SE Q1 Earnings Call: Revenue Misses Estimates, But Profitability and User Growth Accelerate
E-commerce and gaming company Sea (NYSE:SE) fell short of the market's revenue expectations in Q1 CY2025, but sales rose 27.8% year on year to $4.84 billion. Its non-GAAP EPS of $0.83 per share was 8.7% below analysts' consensus estimates.
Is now the time to buy SE? Find out in our full research report (it's free).
Revenue: $4.84 billion (27.8% year-on-year growth)
Adjusted EPS: $0.83 vs analyst expectations of $0.91 (8.7% miss)
Adjusted Operating Income: $857.6 million vs analyst estimates of $470.9 million (17.7% margin, 82.1% beat)
Adjusted EBITDA Margin: 19.6%
Paying Users: 64.6 million, up 15.7 million year on year
Market Capitalization: $98.14 billion
Sea's first quarter performance was defined by rapid growth across all three divisions, supported by expanding user bases and improved monetization efforts. Management attributed the results to operational efficiency measures—particularly in logistics and marketing—across its e-commerce and digital financial services arms. CEO Forrest Li referenced Shopee's record high gross merchandise value and cost reductions, noting, 'Unit economics improved, largely driven by our continued scale expansion, cost optimization and enhanced monetization, especially from advertising.' Garena, Sea's gaming division, posted its strongest quarter since 2021, which management credited to a successful content collaboration and product diversification. The quarter also saw the rebranding of Sea's digital financial services unit as Monee, which posted notable growth in both revenue and loan book size.
Looking ahead, Sea's leadership emphasized continued investment in product enhancement and regional expansion, while balancing growth and profitability. Management sees significant runway for Shopee in Brazil and Southeast Asia, with President Chris Feng stating, 'We remain confident of achieving our full year GMV growth guidance of 20% with improving profitability.' The company also expects Monee's off-platform growth and new lending products to drive broader financial inclusion. However, executives highlighted that future performance will be influenced by macroeconomic trends and shifts in consumer behavior. CFO Tony Hou cautioned that short-term margin fluctuations may arise due to evolving country and product mixes, but Sea remains committed to prudent risk management and diversified funding for its credit operations.
Management pointed to a combination of product innovation, operational improvements, and geographic expansion as key contributors to first quarter results, while also noting the impact of seasonality and strategic cost discipline.
E-commerce efficiency gains: Shopee's improved profitability stemmed from better ad monetization, lower logistics costs, and the rollout of AI-powered tools for sellers. Initiatives like the instant delivery option and the Shopee VIP subscription program, which surpassed one million users, increased purchase frequency and buyer retention.
Brazil market expansion: Growth in Brazil was driven by pricing advantages, improved delivery speed, and targeted logistics investments. Sea's management reported that e-commerce penetration in Brazil remains low, offering additional growth opportunities as Shopee expands into underserved segments and diversifies product categories.
Digital financial services rebranding: The transformation of SeaMoney into Monee marked a strategic broadening of financial services, including new product launches in unsecured lending, insurance, and banking. Off-platform usage of credit products, such as SPayLater, grew notably in markets like Malaysia and Indonesia.
Gaming division momentum: Garena's performance was buoyed by the Free Fire-NARUTO SHIPPUDEN collaboration and localized content strategies. Management highlighted that these campaigns reactivated churned users and drove daily active user counts near pandemic-era peaks, reinforcing Free Fire's market leadership.
Operational discipline and funding mix: Management underscored the importance of maintaining healthy margins and asset quality, especially in Monee. CFO Tony Hou explained Sea's preference for diversifying funding sources—rather than relying solely on internal capital—to support sustainable growth in its loan portfolio.
Sea expects growth to be supported by ongoing e-commerce expansion, product innovation in financial services, and further gaming engagement, though risks from macroeconomic and competitive factors remain.
Shopee's balanced growth approach: Management expects Shopee's growth to continue through enhanced buyer engagement, expanded ad products, and logistics improvements. However, President Chris Feng indicated that the company prioritizes market penetration over maximizing short-term profit margins, given the still early stage of e-commerce in core markets.
Fintech diversification and risk management: Monee's forward strategy involves scaling off-platform lending and launching new financial products, while maintaining a focus on prudent underwriting and asset quality. Management stressed the need for diversified funding partners and stated that country and product mix changes could periodically affect margin trends.
Gaming content innovation: Garena aims to sustain high user engagement through new game launches, IP collaborations, and locally relevant content. CFO Tony Hou noted that while seasonality and major campaigns may create quarter-to-quarter volatility, the long-term outlook anticipates double-digit growth in user base and bookings.
In the coming quarters, the StockStory team will watch (1) the scalability of Shopee's VIP membership and logistics enhancements, (2) Monee's progress in off-platform lending and funding diversification, and (3) Garena's ability to maintain engagement through new game launches and content partnerships. The ongoing development of AI-powered features and expansion in Brazil will also be key indicators of Sea's execution and market positioning.
Sea currently trades at a forward EV/EBITDA ratio of 43.9×. At this valuation, is it a buy or sell post earnings? The answer lies in our full research report (it's free).
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