Sea Limited Q2 2026 Earnings Review
More top-line acceleration (48%!), profitability set to ramp in H2
Revenue: $7.79B v $7.09B est. (+48.1% YoY) 🟢
EPS: $0.70 v $0.79 🔴
Sea Limited reported earnings on 11th August before the market open.
The stock closed the day up 15%.
Selected Key Metrics
Total Gross Profit: $3.55B (+47.3% YoY)
Operating Income: $650.3M (+33.3% YoY)
Total Net Income: $458.1M (+10.6% YoY)
Total Adjusted EBITDA: $917.2M (+10.6% YoY)
Provision for Credit Losses: $555.2M (+71.5% YoY)
GAAP Diluted EPS: $0.70 (vs $0.65 in Q2 2025)
Cash & Cash Equivalents: $10.3B (down from $10.6B in Q2 2025)
E-Commerce (Shopee)
Gross Orders: 4.3B (+27.5% YoY)
GMV: $38.3B (+28.4% YoY)
Revenue: $5.6B (+48.2% YoY)
Adjusted EBITDA: $255.4M (+12.2% YoY)
Digital Financial Services (Monee)
Consumer & SME Loans Outstanding: $11.1B (+62.5% YoY)
Revenue: $1.4B (+58.9% YoY)
Adjusted EBITDA: $288.0M (+12.8% YoY)
90-Day NPL Ratio: 1.0% (down from 1.1% in prior Q)
Digital Entertainment (Garena)
Bookings: $763.5M (+15.5% YoY)
Revenue: $746.6M (+33.5% YoY)
Adjusted EBITDA: $429.8M (+16.7% YoY), 56.3% of bookings
Quarterly Active Users: 666.3M (roughly flat YoY)
Quarterly Paying Users: 68.1M (+10.2% YoY)
Paying User Ratio: 10.2% (vs 9.3% in Q2 2025)
Average Bookings Per User: $1.15 (vs $0.99)
Share Repurchase Program
Repurchased 4.7M shares for an aggregate of $417M = $88.72 per share
Sea Limited continued its top-line acceleration, this time to 48%. This is an incredible rate of growth for a business now run-rating at $30B annual revenue. The bottom-line missed estimates which is to be expected with the business very much still in re-investment mode (although management did suggest it could be coming to an end).
All 3 segments are firing on all cylinders and I continue to believe Sea is one of the most underrated businesses out there. This is potentially the most important business in all of Southeast Asia and $70B for it, appears cheap.
Table of Contents
Shopee (E-Commerce)
Monee (Digital Financial Services)
Garena (Digital Entertainment)
Management Commentary
Concluding Thoughts
1. Shopee (E-Commerce)
Shopee hit another all-time high in GMV and gross orders, and saw its 8th consecutive quarter of sequential growth. Management reiterated their target for 25% full-year GMV growth, which I believe is very achievable.
They also re-affirmed their target of at least $1B in Shopee Adj. EBITDA for FY2026.
Core marketplace revenue was up 65.6% YoY, more than double the pace of GMV growth and is a clear indicator of monetisation inflecting in real-time.
Take-rates also increased, climbing to 14.6%, up from 13.7% in Q1. It is also notable that management addressed this specific point in the call:
“Based on what we have observed so far, the ecosystem remains very healthy even after the increases in take rate. One reason is that we reinvest a significant portion of the take rate back into growing the ecosystem. We are also helping sellers operate online more efficiently over time.
As a result, our prices remain very competitive, not only relative to other marketplaces but also relative to offline alternatives.
Looking forward, we still see opportunities to increase our take rate, not only through commissions but also through paid advertising, which continues to gain penetration.
The pace of commission increases will probably be slower than what we have seen previously, but we still see room to increase the overall take rate by helping sellers operate more efficiently, helping them grow their volumes through reinvestment into the ecosystem, and improving buyer conversion.”
Profitability
Another key point that was one of the reasons SE fell in the past 8 months is the question of Shopee’s profitability.
Management had guided to “at least flat” EBITDA in 2026. For context, Shopee EBITDA in 2025 was $880M. The market took it to mean that EBITDA margins would fall from 0.7% to 0.55%, with the assumption of 25% GMV growth.
This quarter put those fears to bed. Adj. EBITDA margin inflected upwards to 0.67%, and management shared that Adj. EBITDA would come in above $1B, which would mean EBITDA margins will come closer to 0.7% than 0.55%, satisfying the market.
ShopeeVIP
We also saw continued ShopeeVIP member growth, one of the primary reasons management is sacrificing near-term profits.
Q1 2025: 1M members
Q2 2025: 2M members (+100% QoQ)
Q3 2025: 3.5M members (+75% QoQ)
Q4 2025: 7M members (+100% QoQ)
Q1 2026: 10M members (+43% QoQ)
Q2 2026: 15M members (+45% QoQ)
Management shared that these 15M members, which represent about 3.75% of the Shopee user base of 400M people, make up 24% of GMV spend. It is simply a no brainer to sign up as many people as possible. At current growth rates, we are likely to see ShopeeVIP member numbers end closer to 30M at the end of the year, which is simply incredible, and would likely make it one of the most used subscription services in Southeast Asia.
Management also shared that there was ~80% average monthly retention, a number that would have been impossible to imagine half a decade ago. Monee has been crucial to this. The majority of users in Southeast Asia do not have access to credit cards, which makes a subscription system simply unfeasible.
Chris Feng alluded to this in the Q4 2025 earnings call:
“One of the core challenges historically for similar programmes in our region is the payment success rate. When they roll from one month to another, many people drop off, simply because there’s no credit card available for many of our users in the region. We solved this by working closely between Shopee and Monee, to enable a smooth payment process for our VIP programme. As a result, our subscription retention rate has grown from 40% to 70%, let’s say for Indonesia, over the past few quarters.”
Also, a reminder that ShopeeVIP was only introduced to Brazil in April and as of end June had over 1M members. MELI’s own subscription program, MELI+ is estimated to have about 30M members in the region, majority of which originate from Brazil. I think it is not a crazy shout to suggest Shopee can convert over 10M members in Brazil alone.
Shopee Logistics (SPX Express)
Shopee has continued to invest in its logistics capabilities, which is now a key cornerstone of their moat within the business. Instant service in Indonesia can now deliver as quickly as 1 hour, with instant delivery order volumes growing ~80% YoY and cost-per-order falling ~20% YoY in Q2 2026.
Fulfilment order volumes are also up > 20% QoQ, with >60% of SPX-fulfilled parcels arriving the next day in some markets.
Other Interesting Stats
Shopee orders through Facebook increased by >85% QoQ, largely driven by Reels
Extended IG collab to all 8 core markets, promising early results from ID (1st launch market)
Orders from livestreaming and short-form video up >50% YoY, now accounts for >25% of physical good orders in SEA
Avg. monthly new active buyers up 35% YoY, acceleration from previous Q's
2. Monee (Digital Financial Services)
Monee continued its hyper-growth, delivering another record quarter for the loan book, up 62.5% YoY to $11.1B, while the NPL ratio fell from 1.1% to 1.0%. Active credit users grew around 34% YoY to more than 40 million while ~5.3 million first-time borrowers were added in the quarter.
Management also shared that average loans outstanding per user grew around 20%, and the Philippines became the 5th market to cross $1B in loan book volume.
A large part of this is increasingly the introduction of AI tooling. Management shared that their latest underwriting models are pre-trained on behavioural and transactional data across the ecosystem, using transformer architectures similar to modern large language models.
This has led to approval rates growing by 10% while maintaining similar levels of risk. Sea has also deployed AI to verify user-submitted income documents across markets and languages, cutting review time by about 95%. These are all low-hanging fruit, and I believe AI has a long way to go to benefitting businesses that are open to it.
GAAP revenue for the quarter came in at $1.4B while Adj. EBITDA climbed to $288M. As I’ve highlighted in the past few quarters, one of the key items to watch within Monee is the expansion of credit use cases beyond Shopee.
Management disclosed that off-Shopee loans accounted for >20% of the total SPayLater portfolio as of end-June, and were as high as 35% in some markets. The standalone ShopeePay app which is currently live in Indonesia, Thailand, Malaysia and Vietnam, saw monthly transacting users more than double YoY in 2Q26. The app is set to be launched in Brazil soon.
3. Garena (Digital Entertainment)
Garena had yet another steady, good quarter like we have to come expect. One of the points bears keep raising is with regard to the sustainability of Free Fire, and how Sea would be in trouble if Garena stopped printing cash.
The truth is that is simply outdated. Yes, Garena continues to print cash, over $400M in Adj. EBITDA this quarter which is not a small amount. However, Shopee is now generating $250M a quarter in Adj. EBITDA while Monee is generating nearly $300M a quarter. More importantly, these 2 businesses are far from optimal profitability, with management continually re-investing excess profits back for more growth.
At 3% Adj. EBITDA margin, which management has acknowledged is a very clear and realistic target for Shopee, it alone would be printing north of $1B in Adj. EBITDA per quarter, dwarfing Garena.
Garena also announced 2 new mobile games this quarter, built on globally-recognised IP. First, Palword Online, an open-world multiplayer survival adventure game, developed and published by Garena under license from Pocketpair. Secondly, Monster Hunter Outlanders: a survival hunting action game developed by Tencent based on Capcom’s iconic franchise. These are 2 exciting titles that could potentially diversify the Garena revenue base away from just Free Fire.
4. Management Commentary
This section focuses mainly on questions during the earnings call, with key highlights of what I believe are important points to takeaway. I may adjust a few words here and there for clarity purposes, (English is not the first language for the majority of Sea’s management team) but I will not change the meaning of these quotes.
Shopee's investments are already producing better unit economics.
“In terms of the investments we are making in initiatives such as VIP, fulfilment and logistics, we are generally seeing unit economics improve. For our content business, which we invested in for a period of time, the unit economics are already as good as those of the overall platform. For newer initiatives, although we are still in the investment phase, we are generally seeing positive trends in their economics as well."
In short, management is saying that the investments currently suppressing Shopee's reported margins are not necessarily permanent expenses. They are being deliberate and systematic in their spend. This backs up my point that they are doubling down on re-investments because they see strong ROI.
Management thinks the move towards 2-3% Shopee EBITDA margins is relatively straightforward.
"We still believe that a 2-3% margin is well within our reach. In fact, some of our markets are already well above that level. The balance between growth and profitability is something we continuously evaluate. We want to make sure we capture the growth potential of the market while deciding how much profit to take out of the ecosystem, so it remains a dynamic process.
But if you look at the numbers, the path from where we are today to 2-3% is relatively straightforward. We are currently at around 0.67%, so the incremental improvement required is not particularly large.
Part of that will come as many of the programmes we are investing in today mature over time, meaning we will not need to invest as heavily in them. Part will come from fundamental improvements in our cost structure, including logistics and fulfilment costs. And part will come from higher take rates, whether through advertising or other forms of monetisation."
Management is giving the margin bridge pretty clearly here and I think this is the most colour they've given to this. My belief is that this gave the market a lot of confidence which contributed to the 15% move post-earnings.
Shopee still sees meaningful room to increase overall take rates.
“When we think about take rate, we consider it from several angles. First, we look at how much of the take rate is being reinvested into growing the ecosystem. Second, we consider the platform’s price competitiveness. Even after the take rate, do we still maintain our price advantage relative to other platforms?
Third, we compare e-commerce prices on our platform with offline alternatives. Fourth, we consider the impact on sellers’ profitability. We take all of these factors into account when thinking about take rate.
Based on what we have observed so far, the ecosystem remains very healthy even after the increases in take rate. One reason is that we reinvest a significant portion of the take rate back into growing the ecosystem.
Looking forward, we still see opportunities to increase our take rate, not only through commissions but also through paid advertising, which continues to gain penetration."
One concern coming into the call was, especially with the incredible take rate trajectory over the past few years, would Shopee be able to maintain that moving forward? They answered this question pretty directly.
Shopee VIP is crucial and has scaled very quickly.
“Our Shopee VIP programme continues to scale strongly. It is now live across Asia and Brazil, and total membership exceeded 15 million at the end of June, up 45% from the previous quarter. Across Asia, VIP members contributed 24% of GMV during the quarter. Average monthly retention remains strong at around 80%, and members continue to show higher engagement, spending meaningfully more after subscribing. In Brazil, early adoption has also been encouraging. Since launching in April, membership has already exceeded one million."
Shopee VIP was always inevitable and should fuel the next growth leg. The strategic value is not just about subscription revenue, though it will surely help. However, the key is retention, higher frequency and more spending which creates higher customer LTV.
Shopee Brazil is growing faster than the market, and is Shopee's fastest-growing market.
"For Brazil, we continue to grow well above the overall market. In terms of price competitiveness, we remain very competitive and continue to have a strong advantage relative to competitors in the market, even following changes to take rates and free-shipping thresholds.
We believe the fundamentals of e-commerce remain the same: the price competitiveness of the assortment, the breadth and completeness of the assortment, the fundamental cost structure required to serve customers, and the experience buyers have when discovering products on the platform.
Looking forward, we believe Brazil still has a long runway for e-commerce growth. We intend to continue growing profitably while outpacing the market in the coming quarters."
AI is materially improving Monee's underwriting models.
"Our latest risk models are pre-trained on a broad set of behavioural and transactional data from across our ecosystem, using transformer architectures similar to those used in today’s large language models.
Recent improvements to our underwriting models have increased approval rates by around 10% compared with our previous models, while maintaining a similar level of risk.
We are also using AI to build tools that can efficiently verify a wide range of user-submitted income documents across different markets, languages and formats. This has reduced review times by around 95% while maintaining a very high level of accuracy, allowing us to respond to users’ credit-limit requests almost instantly."
AI beneficiaries are everywhere, but nobody talks about e-commerce businesses. I continue to believe that they will be one of the biggest beneficiaries, firstly from simple tasks like customer service, next in logistics and finally in fulfilment.
5. Concluding Thoughts
The past few months have been much better for Sea stock, after several months of getting hammered.
Throughout this period, what has stayed constant is Sea’s consistently strong earnings results. I remain a huge believer in what management is doing, and the proof of their execution has been clear to see. Yes, the stock will remain volatile, but I believe this is a long-term compounder and the story is still in the early stages. If Sea continues to be ignored by the market, management will simply ramp up buybacks again, returning value to shareholders.
On any reasonable sum-of-the-parts or conservative discounted cash flow, the current price still does not reflect what these three segments are worth, and hence I remain a buyer on any dips.
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