(Nov 10): Sea Ltd earnings missed estimates after the Southeast Asia e-commerce leader boosted spending in artificial intelligence (AI) features and intense competition weighed on prices.
Adjusted earnings before interest, taxes, depreciation and amortisation for the three months through September climbed 29% to US$931 million (RM3.78 billion), the company said on Tuesday. Analysts estimated US$990 million on average, according to Bloomberg-compiled data. Revenue rose 43% to US$8.6 billion, exceeding predictions. The stock fell more than 10% in pre-market trading before paring some losses.
Battle for customers with ByteDance Ltd’s TikTok Shop, Alibaba Group Holding Ltd’s Lazada and recently listed Shein Global Holdings Ltd is weighing on prices at Sea’s e-commerce arm Shopee, its biggest unit. At the same time, its expenditures are increasing as the company embeds AI features into its product offerings and works to expand in areas such as cloud computing and food delivery.
Through Monday, Sea’s shares had plunged about 40% from the start of the year, weighed down by rising oil prices and fierce competition. Chief executive officer Forrest Li’s plan to begin offering cloud services to global firms sent the stock lower in October as analysts flagged the firm was unclear about how it would build the new business and how much it would spend.
The AI-led expansion would set Sea against the likes of deep-pocketed cloud providers such as Amazon Web Services. Yet it’s unlikely that Sea could operate at the same scale as its more established rivals, as the firm would need to spend substantially on resources like chips and storage before turning a profit, said Bloomberg Intelligence analysts including Lea El-Hage.
At the same time, Sea is eyeing a public listing of its financial services arm Monee. The potential spin-off would give Monee independent access to capital while its margins stay fragile, according to El-Hage.
Those moves come as the firm seeks to carve out space beyond its home ground — expanding its Shopee retail empire to Brazil, while grappling with possible regulatory hurdles in major regional market Indonesia. Adjusted Ebitda at Shopee rose 45% to US$269.2 million in the latest quarter, while sales jumped 41% to US$6.1 billion.
The company said its board authorised additional US$1 billion in stock buy-backs, after the company purchased a similar amount under a previous repurchase programme.
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