Singapore’s Sea misses earnings estimates as AI costs climb

Sea Ltd shares fell after the Southeast Asia e-commerce leader reported earnings that missed estimates, stoking investor concerns about the cost of keeping pace in the AI race.

Adjusted earnings before interest, taxes, depreciation and amortization for the three months through September climbed 29% to US$931 million, the company said Tuesday. Analysts estimated US$990 million on average, according to Bloomberg-compiled data. Revenue rose 43% to US$8.6 billion, exceeding predictions.

The stock declined 1.5%, erasing gains earlier in the day. Investors have been concerned that competition with ByteDance’s TikTok Shop, Alibaba Group Holding’s Lazada and recently listed Shein Global Holdings is weighing on prices and margins at Shopee, Sea’s biggest unit.

At the same time, Sea’s expenditures are increasing as the company embeds artificial intelligence features into its product offerings and works to expand in areas such as cloud computing and food delivery. Adjusted Ebitda at Shopee rose 45% to US$269.2 million in the period, while revenue jumped to US$6.1 billion.

Sea said its board authorised additional US$1 billion in stock buybacks, after the company purchased a similar amount under a previous repurchase programme.

Shares of Sea have plunged 40% this year, weighed down by rising oil prices and fierce competition.

CEO Forrest Li’s plan to begin offering cloud services sent the stock lower in October as analysts flagged the firm was unclear about how it would build the new business and how much it would spend.

On an earnings call Tuesday, Li said that Sea won’t own large amounts of physical capacity, and is looking to bring in new customers to fund the physical infrastructure of its cloud business.

The AI-led expansion would pit Sea against the likes of deep-pocketed cloud providers such as Amazon Web Services. Yet it’s unlikely that Sea could operate at the same scale as more established rivals, since the company would need to spend substantially on resources like chips and storage before turning a profit, said Bloomberg Intelligence analysts including Lea El-Hage.

Sea is also eyeing a public listing of its financial services arm Monee. The potential spinoff would give Monee independent access to capital while its margins stay fragile, according to El-Hage.

Those moves come as Sea seeks to carve out space beyond its home ground – expanding its Shopee retail empire to Brazil, while grappling with possible regulatory hurdles in major regional market Indonesia.

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