Southeast Asian e-commerce giant Sea (SE.US)'s Q3 profit fell short of expectations, increasing AI and cloud business dragging down profit margins

The Zhitong Finance App learned that Southeast Asian e-commerce giant Sea (SE.US) announced pre-market results for the third quarter of 2026 on Tuesday: revenue exceeded market expectations, but adjusted EBITDA fell short of market expectations. In order to withstand fierce competition, the company increased investment in AI and cloud technology, which dragged down profit margins. Sea shares fell 7% in the premarket after the results were announced.

According to financial reports, Sea's third-quarter revenue was US$8.582 billion, up 43.4% year on year, higher than market expectations; gross profit of US$3,935 million, up 51.4% year on year; net profit of US$502 million, up 34.0% year on year; diluted earnings per share of 0.78 US dollars. Adjusted EBITDA was $931 million, up 28.9% year over year, but below analysts' average expectations of $990 million.

Three major businesses: Shopee and Garena are growing steadily, and Monee's profit margins are under pressure

The total revenue of the e-commerce division Shopee was US$6.070 billion, up 41.3% year over year. Among them, core market revenue (transaction commissions and advertising) was 4.6 billion US dollars, an increase of 50.6%; GMV was 39.7 billion US dollars, an increase of 23.3%; and the number of orders was 4.5 billion, an increase of 25.5%. Adjusted EBITDA was US$269 million, an increase of 44.7%. According to reports, fierce competition is pressuring its prices and profit margins; at the same time, expenses are also increasing as companies embed AI functions and begin to launch cloud businesses.

The digital finance sector, Monee's revenue was US$1,622 million, up 63.9% year on year; the balance of consumer and SME loans was US$12.6 billion, up 60.0%. However, adjusted EBITDA increased by only 15.5% to US$298 million; the 90-day non-performing rate rose from 1.1% to 1.3%. Sea is considering splitting and listing the financial services division Monee. Analyst Lea El-Hage and others pointed out that this move will provide Monee with independent financing channels, but its profit margins are still weak.

The gaming division Garena had revenue of US$840 million, up 28.6% year on year; pre-orders of US$890 million, up 5.9%; adjusted EBITDA of US$458 million, an increase of 45.9%; and quarterly paid subscribers of 68.6 million, an increase of 4.1%.

AI expansion pushes up spending, and the market questions the prospects for returns

In terms of shareholder returns, the company has repurchased 11.1 million shares according to the $1 billion repurchase plan at a cost of US$997.2 million, which is close to completion; the board of directors approved an additional US$1 billion repurchase authorization on November 9, with no expiration date. As of the end of September, the company had cash and equivalents of US$2,905 billion and short-term investments of US$5.113 billion.

As of Monday, Sea's stock price had fallen by a cumulative total of about 40% during the year, hampered by rising oil prices and fierce competition. CEO Li Xiaodong plans to provide cloud services to global companies. This plan lowered the stock price in October. Analysts pointed out at the time that the company did not specify how it would build a new business or how much capital it would invest.

Analysts such as Lea El-Hage pointed out that AI-driven expansion will allow Sea to compete with well-funded cloud service providers such as Amazon AWS; however, Sea is unlikely to operate on the same scale as these established rivals, because before achieving profits, the company will need to invest a lot of money in resources such as chips and storage.

Additionally, Sea is seeking to expand beyond mainland China — expanding Shopee's retail footprint to Brazil while addressing possible regulatory barriers in major regional markets such as Indonesia.