Sea's Q3 2025 Earnings Call: Contradictions Emerge in Investment Strategy, VIP Membership Costs, and Logistics Investments

Date of Call: November 11, 2025

Financials Results

• Revenue: $6.0B total GAAP revenue, up 38% YOY (Q3 2025). Shopee GAAP revenue $4.3B (marketplace revenue $3.8B, core marketplace revenue $3.1B up 53% YOY); Digital Financial Services GAAP revenue $990M, up 61% YOY; Digital Entertainment GAAP revenue $653M, up 31% YOY.

Guidance:

• Shopee full-year 2025 GMV growth expected to be more than 25%.
• Garena on track for >30% YoY bookings growth in 2025.
• Company reiterated ability to deliver ~2%–3% e-commerce adjusted EBITDA margin (management expectation).

Business Commentary:

• E-commerce Performance and Growth:
• Sea Limited's revenue reached $6 billion in Q3, up 38% year-on-year, with Shopee's GMV growing by over 28% year-on-year.

• The growth was driven by increased active buyers and higher purchase frequency, along with improvements in year-on-year profitability across Asia and Brazil.

• Digital Financial Services Expansion:

• Monee's loan book expanded 70% year-on-year, reaching $7.9 billion at the end of September.

• This expansion was supported by both user growth and product expansion across multiple markets, while maintaining a stable NPL ratio.

• Logistics and Delivery Enhancements:

• SPX Express handled more than half of Shopee's orders, with significant cost reductions and improved delivery speeds across Asia and Brazil.

• Investments in delivery capabilities, including innovations like instant and same-day delivery, contributed to enhanced customer satisfaction and operational efficiency.

• AI Integration and Consumer Retail Experience:

• Sea's AI efforts resulted in a 10% year-on-year increase in purchase conversion rate and a 12% year-on-year improvement in buyer purchase frequency.

• AI-driven enhancements in search, recommendations, and personalized content contributed to increased buyer engagement and monetization gains.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly described the quarter as "strong" and "stellar," citing $6.0B revenue (up 38% YoY) and $874M adjusted EBITDA (up 68% YoY). Forrest: "very pleased with the profitable growth" and highlighted across-the-board strength in Shopee, Monee and Garena.

Q&A:

• Question from Pang Vittayaamnuaykoon (Goldman Sachs): On the >25% FY25 GMV guidance — what drivers and competitive assumptions are baked in and how should we think about margin trends into 2026? Also, e‑commerce margins were 0.6% this quarter despite higher take rates — where are investments and how long is this investment cycle?
  Response: Guidance reflects observed momentum mid‑quarter and competitive landscape; company reiterated a 2%–3% e‑commerce EBITDA margin target, with current margin fluctuations driven by ongoing, mostly asset‑light investments in logistics/fulfillment and engagement (e.g., VIP); investments are not highly fixed and expected to improve returns over time.

• Question from Divya Kothiyal (Morgan Stanley): Rationale for closing some LatAm cross‑border ops and reentering Argentina; milestones to localize Argentina and is this a 2026 priority? Also, comment on market share moves in ASEAN and Taiwan and whether you expect increased investment in Taiwan versus cross‑border competition.
  Response: Argentina is a low‑cost extension of Brazil leveraging existing cross‑border infrastructure; Chile/Colombia cross‑border wind‑downs reflect prioritization of resources. Management says they are gaining share in South Asia and grew faster than market in Taiwan (double‑digit), confident in defending and expanding share given superior assortment, pricing and delivery.

• Question from Alicis a Yap (Citigroup): Are any SE Asian markets seeing intensified competition or peers out‑growing Shopee? Will live‑streaming peers shift traffic to a shelf‑based marketplace model and pose a threat? Is the current investment cycle similar to the front‑loaded cycle two years ago?
  Response: Competitive intensity is broadly stable across South Asia; management does not see live‑streaming shifts as a new material threat. Current investments differ from two years ago — they are continuous, more targeted and less CapEx‑intensive (asset‑light logistics/fulfillment, content and VIP), not a large front‑loaded spending wave.

• Question from Piyush Choudhary (HSBC): What percentage of orders are fulfilled by SPX in Asia and Brazil and how has that changed over a year? How much of cost of services increase is driven by logistics investment and outlook for that cost? For Garena, outlook for Free Fire in 2026 and planned IPs or new game launches?
  Response: More than half of orders are delivered via SPX and that share is increasing; SPX cost‑per‑order has improved year‑on‑year while delivery speed has meaningfully improved (e.g., ~2 days faster in Brazil), helping growth. For Garena, management is optimistic for continued momentum into 2026, will pursue selective IP collaborations, explore AI to boost creative/productivity and will provide more detailed 2026 outlook next quarter.

• Question from Jiong Shao (Barclays): Regarding VIP membership economics — unit economics, expected penetration and breakeven timing? And on AI, will Sea build large models or data centers and what AI investments/capex should investors expect?
  Response: VIP is early stage (members up >75% QoQ), GMV penetration in the teens with retention improving materially; management expects higher penetration over time and partner integrations to support unit economics. On AI, Sea will focus on application (ads, discovery, seller tools, customer service), not on building foundational LLMs or data centers — it will partner with big tech and prioritize practical, bottom‑up ROI applications rather than massive AI capex.

Contradiction Point 1

Investment Cycle and Focus

It involves differences in the description of the investment cycle's nature and priorities, which are crucial for understanding the company's strategic focus and financial outlook.

Is the current investment cycle similar to past cycles where upfront investments drive GMV and share growth, such as expanding fulfillment capabilities in certain markets? - Alicis a Yap(Citigroup Inc.)

2025Q3: The current investment cycle is less front-loaded compared to the past. Focus is on strengthening competitive moats and lowering costs, which positively impacts growth. - Hou Tianyu(CFO)

What is the incremental opportunity from Shopee's VIP membership program? How does instant delivery affect gross margins, and which countries are targeted for this service? What is Shopee's EBITDA margin outlook for H2 2023 and 2026? - Piyush Choudhary(HSBC)

2025Q2: We will be investing more upfront to build the base of our Shopee VIP, and there will also be some investments in the fulfilment and logistics side. - Tony Tianyu Hou(CFO)

Contradiction Point 2

VIP Membership Program Cost Impact

It involves differing statements on the cost implications of the Shopee VIP membership program, which could affect financial expectations and program viability.

Is the investment cycle this time similar to previous years, with upfront investments driving GMV growth and market share gains later, particularly when expanding fulfillment capacity in certain markets? - Alicis a Yap(Citigroup Inc.)

2025Q3: We will be investing more upfront to build the base of our Shopee VIP, and there will also be some investments in the fulfilment and logistics side. But over time, these investments will also drive a lot of the higher GMV opportunity, and in the long run, will be quite positive. - Tony Tianyu Hou(CFO)

What is the incremental opportunity from Shopee's VIP membership? How does instant delivery impact margins, and which countries are targeted? What is Shopee's EBITDA margin outlook for H2 and 2026? - Piyush Choudhary(HSBC)

2025Q2: I think VIP program is at a very early stage. We expect to invest more upfront to build the base of the program and then eventually as we get scale, on the VIP program, the cost will be recovered relatively quickly, but I don't think the cost recovery will happen in 2022. - Tony Tianyu Hou(CFO)

Contradiction Point 3

Investment in Logistics and Engagement Programs

It involves changes in the company's strategy regarding investment in logistics and user engagement programs, which could impact operational costs and growth potential.

Can you clarify why e-commerce margin fell to 0.6% despite higher take rates? Where is the investment focused—fulfillment or other areas? Are these primarily fixed or variable costs? And how long will this investment cycle last, and what magnitude should we expect? - Pang Vittayaamnuaykoon (Goldman Sachs Group, Inc., Research Division)

2025Q3: Investments include enhancing logistics and fulfillment capabilities, and deepening user engagement through Shopee VIP. Most investments are less fixed, with a focus on leasing rather than ownership. Improving delivery and logistics capabilities continues, impacting growth positively. - Hou Tianyu(CFO)

What are the prospects for achieving the target Shopee EBITDA margin as a percentage of GMV? Why did VAS revenue take rate sequentially decrease? - Jiong Shao (Barclays Bank PLC, Research Division)

2025Q1: The decline in VAS revenue take rate was due to higher shipping subsidies, which are being managed dynamically to enhance user growth. The strategy involves continuous evaluation and optimization of subsidy deployment. - Tony Hou(CFO)

Contradiction Point 4

VIP Membership Program Impact

It involves differing views on the impact of the VIP membership program on user behavior and revenue growth, which could affect strategic decisions and financial expectations.

好的，我现在需要处理用户提供的这个任务。用户是一位专业的金融文章作者，负责总结和精简美股上市公司财报电话会议中的问答部分。用户给出的例子是关于VIP会员的经济模型和渗透率的问题，需要简化成更简洁、精准的问题，同时保留原意和问号。首先，我需要理解用户的具体要求。用户强调要符合美式英语习惯，输出仅简化后的问题，且必须保留问号。另外，用户提到现场提问可能有冗长的表述，所以需要去除装饰词，保持问题的核心。接下来，分析原问题：“On the VIP membership, what's the unit economics look like for the members? And what do you think the eventual VIP member penetration should be in the region?” 这里有两个部分，第一部分是关于VIP会员的单位经济学，第二部分是关于最终渗透率的问题。简化第一部分时，“unit economics look like for the members”可以简化为“unit economics of VIP members”或者更直接的“unit economics for VIP members”。原句中的“what's the... look like”可以替换为更直接的询问，比如“What are the unit economics...”。第二部分，“what do you think the eventual VIP member penetration should be in the region?” 这里可以简化为“what is the expected VIP member penetration rate in the region?”，去掉“do you think”和“should be”，因为问题本身已经隐含了询问预期或预测的意思。然后，检查是否符合美式英语的表达习惯。例如，“penetration rate”比“penetration should be”更简洁且专业。同时，合并两个问题，确保每个问题独立且清晰，使用问号分隔。最后，确保输出仅包含简化后的问题，没有多余的内容，比如解释或额外的说明。用户可能希望问题之间用问号分开，但根据示例，可能每个问题单独成行。不过原例中用户给出的例子是两个问题合并成一个，但用问号分隔，所以可能需要保持原结构，但可能用户希望每个问题单独列出。不过根据用户提供的例子，可能合并为一个句子，用问号结束。需要确认是否需要分开还是合并。根据用户提供的例子，原问题有两个部分，用问号分隔，但用户可能希望简化为两个独立的问题，每个以问号结尾。但根据示例中的输出，用户可能希望将两个问题合并成一个复合问题，但可能更倾向于分开。需要仔细分析。原问题中的两个问题可以拆分为两个独立的问题，但用户可能希望保持原结构，即一个句子包含两个问题部分。例如，“What are the unit economics for VIP members and what is the expected VIP member penetration rate in the region?” 但这样可能不符合用户的要求，因为用户可能希望每个问题独立。但根据用户提供的例子，输出是两个问题合并成一个，所以可能需要保持原结构。不过，仔细看用户提供的示例输出，用户给出的示例是两个问题合并成一个，用问号结束。因此，可能需要将两个问题合并成一个复合问题，用问号结束。例如，“What are the unit economics for VIP members and what is the expected VIP member penetration rate in the region?”但可能更简洁的方式是分开两个问题，每个以问号结尾。例如：What are the unit economics for VIP members?What is the expected VIP member penetration rate in the region?但用户提供的示例输出中是合并成一个句子，所以需要按照用户示例来处理。可能用户希望保持两个问题合并成一个，用问号结束，但每个问题独立。需要确认。根据用户提供的示例输出，原问题被简化为两个问题合并成一个句子，用问号结束。因此，可能正确的做法是将两个问题合并成一个，用逗号分隔，最后用问号。例如：“What are the unit economics for VIP members and what is the expected VIP member penetration rate in the region?”但需要确保符合美式英语习惯，可能更倾向于分开两个问题，每个以问号结尾。不过用户示例中的输出是合并的，所以可能需要遵循示例的结构。总结，正确的简化应为：What are the unit economics for VIP members and what is the expected VIP member penetration rate in the region?或者分开两个问题：What are the unit economics for VIP members?What is the expected VIP member penetration rate in the region?根据用户示例中的输出，可能合并为一个句子，用问号结束。但需要确认用户是否希望分开。由于用户提供的示例输出中是两个问题合并成一个，所以可能需要合并。但可能更准确的是分开，因为每个问题独立。例如，原问题有两个部分，所以应该分开两个问题。但用户示例中的输出是合并的，所以可能用户希望保持合并。最终决定，根据用户示例，合并成一个句子 - Jiong Shao (Barclays Bank PLC, Research Division)

2025Q3: The VIP program, while initially investing in member acquisition, shows good retention rates and increased user spending. - Hou Tianyu(CFO)

How might the VIP membership program affect Shopee’s VAS revenue? - Alicia Yap (Citigroup Inc., Research Division)

2025Q1: It is not expected to negatively impact VAS revenue growth, as commission rates will be adjusted based on market conditions and seller feedback, with particular focus on ad take rates. - Forrest Li(CEO)