Southeast Asian technology firm Sea Ltd has reported a higher-than-expected revenue for the second quarter of the year, but a jump in costs has pushed profit below estimates. The company, known for its e-commerce platform Shopee, has been navigating through a global economic slowdown that has forced it to streamline its businesses and cut thousands of jobs. This comes after Sea’s impressive performance in 2020 and 2021, when pandemic-led demand had boosted revenues and allowed the company to expand beyond Southeast Asian markets.
In an effort to improve its financial performance, Sea has made strategic decisions such as exiting the Indian market and some markets in Europe and Latin America. Additionally, the company has raised fees charged to sellers on its platform, which has helped it achieve its first annual profit last year. However, in the second quarter of this year, Sea’s total operating expenses jumped by 29% to $1.50 billion.
One of the challenges Sea is facing is stiff competition from other e-commerce platforms such as Tokopedia and Temu. This has led to increased marketing spending at Shopee, according to a note from J.P.Morgan. Despite these challenges, CEO Forrest Li remains optimistic about the business’s performance. He stated that the company will deliver an adjusted core operating profit in the third quarter, with the gross merchandise value (GMV) for the platform expected to grow by mid-20% this year. This is an improvement from the earlier forecast in March, which projected GMV growth in the high teens range by 2024.
E-commerce revenue, which makes up about two-thirds of Sea’s total revenue, grew by 34% to $2.8 billion in the second quarter, surpassing analysts‘ expectations. Bookings at Sea’s digital entertainment segment, which includes gaming unit Garena, also saw a stronger-than-expected growth of 21%. Sales from its financial services business SeaMoney were up by 21.4%, just shy of estimates.
Overall, Sea’s total revenue rose by 23% to $3.81 billion in the quarter ended June 30, beating estimates of $3.71 billion. However, the company’s net profit declined to $79.9 million from $331 million in the same period last year. On a per share basis, Sea earned 14 cents, below estimates of 18 cents. Additionally, Sea announced that CFO Tony Hou had stepped down from its board of directors.
In conclusion, Sea Ltd’s performance in the second quarter reflects the challenges and opportunities faced by the company in the current economic environment. Despite the increase in costs and competition, Sea remains focused on driving growth and profitability in its e-commerce and digital entertainment segments. With a revised forecast for Shopee and a commitment to delivering strong financial results, Sea is poised to navigate through the challenges and emerge as a resilient player in the Southeast Asian technology market.