Sea Q3 2026 Earnings Call Transcript

Sea (NYSE:SE) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Sea Limited reported a record high of $8.6 billion in revenue for Q3 2026, up 43% year on year, and over $930 million in adjusted EBITDA, up 29% year on year.

Shopee continued its strong performance with a 23% increase in GMV and a 26% rise in gross orders year on year. Adjusted EBITDA for Shopee reached $259 million, marking its most profitable quarter.

SeaMoney’s loan book grew 50% year on year to $12.6 billion, and the company is considering a standalone listing for SeaMoney within the next one to three years.

Garena, Sea’s gaming arm, showed solid results with bookings growing 6% year on year to $890 million, driven by the success of games like Free Fire and Arena of Valor.

Sea announced the launch of Sea Cloud, aiming to leverage its AI capabilities for external organizations, although it is still in the early stages.

Sea completed its $1 billion share repurchase program and announced plans for an additional $1 billion in buybacks.

The company remains optimistic about future growth, with a goal to achieve $1 billion in adjusted EBITDA for the full year of 2026.

Full Transcript

OPERATOR

Good morning and good evening to all, and welcome to the Sea Limited Third Quarter 2026 Results Conference Call. All lines have been placed on mute 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 star one again. For operator assistance throughout the call, please press star zero.

And finally, I would like to advise all participants that this call is being recorded. Thank you. I’d now like to welcome Mr. Elson Choi to begin the conference. Please go ahead.

Elson Choi (Investor Relations)

Hello everyone and welcome to Sea’s 2026 third quarter earnings conference call. I am Elson 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 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 Feng, and Chief Financial Officer Tony Ho. Our management will share strategy and business updates, operating highlights, and financial performance for the third 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 Chief Executive Officer)

Hello everyone and thank you for joining today’s call. Our strong momentum from the first half of the year has continued into the third quarter. Sea achieved a new record high of $8.6 billion in revenue, up 43% year on year, and over $930 million in adjusted EBITDA, up 29% year on year. We are pleased with this solid performance and will continue to focus on executing our priorities with discipline. With that, let me take you through each business’s performance, starting with Shopee. Shopee delivered another strong quarter, again achieving new record highs in both top- and bottom-line metrics. GMV rose 23% and gross orders rose 26% year on year. Revenues reached new highs and adjusted EBITDA reached $259 million, making this our most profitable quarter ever. The acceleration in new user growth we saw in the second quarter has continued into the third.

We engaged and re-engaged a broad range of users through both online and offline campaigns, brought our content to more social and video platforms, and widened our service options, especially in delivery, to serve different user needs. With this effort, new average monthly active buyers grew more than 50% and the total average monthly active buyers increased by 20% year on year. Monetization has also continued to do well. Driven by ads, sellers are responding well to the greater value they see in our AI-driven ad solutions. Ad-paying sellers rose more than 35% while average ad spend per seller increased around 13% year on year, and revenue grew more than 55% and our take rate improved by over 80 basis points year on year.

Our operational priorities to enhance service quality, price competitiveness, and discovery remain consistent and continue to be driven by our efforts in logistics, Shopee VIP, and our content ecosystem, each of which made good progress this quarter. First, logistics. We expanded our delivery options to serve a wider range of buyer needs, from instant and same-day delivery to low-cost services. Our instant delivery service can now deliver as quickly as one hour. This has expanded our addressable market by unlocking new spending scenarios where speed matters most. These tend to be high-frequency categories such as groceries and pharmaceutical items, boosting our overall purchase frequency. In Indonesia, orders using these services more than doubled year on year, with cost per order declining year on year.

Retailers there have embraced the service. We now have more than 12,000 offline stores on our instant platform, and adoption is also growing in Thailand, where instant and same-day delivery now account for nearly 15% of orders in Greater Bangkok. We will continue to grow this service in areas where demand is high and the unit economics make sense. At the same time, we have continued to expand lower-cost delivery services to ensure that all users continue to have full, affordable, convenient options. In the third quarter, parcel self-collection order penetration reached more than 30% in Singapore and more than 15% in Malaysia. In Indonesia, our economical shipping option has gained strong adoption and now accounts for more than half of total orders. Its cost per order is more than 20% lower than the platform average in the market.

These initiatives allow us to offer free shipping at a lower minimum spend, giving our buyers the flexibility to choose between cost and speed and letting us serve a broader range of buyers’ needs. We have also continued to scale fulfillment quickly. Sellers have responded well to our fulfillment offerings as we help them take on the complexity of storing, packing, and shipping. This represents significant efficiency gains for them, especially during peak campaign periods where orders may be several times higher than normal. With our services, sellers can build their businesses more easily without having to increase their own warehouse space or staff size.

In the third quarter, fulfilled order volumes accelerated to around 25% quarter on quarter. Unit economics for our Fulfilled by Shopee service improved sequentially in Asia, and we see further room to gain efficiency through higher warehouse utilization and automation. Fulfillment also drives synergies with delivery, enabling us to deliver more packages more quickly. The number of parcels delivered by the next day or sooner grew over 60% year on year, more than twice as fast as our overall order growth.

Second, Shopee VIP is growing fast. Membership across markets exceeded 21 million at the end of September, up more than 40% quarter on quarter, and the members contributed close to 25% of Shopee’s overall GMV. The program is demonstrating stickiness, with monthly retention around 80%. Members show a consistent double-digit percentage uplift in spend on average after subscribing, and with more sellers and partners investing alongside us in membership benefits, the program’s unit economics improved sequentially.

We have also continued to enhance the program’s value proposition through new subscription tiers with more benefits. In September, we introduced the Shopee VIP Plus in Indonesia, Thailand, and the Philippines, a higher subscription tier that combines core member benefits with a Netflix subscription. Third, our content ecosystem continues to make discovery more engaging. Orders from live streaming and short-form video grew more than 45% year on year and accounted for more than 25% of physical goods ordered in Southeast Asia. Unit economics also improved sequentially. Beyond our app, our affiliate program remains an effective and growing channel to bring new buyers to Shopee from other platforms. In the third quarter, orders driven by YouTube content more than doubled year on year, and Shopee affiliate orders generated by Facebook-linked creators grew more than 90% sequentially.

On Instagram, more than 4 million reels have been tagged with Shopee products since we launched the partnership in April, with the number growing more than four times quarter on quarter. Shopee is also one of the early connector partners for Meta’s AI personal assistant that has just launched in Singapore. Users will be able to research and compare products on Shopee through Meta AI, helping them make purchase decisions tailored to their preferences.

The partnership is still at an early stage, but we see potential for it to become a solid additional channel for buyer acquisition and incremental GMV growth over time. Brazil remains our fastest-growing market, and we again grew faster than the broader market in the third quarter. Logistics improvements underpinned this growth. We continued to widen the range of faster delivery options we offer across the country, with average buyer waiting time improving 12% year on year. We have branched into air delivery, cutting delivery times to the North and the Northeast regions significantly. In Greater São Paulo, around 40% of parcels now arrive by the next day and nearly 60% within two days.

Our new instant delivery service there, Shopee Turbo, already delivers in under four hours from more than 7,000 partner stores. Stronger delivery capabilities have enabled us to onboard more sellers to fulfillment. For example, we rolled out an in-house delivery service for bulky items such as large appliances and furniture. Combined with our strong service reputation and reliable cross-nation coverage, this has made more large-item sellers willing to fulfill with us across the country.

Fulfillment order volume more than doubled year on year. These service quality improvements have helped drive stronger growth in higher-value categories. More upmarket buyers are joining Shopee and existing buyers are shopping across more categories. The autos, automotive, and home improvement categories grew more than 80% year on year, and more brand sellers have come on board. GMV from Shopee Mall sellers was up nearly two and a half times from a year ago, and Shopee Mall orders carry an average basket size almost three times the platform average.

Looking ahead, we see a lot of headroom to grow in this exciting market. In summary, Shopee delivered another quarter of strong growth while generating the highest quarterly profit we have ever achieved. Our strategies have proven effective at strengthening our fundamentals, giving us a growing buyer base, stronger monetization, and improving unit economics. We do see a long runway of opportunity ahead, and we will keep executing with the discipline to capture it.

We remain on track to deliver GMV growth of around 25% and an adjusted EBITDA of $1 billion for the full year of 2026. Next, moving to Money. Money has grown well beyond its origins as a payment infrastructure serving our internal business needs. Today it has evolved into a financial services business across mobile wallet, credit, digital banking, and more. Money has shown consistent strong growth and has been profitable for the last three fiscal years. We believe Money has reached the scale and the maturity to sustain itself and would benefit from becoming more independent.

Today, Money is already one of the largest unsecured consumer lending companies in Southeast Asia, serving nearly 44 million active credit users with a loan book of over $12 billion. Increasingly, Money’s growth is coming from beyond Shopee, and it is building direct relationships with users through standalone apps across Southeast Asia and Brazil. Personal cash loans and off-Shopee loans made up around 50% of our loan book at the end of September, and average monthly transacting users on these apps more than doubled year on year in the third quarter.

Our ambition is to keep growing Money into a full financial ecosystem with inclusion at its heart, serving users across their lifecycle needs, from unsecured loans to secured lending, insurance, wealth management, and more. We believe a standalone listing would give Money the dedicated capital base it needs to build this ecosystem and let it invest for growth while managing risk with discipline. I want to be clear about what does not change. Money and Shopee will continue to work closely together as they do today.

Money will remain a key payment and credit partner for Shopee, and Shopee will remain a key platform for Money to reach users. Insights from our businesses will continue to empower Money’s growth. We hope to list Money at the right time in the next one to three years, taking into consideration factors such as market conditions, macro environment, and regulatory requirements. We will approach this carefully, working closely with our stakeholders in each market throughout.

We aim to deliver value for our shareholders. With that, let me take you through Money’s performance this quarter. Money delivered another quarter of healthy growth. Our loan book grew around 50% year on year to $12.6 billion at the end of September. Unit economics are healthy, and we continue to invest where we see a clear path to attractive long-term returns. We continue to expand our credit business on three fronts: acquiring new users, deepening our relationship with existing users, and expanding our credit use cases.

Our user base continued to grow steadily in the third quarter. We added nearly 6 million first-time borrowers, bringing active credit users to nearly 44 million, up around 28% year on year. As borrowers build longer credit histories with us, we can progressively offer them higher limits, longer tenures, and more products. Average loan outstanding per user grew 23% in the third quarter year on year, and over 40% of our active credit users were using two or more of our credit products at the end of September. SPayLater is becoming an everyday way to pay both online and offline in many of our markets. Our off-Shopee SPayLater portfolio more than doubled year on year to nearly 25% of our entire SPayLater portfolio at the end of September.

In Malaysia, its share is nearly 40%. In Thailand, the Shopee Pay Unlimited card allows SPayLater users to access their approved SPayLater credit limit wherever Mastercard is accepted. Monthly transacting users of the card in September grew more than 50% compared to a quarter ago. We are rolling the card out at the pace set by risk performance, and we plan to bring it to Malaysia later this year. Risk management remains our top priority as we continue to grow our loan book. Our 90-day NPL ratio was 1.3% at the end of September. The modest uptick primarily reflects an evolving credit environment, especially in Thailand and Brazil, as well as market and product mix, including faster growth in Brazil and off-Shopee SPayLater. Our underwriting is highly responsive to market conditions. We proactively adjusted our underwriting criteria and credit limit management for selective customer segments at early signs of softness to maintain disciplined growth and optimize risk-adjusted returns.

We are staying close to the data and will keep adjusting as needed so our loan book growth stays healthy and sustainable. In summary, Money delivered healthy growth while staying disciplined in how we manage risk and how we invest. Our credit playbook remains consistent: start small, prove economics, then scale. We are reaching more users, deepening relationships with existing ones, and extending credit into more everyday spending scenarios both on and off Shopee.

Many of our initiatives are still in the early stages, and we are making good progress capturing the large underserved opportunity across our markets. Next, turning to Garena. Garena delivered a solid third quarter with bookings continuing to grow from the high base set last year. Profitability also improved. Free Fire anchored this performance with strong bookings growth, and Arena of Valor continued its strong momentum from its 10th year anniversary celebrations in January. Last year, we released our smash hit IP collaboration, Naruto Shippuden Chapter 1. This year, by popular demand, we brought it back with upgraded gameplay and fresh rewards, rebuilt around top fan-requested content.

Our players loved last year’s original campaign’s most iconic moment, when the enemy giant Nine-Tailed Fox descended on the battlefield as a threat that everyone had to survive. To build on it, we brought in one of the most important powers from the Naruto universe, the Sharingan. This is an iconic ability the anime’s most powerful characters use to control the Nine-Tailed Fox. Players could use it to make the giant creature attack their opponents, bringing the excitement of the moment to a new level.

We also expanded the map with places fun and nostalgic to explore, like the ninja school where the main characters first trained. We continued to pay close attention to detail, even including small but important elements like the swing where a young Naruto stands alone in the original anime, that gave players an extra boost for the rest of the game. Our careful authenticity has resonated with the players and the industry alike. Content around our Naruto Shippuden collaborations has generated more than 6.5 billion views on social media to date.

This quarter, we were also honored that our Naruto Shippuden Chapter 2 collaboration won the award for Best Use of IP or License at the 2026 Pocket Gamer Mobile Games Awards. Beyond Free Fire, Arena of Valor is celebrating its 10th anniversary this year. Instead of one single event, we are making the entire year a celebration with a series of in-game content releases and our biggest ever real-world event. We hosted AOV’s biggest ever offline celebrations with a concert at Taiwan’s largest indoor venue, the Taipei Dome, the first-ever gaming event to be held there. Around 30,000 fans came to see K-pop and local artists, many of whom had previously collaborated with us on music for AOV.

We also transformed parts of Taipei into an AOV-themed city, collaborating with the metro stations and 7‑Elevens, putting on an anniversary exhibition, and holding a light show at the iconic Taipei 101. The campaign went viral, becoming the number one trending topic on social media in Taiwan. Ten years in, AOV is still winning over new generations of players and deepening its bonds with long-term fans. With its strong engagement, we believe that, just like Free Fire, AOV will continue to be an evergreen game.

In summary, Garena’s performance this quarter showcases our ability to keep successful games fresh, listen closely to our players, and build lasting relationships with them. We will remain focused on delivering engaging experiences and strengthening our franchises for the long term. In addition to our three existing business segments, we have always been exploring and experimenting with new businesses. The most recent of these is Sea Cloud. As we announced recently, as AI has taken off, we have built up meaningful capabilities over the past two years across the infrastructure, model, and agentic application layers, and our own businesses have benefited significantly from them. Sea Cloud looks to bring these capabilities to other organizations across all three layers.

Today there is a lot of focus on compute prices and the cyclical margins, and having enough compute certainly matters, but we believe the ultimate prize lies elsewhere. The cost of tokens is falling rapidly and structurally, and as it does, AI becomes affordable for far more organizations and far more use cases. The real opportunity is to build a significant business around the long-term decline in token prices, helping organizations drive much broader AI adoption.

We see much of the lasting value in the layers above bare-metal capacity. One is running AI efficiently, getting more out of every GPU through better utilization, faster deployment, and leaner operations, which we have mastered for our own businesses. The other, and the more important over time, is the agent software and orchestration that helps organizations put AI to work: running models reliably and securely, adapting them to their own data and languages, keeping that data close to home, and moving to newer and more cost-efficient models, including open models as they emerge, without having to rebuild each time.

Many organizations grasp this, but few have the specialist teams to build it themselves. That is where we intend to focus, and it is not theoretical for us. It is what we have had to do for our own businesses, running AI at scale in areas such as fraud detection, customer service, and content generation under real commercial pressure, and in Money’s case in a highly regulated environment. We see this as an opportunity to turn our AI capabilities today across the center for Sea into a profit center. We are already making this investment for our own businesses. By serving external customers on top of that existing base, we can spread our fixed costs across more users and earn attractive incremental returns on capital. This is consistent with how we have entered new businesses throughout our history, like Money, beginning as a payment infrastructure, building our own platforms, before going into a business serving customers well beyond them.

We are setting up Sea Cloud as a full go startup so that it can stay nimble and respond quickly to market demand. Our focus is the software and the customer relationship, not owning large amounts of physical capacity. Where customers need dedicated computing capacity, we will only pursue opportunities with clear customer commitments and attractive returns. We will mainly look to partners and customer prepayments to fund the physical infrastructure.

As a result, we do not expect Sea Cloud to have a significant impact on our financials for now. It is still early, and we will update investors on any meaningful development. We also want to give an update on our share repurchase program. As of today, we have almost fully completed our $1 billion share repurchase program announced a year ago. We are pleased to announce that we plan to buy back an additional $1 billion worth of shares. In conclusion, we have delivered another strong quarter. Our three businesses have all expanded their addressable opportunity and strengthened their competitive position. Unit economics continue to improve across many of our initiatives, a testament to our financial discipline and operational efficiency. Our progressive momentum across the first three quarters gives us greater confidence for the rest of the year. As always, we greatly appreciate your trust and support.

With that, I invite Tony to discuss our financials.

Tony Ho (Chief Financial Officer)

Thank you, Forrest, and thanks to everyone for joining the call. Overall, total GAAP revenue increased 43% year on year to $8.6 billion in the third quarter of 2026. This was primarily driven by growth in Shopee and Money. Our total adjusted EBITDA was up by 29% year on year to $931 million in the third quarter of 2026. On Shopee, gross orders increased 26% year on year to 4.5 billion in the third quarter of 2026, and GMV increased by 23% year on year to $39.7 billion in the third quarter of 2026. Our third quarter GAAP revenue of $6.1 billion included GAAP marketplace revenue of $5.3 billion, up 41% year on year, and GAAP product revenue of $0.7 billion. Within GAAP marketplace revenue, core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was $4.6 billion, up 51% year on year.

Value-added services revenue, mainly consisting of revenues related to logistics services, was $0.7 billion. Shopee adjusted EBITDA was up by 45% year on year to $269 million in the third quarter of 2026. Money GAAP revenue was up by 64% year on year to $1.6 billion in the third quarter of 2026. Adjusted EBITDA was up by 15% year on year to $298 million in the third quarter of 2026. As of the end of September, our consumer and SME loans principal outstanding reached $12.6 billion, up 60% year on year. This consists of $11.2 billion on-book and $1.3 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 1.3% at the end of the quarter.

Garena bookings grew 6% year on year to $890 million. GAAP revenue was up by 29% year on year to $840 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 46% year on year to $458 million. Returning to our consolidated numbers, we recognized net non-operating income of $123 million in the third quarter of 2026 compared to net non-operating income of $61 million in the third quarter of 2025. We had a net income tax expense of $280 million in the third quarter of 2026 compared to net income tax expense of $161 million in the third quarter of 2025. As a result, net income was up by 34% year on year to $502 million.

Elson Choi (Investor Relations)

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 assemble our roster. Your first question comes from the line of Alicia Yap with Citigroup. Your line is open. Please go ahead.

Alicia Yap (Analyst at Citigroup)

Thank you. Good evening, management. Congrats on the solid set of results. Thanks. Two questions. First, I wanted to ask on Sea Cloud. So as Sea plans to invest in cloud and AI infrastructure, how should investors think about the expected return profile for these investments? What are the key use cases or demand drivers that give you confidence that Sea Cloud can become a meaningful business over time? Second question: SeaMoney has reached a meaningful scale with over 12 billion in loans outstanding, 44 million active credit users, and also an increasingly diversified business beyond the Shopee ecosystem. As you look ahead, what milestones do you believe are still needed before SeaMoney can be viewed as a standalone financial platform? And strategically, how do you think about the benefits of keeping SeaMoney integrated within Sea versus creating a more independent segment over time?

Thank you.

Forrest Li (Chairman and Chief Executive Officer)

Thank you, Alicia. For the Sea Cloud business, as I just mentioned in my remark, this is a very new initiative and this is at a very, very early stage. So we are thinking, what are the potential new business opportunities we may have during the AI era? And continually and increasingly, we believe eventually, because of this new technology, both consumers and organizations across the whole world, and especially in our region as well, will go through AI transformation.

And every organization needs to build up certain AI capabilities, right? This includes across all the layers, including the compute capacity and the models, and also how to use the model, how to deploy the model in an affordable way, in an efficient way, in a secure way. And also on top of that, what is the software that can be used and what is the agent that can be built, right? And this is going to make a meaningful impact. And I think actually it’s not an easy process and this will take time and will take quite some effort for that transformation.

In the past few years we have gone through this for our own business firsthand. Although this is very, very challenging, we put a lot of effort. We’re also very excited about the impact it can make, right? And so in my remark I mentioned specifically several cases like fraud detection, customer service, content generation. These benefit our business significantly on a daily basis. And we have a strong conviction that the capability we have built, the know-how and the knowledge we have learned through our own use case experience, will be valuable to other organizations as well.

And also not every other organization has the same technical capability and the use cases as we have today in-house to allow us to build such capability from scratch. That’s why we think the aspiration is really to externalize what we already have built as internal capabilities and resources, and become a standard kind of new business to serve external customers. We also believe the adoption will be accelerated because the model is getting better and better and the agent can do more and more things, and also the token cost will continually go down. This makes the entire AI demand more affordable and more accessible and at an accelerated pace. So that is the big picture we are looking at, and we think the demand will be huge. This is at a very, very early stage, so we want to get into this business early. There are a lot of things we don’t know yet.

Again, this is very early. This is a kind of startup, so there are a lot of things we need to figure out. For example, what exactly is the segment we should focus on, what exactly type of customers we should focus on, and what is the best business model we should use. We think we’ll get a better picture when we really get our own feet into the game and we start to get firsthand experience. I hope, and I’m sure, the learning will be very, very quick when we really have a real business working on that.

We feel in the past, although this is very early, in the past few months we have gained a lot of insight and learning about the potential opportunities we have. I think we’re going to keep investors updated. At the same time, because this is very new and there’s a very dynamic situation and opportunity, we want to make sure we will be very, very frugal in terms of the capital expenditure and in terms of the cash flow spending. Whatever the opportunity we are looking at top-down, we believe in the big potential ahead of us.

But bottom-up, when we look at each project, each customer, each potential deal, we’re very much disciplined in terms of what return we’re looking at, what it means to us financially. I don’t think at this moment we have a very, very clear order as a business of what the return on investment will look like. We believe this will be very, very good, but again we also want to stay humble. There are a lot of things we know that we don’t know. But bottom-up for each project we’ll keep the financial discipline very, very seriously.

We want to make sure every project we work on will generate attractive returns for us and minimize our potential financial risk, if there’s any. So I think that is the overall thinking we have for this Sea Cloud business. It is still at the formation stage. It’s a very, very different profile compared to the three existing businesses we have. It took us a decade to build up the three existing businesses to today’s stage. I think Sea Cloud will be really a long-term bet, and this is one of the bets we have in the AI times. We are very excited about it and we’ll keep our investors and shareholders updated if there’s any major development on that front.

And for your question about the SeaMoney IPO, again this is a very, very exciting project. It always has been our aspiration to build SeaMoney into a standalone financial services business, and we believe SeaMoney has the potential to be one of the best in the world in the fintech businesses. I think we’re on the right track now, and now we feel comfortable it can reach the stage and scale to be sustainable itself. I think being listed standalone will give more room and more flexibility for SeaMoney to continually grow.

In the past, SeaMoney has benefited hugely being part of Sea and being integrated, being part of an integrated system. I think that is a very, very critical success factor for SeaMoney in the past. But moving forward, we expect SeaMoney will continue to grow and not only rely on the Sea ecosystem, but really have the courage and have the flexibility and have the room to grow out of it. Meanwhile, please don’t get it wrong. As I shared in my remark, whatever the benefit of being together with Sea and with Shopee in the past will still be there. There will be very, very integrated, tight collaborations between Shopee and SeaMoney, and there’s a huge synergy we’re definitely not giving away. At the same time, from Sea’s perspective, the capability we built during the AI era will continue to be the technical support enabler for SeaMoney to grow.

So that is our thinking for now. Again, we are not in any rush. We just want to share this directional move with the investors and shareholders as early as possible, and we are looking at a one- to three-year timeline. There are a lot of things: when we start to kick off the process there will be a lot of learnings, and we’ll weigh the different ways of doing that and the pros and the cons. At the same time, we’re going to keep all the shareholders and investors updated along the journey as well.

OPERATOR

Your next question comes from the line of Divya Cathill with Morgan Stanley. Your line is open.

Divya Cathill (Analyst at Morgan Stanley)

Thank you very much. My first question is on Shopee and really when does the monetization actually start flowing through profitability? So we saw that despite the strong growth in take rates and advertising, margins are still flat quarter on quarter at about 68 basis points. Could you elaborate what absorbed these monetization gains specifically, and which investments should start delivering some sort of operating leverage next year? If you could also comment on the profitability runway difference between ASEAN and Brazil, as well as between content or ecosystem versus shous.

So that’s my first question on Shopee profitability. My second question is just on agentic AI in Shopee. You are an early connector partner for Mug, as you mentioned. If product discovery moves to an internal agent, how do the economics of a Shopee order change, particularly the advertising revenue and the contribution profit? Do you actually retain the customer relationship and data? And if you could also comment on how MIGU is performing on adoption and conversion, and how do you see its role in Shopee as the agentic AI going forward?

Chris Feng (Chief Executive Officer of Shopee)

On the Shopee side, for the monetization that you mentioned, we do see better monetization over the quarters. As you point out, our EBITDA also remained relatively stable from quarter to quarter. I think overall the thinking we have is that we still see quite a lot of growth potential in both Southeast Asia and the Brazil market. In fact, if you look at our growth rate, we grew 23% plus this year. This quarter, if you look at the growth without the forex impact, we grew more than 26%, close to 26.5%.

So we do see a lot of potential in our market, and we would like to grow e-commerce penetration further in both Southeast Asia and the Brazil market. At the same time, as Boris mentioned in the opening remarks, we commit to have our EBITDA more than $1 billion this year. I think we still hope that, as our standard, we expect, in fact, going forward our monetization will also be better, primarily from the ad side, less from the fixed commission side, and part of that will flow to the bottom-line EBITDA improvement over time and part of that might go to the investment to grow our market further as well.

Between Brazil and Southeast Asia, I don’t think there’s a particular difference in some of the trends between the two regions. I think both Brazil and Southeast Asia are relatively stable if you look from a quarter-to-quarter perspective. For content side, content for us comprises both the videos and live streams. Our content ecosystem has been growing year to year and quarter to quarter. At the same time, our profitability also grew better for content as well. If you look at a contribution margin perspective, our content part of the business has been profitable already for this quarter, which is a very good milestone for us to achieve.

Coming to the second question on the agentic AI, we actually partner with a range of partners, starting from ChatGPT, now, as you mentioned, the Muse. At this point in time, all the checkout and seller relationships and buyer relationships happen within the Shopee platform, and we wouldn’t see a meaningful impact to our economics for the near future. At the same time, I would like to point out that we work with many platforms as affiliate partners as well.

For example, we have been working very closely with both YouTube and Meta for Facebook and Instagram as affiliate partners, which works similar to the fashion we work with platforms like Muse as an affiliate partner. We’ve been generating a sizable number of new users to our platform, generating sizable traffic to our platform, and it’s been part of our economics in the past years. So we don’t see this will dramatically change the picture when we work with Muse or ChatGPT.

OPERATOR

Your next question comes from the line of Piyush Chowdhury with HSBC. Your line is open.

Piyush Chowdhury (Analyst at HSBC)

Hi, thanks a lot and congratulations on good set of numbers. Two questions. Firstly on Shopee, when do you think the peak investments would pass considering the ongoing investment in Shopee VIP, Instant Delivery, Fulfillment? And did I hear correctly that content ecosystem is now EBITDA positive? Or if not, then how much is the drag on profitability, and can you also share what’s the progress on fulfillment both in Asia and Brazil? Second question on Sea Cloud: you have explained in detail your aspirations, but can I check if you have secured any enterprise contracts already? And just to clarify, would you invest in data centers and GPUs, or would it be capex-light where you will lease these assets? And any guardrails that you have put on maximum capital investment over the next two to three years in this segment would be great. Thank you.

Chris Feng (Chief Executive Officer of Shopee)

Yeah, I think we’ve been investing in the Shopee value and procurement and also the other initiatives like the instant delivery, et cetera, across our countries. It’s a bit hard to argue when is the peak investment, as we roll out these programs in different countries, different markets at different time frames. So if you look at our early countries that we started, let’s say some programs, it does pass a peak investment, but, you know, there are some other countries starting later.

So the mix of country and the pace of it has a lot of impact in terms of the phase of investment. But in any case, as I shared earlier in the previous answers, we do see the bottom line — essentially the EBITDA per GMV — the EBITDA will continue to improve year over year, which includes all the investment to these programs. So we manage it within how much take rate we can take and how much investment we can make while growing the ecosystem and the user base.

For content ecosystem, which includes video, live stream, I think it’s a bit hard to split a particular segment to the EBITDA levels because there are many shared costs below that. I think for us we look at sort of variable cost or contribution margins to our platforms. The content platform does have a positive contribution margin. Essentially what we’re saying is if we grow content business more on our platforms, we’ll have more profit rather than less profit for our businesses.

The fulfillment penetration — I think the overall fulfillment has been growing quite a lot year over year. We started this in Southeast Asia earlier than Brazil, so in reality the penetration in Southeast Asia will have a slightly higher percentage as overall platform than Brazil. But we do believe that the penetration will further grow in both Brazil and Southeast Asia. The other thing that we spend a lot of time on is to optimize the cost of fulfillment, which is very important for us.

We’re seeing meaningful reduction in both Southeast Asia and Brazil for our cost to fulfill for our fulfillment businesses. Part of that is contributed by the scale that we’ve built over time. Part of that is contributed by better automations, which is a very important tool for us to reduce the cost to fulfill compared to many of our sellers. Part of that also comes from how to optimize the way we work with the sellers, the way we inbound, the product selection we have, how long we keep the products in our fulfillment centers, et cetera.

I think all those contribute to the growth of fulfillment while improving the economics of fulfillment over time.

Forrest Li (Chairman and Chief Executive Officer)

For Sea Cloud, for your question: as you know, this is just at the very, very beginning of the business. At this moment we haven’t secured any enterprise contracts. And for the investment in the data centers and the GPUs, let me put it this way: we definitely probably will invest in the GPUs, and primarily for our own use. So regardless there is a Sea Cloud business or not — like how the business progresses down the road — we are going to invest into GPUs and primarily for all the internal use cases.

And in the data centers, we’ll see how the opportunity looks. In general, we are not interested to spend to invest in data centers, but we may spend the money to build data centers for our own use cases — primarily for our uses, for example for our financial services business. Based on regulations, a lot of data need to stay in Singapore. So for those cases, we’ll evaluate the options in terms of building our own data centers because this is a very, very clear usage and a very clear use case, versus leasing the data center capacity.

I would say we’re going to be open-minded on that part. But again, I would say this has nothing to do with the Sea Cloud business; in general, from Sea’s perspective, we’ll keep those options open. In terms of the guardrail on capital investment here, as I mentioned, we’ll be very cautious. The good thing is it’s different from the consumer business where you have to spend a huge amount of investment upfront and then along the way reach the critical mass and start to, because of the density, because of the volume, see the unit economics from negative to positive. We have gone through several rounds of that — we know that part very, very well.

But the business nature is a bit different for Sea Cloud. I think we’ll be very much deal-by-deal driven at least at the beginning stage, and with very, very specific targets in terms of the customers, in terms of the projection of the revenue, and what is the timeline for that, and what is the potential investment we put in. So I think we are going to have a guardrail. As I mentioned in the remarks, we’ll only pursue opportunities with a clear customer commitment and a clear return profile.

And we’re going to make the case-by-case judgment if that return is good enough for us or not. We don’t have to pursue the opportunities if we don’t like the return profile. And at the same time, we’re going to try all the ways to minimize the impact on our own financials, especially the cash flow and the balance sheet. I think there are a lot of ways to work with potential partners, and a lot of things can be worked through the customer prepayment.

But the spirit is to minimize our own financial impact.

OPERATOR

Your next question comes from Thomas Chong with Jefferies. Your line is open.

Thomas Chong (Analyst at Jefferies)

Hi, good evening. Thanks, management, for taking my question. I also have two questions. The first question is also on the Sea Cloud business. Given that we have talked about it’s a project-by-project basis and we also look into the return profile, I just want to get some color from management’s strategic perspective. If we look at three years or five years down the road, in terms of our business mix or our profit mix, how significant is Sea Cloud to our overall business?

Would that become another very meaningful business three to five years down the road? That’s my first question. And then my second question is back to Shopee business outlook. Given that we are seeing the macro is very dynamic, fuel price and other macro uncertainties, how should we think about our GMV outlook or growth rate going down the road, and are we actually expecting a meaningful slowdown or a gradual slowdown given all these headwinds? Thank you.

Forrest Li (Chairman and Chief Executive Officer)

Thank you, Thomas. Yeah. For Sea Cloud, strategically and in the big picture, we are very, very bullish. We are very optimistic, as I shared. Number one, we believe AI is a fantastic technology. This will make a huge impact for every single organization, every single business. Every organization, every single business will need to right away figure out their own strategy and the action plans, executions, how to make the transformation and how to make them relevant in the AI era.

So if you look from that perspective, the demand is huge. And the second thing we bet on is the AI adoption across all industries will be accelerated, and it’s mainly because the model is getting better and the agent can do more things and can really make impact in the workflow and in the day-to-day use cases, and at the same time the token cost and the token price is going down rapidly. This gives us the conviction, and the opportunity could be huge. Whether this will happen in three years or five years depends — I don’t have a very, very clear view, and things go very, very fast in this industry.

To be honest, I don’t have the exact perspective on that specific timeline. But we build this business not only for three years or five years — we want to build it to become a sustainable business, become a part of our businesses permanently. That’s the aspiration. And of course we only do this because we believe this will generate very, very meaningful, very, very sizable revenue and profit for us down the road.

Chris Feng (Chief Executive Officer of Shopee)

On Shopee growth, first of all, we don’t see a big Shopee GMV growth rate slowdown yet. As we shared earlier, in Q3 we do see meaningful growth, a similar growth rate as compared to last quarter from a year-over-year perspective if we take away the FX impact. You are right that there are many macro factors like fuel prices, et cetera, impacting consumption overall. What we see is that although we have noticed some more value-seeking behaviors in our market due to this macro environment, the overall demand has been relatively resilient. But again, I would like to reiterate that our competitive advantage will continue to differentiate us from peers even in the macro situation that we are in right now. Given that we built our platform around long-tail products and also the pricing, our platform is a lot more competitive compared to other platforms online or compared to the alternative offline as well.

On top of that, a large part of our platform’s GMV is driven by people who have the needs to purchase rather than people as impulse buying. All those make us, put us in a more resilient position on the growth for our e-commerce in our market. I think we will continue to monitor our market very closely for any changes. But again, given all the things we mentioned above and also that e-commerce penetration is still relatively low compared to many other markets, we still believe that there is a big runway for us to grow our e-commerce in the region.

OPERATOR

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

Elson Choi (Investor Relations)

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.

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