SE Q2 Earnings Miss Estimates as Costs Rise, Revenues Beat & Grew Y/Y

SE's Q2 Revenue Mix Leans on Shopee and Monee

Service revenues increased 48.6% year over year to $7.13 billion, while sales of goods rose 42.8% to $657.7 million. The mix continued to favor services, which include e-commerce marketplace activity, digital financial services and gaming.

Gross profit advanced 47.3% to $3.55 billion. However, gross margin edged down to 45.6% from 45.8% a year earlier as total cost of revenues increased 48.7% to $4.24 billion.

Sea Limited's Shopee Monetization Gains Strength

E-commerce (Shopee) generated revenues of $5.59 billion, up 48.2% year over year in the reported quarter. Marketplace revenues rose 48.9% to $4.93 billion, supported by GMV growth and improved monetization.

Core marketplace revenues, mainly transaction-based fees and advertising, surged 65.6% to $4.26 billion. Value-added services revenues fell 9.0% to $676.4 million due to higher revenue net-off against shipping subsidies.

Gross orders rose 27.5% to 4.2 billion, while adjusted EBITDA increased 12.2% to $255.4 million. Average monthly active buyers increased 18% year over year, and purchase frequency rose 8%. Ad revenues grew more than 70%, with ad take rate improving by more than 90 basis points.

SE's Monee Loan Book Expands With Stable NPLs

Digital Financial Services (Monee) revenues climbed 58.9% year over year to $1.40 billion, primarily reflecting growth in the credit business as lending activity increased. Adjusted EBITDA rose 12.8% to $288.0 million.

Consumer and SME loans principal outstanding reached $11.1 billion at quarter-end, up 62.5% year over year. The total included $10.0 billion of on-book loans and $1.1 billion of off-book loans. Loans past due by more than 90 days remained 1.0% of principal outstanding, stable sequentially. Management said it added around 5.3 million unique first-time borrowers during the quarter, while active credit users grew around 34% year over year to more than 40 million.

Sea Limited's Garena Posts Higher Bookings

Digital Entertainment’s (Garena) revenues increased 33.5% year over year to $746.6 million, driven by a larger active user base and deeper paying-user penetration. Bookings grew 15.5% to $763.5 million.

Adjusted EBITDA advanced 16.7% to $429.8 million and represented 56.3% of bookings, up from 55.7% a year earlier. Quarterly paying users increased 10.2% to 68.1 million, lifting the paying-user ratio to 10.2% from 9.3%.

SE's Higher Spending Pressures Operating Leverage

Sales and marketing expenses jumped 64.5% year over year to $1.66 billion, reflecting higher spending across Shopee, Monee and Garena. Provision for credit losses increased 71.5% to $555.2 million as Monee's lending activities expanded.

Operating income still rose 33.3% to $650.3 million, but operating margin narrowed to 8.4% from 9.3%. Net income increased 10.6% to $458.1 million, while income tax expense climbed 74.0% to $250.6 million.

SE’s Balance Sheet & Cash Flow

As of June 30, 2026, Sea Limited had cash and cash equivalents of $3.53 billion, compared with $4 billion as of March 31, 2026.

During the second quarter, the company repurchased 4.7 million shares for $416.8 million under its $1 billion share repurchase program.

Net cash generated from operating activities totaled $2.56 billion for the first six months of 2026. SE reported $1.1 billion in cash from operating activities in the first three months of 2026.

Sea Limited's Shopee Outlook Stays Firm

Management remains confident in Shopee's full-year GMV growth outlook of around 25%, while acknowledging foreign-exchange headwinds and tougher GMV comparisons in the second half. The company is also optimistic that Shopee will reach $1 billion in adjusted EBITDA for 2026. Management said the competitive environment remained relatively stable, while fulfillment economics continued to improve quarter over quarter. It also sees further room to raise the overall take rate through advertising and seller efficiency.

SE’s Zacks Rank & Stocks to Consider

Currently, Sea Limited carries a Zacks Rank #4 (Sell).

Marvell Technology MRVL, Analog Devices ADI and NVIDIA NVDA are some better-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. Each stock carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Marvell Technology’s shares have surged 155.5% year-to-date. MRVL is set to report its second-quarter fiscal 2027 results on Aug. 27, 2026.

Analog Devices’ shares have gained 41.8% year-to-date. ADI is scheduled to report its third-quarter fiscal 2026 results on Aug. 19.

NVIDIA shares have returned 19.8% year-to-date. NVDA is scheduled to report its second-quarter fiscal 2027 results on Aug. 26, 2026.

Zacks' Research Chief Names "Stock Most Likely to Double"

Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.

This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research