Sea Limited (SE) Q3 2026 earnings review
Sea's revenue jumps 43%, but loan and marketing costs climb
Sea Limited — the owner of Shopee online shopping, Monee digital lending and Garena games — grew sales fast, but lending and marketing costs ate into its operating leverage. Third-quarter revenue rose 43% to $8.6 billion as sellers bought more ads and borrowers took out more loans. Chief executive Forrest Li kept his full-year Shopee targets unchanged and unveiled a one-to-three-year plan to list Monee separately, though by our math an accounting change at Garena lifted total Adjusted EBITDA growth from 12% to a reported 29%.
| Revenue | $8.58B +43.4% from a year ago |
|---|---|
| Total Adjusted EBITDA (like-for-like old basis) | +12.5% +28.9% reported after Garena accounting change |
| Monee loan book / past-due rate | $12.6B (+60%) 90+ day late loans at 1.3% (1.0% in Q2) |
| Full-year Shopee outlook | Unchanged ~25% merchandise growth and $1B Adjusted EBITDA |
⚖️ Verdict: ⚪ Neutral
The standing case is unchanged because strong e-commerce ad sales and resilient gaming cash flow balanced out worsening credit trends at Monee. Shopee beat the third-quarter profit pace implied by its $1 billion annual plan and Garena grew player spending despite lapping last year's huge Naruto event. On the other side, Monee's late-loan ratio rose from 1.0% to 1.3% on softness in Thailand and Brazil while loan-loss provisions jumped 82%, and Shopee's profit margin stayed flat as marketing and unallocated project losses swelled.
The question now is whether Monee's shrinking profit margin per loan dollar reflects harmless expansion into new markets or deteriorating credit quality that will hurt its planned stock listing. Optimists see an early lending platform investing to win 44 million users, while sceptics see rising defaults masked by a fast-growing loan book. Fourth-quarter past-due loan rates and provisions, after management's recent underwriting tightening, will show which side is right.
🐂 Bull Case
Ad Sales Lift Shopee Revenue Twice as Fast as Merchandise
Shopee, the company's online shopping platform in Southeast Asia and Brazil, is collecting a much larger slice of every dollar spent on its sites. "Shopee delivered another strong quarter, again achieving new record highs in both top- and bottom-line metrics," chief executive Forrest Li said. While the total value of goods sold rose 23.3%, Shopee's total revenue climbed 41.3% to $6.07 billion, taking its total cut of merchandise value to 15.3% by our math.
- Core marketplace revenue (transaction fees and ads): $4.60 billion, up 50.6% from a year ago
- Advertising revenue: up more than 55%, as ad-paying sellers rose over 35% and raised their ad share of merchandise value by more than 0.8 percentage points
- ShopeeVIP (paid loyalty programme): over 21 million members, up more than 40% from last quarter and driving nearly 25% of merchandise value
- Fulfilled orders (stored and packed by Shopee): up about 25% from last quarter in Asia and more than doubled from a year ago in Brazil
This gap matters because finance chief Tony Hou noted that future fee gains will come mainly from advertising rather than fixed commission hikes. Video and livestream orders grew over 45% to pass a quarter of physical orders in Southeast Asia, and Hou said that content business now turns a profit after variable costs.
What to watch: whether core marketplace revenue keeps growing at least 15 percentage points faster than merchandise value in the fourth quarter. Maintaining that gap as fixed commission hikes slow will prove that ad tools alone can carry Shopee's fee rate higher.
Garena Beats a Tough Comparison and Sea Plans a Monee Listing
Garena, the company's online video game publisher, avoided an expected drop in player spending even though it faced a 51% growth comparison from last year's hit Naruto event. Bookings — cash spent by players during the quarter — grew 5.9% from a year ago to $890 million as Garena brought back a second chapter of the Naruto collaboration in Free Fire and held a 10th-anniversary concert for Arena of Valor.
Alongside the game results, Sea moved to unlock value from its balance sheet and financial unit. It finished $997.2 million of its previous $1 billion buyback — spending $397.5 million since the second-quarter report by our math, which trimmed its nine-month diluted share count by 0.8% — and approved a new $1 billion repurchase plan. Li also announced plans for a separate stock market listing of Monee, its digital lending and payments arm: "We hope to list the Monee at the right time in the next 1 to 3 years."
What to watch: fourth-quarter Garena bookings and the launch timing of new mobile games like Monster Hunter Outlanders. Holding bookings near $890 million without a Naruto event will show Free Fire's player base can sustain cash flow on its own.
🐻 Bear Case
Monee Loan Book Grows 60%, but Bad-Loan Costs and Marketing Eat the Profit
Monee, Sea's consumer and small-business lending unit, remains both the group's fastest revenue driver and its biggest credit risk. Supporters point to its rapid expansion beyond Shopee: total loans outstanding rose 60% from a year ago to $12.6 billion across 44 million active borrowers, lifting segment revenue 63.9% to $1.62 billion as off-Shopee loans reached half the book. Yet operating profit before depreciation and amortisation (Adjusted EBITDA) grew only 15.5% to $298.3 million.
- Provision for credit losses (money set aside for unpaid loans): $681.5 million across Sea, up 82.3% from a year ago and rising 1.7 percentage points of revenue
- Monee sales and marketing spend: $334.6 million, up 111.8% from a year ago
- Loans past due by more than 90 days: 1.3% of total loans, up from 1.0% last quarter and 1.1% a year ago
- Monee Adjusted EBITDA margin: 18.4% of revenue, down 7.7 percentage points from 26.1% a year ago by our math
"The modest uptick primarily reflects an evolving credit environment, especially in Thailand and Brazil as well as market and product mix," Li said of the late-loan rate, adding that Monee tightened lending rules for softer customer groups. Because the loan book added $1.5 billion in three months, today's 1.3% late-loan ratio still sits over a newly issued denominator, and annualized profit per dollar of average loans has fallen from 14.0% a year ago to 10.1% by our math.
What to watch: Monee's 90-day past-due loan ratio and loan-loss provisions in the fourth quarter. A second rise in late payments after management tightened lending standards would show that fast growth in Brazil and off-Shopee cash loans is hurting credit quality.
An Accounting Change Turns 10% Garena Profit Growth Into 46%
Sea reported that Garena's Adjusted EBITDA rose 45.9% from a year ago to $458.2 million, lifting the whole company's Adjusted EBITDA up 28.9% to $931.3 million. In the release, the Singapore group noted that "we have excluded the net effect of changes in deferred revenue and its related cost in Adjusted EBITDA" starting this quarter. Deferred revenue in gaming is cash players have already spent on virtual items that Sea recognises on its income statement over later months.
That accounting switch flatters the headline growth rate right when Garena's cash collection slowed against last year's Naruto surge. In the third quarter of 2025, Garena added $151.9 million of net deferred revenue; this quarter it added only $52.0 million. Including those cash deferrals under the old formula, Garena's Adjusted EBITDA grew 9.5% from a year ago ($510.2 million versus $465.9 million) by our math, and Sea's total Adjusted EBITDA rose 12.5% rather than 28.9%.
The company's reported net income of $502.5 million (up 34.0%) also benefited from a $65.2 million investment gain in non-operating income; without that gain, net income was $437.3 million by our math. What to watch: the supplemental deferred-revenue line in the fourth-quarter segment table. If player cash additions keep shrinking relative to recognised revenue, reported segment profit will continue to outrun actual cash bookings.
Shopee Profit Rate Stalls as Marketing and Other Losses Grow
Although Shopee raised its advertising take rate by more than 0.8 percentage points, none of that extra cut reached its bottom line this quarter. Shopee's Adjusted EBITDA margin stayed flat from the second quarter at 0.68% of merchandise value ($269.2 million on $39.7 billion of goods), well below management's long-standing 2% to 3% target, which went without a target date for a sixth consecutive quarter.
Higher selling costs absorbed the fee gains: company-wide sales and marketing expenses climbed 64.0% from a year ago to $1.89 billion — rising 2.8 percentage points to 22.0% of revenue by our math — led by a 60.0% jump at Shopee to $1.43 billion as it subsidised one-hour delivery and Netflix-bundled VIP memberships. Meanwhile, Adjusted EBITDA losses in Other Services, which houses smaller business activities, more than tripled from a year ago to $83.9 million from $25.1 million without explanation on the call.
What to watch: Shopee's Adjusted EBITDA as a share of merchandise value in the fourth quarter. A reading stuck near 0.7% during the peak holiday shopping season would show that shipping and loyalty subsidies are consuming all of Shopee's advertising gains.
Currency Headwinds and Fuel Prices Slow Merchandise Growth
Shopee's reported merchandise value growth stepped down from 28.0% in the second quarter to 23.3% in the third. Hou said that without foreign-exchange swings, merchandise value grew nearly 26.5% from a year ago, meaning weaker local currencies against the US dollar shaved more than 3 percentage points off the headline rate.
On the call, Li acknowledged that higher fuel prices and broader economic uncertainty are causing shoppers to hunt for bargains, though he said overall buying demand remains steady because Shopee sells low-priced everyday necessities. Even so, keeping the full-year merchandise growth outlook at around 25% leaves fourth-quarter growth at 18.4% by our math, down from 23.3% this quarter. What to watch: whether fourth-quarter merchandise growth holds above 20% despite currency pressure and budget-conscious consumers.
👓 Other Themes
Sea Launches an External AI Cloud Unit Without Contracts Yet
Sea recently announced Sea Cloud, a new division that will sell the artificial-intelligence software, model management and computing tools it built for its own apps to outside businesses. "We are setting up Sea Cloud as a frugal start-up so that it can stay nimble and respond quickly to market demand," Li said, relying on partners and customer prepayments for hardware. Hou confirmed that "at this moment, we don't have any -- we haven't secured any enterprise contracts," and said Sea's own graphics-chip and data-centre spending is strictly for internal needs like keeping financial data in Singapore.
💲 Other KPIs
Deposits payable — cash customers hold in Sea's digital banks — rose 41.1% from $3.80 billion at the end of December 2025. That $1.82 billion nine-month deposit inflow provided low-cost funding for almost 41% of Monee's $4.45 billion expansion in loan receivables over the same period, though it also pushed Monee's interest expenses higher.
By our math from the nine-month cash flow statement, Sea spent $547 million on property and equipment in the third quarter alone — more than the $495 million it spent in the entire first half — lifting capital spending to 6.4% of revenue as it bought graphics chips and servers for internal AI and logistics. Quarterly free cash flow was $954 million, or 11.1% of revenue.
Deferred revenue — cash collected from players and users before Sea delivers the service — grew 16.4% from a year ago by our math, up from $2.39 billion in the second quarter and $2.10 billion at year-end. Growth trailed the 43.4% rise in total revenue because Garena added $49.9 million to deferred revenue this quarter compared with $187.6 million during last year's third quarter.
🔮 Guidance
Unchanged. "We remain on track to deliver GMV growth of around 25% and an adjusted EBITDA of $1 billion for the full year of 2026," Li said. After 27% merchandise growth across the first three quarters, a 25% full-year finish leaves about 18.4% growth for the fourth quarter by our math, down from 23.3% in Q3. Sea beat its initial full-year merchandise outlook by an average of 5 percentage points across the last two years.
Unchanged. The full-year target of $1 billion calls for 13.6% profit growth over 2025's $880.6 million. With $747.8 million already earned in the first nine months, Shopee needs $252.2 million in the fourth quarter by our math — 6.3% below Q3's $269.2 million record, but 24.6% above last year's fourth quarter, making the target easily achievable.
❓ Key Questions
What caused Other Services losses to triple to $84 million?
Adjusted EBITDA losses in Other Services jumped from $25.1 million a year ago and $46.2 million last quarter to $83.9 million in Q3. How much of this $38 million quarterly increase comes from early Sea Cloud hiring and AI research versus other experiments?
What is Monee's profit yield by country after credit losses?
Monee's annualized Adjusted EBITDA per dollar of loans has dropped from 14.0% to 10.1% over the past year while past-due loans ticked up to 1.3% on soft trends in Thailand and Brazil. What steady-state return on loans does management require before listing Monee?
Why did third-quarter capital spending jump to $547 million?
Property and equipment purchases reached $547 million in Q3, exceeding the $495 million spent in the entire first half. How much of that bill went to graphics chips for internal AI versus Singapore data centres or logistics automation, and what is the 2027 budget?
What is Shopee's exact advertising take rate today?
Management said advertising take rate rose by more than 0.8 percentage points from a year ago, after last stating the absolute level at roughly 2% in mid-2025. Where does the ad rate sit now, and when will those gains lift Shopee's 0.68% profit margin?