Sea Limited (SE) Q4'25 - Shopee in Focus

Market competitiveness unchanged, investment priorities / return?

Hi everyone,

Sea Limited (SE) holds a special place in my portfolio. The central thesis has always been a three-headed technology company growing more heads, leveraging the growing scale and data richness. When I first bought the company for my daughters (Sleep Well Portfolio), it had just risen (posting $1.5B in free cash flow) from the crushing depths of post-COVID. The group was burning $2B a year, the e-commerce arm, Shopee, was still loss-making; the gaming arm, Garena, was not seen as evergreen; and Monee (SeaMoney at the time) was still a ‘promising’ fintech venture.

Today, three years later, the company generated ~3.5B in free cash flow. Impressively, across the ~700M people in Southeast Asia (and +200M in Brazil), ~400M unique buyers and ~20M sellers are on Shopee, ~37M take credit (BNPL, personal loans, SME loans) on Monee, and ~100M play games daily on Garena. Half of the sellers were reported to earn their main income on Shopee (per Q1’25). And, 20% of total GMV was generated by just ~2% of buyers (VIPs). Incredible. Ah, then the current loan book is just $9B (growing at 80% rate), or <10% of a typical bank's loan book in Southeast Asia. Finally, only 10% of quarterly active gamers pay on Garena.

When you internalize the sheer impact of Shopee on sellers’ lives, the sheer purchasing power of VIP members (similar to Amazon Prime members), and the number of gamers spending time on the platform. I don’t see any issue with Sea's decision to invest in increasing the wallet share and penetration. Of course, it depends, but we will see what they have invested in (FY2025) and what they are going to focus on, which makes a stronger company.

To me, this is a multi-year, decade-long story, as the business's lifecycle is still in its early stages.

At the helm, Forest Li, CEO and founder, is a rare breed. I admire him for the ability to pivot (2015) to a platform, grow the company at the speed of light (2016-2021), then brake hard to rebalance and change course as soon as things didn’t work out (2022-2023). Every quarter, I listen to his call and see a humble, eager-to-improve CEO. So when he said that AI would help Sea become a $1 trillion company (15x its current size). I tend to believe in the story.

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So, that’s the lens I use when I read the quarterly results. With shares declining to ~$88/share after the Q4’25 announcement, the road I am walking may not be shared with the majority of the market, but I am totally ok, as my additions will be more meaningful at these levels.

But let’s get one thing out of the way: why were shares down by -16%?

Shopee's Adj.EBITDA margin was guided to be

• FY2027: ~0.55%, compared to

• FY2025: 0.7% in 2025, and

• FY2024: 0.2% in 2024.

Further away from the 2-3% long-term goals.

But that’s not what I am focused on. There is an enormous underserved community in Southeast Asia and Brazil that Shopee monetizes on, but the time isn’t now.

Let’s go through

• 1. Brief FY2025 results

• 2. Shopee - where are the investments?

  • SPX Express

  • VIP program

  • Shopee Live + Youtube + Meta

• 3. Monee

• 4. Garena

SWI’s SE coverage: [deep dive, 4th buy, 3rd buy, 2nd buy, 1st buy, AI risks, Sum-of-parts Valuation, tariff review, Q3’25, Q2’25, Q1’25, Q4’24, Q3’24, Q2’24 update]

**Links to thesis updates, buy-and-sell, and deep dives—all in the Sleep Well Portfolio spreadsheet above.

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