Shopee-owner Sea signals growth over profits after weak Q2 performance

Shopee-owner Sea signals growth over profits after weak Q2 performance

Technology

Shopee-owner Sea signals growth over profits after weak Q2 performance

(Reuters) - Technology firm Sea Ltd (SE.N) signaled on Tuesday it will boost investments in its core e-commerce business which may lead to losses in some quarters, pivoting its strategy after months of cost cuts and weak performance in the second quarter.

U.S.-listed shares of the company were down over 21% in early trading.
Southeast Asia's biggest listed technology firm began a major overhaul last year involving cutting its workforce by 10% and lowering marketing spending, which helped Sea deliver its first-ever quarterly net profit in December.

However, the rapid rise in digital services has largely tapered from the boom seen during the peak pandemic period, with Sea's top-line growth dropping to single digits in the past three quarters from over 100% seen in some quarters of 2021.

"We have started and will continue, to ramp up our investments in growing the e-commerce business across our markets. Such investments will have an impact on our bottom line and may result in losses for Shopee and our group as a whole in certain periods," said Forrest Li, chairman and group CEO at Sea.

Sea posted mixed results in the three months ended June 30, as tepid consumer spending amid a challenging macroeconomic outlook pressured its e-commerce business and caused a steep decline in its mobile gaming unit.

Revenue grew 5.2% from a year earlier to $3.10 billion, below Refinitiv's estimates of $3.20 billion. However, per-share earnings were a comfortable 12 cents higher than expectations at 54 cents, signaling gains from the cost measures.

Sea's e-commerce business Shopee, which contributes about two-thirds to the group's top line, grew nearly 21% to $2.1 billion. It was below the consensus estimate of $2.25 billion, despite Sea posting 10% sequential growth in active buyers in the second quarter and raising platform commissions earlier this year.

Sales from the digital entertainment segment, which includes gaming platform Garena, fell over 41%, declining for the fifth quarter in a row. Sales from the financial services business were up over 53%.