NYSE-listed Sea Ltd, parent company of Southeast Asian e-commerce giant Shopee, has been on a wild ride over the last couple of years. In November 2021, Sea was trading at over $350 a share. This was, in large part, because rock-bottom interest rates during the pandemic pushed vast amounts of money into equities, and as a result, many stocks became over-valued. When the U.S. Federal Reserve started raising interest rates, there was a big correction, and by November 2022, Sea was trading at $44. The following year wasn’t much better, with the stock stuck at around $40 for much of the year.
Now, Sea is mounting a comeback. It has done what other big consumer-facing tech firms in the region have so far struggled to do: become consistently profitable. Financially, 2024 was its best year yet. Meanwhile, the company’s e-commerce and digital finance segments are becoming increasingly important pillars of its business operations, which could bode well for long-term growth. The stock is currently trading at around $140 a share.
Sea reported net income of $448 million in 2024, while revenue increased 29 percent to $16.8 billion. Net cash from operations was $3.3 billion. This represents a dramatic turnaround, as Sea recorded a net loss of $1.6 billion in 2022. Big spending cuts helped Sea become profitable for the first time in 2023, but with net income of $163 million, margins were still thin. The latest financial results indicate this was not a one-off, and that Sea appears to be on a path to stable profits.
How did Sea accomplish this? First, let’s look at their business operations. Sea has three main lines of business: online gaming, e-commerce, and digital finance. They actually began life as an online gaming platform called Garena. Garena was extremely profitable, and the cash flow generated by the successful gaming arm was funneled into growing the e-commerce business. More recently, Sea also launched one of the region’s first digital banks.
The gaming segment remains a reliable profit-maker, but its role within the wider Sea ecosystem has been steadily declining. Revenue and profits from digital entertainment were down by about 50 percent compared to 2022. Meanwhile, revenue from e-commerce is up 76 percent over the same period.
Sea’s digital finance activities have also been profitable right off the bat, with the segment contributing $657.5 million in net income last year. Taken together, Sea appears committed to moving away from its historical reliance on gaming, with e-commerce and digital finance set to play a much larger role in the years ahead.
Sea has also been successful at diversifying its geographical exposure. While rivals like GoTo and Grab are concentrated mostly in Southeast Asia (GoTo almost entirely in Indonesia), Sea has found success in markets further afield. Although Southeast Asia remains its largest market, revenue from Latin America increased by 49 percent to $3.3 billion in 2024.
But the real story to watch here is Sea’s e-commerce marketplace, Shopee. E-commerce in Southeast Asia promises much, but has so far delivered little. Every year, we see new forecasts and analyses telling us that the potential size of the region’s e-commerce market is enormous. This is part of the reason why online marketplaces like Tokopedia and Bukalapak were, at one time, given sky-high valuations. And while it is true that these platforms are facilitating hundreds of billions of dollars in online transactions, they have struggled to do so profitably.
Tokopedia’s losses were so great that they were dragging down any chance GoTo had of becoming profitable in the near future, and the e-commerce platform was eventually spun off to TikTok. Sea’s e-commerce segment, which saw $100 billion worth of transactions in 2024, still posted a net loss of $139.5 million despite raising commissions and fees. Even Amazon, one of the world’s most valuable companies, has pretty slim margins on its e-commerce activities. Amazon’s most profitable segments are the digital amenities it offers, like Amazon Web Services.
It is increasingly clear that building an e-commerce platform, in and of itself, is simply not a very financially rewarding endeavor for shareholders and investors. If Sea’s e-commerce segment finally becomes profitable in 2025, it will prove that e-commerce can be a winning proposition in the region if your market is big enough, and if you cut spending and raise commissions and fees.
Of course, it also helps if you have other profit-generating business segments such as gaming or digital finance, which can cross-subsidize losses in your e-commerce division and fend off impatient shareholders until you reach sufficient scale to become profitable. While it looks like that strategy is starting to pay off for Sea, it may not be something that every firm will be able to do.