some more markets in the pipeline.

[Chris Feng, President at Sea Limited]

The target launch time will be this year.

[Tony Hou, CFO at Sea Limited]

I think for the provision, it's primarily driven by the loan mix. I think there are two components in our loan mix. We naturally have high provisions. One is the off Shopee SPL, and second one is the Brazil loan outstanding. Although Brazil have very different outlook there, it's a high interest, high risk market. The higher mix of these two components contributes to the higher provision you see.

[Operator]

This concludes our question and answer session. I would like to turn the conference call back over to Mr. Casey Ong for any closing remarks.

[Casey Ong, Investor Relations Member at Sea Limited]

Thank you all for joining today's call. We look forward to speaking to all of you again next quarter.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Analysts

• Casey Ong, Investor Relations Member at Sea Limited
• Forrest Li, Chairman and CEO at Sea Limited
• Tony Hou, CFO at Sea Limited
• Piyush Choudhary, Director of Equity Research at HSBC
• Alicia Yap, Analyst at Citigroup
• Divya Kothiyal, Executive Director at Morgan Stanley
• John Choi, Executive Director at Daiwa
• Navin Killa, Managing Director at UBS
• Jiong Shao, Analyst at Barclays
• Ranjan Sharma, Executive Director at JPMorgan
• Chris Feng, President at Sea Limited