SE Sea's Revenue Grew 47%. Its Adjusted EBITDA Grew Just 9%

Record Revenue, a Profit Line That Didn't Keep Up

Forrest Li opened Sea's Q1 2026 call framing with "strong growth with financial discipline" — a phrase built to reassure a market that's watched Sea reinvest hard before. GAAP revenue hit a record $7.1 billion, up 46.6% year-over-year, the fastest growth rate in this series' trailing eight-quarter window (see Trailing Quarters below). But Total Adjusted EBITDA^» grew only 9.3% to $1,034.3 million, and net income grew just 6.7% to $438.2 million — both a full order of magnitude slower than the topline. That gap isn't a rounding artifact: it's Shopee, the company's largest and most-featured segment this quarter, whose own operating income fell 28.8% year-over-year and whose Adjusted EBITDA fell 15.6%, even as management pointed to Shopee's "record-setting quarter" on GMV, gross orders, and revenue. See Beyond the Usual for why "financial discipline" is a harder claim to defend than the headline numbers suggest.

None of the quarter's growth showed up in the stock either. The ADS closed at $82.81 on March 31, 2026, down 35.1% from Q4 2025's $127.57 — the second consecutive quarter of a double-digit percentage decline, and one that leaves the stock below this series' updated DCF bear case for the first time since this valuation exercise began. See Sea's Stock Fell Below Even Its Own Bear Case and Target Valuation Range below.

No transcript was available for this quarter's call, so what management said live can't be directly confirmed either way — but the press release and investor presentation, the only two documents available this quarter, say nothing about Sea's $86 million securities-litigation settlements, continuing the pattern this series has tracked in written materials since Q1 2025. See Beyond the Usual for detail.

The Prescription

Sea should keep doing what's actually working underneath the noisy headline number: Garena's global-content playbook (the Jujutsu Kaisen collaboration on Free Fire generated over 700 million official content views, and Arena of Valor posted record bookings in its tenth year of operation) just delivered the segment's best quarter since 2021 and carried the group's Adjusted EBITDA growth almost single-handedly this quarter. Monee's expansion into new use cases and geographies — Brazil crossed $1 billion in loan book size, growing over 250% year-over-year, and just received an SCFI license to broaden the financial services it can offer there — is a genuine second growth engine, not a rounding error on Shopee's balance sheet anymore.

What Sea should stop doing is calling this "growth with financial discipline" without reconciling that phrase against its own segment table. Shopee's cost of revenue grew 55.1% year-over-year — faster than Shopee's own 45.1% revenue growth — because logistics investment (SPX Express capacity, faster fulfilment) is being funded out of gross margin, not out of a separate capital budget. That's a legitimate strategic bet, but it is not what "financial discipline" ordinarily means, and calling it that while Shopee's own operating income fell 28.8% year-over-year is exactly the kind of framing gap this series flags every time it appears (see Beyond the Usual). A five-word phrase that contradicts the segment table underneath it costs Sea nothing to fix and costs it credibility every time a reader checks the numbers.

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	Q1 2026	Q1 2025	YoY	QoQ (vs Q4 2025)	Q1 2026 Op. Income	Q1 2026 Adj. EBITDA
E-commerce (Shopee)	$5,113.6M revenue	$3,524.2M	✅ +45.1%	✅ +2.8%	⚠️ $138.9M (-28.8% YoY)	⚠️ $223.2M (-15.6% YoY)
Digital Financial Services (Monee)	$1,241.8M revenue	$787.1M	✅ +57.8%	✅ +9.7%	✅ $265.6M (+16.2% YoY)	✅ $275.2M (+14.0% YoY)
Digital Entertainment (Garena)	$931.4M bookings	$775.4M	✅ +20.1%	✅ +38.5%	✅ $363.6M (+65.3% YoY)	✅ $573.6M (+25.2% YoY)
Other Services	$45.5M revenue	$34.2M	✅ +33.0%	—	⚠️ -$32.3M (worse YoY)	⚠️ -$28.1M (worse YoY)
Unallocated expenses	—	—	—	—	-$142.9M (improved YoY)	-$9.6M
Total	$7,097.5M revenue	$4,841.1M	✅ +46.6%	✅ +3.6%	✅ $593.0M (+29.9% YoY)	⚠️ $1,034.3M (+9.3% YoY)

The table is where the quarter's real story sits, not the headline: Garena, the smallest segment by revenue, generated the most operating income ($363.6 million) and by far the fastest year-over-year growth in both operating income (+65.3%) and Adjusted EBITDA (+25.2%) — continuing the pattern flagged at Q4 2025 where Garena quietly carries the group's profit. Monee grew cleanly across revenue, operating income, and Adjusted EBITDA, all accelerating from Q4. Shopee is the outlier: it delivered the fastest revenue growth of the three core segments' most recent comparison but is the only one where operating income and Adjusted EBITDA both fell year-over-year — the segment's own cost of revenue (mostly logistics) grew faster than its revenue, compressing segment gross margin even as absolute volume hit new records.

E-commerce (Shopee)

GAAP revenue was $5,113.6 million, up 45.1% year-over-year and 2.8% quarter-over-quarter, on record GMV ($37.3 billion, +30.2% YoY) and gross orders (4.0 billion, +29.3% YoY) — genuinely the best quarter yet on every volume metric Sea discloses. But segment operating income fell to $138.9 million from $195.0 million a year ago (-28.8%), and Adjusted EBITDA fell to $223.2 million from $264.4 million (-15.6%), because segment cost of revenue rose 55.1% year-over-year to $3,578.2 million — faster than the segment's own 45.1% revenue growth — driven by higher logistics costs as order volumes grew and continued investment in fulfilment capacity. Segment sales and marketing spend actually grew more slowly than revenue (+40.4% to $1,091.8 million), so the profit compression isn't a marketing-spend story this quarter, it's a cost-of-revenue story: Shopee's core marketplace revenue (transaction fees plus advertising) grew a strong 61.0% to $3.8 billion on ad revenue up over 80% and ad take rate up more than 90 basis points, but value-added services revenue (mostly logistics) actually fell 8.1% year-over-year to $691.6 million "as a result of higher revenue net-off against shipping subsidies" — Sea's own words for absorbing more of the delivery cost itself. ShopeeVIP crossed 10 million members (up more than 40% quarter-over-quarter) with retention averaging over 80% and members now contributing roughly 20% of Asia GMV, a genuine monetization lever still scaling. Management reiterated the 2026 guidance first given last quarter: Shopee GMV growth "around 25%" for the full year, with full-year Adjusted EBITDA "no lower than 2025 in absolute dollar terms" — a guidance floor that this quarter's segment Adjusted EBITDA decline makes more interesting to track, not less, since three more quarters now have to outpace 2025's pace to hold that floor after Q1 came in below Q1 2025's own $264.4 million.

Digital Financial Services (Monee)

GAAP revenue was $1,241.8 million, up 57.8% year-over-year, and Adjusted EBITDA was $275.2 million, up 14.0% year-over-year — a sixteenth straight profitable quarter extending the streak tracked since Q1 2023. Consumer and SME loans principal outstanding reached $9.9 billion, up 71.3% year-over-year ($8.8 billion on-book, $1.1 billion off-book), with 4.9 million new first-time borrowers added in the quarter and active credit users crossing 38 million, up more than 35% year-over-year — the loan-to-user growth gap this series has tracked since 2024 holds at roughly 2-to-1, essentially unchanged from Q4 2025's re-widened reading. The NPL^»90+ ratio held at 1.1% for a third straight quarter, "stable quarter-on-quarter" per Sea's own release. Average loan outstanding per user rose 25% year-over-year to around $250. Brazil became Monee's fourth market to cross $1 billion in loan book size, growing more than 250% year-over-year, with SPayLater GMV penetration on Shopee still around 10% there (well below Sea's more mature markets) and a new SCFI license obtained to broaden the financial services Sea can offer in the country. Off-Shopee SPayLater kept expanding in Malaysia, Thailand, and Indonesia, exceeding 20% of the SPayLater portfolio in the latter two markets. See Beyond the Usual for a note on the segment's provision for credit losses, which grew faster than segment revenue this quarter even as the headline delinquency ratio held flat.

Digital Entertainment (Garena)

Bookings were $931.4 million, up 20.1% year-over-year and 38.5% quarter-over-quarter — Garena's strongest quarter since 2021, per management's own framing, and the fastest sequential growth in this series' recent tracking. GAAP revenue was $696.6 million (+40.6% YoY), and Adjusted EBITDA was $573.6 million, up 25.2% year-over-year, representing 61.6% of bookings — the highest margin this series has recorded for the segment, up from 59.1% a year ago and 54.1% in Q4. The growth was driven by Free Fire's collaboration with Jujutsu Kaisen, which generated over 700 million official content views (one of Garena's most successful IP partnerships to date, alongside last year's NARUTO SHIPPUDEN run), and a record quarter for Arena of Valor in its tenth year of operation. Quarterly active users^» were 666.5 million, up a modest 0.7% year-over-year but recovering from Q4's sequential dip to 633.3 million. Average bookings per paying user (ARPPU^») rose to $12.8 from Q1 2025's $12.0, and the paying-user ratio jumped to 10.9% from 9.8% a year ago — both signs the collaboration drove deeper monetization, not just a one-off content spike. Management's framing that Garena "demonstrates our unique ability to operate games well across genres, in multiple markets, and over long periods of time" is, for once this series' tracking, fully backed by the numbers underneath it.

Key Financial Metrics

Q1 2026 vs. Q1 2025, all figures in USD as reported (Sea reports in US dollars)

Metric	Q1 2026	Q1 2025	YoY
Total GAAP revenue	$7,097.5M	$4,841.1M	✅ +46.6%
Total gross profit	$3,145.6M	$2,236.2M	✅ +40.7%
Operating income	$593.0M	$456.4M	✅ +29.9%
Total Adjusted EBITDA»	$1,034.3M	$946.5M	⚠️ +9.3%
Net income	$438.2M	$410.8M	⚠️ +6.7%
Free cash flow	$918.9M (operating cash flow $1,057.9M less capex $139.0M)	—	Q1 2025 capex wasn't separately broken out in this filing, so no YoY comparison is made
Cash and cash equivalents	$4,035.2M	$2,183.0M	✅ +84.8%
Total Sea Limited shareholders' equity	$12,853.2M	$8,963.4M	✅ +43.4%

Total Adjusted EBITDA growth has now decelerated for four straight quarters — from Q1 2025's +135.9% YoY, to Q2's +84.9%, Q3's +67.7%, Q4's +33.2%, and now Q1 2026's +9.3% — the slowest reading in this series' entire trailing eight-quarter window (see Trailing Quarters below), even as revenue growth accelerated to its fastest pace in the same window. Net income growth (+6.7%) lagged revenue growth (+46.6%) by an even wider margin than Adjusted EBITDA did, on top of Shopee's segment decline: the effective tax rate jumped to 32.7% of pre-tax income from 25.0% a year ago (income tax expense +57.0% to $214.0 million against pre-tax income growth of only 20.0%), and non-operating income fell 30.7% to $61.8 million as interest income eased. Both are worth watching next quarter — see Beyond the Usual.

Beyond the Usual

Sea's Q1 2026 disclosure package is thinner than a fiscal year-end quarter: no transcript was available for this quarter, and the "quarterly report" on file is the same unaudited press release furnished as a 6-K exhibit, with no footnote package — consistent with every non-fiscal-year-end quarter this series has tracked, since Sea, as a foreign private issuer, has no 10-Q-equivalent interim filing. That limits how deep footnote mining can go this quarter; the findings below come from the segment table and financial statements themselves rather than notes to the financials.

"Financial discipline" is a hard claim to square with Shopee's own falling segment profit

Forrest Li's prepared framing called this "strong growth with financial discipline," and specifically praised Shopee for "another record-setting quarter... while maintaining financial discipline." Sea's own segment table shows the opposite for Shopee specifically: segment operating income fell 28.8% year-over-year to $138.9 million (from $195.0 million), and segment Adjusted EBITDA fell 15.6% to $223.2 million (from $264.4 million) — even as Shopee's GMV, gross orders, and revenue all hit new highs. The mechanism is legitimate (segment cost of revenue grew 55.1% year-over-year, faster than the segment's 45.1% revenue growth, on logistics investment), but "financial discipline" is not the phrase for a segment whose own profit line moved backward year-over-year while its headline growth metrics moved forward. This is the same pattern this series has flagged before — a leadership framing that doesn't survive a look at the segment table underneath it, most recently at Q2 2024 — and it recurs here in a milder but structurally identical form: growth headlined, profit contradiction left unaddressed in the same breath.

For a fifth straight quarter, Sea's available materials say nothing about its own $86 million litigation settlement

No transcript exists for this quarter's earnings call, so what management actually said live cannot be directly confirmed here for the first time in over a year. What is verifiable: the press release and investor presentation — the only two documents available for this quarter — contain zero reference to Sea's $86 million securities-litigation settlements, continuing the same silence this series has tracked in every earnings call transcript since Q1 2025, through Q2, Q3, and Q4 & FY2025, where the FY2025 20-F confirmed both underlying cases now carry final court judgments dismissing them with prejudice. This quarter's written materials extend that same pattern of omission, on a matter with no remaining pending exposure to disclose — though this series can no longer confirm whether the live call itself did the same, since no transcript exists to check against.

Monee's provision for credit losses is growing faster than the segment's own revenue, even as the headline delinquency ratio holds flat

Monee's segment provision for credit losses rose 66.2% year-over-year to $461.3 million — faster than the segment's own 57.8% revenue growth — while the NPL90+ ratio held at 1.1% for a third straight quarter and management calls asset quality "stable." Both things can be true at once: a provisioning rate outpacing revenue is a forward-looking, model-driven number (this quarter's own filing offers no footnote to explain the assumptions behind it, since no 10-Q-equivalent footnote package exists for an interim quarter), while NPL90+ is a backward-looking, already-realized default rate. The loan-to-active-user growth gap this series has tracked since 2024 also holds at roughly 2-to-1 (loans +71.3% YoY vs. active credit users "more than 35%"), essentially unchanged from Q4 2025's re-widened reading rather than narrowing further. Neither point is alarming in isolation, but the combination — faster provisioning, a persistent loan-to-user gap, and expansion into newer, thinner-track-record channels (off-Shopee SPayLater, a brand-new Brazil credit license) — is worth checking again once the next annual filing's footnotes are available.

The effective tax rate jumped nearly 8 percentage points, and nothing in this quarter's materials explains why

Sea's effective tax rate rose to 32.7% of pre-tax income in Q1 2026, up from 25.0% in Q1 2025 — income tax expense grew 57.0% to $214.0 million while pre-tax income grew only 20.0%. This is the single largest driver, alongside a 30.7% drop in non-operating income, of why net income growth (+6.7%) lagged revenue growth (+46.6%) by such a wide margin this quarter. No jurisdictional or one-time-item breakdown is available in this quarter's unaudited press release to explain the jump — that level of detail typically only appears in the annual 20-F's tax footnote — so this is a number to revisit once FY2026's full filing is available, not a conclusion to draw yet.

Sea authorized its first ordinary-share buyback program in this series' tracking, and started using it during the same quarter the stock fell 35%

Sea repurchased 1.8 million ordinary shares for $168.4 million in Q1 2026 under a newly disclosed US$1.0 billion share repurchase program — the first buyback of Sea's own ordinary shares this series has tracked, distinct from the convertible-note repurchases tracked since 2024. Treasury stock on the balance sheet jumped from $14.5 million to $149.3 million quarter-over-quarter, consistent with the disclosed repurchase amount. Buying back stock in the same quarter it fell 35% is a defensible capital-allocation choice (management effectively bought shares near a two-year low) but also a real tradeoff against reinvesting further in Monee's newer markets or Garena's content pipeline — worth watching whether the program's pace changes as the stock's price relative to intrinsic value (see Target Valuation Range below) becomes even more favorable for buybacks specifically.

Target Valuation Range

Undervalued relative to the model, and for the first time in this series, trading below the bear case itself. An updated DCF, using an estimated trailing-twelve-month free cash flow of approximately $4.79 billion (up modestly from Q4's ~$4.50 billion estimate), puts intrinsic value at roughly $114-$243 per share across bear/base/bull scenarios (base ~$177), while the ADS closed the quarter at $82.81 — about 53% below the base case and roughly 27% below even the bear case, a sharper disconnect than Q4's already-reversed "23% below base" reading.

Using 636,172,778 weighted-average diluted shares and the March 31, 2026 close of $82.81, Sea's implied market capitalization fell 35.3% quarter-over-quarter, tracking the ADS's own decline almost exactly since the share count barely moved.

Market cap → enterprise value	Q1 2026
Share price (period-end)	$82.81
Shares outstanding (weighted-average diluted)	636,172,778
Market capitalization	~$52.68B
Plus: convertible notes (debt)	$995.8M
Less: cash and cash equivalents	$4,035.2M
Enterprise value	~$49.64B

This is the second straight quarter of sharp multiple compression, and this time it's compounding a quarter that already looked cheap:

Peer-multiple sanity check	FY2025 (TTM)	Q1 2026 (TTM)	Change
Market capitalization	~$81.42B	~$52.68B	✅ down 35.3%
Revenue (TTM)	$22,938.5M	~$25,190M	✅ up
Price/Sales	~3.55x	~2.09x	✅ down
Price/Book	~6.50x	~4.10x	✅ down
Total Adjusted EBITDA (TTM)	$3,437.1M	~$3,520M	✅ up
EV/EBITDA»	~22.8x	~14.1x	✅ down

Trailing-twelve-month operating cash flow comes to approximately $5.33 billion (FY2025's actual $5,024.5 million, less Q1 2025's actual $756.9 million, plus Q1 2026's actual $1,057.9 million — all three figures as disclosed, no estimation needed). Capex is less precise: Q1 2026's $139.0 million is disclosed exactly, but Q1 2025's capex wasn't broken out separately in any filing this series has access to, so it's estimated at roughly $131 million (one quarter of FY2025's disclosed annual capex of $524.5 million, assumed evenly spread) purely to complete the trailing-twelve-month calculation — flagged here as an estimate, not a filed number. That puts trailing-twelve-month free cash flow at approximately $4.79 billion. Using that base and an unchanged 11.7% WACC:

Scenario	Key assumption	WACC	Implied price
Current (period-end close)	— actual market price, for reference	—	$82.81
Bear	20% initial FCF growth decelerating to a 2% terminal rate, reflecting a credit-cycle turn in Monee or a sharper-than-expected Garena bookings normalization	13%	~$114
Base	30% initial FCF growth decelerating to a 3% terminal rate by year six	11.7%	~$177
Bull	35% initial FCF growth decelerating to a 4% terminal rate	11%	~$243

Neither bear-case trigger actually showed up this quarter — Monee's delinquency ratio held flat and Garena just posted its best quarter since 2021 — yet the ADS closed 27% below even that scenario. This remains a sanity check, not a precise target, but a stock trading below its own bear case while the bear case's own triggers aren't firing is the more striking read this quarter than the specific dollar figures.

Sea's Stock Fell Below Even Its Own Bear Case

The ADS closed Q1 2026 at $82.81, down 35.1% from Q4 2025's $127.57 — a second consecutive quarter of a double-digit percentage decline, following Q4's 28.6% drop, and together the sharpest two-quarter drawdown in this series' tracking outside the depths of 2022. Sea's own materials don't identify a cause, and none is claimed here; what's verifiable is that the decline arrived alongside a quarter of record revenue, accelerating YoY growth, and Sea's best Garena quarter since 2021 — the same disconnect between price and disclosed fundamentals this series flagged at Q4 2025, now extended a second quarter rather than reversed. Zooming out, the two-year window this series tracks for every post has now turned negative for the first time since 2023: from $63.19 on April 30, 2024 to $82.81 on March 31, 2026 is still up 31.1% over that window, but down 55.6% from the August 2025 peak of $186.54 — more than half the peak value given back in seven months. The size, speed, and second consecutive quarter of this drawdown — now pushing the stock below even this series' bear-case DCF scenario (see Target Valuation Range above) despite bear-case triggers not actually materializing — is the sharpest price-fundamentals disconnect this series has recorded.

Trailing Quarters: Total GAAP Revenue and Total Adjusted EBITDA

Quarter	Total GAAP Revenue	Total Adjusted EBITDA
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
Q1 2026	$7,097.5M	+$1,034.3M

Revenue growth has now been positive for seventeen straight quarters in this window, and Q1 2026's 46.6% year-over-year growth is the fastest of the eight quarters shown, well ahead of Q4's already-record 38.4%. Total Adjusted EBITDA's year-over-year growth rate tells the opposite story: it has decelerated for four consecutive quarters (+135.9% at Q1 2025, +84.9% at Q2, +67.7% at Q3, +33.2% at Q4, and now +9.3% at Q1 2026) even as revenue growth accelerated over the same stretch — the widest revenue-versus-profitability divergence this table has recorded, and the one number from this quarter most worth tracking into Q2.

---