Singapore’s Sea misses earnings estimates as AI costs climb

Singapore's Sea Ltd share prices fell after the company reported earnings that fell short of expectations, raising concerns about rising AI costs. Adjusted earnings before interest, taxes, depreciation and amortization for the three months to September rose 29% to US$931 million, exceeding analyst estimates of US$990 million. Revenue increased 43% to US$8.6 billion, beating predictions.

However, investors remain worried that competition from ByteDance's TikTok Shop, Alibaba Group Holding's Lazada, and Shein Global Holdings is affecting Shopee's pricing and margins. As Sea invests more in AI features and expands into cloud computing, food delivery, and other areas, adjusted Ebitda at Shopee grew by 45% to US$269.2 million, with revenue reaching US$6.1 billion.

The company's board authorized an additional US$1 billion in stock buybacks, following a previous program. Sea's CEO, Forrest Li, announced plans to offer cloud services, which prompted a 40% year-on-year decline in the stock price. Li stated that Sea will not own significant physical capacity and aims to attract new customers to fund the infrastructure of its cloud business.

The AI-driven expansion will face challenges against well-capitalized cloud providers like Amazon Web Services. Sea is also considering a public listing for its financial services subsidiary, Monee, to obtain independent access to capital as its margins remain thin. These moves come as Sea seeks to expand its Shopee retail business into Brazil while navigating potential regulatory hurdles in major regional markets like Indonesia.