Shopee-owner Sea’s profit miss overshadows strong e-commerce gains

(Reuters) – Southeast Asian technology firm Sea Ltd reported a higher-than-expected revenue for the second quarter and raised its forecast for e-commerce platform Shopee, but a jump in costs pushed profit below estimates.

A global economic slowdown has forced the company to streamline its businesses and cut thousands of jobs, after Sea’s meteoric run in 2020 and 2021, when pandemic-led demand had lifted revenues and helped it expand beyond Southeast Asian markets.

Exiting India, and some markets in Europe and Latin America, as well as raising fees charged to sellers on its platform, helped the company achieve its first annual profit last year.

In the second quarter, however, its total operating expenses jumped 29% to $1.50 billion.

Stiff competition from Tokopedia, a unit of Indonesia’s GoTo Gojek Tokopedia and Temu, a unit of China-based PDD Holdings, has led to increased marketing spending at Shopee, according to a JPMorgan note from June.

Still, CEO Forrest Li said the business will deliver an adjusted core operating profit in the third quarter, with the gross merchandise value (GMV) for the platform expected to grow mid-20% this year. Its earlier forecast from March was for 2024 GMV growth in the high teens range.

E-commerce revenue, which makes up about two-thirds of the company’s total, grew 34% to $2.8 billion, above analysts’ expectations of $2.68 billion, according to LSEG data.

Bookings at its digital entertainment segment, which includes gaming unit Garena, grew a stronger-than-expected 21%, while sales from its financial services business SeaMoney were up 21.4%, just shy of estimates.

Sea’s total revenue rose 23% to $3.81 billion in the quarter ended June 30, beating estimates of $3.71 billion, while its net profit declined to $79.9 million from $331 million last year.

On a per share basis, the company earned 14 cents, below estimates of 18 cents.

Sea also said CFO Tony Hou had stepped down from its board of directors.

(Reporting by Yuvraj Malik in Bengaluru; Editing by Devika Syamnath)