SE Sea Posted Its Best Profit Quarter Ever. Its Stock Fell 29% Anyway

A Record Profitable Year, and a Fourth Straight Quarter of Silence

Forrest Li opened Sea's Q4 & FY2025 call by calling it "a great year" — and for once the description undersells it. Full-year GAAP revenue hit a record $22.9 billion, up 36.4% year-over-year and an acceleration from 2024's growth rate. Full-year net income more than doubled to $1.6 billion, up 259.7% from $447.8 million, and full-year Total Adjusted EBITDA^» rose 75.2% to $3.4 billion. All three businesses — Shopee, Monee, and Garena — scaled past management's own initial 2025 targets, and for the first time in this series' tracking, the sequential divergence flagged last quarter actually reversed: both GAAP operating income ($565.2 million, up 18.8% from Q3's $475.9 million) and net income ($410.9 million, up 9.6% from Q3's $375.0 million) grew quarter-over-quarter alongside the record revenue, closing the gap this series called out at Q3 2025.

None of that showed up in the stock. The ADS closed the year at $127.57, down 28.6% from Q3's $178.73 — a real correction inside a quarter where the underlying numbers were, by nearly every measure in this series' tracking, the best Sea has ever reported. See Sea's Stock Fell Almost 29% in a Quarter It Posted Record Profit below.

And for a fourth consecutive quarter, management's prepared remarks and Q&A said nothing about Sea's own $86 million securities-litigation settlements — even though this quarter's Form 20-F is the first document in this series to confirm both cases are now fully and finally closed, dismissed with prejudice by the courts. See Beyond the Usual for detail.

The Prescription

Sea should keep running the playbook that just produced its best fiscal year: Shopee's monetization kept climbing (GAAP take rate hit 13.5% in Q4, its highest yet) without stalling GMV growth, Monee crossed $9 billion in loans while adding over 20 million new borrowers for the year, and Garena squeezed a full extra year of relevance out of an eight-year-old franchise through disciplined, multi-year content bets like the NARUTO SHIPPUDEN collaboration. Management's 2026 guidance — Shopee GMV growth of "around 25%," full-year Adjusted EBITDA "no lower than 2025 in absolute dollar terms" — is a real, falsifiable commitment rather than a vague aspiration, and the discipline behind it (financial guardrails attached to a growth target, not growth at any cost) is exactly what got Sea here.

What Sea should stop doing is the same thing flagged for three quarters running: treating a fully resolved, already-public $86 million legal settlement as something that never needs a sentence on an earnings call. This quarter made the omission harder to defend, not easier — the FY2025 20-F shows both underlying cases were dismissed with prejudice by mid-2025, meaning management now has less, not more, reason to stay silent about a matter with no pending exposure left. A company willing to attach precise forward numbers to Shopee's 2026 GMV and Adjusted EBITDA clearly isn't short on things to say; it has simply never chosen to say this one.

Segment Comparison

Sea reports three segments plus Other Services and unallocated corporate expenses, using bookings for Digital Entertainment and GAAP revenue for the other two, per the metric set established in Q3 2020.

Segment	Q4 2025	Q4 2024	YoY	QoQ (vs Q3 2025)	Q4 2025 Adj. EBITDA	FY2025 Adj. EBITDA	FY2025 Op. Income
E-commerce (Shopee)	$4,974.6M revenue	$3,662.6M	✅ +35.8%	✅ +15.8%	✅ +$202.5M (+33.0% YoY)	$880.6M (+465.3% YoY)	$581.1M
Digital Financial Services (Monee)	$1,131.9M revenue	$733.3M	✅ +54.3%	✅ +14.3%	✅ +$263.1M (+24.7% YoY)	$1,018.1M (+42.9% YoY)	$972.7M
Digital Entertainment (Garena)	$672.4M bookings	$543.2M	✅ +23.8%	⚠️ -20.0%	✅ +$363.8M (54.1% margin)	$1,656.1M (+38.1% YoY)	$1,184.1M
Other Services	$44.4M revenue	$35.4M	✅ +25.4%	✅ +4.1%	⚠️ -$32.7M segment-level	-$80.7M	-$90.5M
Unallocated expenses	—	—	—	—	⚠️ -$9.4M segment-level	-$37.0M	-$662.0M
Total	$6,851.9M revenue	$4,950.4M	✅ +38.4%	✅ +14.6%	✅ +$787.1M (+33.2% YoY)	$3,437.1M (+75.2% YoY)	$1,985.3M

The full-year comparison is where the real story sits: Garena, the smallest of the three segments by revenue ($2.4 billion for the year, against Shopee's $16.6 billion and Monee's $3.8 billion), generated the most segment operating income ($1,184.1 million) — more than Monee's $972.7 million and nearly double Shopee's $581.1 million. Shopee's revenue engine is by far the largest, but its operating margin is still the thinnest of the three even after 2025's improvement; Garena's mature, high-margin bookings model remains the business quietly carrying the group's profit, not Shopee's headline growth. Quarter-over-quarter, the segments diverged in the opposite direction from their full-year pattern: Shopee's Adjusted EBITDA rose for a second straight quarter (+8.8% to $202.5 million) as Q4's monetization gains offset ongoing reinvestment, Monee kept its uninterrupted five-quarter climb (+1.8% to $263.1 million), while Garena's Adjusted EBITDA fell 21.9% sequentially (to $363.8 million) as bookings normalized down from Q3's Squid Game/NARUTO-driven spike — the same post-campaign pattern this series tracked after Q1's NARUTO Chapter 1 spike faded into Q2.

E-commerce (Shopee)

GAAP revenue was $4,974.6 million, up 35.8% year-over-year and 15.8% quarter-over-quarter — another record quarter on GMV, gross orders, and revenue, per management's own framing. GMV grew 28.6% year-over-year to $36.7 billion on 4.0 billion gross orders (+30.5%), and the GAAP take rate rose to 13.5% from 12.8% a year ago — its highest level in this series' tracking — driven again by advertising, where ad revenue grew over 70% year-over-year and ad take rate rose more than 80 basis points as ad-paying sellers grew over 20% and their average spend grew over 45%. Full-year GMV reached $127.4 billion (+26.8% YoY) on 13.9 billion gross orders, and full-year Adjusted EBITDA came in at $880.6 million against a full-year loss the year before Sea turned Shopee profitable — a genuine step-change, not incremental improvement. Management highlighted three specific 2026 investment areas on the call: logistics (SPX Express now processes over 30 million parcels daily; fulfilment-service penetration is targeted to double by year-end), the Shopee VIP membership program (over 7 million subscribers by year-end, more than double the prior quarter, with members in some markets already contributing over 15% of quarterly GMV), and the content/affiliate ecosystem (YouTube-driven orders more than tripled year-over-year in Q4, and the new Meta/Facebook cross-checkout partnership had already linked over 3 million affiliate accounts by year-end). For 2026, management guided to "around 25%" GMV growth with full-year Adjusted EBITDA "no lower than that of 2025 in absolute dollar terms" — the first time this series has seen Sea attach explicit forward numbers to both Shopee's growth and its profit floor in the same breath.

Digital Financial Services (Monee)

GAAP revenue was $1,131.9 million, up 54.3% year-over-year, and Adjusted EBITDA was $263.1 million, up 24.7% year-over-year — a fourteenth straight profitable quarter extending the streak tracked since Q1 2023. Consumer and SME loans principal outstanding reached $9.2 billion at year-end, up 80.4% year-over-year and up 16.4% quarter-over-quarter ($8.2 billion on-book, $1.0 billion off-book), with 5.8 million new first-time borrowers added in the quarter (over 20 million for the full year) and active credit users crossing 37 million, up more than 40% year-over-year. That reopens the loan-book-to-user-growth gap this series has tracked since 2024: loan growth (80.4%) is now running at roughly twice active-user growth (~40%+), wider again than Q3's narrowed ~1.5-to-1 reading — see Beyond the Usual. The NPL^»90+ ratio held at 1.1%, unchanged from Q3 and explicitly described by Sea's own release as "stable quarter-on-quarter" — a genuine stabilization after Q3's first uptick in this series' tracking. Average loan outstanding per user rose 27% year-over-year to around $240, reflecting management's shift from a whitelist-based approach to a broader "all-can-apply" model plus deeper engagement with existing prime borrowers (higher limits, longer tenures, first-month-interest-free offers). Off-Shopee SPayLater — the standalone credit product now live in four markets — grew over 300% year-over-year and reached more than 15% of the total SPayLater portfolio by year-end (closer to 30% in Malaysia specifically), continuing the market-expansion push flagged last quarter.

Digital Entertainment (Garena)

Bookings were $672.4 million, up 23.8% year-over-year but down 20.0% quarter-over-quarter as the campaign-driven Q3 spike (Squid Game collaboration, NARUTO SHIPPUDEN Chapter 2) normalized — the same seasonal pattern this series tracked when Q1's NARUTO Chapter 1 launch faded into a quieter Q2. GAAP revenue was $701.0 million (+35.1% YoY), and Adjusted EBITDA was $363.8 million, up 25.6% year-over-year, representing 54.1% of bookings — a modest compression from Q3's 55.4% margin but still comfortably within this series' healthy range. Quarterly active users^» came in at 633.3 million, up 2.5% year-over-year but down 5.6% sequentially from Q3's 670.8 million, ending the three-quarter run of sequential QAU increases first confirmed at Q1 2025. Average bookings per paying user (ARPPU^») eased to $11.6 from Q3's $12.8, and the paying-user ratio dipped to 9.2% from Q3's 9.8% — both consistent with a post-campaign cooldown rather than a change in underlying engagement. For the full year, bookings grew 37.3% to $2.9 billion and Adjusted EBITDA grew 38.1% to $1.7 billion, Free Fire's second consecutive year of bookings growth above 30% and, per management, nearly double its 2023 level — a genuinely rare growth curve for an eight-year-old mobile franchise. EA Sports FC Mobile, launched in October, became Vietnam's most-downloaded mobile game and drew 80 million online viewers to its Ho Chi Minh City launch event, an early but real proof point for Garena's broader-portfolio strategy beyond Free Fire.

Key Financial Metrics

Q4 2025 vs. Q4 2024, and full year 2025 vs. full year 2024, all figures in USD as reported (Sea reports in US dollars)

Metric	Q4 2025	Q4 2024	YoY	FY2025	FY2024	YoY
Total GAAP revenue	$6,851.9M	$4,950.4M	✅ +38.4%	$22,938.5M	$16,819.9M	✅ +36.4%
Total gross profit	$2,998.4M	$2,205.5M	✅ +36.0%	$10,243.7M	$7,205.1M	✅ +42.2%
Operating income	$565.2M	$305.8M	✅ +84.9%	$1,985.3M	$662.2M	✅ +199.8%
Total Adjusted EBITDA»	$787.1M	$590.9M	✅ +33.2%	$3,437.1M	$1,961.9M	✅ +75.2%
Net income	$410.9M	$237.6M	✅ +72.9%	$1,610.9M	$447.8M	✅ +259.7%
Free cash flow	~$4,500.0M (FY est.)	—	—	Operating cash flow $5,024.5M less $524.5M capex	Operating cash flow $3,277.4M less $321.6M capex	✅ up ~52.2%
Cash and cash equivalents	$4,158.9M	$2,405.2M	✅ +72.9%	—	—	—
Total Sea Limited shareholders' equity	$12,526.5M	$8,372.3M	✅ +49.6%	—	—	—

For a fourth straight quarter, GAAP operating income and net income moved with revenue rather than against it — both accelerated quarter-over-quarter in Q4 itself ($565.2 million and $410.9 million, up from Q3's $475.9 million and $375.0 million), directly reversing the divergence flagged at Q3 2025. Total Adjusted EBITDA fell 10.0% sequentially (to $787.1 million from Q3's $874.3 million) purely on Garena's seasonal bookings normalization — Shopee and Monee's Adjusted EBITDA both rose quarter-over-quarter — so the EBITDA dip reads as segment mix, not a broader profitability wobble. Diluted EPS was $0.63 for the quarter and $2.52 for the full year, on 638,227,141 weighted-average diluted shares for FY2025 (up from 604,713,980 in FY2024).

Beyond the Usual

Sea's Q4 & FY2025 disclosure includes the audited Form 20-F with its full footnote package, giving this quarter genuine depth to mine beyond the presentation deck and press release.

For a fourth straight quarter, Sea's earnings call didn't mention its own $86 million litigation settlement — even though the underlying cases are now fully and finally closed

The FY2025 Form 20-F confirms what this series has tracked since Q4 2024: Sea settled two securities-fraud class actions for a combined $86 million. This filing goes further than any prior one by confirming both matters are now completely closed — the New York action settled at $40 million with the court's final judgment entered September 10, 2025, and the Arizona action settled at $46 million with final judgment entered July 11, 2025, both dismissing the underlying cases with prejudice. There is, as of this filing, no remaining pending exposure on either matter. Despite that, this March 3, 2026 call was the fourth consecutive earnings call held entirely after the settlements became public, and the result was identical to Q1, Q2, and Q3: neither Forrest Li, Chris Feng, nor Tony Hou referenced the settlements, the underlying cases, or securities litigation of any kind, in prepared remarks that otherwise covered new 2026 guidance for Shopee's GMV and profit floor. A full calendar year of quarterly silence on a matter now fully resolved and fully disclosed elsewhere in the same filing is not an oversight — it is Sea's settled communications policy on the subject, and this quarter's filing removes the last argument (ongoing litigation risk) that could have explained staying quiet.

The loan-book/user-growth gap re-widened this quarter, even as delinquency held flat

Monee's loan book grew 80.4% year-over-year to $9.2 billion, while active credit users grew "more than 40%" — reopening the gap to roughly 2-to-1, wider than Q3's narrowed ~1.5-to-1 reading and back toward the widest levels this series has tracked. The NPL90+ ratio itself held flat at 1.1%, which Sea's own release again calls "stable quarter-on-quarter," and the full-year allowance-for-credit-losses ratio (allowance divided by gross consumer/SME and other loans) actually improved slightly to 9.56% from 9.75% a year earlier even as the loan book nearly doubled — a reassuring counterpoint on the credit-quality side. But a widening loan-to-user growth gap is worth tracking again next quarter regardless of what delinquency does in isolation, particularly with off-Shopee SPayLater (less repayment history than the core on-Shopee book) now over 15% of the total SPayLater portfolio and still growing over 300% year-over-year.

The $1.15 billion "2025" convertible notes — the tranche issued in May 2020 — matured in December 2025, and the substantial majority of the outstanding principal was unconverted and repaid in cash at maturity, retiring that entire liability from the balance sheet. Separately, Sea converted approximately $1.15 billion of its remaining "2026" convertible notes into ordinary shares during 2025 (versus just $152.0 million converted in 2024), alongside $432.3 million of 2026-note repurchases across the year and the settlement of the capped call transactions tied to both the matured 2025 notes ($582.4 million) and the earlier-matured 2024 notes. The net effect: total convertible notes outstanding fell from $2,626.8 million at the end of 2024 to $1,050.1 million at the end of 2025, now entirely a current liability since the remaining 2026 notes mature in September 2026, with a further $54.8 million repurchased and $996.7 million left outstanding as of the filing date in March 2026. This is a considerably more complete unwind of the convertible-notes overhang this series has tracked since Q1 2025 than a simple continuing buyback — most of the reduction came from an outright maturity and a sharp jump in equity conversions, not just cash repurchases.

Sea's related-party disclosure picked up a new item this year: Forrest Li was elected president of an unnamed association in 2025, making it a related party under U.S. GAAP, and Sea donated $7.8 million to it during the year — a new, small, but genuinely disclosed item that wasn't present in any prior filing this series has reviewed. Separately, the sole other disclosed related party (an equity-method investee retained from a 2023 deconsolidation) saw services it provided to Sea rise further to $73.1 million (from $57.2 million in 2024), while services Sea provided to it fell to $15.3 million (from $32.4 million); amounts due from the investee rose to $475.2 million and amounts due to it rose to $273.1 million, both continuing to climb but at a more moderate pace than the prior year's larger swings.

The FY2025 audit report disclosed two Critical Audit Matters for the first time this series has reviewed a Sea 20-F closely enough to note them: Garena's revenue recognition, which depends on management's estimate of paying users' average lifespan to determine the performance-obligation period over which bookings convert to recognized revenue, and the allowance for current expected credit losses (CECL) on Monee's consumer and SME loan book, which depends on modeled roll-rate and delinquency-transition assumptions. Both are exactly the two places in Sea's financials where the most judgment — and therefore the most room for a modeling assumption to move the reported numbers — actually sits, a useful reminder of where a reader should focus skepticism beyond the headline growth rates.

Unrecognized tax benefits, excluding interest and penalties, rose to $116.0 million at year-end from $108.5 million at the end of 2024 — a modest increase after three straight quarters flat at $132.1 million on the balance-sheet-liability basis that includes interest and penalties (which itself eased slightly to $135.7 million from $138.0 million). Neither move is large enough to be more than a footnote-level data point, but it breaks the multi-quarter flat reading this series had been tracking as a stabilization signal.

Management's Case for a Record Year

Forrest Li's framing leaned harder into forward commitments than any call in this series' tracking: alongside the usual full-year recap, he attached explicit 2026 numbers to both Shopee's GMV growth ("around 25%") and its profit floor ("full year adjusted EBITDA no lower than 2025 in absolute dollar terms") in the same breath — a genuinely falsifiable pair of commitments, not the vaguer guidance language used in earlier quarters. Tony Hou's financial recap covered Q4 and full-year figures across all three segments without dwelling on any softer read of the numbers, because for the first time in a full year there wasn't one to dwell on — GAAP operating income and net income both grew sequentially alongside the record revenue. What's notable by its absence, for a fourth consecutive call spanning a full calendar year, is any reference to the $86 million of litigation settlements that the same quarter's own 20-F confirms are now fully and finally closed (see Beyond the Usual) — a call confident enough to introduce two new forward numbers mid-session found no room for one sentence acknowledging a matter with zero remaining downside to disclosing. No Q&A transcript beyond the prepared remarks was available in this quarter's materials, consistent with every quarter this series has tracked since interim disclosure began.

Target Valuation Range

Undervalued relative to the model for the first time in over a year. An updated DCF, using an estimated full-year 2025 free cash flow of approximately $4.50 billion (up from Q3's ~$4.13 billion estimate on stronger full-year operating cash flow), puts intrinsic value at roughly $107-$228 per share across bear/base/bull scenarios (base ~$166), while the ADS closed the year at $127.57 — about 23% below the base case, a sharp reversal from Q3's "20% above base" reading, driven almost entirely by the quarter's 28.6% price decline rather than any deterioration in the underlying model inputs.

Using 638,227,141 weighted-average diluted shares (the full-year 2025 figure disclosed in the 20-F) and the December 31, 2025 close of $127.57, Sea's implied market capitalization fell 28.6% quarter-over-quarter, tracking the ADS's own decline almost exactly since the share count barely moved.

Market cap → enterprise value	Q4/FY2025
Share price (period-end)	$127.57
Shares outstanding (weighted-average diluted, FY2025)	638,227,141
Market capitalization	~$81.42B
Plus: convertible notes (debt)	$1,050.1M
Less: cash and cash equivalents	$4,158.9M
Enterprise value	~$78.31B

That's the sharpest multiple compression this series has recorded in a single quarter, and it happened entirely on the price side — trailing fundamentals kept improving throughout the quarter, so the compression reflects a genuine re-rating rather than the business getting worse:

Peer-multiple sanity check	Q3 2025 (TTM)	FY2025	Change
Market capitalization	~$114.05B	~$81.42B	✅ down 28.6%
Revenue (TTM/FY)	~$21,037M	$22,938.5M	✅ up
Price/Sales	~5.42x	~3.55x	✅ down
Price/Book	~11.19x	~6.50x	✅ down
Total Adjusted EBITDA (TTM/FY)	~$3,240.9M	$3,437.1M	✅ up
EV/EBITDA»	~35.0x	~22.8x	✅ down

Full-year 2025 operating cash flow was $5,024.5 million and capital expenditure was $524.5 million (both explicitly disclosed for the first time as full annual figures in this filing, rather than derived from partial quarterly disclosures), implying full-year free cash flow of approximately $4.50 billion — up about 9% from the trailing-twelve-month estimate used at Q3. Using that $4.50 billion base, an unchanged 11.7% WACC, and the same growth trajectory used in prior quarters:

Scenario	Key assumption	WACC	Implied price
Current (period-end close)	— actual market price, for reference	—	$127.57
Bear	20% initial FCF growth decelerating to a 2% terminal rate, reflecting a credit-cycle turn in Monee's re-widened loan-to-user growth gap or a sharper-than-expected Garena bookings normalization	13%	~$107
Base	30% initial FCF growth decelerating to a 3% terminal rate by year six	11.7%	~$166
Bull	35% initial FCF growth decelerating to a 4% terminal rate	11%	~$228

The base case comes out up from Q3's ~$149 on the larger FCF base. At $127.57, the ADS now sits meaningfully below the base case and only modestly above the bear case — a genuine reversal from every quarter since Q1 2025, when this series' DCF consistently showed the stock trading at or above its base-case value. This remains a sanity check rather than a precise target, but the direction of the gap flipping in a single quarter — with the model's own inputs actually improving — is itself the notable finding this quarter, more than the specific numbers.

Sea's Stock Fell Almost 29% in a Quarter It Posted Record Profit

The ADS closed 2025 at $127.57, down 28.6% from Q3's $178.73 — the sharpest single-quarter decline this series has tracked since the depths of 2022, and one that arrived in the same quarter Sea posted its highest-ever GAAP operating income and net income. Sea's own materials don't identify a specific cause for the decline, and none is claimed here; what's verifiable is only that the drawdown happened alongside, not because of, anything disclosed about the business itself — Q4's revenue, profit, and guidance were all records or improvements on the prior quarter. Zooming out, the two-year window this series tracks for every post still shows a substantial gain: from $40.50 on December 29, 2023 to $127.57 on December 31, 2025 is a 215.0% increase, even after giving back roughly a third of the value the stock had reached at its August 2025 peak of $186.54. Within 2025 alone, the stock still ended the year up 20.2% from 2024's $106.10 close, despite the Q4 reversal. The size and speed of the Q4 drawdown — a stock priced for continued acceleration correcting hard in the same quarter the business actually delivered that acceleration — is exactly the kind of divergence the DCF's flipped verdict above is meant to surface: multiples can compress even when nothing about the underlying numbers goes wrong.

Trailing Quarters: Total GAAP Revenue and Total Adjusted EBITDA

Quarter	Total GAAP Revenue	Total Adjusted EBITDA
Q1 2024	$3,734.3M	+$401.1M
Q2 2024	$3,806.9M	+$448.5M
Q3 2024	$4,328.2M	+$521.3M
Q4 2024	$4,950.4M	+$590.9M
Q1 2025	$4,841.1M	+$946.5M
Q2 2025	$5,259.5M	+$829.2M
Q3 2025	$5,986.0M	+$874.3M
Q4 2025	$6,851.9M	+$787.1M

Revenue growth has now been positive for sixteen straight quarters in this window, with Q4 2025's 38.4% year-over-year growth the fastest of the eight quarters shown, edging past Q3's already-record 38.3%. Total Adjusted EBITDA fell 10.0% sequentially from Q3's $874.3 million — the second-highest reading in this window — entirely on Garena's seasonal bookings normalization (see Segment Comparison), while Shopee and Monee's own Adjusted EBITDA both continued climbing quarter-over-quarter. Sea's full fiscal year, taken together, was unambiguously its best on record across every metric this table and the Key Financial Metrics section above track.

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