Singapore technology firm Sea signalled on Tuesday (Aug 15) it will boost investments in its core e-commerce business which may lead to losses in some quarters, pivoting its strategy after months of cost cuts and weak performance in the second quarter.
US-listed shares of the company were down over 21 percent in early trading.
Southeast Asia’s biggest listed technology firm began a major overhaul last year involving cutting its workforce by 10 percent and lowering marketing spending, which helped Sea deliver its first-ever quarterly net profit in December.
However, the rapid rise in digital services has largely tapered from the boom seen during the peak pandemic period, with Sea’s top-line growth dropping to single digits in the past three quarters from over 100 percent seen in some quarters of 2021.
“We have started and will continue, to ramp up our investments in growing the e-commerce business across our markets. Such investments will have an impact on our bottom line and may result in losses for Shopee and our group as a whole in certain periods,” said Forrest Li, chairman and group CEO at Sea.
Sea posted mixed results in the three months that ended on Jun 30, as tepid consumer spending amid a challenging macroeconomic outlook pressured its e-commerce business and caused a steep decline in its mobile gaming unit.
Revenue grew 5.2 percent from a year earlier to US$3.1 billion (S$4.2 billion), below Refinitiv estimates of US$3.2 billion. However, per-share earnings were a comfortable 12 cents higher than expectations at 54 cents, signalling gains from the cost measures.
Sea’s e-commerce business Shopee, which contributes about two-thirds to the group’s top line, grew nearly 21 percent to US$2.1 billion. It was below the consensus estimate of US$2.25 billion, despite Sea posting 10 percent sequential growth in active buyers in the second quarter and raising platform commissions earlier this year.
Sales from the digital entertainment segment, which includes gaming platform Garena, fell over 41 percent, declining for the fifth quarter in a row. Sales from the financial services business were up over 53 percent.
