How did SE's Q4 earnings surprise investors?

Sea Ltd.'s (SE) Q4 earnings report exceeded investor expectations in terms of profitability, reflecting strong revenue growth across its core segments:

1. **Earnings Performance**:
- Sea Ltd. reported adjusted earnings of $0.39 per share for Q4 2024, surpassing the same quarter last year’s earnings of -$0.19 per share.
- The mean expectation of ten analysts for the quarter was for earnings of $0.44 per share. This indicates that the company's performance exceeded analysts' expectations, with a slight miss of approximately $0.05 per share.
2. **Revenue Growth**:
- Revenue rose by 36.9% to $4.95 billion compared to the same quarter last year, surpassing analysts' expectations of $4.62 billion.
- Such a significant revenue increase, coupled with improved profitability, highlights Sea Ltd.'s successful expansion in its core segments, including e-commerce, digital financial services, and digital entertainment.
3. **Segment Performance**:
- **E-commerce (Shopee)**: Gross Merchandise Value (GMV) increased by 25.2% year-over-year, driven by strong performance and market leadership in Asia.
- **Digital Entertainment (Garena)**: Total bookings grew by 24.3% year-over-year, attributed to the continued success of Free Fire, which achieved over 100 million daily active users.
4. **Stock Performance and Analyst Confidence**:
- Despite the slight earnings miss, Sea Ltd.'s stock has surged by 46% over the past three months, significantly outperforming the Computer & Technology and Internet Software industries.
- The current average analyst rating is "buy," with a consensus recommendation for the software peer group also being "buy." Wall Street's median 12-month price target stands at $134.25.
5. **Return Trends and Reinvestment Potential**:
- Sea Ltd. has shown improving return trends, with a Return on Capital Employed (ROCE) of 2.5% as of the trailing twelve months to September 2024, although this is still below the industry average.
- The company's recent profitability and increased capital employment suggest promising reinvestment opportunities, indicating potential for further growth and profitability enhancements.

In conclusion, while Sea Ltd. slightly missed earnings expectations, its robust revenue growth, particularly in e-commerce and digital entertainment, along with improved profitability and strong stock performance, have likely contributed to positive investor sentiment. The company's strategic focus on expanding its core segments and maintaining a strong market position in Asia positions it well for future growth.