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You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the
related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in
these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report.
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A. Operating Results
Overview
Sea operates three key businesses—Shopee, Monee and Garena. Each of our businesses provides a distinct and compelling value proposition to our users, and we believe each exhibits strong virtuous
cycle dynamics. We develop, curate and localize the content and services on our platforms to serve a highly diverse population across multiple markets and regulatory regimes.
Since our founding, we have achieved significant scale and growth. Our total revenue increased from US$13.1 billion in 2023 to US$22.9 billion in 2025, a CAGR of 32.5%. We had gross profit of
US$5.8 billion, US$7.2 billion and US$10.2 billion in 2023, 2024 and 2025, respectively. We had net income of US$162.7 million, US$447.8 million and US$1.6 billion in 2023, 2024 and 2025, respectively.
Major Factors Affecting Our Results of Operations
Our results of operations and financial condition are affected by general factors driving the e-commerce, digital financial services, digital entertainment and other industries in our markets,
including demographic and macro-economic growth, technology adoption trends, and the digital transformation of industries.
Our results of operations are also directly affected by certain factors specific to us, including the following:
Size of Our User Base
Our revenue is largely driven by the number of users and the level of user engagement across our three businesses, subject to other factors such as macro-economics, geopolitics and consumer
spending power. In our e-commerce business, the larger the number of sellers and buyers on the platform, the larger the number and value of transactions which over time will drive advertising and transaction-based fee revenue for us. In our digital
financial services business, the larger the number of users, the greater the potential to generate revenue. In our digital entertainment business, due to our freemium business model of our immersive games, the higher the number of active users in
our games, the larger the number of users likely to make in-game purchases.
User Engagement and Monetization
As our level of user engagement increases, the potential for user spending and consequently our revenue also increases. A critical component of maximizing the monetization potential of each of our
businesses is providing high-quality content and services and pricing our content and services correctly. Monetization is also dependent upon our ability to convert active users into paying users, and then increase revenue per paying user. For
example:
● In our e-commerce business, we closely monitor the number of transactions per active buyer. We optimize the assortment of our product categories on our marketplace and build convenient tools to attract sellers. We monetize our e-commerce business mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services, including logistics and fulfillment. We may consider other monetization methods in order to capture additional revenue streams. We also purchase products from manufacturers and third parties and sell them directly to buyers on our Shopee platform.
● In our digital financial services business, we mainly monetize by earning interest and fees from our credit and banking businesses, fees from our e-wallet, payment processing and wealth services and fees and premiums from our insurance business.
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● In our digital entertainment business, our primary source of revenue is the sale of in-game items. We focus on developing and curating the best content and localizing that content to cater to the tastes and preferences of each of our unique markets. We maximize the in-game user experience to keep our users highly engaged and increase the likelihood of in-game spending so as to maximize revenue. To do so, we provide a high-quality entertainment experience, adopt effective pricing strategies for each market and game, and leverage our platform’s cross-selling tools to support long-term user engagement with our games.
Benefits of Our Platforms
Our platforms benefit from internal dynamics that allow us to increase our scale and user engagement quickly and in a cost-effective manner. Our businesses enjoy network effects, virtuous cycles
and synergies across our platforms.
We benefit from the network effects resulting from the significant social aspects of our platforms. For example, because game players find it highly beneficial to join a platform with a large
number of other game players, each new player that joins creates value for the existing community. This encourages current users to invite new users to our platforms, which allows us to grow our user base with moderate acquisition cost and
increases the likelihood that users will remain active and engaged and therefore spend on our platforms.
Each of our three businesses is a multi-sided platform which benefits from virtuous cycle dynamics. Thus, as our platforms grow, they become more valuable to each of our users and this increases
their potential spending opportunities. For example, as the number of buyers on our Shopee platform increases, Shopee attracts an increasing number of sellers, resulting in increases in the volume and variety of products available on the platform,
which increases the purchasing opportunities for each of those buyers. In addition, other platform services and support services such as payment, logistics and fulfillment services benefit and improve the user experience for both buyers and
sellers. This results in greater monetization potential as the size of each platform grows.
Finally, synergies among our digital financial services business and each of our e-commerce and digital entertainment businesses allow us to increase our user base and use cases, and benefit our
monetization and cost efficiencies. At the same time, the large user base on Shopee may also increasingly explore other services and product offerings available on our digital financial services platform, such as our credit, banking and insurtech
services.
Optimization of Our Cost and Expense Structure
Our cost and expense structure has several broad components: sales and marketing expenses, consisting primarily of customer acquisition and retention expenses for all our business segments; costs of logistics,
including expenses for warehousing, for our e-commerce business; funding costs as well as credit and default costs, for our consumer and SME credit business; payment channel costs, royalties, amortized license fees and hosting costs for our digital
entertainment business; staff compensation and welfare costs and expenses, which are spread among different functions; research and development expenses; and other costs and expenses across our businesses that are mainly fixed in nature. By
offering our own e-wallet and payment processing services, we strive to effectively reduce our payment channel costs and capture value that may otherwise go to third-party payment service providers. The
size of our businesses has allowed us to optimize our costs through greater economies of scale.
Foreign Exchange Rates
Our reporting currency is the U.S. dollar and changes in currency exchange rates may materially affect our reported results and consolidated trends. We earn revenue denominated in local currencies
of our markets in Southeast Asia, Taiwan and Brazil, among other currencies, while some of our costs and expenses are paid in other foreign currencies. We do not rely on any single currency as we earn revenue in different local currencies across
our markets and keep a significant cash position in U.S. dollars.
Our expenses may become higher and our revenue and operating metrics may become lower than would be the case if exchange rates were stable or if we were operating and reporting in one currency. For
example, if the U.S. dollar weakens relative to currencies in our local markets, our revenue and operating expenses will be higher than if currencies had remained constant. Likewise, if the U.S. dollar strengthens relative to currencies in our
local markets, our revenue and operating expenses will be lower than if currencies had remained constant. Movements in foreign currency exchange rates may have a material adverse effect on our results of operations, which may cause our financial
and operational metrics reported in the U.S. dollar to be not fully representative of the underlying business performance. We believe that our diversification in geographic coverage benefits our shareholders over the long-term. We may also enter
into foreign currency derivative transactions to hedge potential foreign exchange risks. See “Item 3. Key Information—D. Risk Factors—Business and Operational Related Risks—Risks Applicable Across Multiple Businesses—Fluctuations in foreign
currency exchange rates may adversely affect our operational and financial results, which we report in U.S. dollars.”
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Description of Certain Statement of Operations Items
Revenue
We currently generate revenue primarily from our e-commerce business, digital financial services business and digital entertainment business. The table below sets forth our revenue breakdown.
For the Year Ended December 31,
2023 2024 2025
US$ Percentage of Total Revenue US$ Percentage of Total Revenue US$ Percentage of Total Revenue
(thousands, except for percentages)
Service revenue
E-commerce (Shopee) 7,885,185 60.3 10,862,263 64.6 14,545,894 63.4
Digital Financial Services (Monee) 1,759,422 13.5 2,367,739 14.1 3,791,641 16.6
Digital Entertainment (Garena) 2,172,009 16.6 1,910,589 11.3 2,408,765 10.5
Other Services(1) 125,769 1.0 120,672 0.7 166,761 0.7
Sales of goods(2) 1,121,175 8.6 1,558,603 9.3 2,025,408 8.8
Total revenue 13,063,560 100.0 16,819,866 100.0 22,938,469 100.0
(1) Other services are a combination of multiple business activities that do not meet the quantitative threshold to qualify as reportable segments.
(2) Sales of goods revenue mainly comes from our e-commerce business.
The table below sets forth the revenue from external customers based on the geographical locations where the services were provided or goods were sold, both in absolute amount and as a percentage
of total revenue for the periods indicated.
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For the Year Ended December 31,
2023 2024 2025
US$ Percentage of Total Revenue US$ Percentage of Total Revenue US$ Percentage of Total Revenue
(thousands, except for percentages)
Singapore 506,482 3.9 659,107 3.9 792,705 3.5
Southeast Asia excluding Singapore 8,673,045 66.4 11,114,896 66.1 14,379,011 62.7
Latin America 2,193,758 16.8 3,276,281 19.5 5,532,738 24.1
Rest of Asia 1,496,433 11.4 1,591,487 9.4 2,005,721 8.7
Rest of the world 193,842 1.5 178,095 1.1 228,294 1.0
Total revenue 13,063,560 100.0 16,819,866 100.0 22,938,469 100.0
E-commerce (Shopee)
E-commerce service revenue consists of revenue generated from our e-commerce marketplace services and logistics services. Revenue from products owned and sold by us on our Shopee platform was
recorded under sales of goods revenue as discussed below. Our e-commerce service revenue constituted 60.3%, 64.6% and 63.4% of our total revenue during 2023, 2024 and 2025, respectively.
We monetize Shopee’s marketplace model mainly by offering sellers paid advertising services, charging transaction-based fees, and charging for certain value-added services, including logistics and
fulfillment.
Digital Financial Services (Monee)
We generate revenue from our digital financial services business primarily from earning interest and fees from our credit and banking businesses, fees from our e-wallet, payment
processing and wealth services and fees and premiums from our insurance business. For loans receivable, interest and fees earned are recognized over the period of the loan based on the effective
interest method. Our digital financial services revenue constituted 13.5%, 14.1% and 16.6% of our total revenue during 2023, 2024 and 2025, respectively.
Digital Entertainment (Garena)
We generate revenue from our digital entertainment business primarily by selling in-game items to our game players. We recognize revenue ratably over the estimated service period. Our revenue
generated from digital entertainment accounted for 16.6%, 11.3% and 10.5% of our total revenue in 2023, 2024 and 2025, respectively.
The primary driver for revenue in our digital entertainment business is the size of our active user base and the level of user engagement. Due to the freemium business model of our immersive games,
the higher the number of active users on our games, the greater the likelihood of such users to make in-game purchases. Therefore, we believe Game QAU is a key metric to help us understand both the active user base and user engagement on our games.
Sales of Goods
Sales of goods revenue mainly comes from our e-commerce business. While we primarily operate as a marketplace, we also purchase products from manufacturers or third parties directly and sell on our
Shopee platform under our official store to meet buyers’ demand for such products. Bulk purchasing and direct product sales for specific product categories also enable us to offer better product assortment and more competitive prices to our buyers.
Cost of Revenue
Our cost of revenue primarily consists of direct expenses in generating revenue from our businesses. The table below sets forth our cost of revenue breakdown.
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For the Year Ended December 31,
2023 2024 2025
US$ Percentage of Total Revenue US$ Percentage of Total Revenue US$ Percentage of Total Revenue
(thousands, except for percentages)
Cost of service
E-commerce (Shopee) 5,171,361 39.6 7,165,351 42.6 9,502,668 41.4
Digital Financial Services (Monee) 279,745 2.1 348,424 2.1 475,024 2.1
Digital Entertainment (Garena) 672,481 5.1 610,586 3.7 791,378 3.4
Other Services(1) 78,937 0.6 40,026 0.2 42,969 0.2
Cost of goods sold 1,027,389 7.9 1,450,391 8.6 1,882,693 8.2
Total cost of revenue 7,229,913 55.3 9,614,778 57.2 12,694,732 55.3
(1) Other services are a combination of multiple business activities that do not meet the quantitative threshold to qualify as reportable segments.
E-commerce (Shopee)
Our cost of revenue for e-commerce services primarily consists of expenses associated with our logistics and other value-added services, bank transaction fees for transactions conducted through our
Shopee platform, server and hosting costs, and staff compensation and welfare costs, which include share-based compensation.
Digital Financial Services (Monee)
Our cost of revenue for digital financial services primarily consists of server and hosting costs, interest expenses for customer deposits under our banking business, other funding costs, bank
transaction fees, collection expenses, amortization costs for internally developed software, commissions we pay to counter operators, and staff compensation and welfare costs, which include share-based compensation.
Digital Entertainment (Garena)
Our cost of revenue for digital entertainment primarily consists of payment channel costs, recognized as expenses over the performance obligation period, royalties, and other fees relating to our
use of various third-party intellectual properties. Other costs include server and hosting costs, upfront licensing fees, which are fixed and amortized over the shorter of estimated useful life or game licensing period, and staff compensation and
welfare costs, which include the share-based compensation.
Sales of Goods
Our cost of revenue for sales of goods is mainly attributable to the goods we purchase from manufacturers and third parties and sell directly to buyers on our Shopee platform.
Gross Profit
Our gross profit is defined as total revenue minus total cost of revenue.
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Gross Margin
Our gross margin is defined as total gross profit as a percentage of total revenue. The basis for gross margin for each of our business segments and the reason for the variations in the gross
margins are mainly due to the different nature of our businesses. For example, gross margins in our digital entertainment segment are relatively high mainly because of the digital nature of the production and sale of the virtual items in our games.
By comparison, e-commerce involves more significant physical operations, including logistics which includes costs associated with the storage and delivery of the goods sold by sellers on Shopee. As such, our e-commerce has lower gross margins
compared to our digital entertainment business.
Operating Income and Expenses
Our operating expenses consist of sales and marketing expenses, general and administrative expenses, provision for credit losses, research and development expenses and impairment of goodwill, net
of other operating income. The table below sets forth our operating expenses, both in absolute amount and as a percentage of total revenue, for the periods indicated.
For the Year Ended December 31,
2023 2024 2025
US$ Percentage of Total Revenue US$ Percentage of Total Revenue US$ Percentage of Total Revenue
(thousands, except for percentages)
Other operating income (221,021 ) (1.7 ) (180,443 ) (1.1 ) (121,328 ) (0.5 )
Sales and marketing expenses 2,779,223 21.3 3,472,686 20.6 4,492,203 19.6
General and administrative expenses 1,134,724 8.7 1,267,706 7.6 1,357,791 5.9
Provision for credit losses 633,942 4.8 776,937 4.6 1,372,616 6.0
Research and development expenses 1,164,126 8.9 1,206,050 7.2 1,157,149 5.0
Impairment of goodwill 117,875 0.9 - - - -
Total operating expenses 5,608,869 42.9 6,542,936 38.9 8,258,431 36.0
Other Operating Income
Our other operating income consists primarily of rebates from e-commerce-related logistic services provided by third parties.
Sales and Marketing Expenses
Our sales and marketing expenses consist primarily of online and offline advertising expenses, sales incentives, and staff compensation and welfare expenses, which include share-based compensation
for our employees engaged in sales and marketing functions. Our excess sales incentive, representing the sales incentive given exceeding the revenue we expect to receive on a transaction-by-transaction basis, was less than 10% of total revenue in
2025.
General and Administrative Expenses
Our general and administrative expenses consist primarily of facilities and other overhead expenses, depreciation and amortization expenses, impairment losses, external professional service
expenses, and staff compensation and welfare expenses, which include share-based compensation for our employees engaged in general and administrative functions.
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Provision for Credit Losses
Our provision for credit losses relates primarily to our credit business. Our provision for credit losses could increase with the growth of our lending activity and loans receivable or if the credit environment
worsens. Changes in our lending activity, including regional mix, tenure variation and user profile, during the year may impact our annual credit loss provisioning expense during the year.
Research and Development Expenses
Our research and development expenses consist primarily of staff compensation and welfare expenses, which include share-based compensation for our employees engaged in product development
functions. We believe developing our platforms and content is extremely important to achieving our strategic objectives.
Impairment of Goodwill
We test goodwill for impairment at least annually and evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Goodwill impairment is
recognized as the excess of goodwill allocated to the reporting unit’s carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.
Results of Operations
The table below sets forth a summary of our consolidated results of operations for the periods indicated, both in absolute amounts and as percentages of our total revenue. This information should
be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.
For the Year Ended December 31,
2023 2024 2025
US$ Percentage of Total Revenue US$ Percentage of Total Revenue US$ Percentage of Total Revenue
(thousands, except for percentages)
Selected Consolidated Statements of Operations Data:
Revenue:
Service revenue 11,942,385 91.4 15,261,263 90.7 20,913,061 91.2
Sales of goods 1,121,175 8.6 1,558,603 9.3 2,025,408 8.8
Total revenue 13,063,560 100.0 16,819,866 100.0 22,938,469 100.0
Cost of revenue:
Cost of service (6,202,524 ) (47.4 ) (8,164,387 ) (48.6 ) (10,812,039 ) (47.1 )
Cost of goods sold (1,027,389 ) (7.9 ) (1,450,391 ) (8.6 ) (1,882,693 ) (8.2 )
Total cost of revenue (7,229,913 ) (55.3 ) (9,614,778 ) (57.2 ) (12,694,732 ) (55.3 )
Gross profit 5,833,647 44.7 7,205,088 42.8 10,243,737 44.7
Operating income (expenses):
Other operating income 221,021 1.7 180,443 1.1 121,328 0.5
Sales and marketing expenses (2,779,223 ) (21.3 ) (3,472,686 ) (20.6 ) (4,492,203 ) (19.6 )
General and administrative expenses (1,134,724 ) (8.7 ) (1,267,706 ) (7.6 ) (1,357,791 ) (5.9 )
Provision for credit losses (633,942 ) (4.8 ) (776,937 ) (4.6 ) (1,372,616 ) (6.0 )
Research and development expenses (1,164,126 ) (8.9 ) (1,206,050 ) (7.2 ) (1,157,149 ) (5.0 )
Impairment of goodwill (117,875 ) (0.9 ) - - - -
Total operating expenses (5,608,869 ) (42.9 ) (6,542,936 ) (38.9 ) (8,258,431 ) (36.0 )
Operating income 224,778 1.7 662,152 3.9 1,985,306 8.6
Interest income 331,310 2.6 365,817 2.2 331,072 1.4
Interest expense (41,075 ) (0.3 ) (38,341 ) (0.2 ) (33,610 ) (0.1 )
Net investment loss (125,656 ) (1.0 ) (250,220 ) (1.5 ) (43,443 ) (0.2 )
Net gain on debt extinguishment 38,550 0.3 42,621 0.2 21,017 0.1
Foreign exchange gain (loss) 4,487 0.0 (3,246 ) (0.0 ) 20,517 0.1
Income before income tax and share of results of equity investees 432,394 3.3 778,783 4.6 2,280,859 9.9
Income tax expense (262,680 ) (2.0 ) (321,168 ) (1.9 ) (651,081 ) (2.8 )
Share of results of equity investees (7,032 ) (0.1 ) (9,788 ) (0.1 ) (18,884 ) (0.1 )
Net income 162,682 1.2 447,827 2.7 1,610,894 7.0
For the Year Ended December 31,
2023 2024 2025
(US$ thousands)
Gross profit:
Services
E-commerce (Shopee) 2,713,824 3,696,912 5,043,226
Digital Financial Services (Monee) 1,479,677 2,019,315 3,316,617
Digital Entertainment (Garena) 1,499,528 1,300,003 1,617,387
Other Services 46,832 80,646 123,792
Sales of goods 93,786 108,212 142,715
Total gross profit 5,833,647 7,205,088 10,243,737
For the Year Ended December 31,
2023 2024 2025
(Percentage)
Gross margin:
Services
E-commerce (Shopee) 34.4 34.0 34.7
Digital Financial Services (Monee) 84.1 85.3 87.5
Digital Entertainment (Garena) 69.0 68.0 67.1
Other Services 37.2 66.8 74.2
Sales of goods 8.4 6.9 7.0
Total gross margin 44.7 42.8 44.7
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Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Revenue
Our total revenue increased by 36.4% from US$16.8 billion in 2024 to US$22.9 billion in 2025.
● E-commerce (Shopee): Our e-commerce service revenue increased by 33.9% from US$10.9 billion in 2024 to US$14.5 billion in 2025. This is mainly due to the growth of GMV, as GMV grew 26.8% from US$100.5 billion in 2024 to US$127.4 billion in 2025, and secondarily attributable to an increase in the rate of monetization on the GMV, as e-commerce service revenue over GMV improved from 10.8% in 2024 to 11.4% in 2025. GMV growth was driven by overall online consumption growth in our markets as well as continual improvements in our service offerings, such as faster delivery, enhanced user engagement with better e-commerce content, and greater efficiency in advertising and search. Average order value on Shopee remained stable year-on-year, at approximately US$9, while our order volume grew 27.2% from 10.9 billion in 2024 to 13.9 billion in 2025.
● Digital Financial Services (Monee): Our digital financial services revenue increased by 60.1% from US$2.4 billion in 2024 to US$3.8 billion in 2025. This is mainly due to growth of our credit business as our lending activities increased and our loans receivable grew from US$4.2 billion as at December 31, 2024 to US$8.0 billion as at December 31, 2025. Growth of our loans receivable was mainly driven by a few factors including growth of our e-commerce platform, deepening penetration of our consumer lending activities on the platform and expansion of our credit offerings off our e-commerce platform. Approximately 95% of our loans receivable as of December 31, 2025 were attributable to consumer and SME loans.
● Digital Entertainment (Garena): Our digital entertainment revenue increased by 26.1% from US$1.9 billion in 2024 to US$2.4 billion in 2025. The increase was primarily due to the increase in our active user base as well as the deepened paying user penetration, as average Game QAUs increased by 5.7% from 622.3 million in 2024 to 657.7 million in 2025, while average Game QPUs increased by 23.9% from 50.5 million in 2024 to 62.6 million in 2025.
● Sales of goods: Revenue increased by 30.0% from US$1.6 billion in 2024 to US$2.0 billion in 2025, primarily due to the increase in our product offerings on the e-commerce platform.
Cost of Revenue
Our total cost of revenue increased by 32.0% from US$9.6 billion in 2024 to US$12.7 billion in 2025.
● E-commerce (Shopee): Cost of revenue increased by 32.6% from US$7.2 billion in 2024 to US$9.5 billion in 2025. The increase was primarily driven by the increase in logistics costs as orders volume grew 27.2% from 10.9 billion in 2024 to 13.9 billion in 2025, as well as investment in our logistics capabilities for better user experience.
● Digital Financial Services (Monee): Cost of revenue increased by 36.3% from US$348.4 million in 2024 to US$475.0 million in 2025, primarily driven by interest expenses due to the growth in customer deposits under our banking business, other funding costs associated with our credit business, collection expenses, bank transaction fees and server and hosting expenses.
● Digital Entertainment (Garena): Cost of revenue increased by 29.6% from US$610.6 million in 2024 to US$791.4 million in 2025, primarily from third-party payment channel costs, which was largely in line with the increase in digital entertainment revenue, as well as an increase in royalty payments to game developers and higher royalties associated with the use of third-party intellectual properties.
● Cost of goods sold: Cost of goods sold increased by 29.8% from US$1.5 billion in 2024 to US$1.9 billion in 2025. The increase was largely in line with the increase in our revenue from sales of goods.
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Gross Profit
As a result of the foregoing, our gross profit grew 42.2% from US$7.2 billion in 2024 to US$10.2 billion in 2025. Our gross margins improved from 42.8% in 2024 to 44.7% in 2025, primarily due to a
shift in gross profit mix, driven by a higher contribution from our digital financial services business, which had a higher gross margin than the other business units, as well as improvements in the gross margin of our digital financial services
and e-commerce business year over year.
Other Operating Income
Our other operating income decreased by 32.8% from US$180.4 million in 2024 to US$121.3 million in 2025 primarily due to lower rebates from our logistics services providers.
Sales and Marketing Expenses
Our sales and marketing expenses increased by 29.4% from US$3.5 billion in 2024 to US$4.5 billion in 2025. The increase in sales and marketing expenses in 2025 was mainly from our e-commerce and
digital financial services business. The increase in marketing expenses for our e-commerce business was primarily driven by increased promotional activities on Shopee and advertising through third-party channels, as we continue to grow Shopee
across our markets. The increase in marketing expenses for our digital financial services business was primarily driven by investments in user acquisition and user retention.
General and Administrative Expenses
Our general and administrative expenses increased by 7.1% from US$1.3 billion in 2024 to US$1.4 billion in 2025. The increase was primarily due to an increase in staff compensation
and welfare expenses from higher staff headcount.
Provision for Credit Losses
Our provision for credit losses increased by 76.7% from US$776.9 million in 2024 to US$1.4 billion in 2025, primarily driven by an increase in lending activity during the year, in line with the
growth in our loan book over the year. Our loans receivable increased by 91.4%, from US$4.2 billion as at December 31, 2024 to US$8.0 billion as at December 31, 2025.
Research and Development Expenses
Our research and development expenses were relatively stable at US$1.2 billion for 2024 and 2025, which consist primarily of staff compensation and welfare expenses, which include share-based
compensation for our employees engaged in product development functions.
Other Income, Expenses, Gains and Losses
Our interest income, interest expense, net investment loss, net gain on debt extinguishment, and foreign exchange gain (loss) was a net income of US$116.6 million in 2024 compared to US$295.6
million in 2025. The improvement was mainly due to lower investment loss and a net foreign exchange gain in 2025, as compared to a net foreign exchange loss in 2024, which was partially offset by lower interest income and lower gain on debt
extinguishment.
Income before Income Tax and Share of Results of Equity Investees
As a result of the foregoing, we had income before income tax and share of results of equity investees of US$778.8 million in 2024 and US$2.3 billion in 2025.
Income Tax Expense
We had an income tax expense of US$321.2 million in 2024 and US$651.1 million in 2025. The higher income tax expense was primarily due to higher income tax expenses incurred by our e-commerce and
digital financial services businesses.
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Share of Results of Equity Investees
We had share of loss of equity investees of US$9.8 million in 2024 and US$18.9 million in 2025.
Net Income
As a result of the foregoing, we had net income of US$447.8 million in 2024 compared to US$1.6 billion in 2025.
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Revenue
Our total revenue increased by 28.8% from US$13.1 billion in 2023 to US$16.8 billion in 2024.
● E-commerce (Shopee): Our e-commerce service revenue increased by 37.8% from US$7.9 billion in 2023 to US$10.9 billion in 2024. This was primarily attributable to the growth of GMV, as GMV grew 28.0% from US$78.5 billion in 2023 to US$100.5 billion in 2024, and secondarily attributable to an increase in the rate of monetization on the GMV, which increased from 10.0% in 2023 to 10.8% in 2024. GMV growth was driven by overall online consumption growth in our markets as well as continual improvements in our service offerings, such as faster delivery, enhanced user engagement with better e-commerce content, and greater efficiency in advertising and search. Average order value on Shopee decreased slightly to approximately US$9 in 2024, as compared to approximately US$10 in 2023, while our orders volume grew 33.0% from 8.2 billion in 2023 to 10.9 billion in 2024.
● Digital Financial Services (Monee): Our digital financial services revenue increased by 34.6% from US$1.8 billion in 2023 to US$2.4 billion in 2024. This is mainly due to growth of our credit business as our lending activities increased and our loans receivable grew 67.4% from US$2.5 billion as at December 31, 2023 to US$4.2 billion as at December 31, 2024. Growth of our loans receivable was mainly driven by a few factors including growth of our e-commerce platform, deepening penetration of our consumer lending activities on the platform and expansion of our credit offerings off our e-commerce platform. Approximately 95% of our loans receivable as of December 31, 2024 were attributable to consumer and SME loans.
● Digital Entertainment (Garena): Our digital entertainment revenue decreased by 12.0% from US$2.2 billion in 2023 to US$1.9 billion in 2024. The decrease was primarily driven by higher bookings in 2022 compared to 2023, which resulted in more revenue being deferred and subsequently recognized in 2023. On the other hand, bookings for 2024 is higher than 2023, as average Game QAUs increased by 18.0% from 527.2 million in 2023 to 622.3 million in 2024, while average Game QPUs increased by 25.5% from 40.2 million in 2023 to 50.5 million in 2024.
● Sales of goods: Revenue increased by 39.0% from US$1.1 billion in 2023 to US$1.6 billion in 2024, primarily due to the increase in our product offerings.
Cost of Revenue
Our total cost of revenue increased by 33.0% from US$7.2 billion in 2023 to US$9.6 billion in 2024.
● E-commerce (Shopee): Cost of revenue increased by 38.6% from US$5.2 billion in 2023 to US$7.2 billion in 2024. The increase was primarily driven by the increase in logistics costs as orders volume grew 33.0% from 8.2 billion in 2023 to 10.9 billion in 2024.
● Digital Financial Services (Monee): Cost of revenue increased by 24.6% from US$279.7 million in 2023 to US$348.4 million in 2024, primarily driven by interest expenses due to the growth in customer deposits under our banking business, and server and hosting expenses.
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● Digital Entertainment (Garena): Cost of revenue dropped by 9.2% from US$672.5 million in 2023 to US$610.6 million in 2024, primarily from payment channel costs, which was largely in line with the decrease in digital entertainment revenue.
● Cost of goods sold: Cost of goods sold increased by 41.2% from US$1.0 billion in 2023 to US$1.5 billion in 2024. The increase was largely in line with the increase in our revenue from sales of goods.
Gross Profit
As a result of the foregoing, our gross profit grew 23.5% from US$5.8 billion in 2023 to US$7.2 billion in 2024. Our gross margin was 44.7% in 2023, as compared to 42.8% in 2024, primarily due to a
shift in gross profit mix. The contribution from our higher-margin digital entertainment business decreased, while our lower-margin e-commerce business made up a larger share of our gross profit.
Other Operating Income
Our other operating income decreased by 18.4% from US$221.0 million in 2023 to US$180.4 million in 2024 primarily due to lower rebates from our logistics services providers.
Sales and Marketing Expenses
Our sales and marketing expenses increased by 25.0% from US$2.8 billion in 2023 to US$3.5 billion in 2024. The increase in sales and marketing expenses in 2024 was mainly from our e-commerce and
digital financial services businesses. The increase in marketing expenses for our e-commerce business was primarily driven by online marketing efforts and higher marketing incentives, as we continue to grow the e-commerce business across our
markets. The increase in marketing expenses for our digital financial services business was primarily driven by investments in user acquisition and user retention.
General and Administrative Expenses
Our general and administrative expenses increased by 11.7% from US$1.1 billion in 2023 to US$1.3 billion in 2024. The increase was primarily due to an increase in staff compensation and welfare
expenses from higher staff headcount, as well as one-time expenses related to the settlement of two securities class actions in 2024.
Provision for Credit Losses
Our provision for credit losses increased by 22.6% from US$633.9 million in 2023 to US$776.9 million in 2024, primarily driven by an increase in lending activity during the year, in line with the
growth in our loan book as our loans receivable increased by 67.4%, from US$2.5 billion as at December 31, 2023 to US$4.2 billion as at December 31, 2024.
Research and Development Expenses
Our research and development expenses were relatively stable at US$1.2 billion for 2023 and 2024.
Impairment of Goodwill
We recorded nil impairment of goodwill in 2024, compared to US$117.9 million in 2023. The goodwill impairment in 2023 was primarily due to the change in carrying amount of goodwill associated with
our prior acquisition.
Other Income, Expenses, Gains and Losses
Our interest income, interest expense, net investment loss, net gain on debt extinguishment, and foreign exchange (loss) gain was a net income of US$207.6 million in 2023 compared to US$116.6
million in 2024. The lower non-operating income was mainly due to higher investment losses recognized in 2024, partially offset by higher interest income.
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Income before Income Tax and Share of Results of Equity Investees
As a result of the foregoing, we had income before income tax and share of results of equity investees of US$432.4 million in 2023 and US$778.8 million in 2024.
Income Tax Expense
We had an income tax expense of US$262.7 million in 2023 and US$321.2 million in 2024. The higher income tax expense was primarily due to higher income tax expenses incurred by our e-commerce and
digital financial services businesses.
Share of Results of Equity Investees
We had share of loss of equity investees of US$7.0 million in 2023 and US$9.8 million in 2024.
Net Income
As a result of the foregoing, we had net income of US$162.7 million in 2023 compared to US$447.8 million in 2024.
Segment Reporting
We have three reportable segments, namely, e-commerce, digital financial services and digital entertainment. The chief operating decision maker (“CODM”), comprising our senior management team,
evaluates each segment’s financial performance by reviewing revenue, significant operating expenses, and segment operating income or loss. To allocate resources for each segment, the CODM evaluates these results, along with certain key operating
metrics of each segment. This assessment is done regularly by monitoring each segment’s actual financial and operating performance against projections as part of the Company’s business planning and budgeting process.
Information about segments during the years ended December 31, 2023, 2024 and 2025 presented is as follows:
For the Year ended December 31, 2025
E-commerce (Shopee) Digital Financial Services (Monee) Digital Entertainment (Garena) Other Services(1) Total
(US$ thousands)
Revenue 16,564,605 3,791,641 2,408,765 173,458 22,938,469
Less(2)
Cost of revenue (11,380,266 ) (475,024 ) (791,378 ) -
Sales and marketing expenses (3,546,753 ) (614,228 ) (174,104 ) -
Provision for credit losses - (1,365,556 ) - -
Other operating expenses(3) (1,056,534 ) (364,151 ) (259,212 ) (263,995 )
Operating segment income (loss) 581,052 972,682 1,184,071 (90,537 ) 2,647,268
Unallocated expenses(4) (661,962 )
Operating income 1,985,306
Non-operating income, net 295,553
Income tax expense (651,081 )
Share of results of equity investees (18,884 )
Net income 1,610,894
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For the Year ended December 31, 2024
E-commerce (Shopee) Digital Financial Services (Monee) Digital Entertainment (Garena) Other Services(1) Total
(US$ thousands)
Revenue 12,415,231 2,367,739 1,910,589 126,307 16,819,866
Less(2)
Cost of revenue (8,611,530 ) (348,424 ) (610,586 ) -
Sales and marketing expenses (2,966,084 ) (298,386 ) (117,556 ) -
Provision for credit losses - (771,407 ) - -
Other operating expenses(3) (977,048 ) (292,020 ) (203,626 ) (170,210 )
Operating segment (loss) income (139,431 ) 657,502 978,821 (43,903 ) 1,452,989
Unallocated expenses(4) (790,837 )
Operating income 662,152
Non-operating income, net 116,631
Income tax expense (321,168 )
Share of results of equity investees (9,788 )
Net income 447,827
For the Year ended December 31, 2023
E-commerce (Shopee) Digital Financial Services (Monee) Digital Entertainment (Garena) Other Services(1) Total
(US$ thousands)
Revenue 9,000,848 1,759,422 2,172,009 131,281 13,063,560
Less(2)
Cost of revenue (6,194,900 ) (279,745 ) (672,481 ) -
Sales and marketing expenses (2,510,693 ) (116,445 ) (104,721 ) -
Provision for credit losses - (630,300 ) - -
Other operating expenses(3) (845,725 ) (242,723 ) (216,936 ) (188,009 )
Operating segment (loss) income (550,470 ) 490,209 1,177,871 (56,728 ) 1,060,882
Unallocated expenses(4) (836,104 )
Operating income 224,778
Non-operating income, net 207,616
Income tax expense (262,680 )
Share of results of equity investees (7,032 )
Net income 162,682
(1) A combination of multiple business activities that do not meet the quantitative thresholds to qualify as reportable segments are grouped together as “Other Services”.
(2) The significant expenses categories and amounts align with the segment-level information that is regularly provided to the CODM.
(3) Other operating expenses for E-commerce and Digital Entertainment include general and administrative expenses, research and development expenses, and provision for credit losses, net of other operating income. Other operating expenses for Digital Financial Services include general and administrative expenses and research and development expenses, net of other operating income.
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(4) Unallocated expenses are mainly related to share-based compensation, impairment of goodwill of prior acquisitions that are not under our reportable segments, and general and corporate administrative costs such as professional fees and other miscellaneous items that are not allocated to segments. These expenses are excluded from segment results as they are not reviewed by the CODM as part of segment performance.
Taxation
Cayman Islands
We are incorporated in the Cayman Islands and our primary business operations are conducted through our subsidiaries, branch offices and consolidated affiliated entities. Under the current laws of
the Cayman Islands, we are not subject to tax on income or capital gains.
Singapore
Our subsidiaries incorporated in Singapore are subject to the Singapore corporate tax of 17% in 2023, 2024 and 2025. Garena Online Private Limited was granted a five-year development and expansion
incentive by the Singapore Economic Development Board, or the EDB, commencing from January 1, 2022, which grant a concessionary tax rate of 10.5% from January 1, 2022 to December 31, 2026 on qualifying income, subject to certain terms and
conditions imposed by the EDB.
Others
Subsidiaries incorporated in other jurisdictions are subject to the respective applicable corporate income tax rates of those jurisdictions.
B. Liquidity and Capital Resources
Cash Flows and Working Capital
Our principal sources of liquidity have historically been cash generated from operating activities and financing activities including customer deposits
under our banking business. The principal driver of our operating cash flows is cash received from sales of our services and products, including fees from paid advertising services, transaction-based fees, value-added services and proceeds
from direct sales of goods in our e-commerce business, interest and fees received from our credit and banking businesses, fees from our e-wallet services, fees and premiums from our insurance business,
and proceeds from our sales of in-game virtual items in our digital entertainment business, offset by operating expenses.
As of December 31, 2023, 2024 and 2025, we had US$4.2 billion, US$4.1 billion and US$6.4 billion, respectively, in cash, cash equivalents and
restricted cash. Cash and cash equivalents consist of cash on hand, demand deposits and money market funds placed with banks and other financial institutions which are unrestricted as to withdrawal and use and have original maturities of
three months or less. Restricted cash mainly comprises monies received that are held in escrow in connection with our e-commerce business and e-wallet in connection with our digital financial services business. Our cash, cash equivalents and
restricted cash are primarily denominated in U.S. dollars as well as in local currencies of the markets where we operate. We believe that our cash and cash equivalents, together with cash generated from operating and short-term investments,
will be sufficient to meet our anticipated cash needs and obligations for the next 12 months. We may also access capital markets or credit facilities should we require additional working capital.
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The following table sets forth a summary of our cash flows for the periods indicated:
For the Year Ended December 31,
2023 2024 2025
(US$ thousands)
Net cash generated from operating activities 2,079,688 3,277,420 5,024,523
Net cash used in investing activities (5,804,462 ) (5,040,846 ) (4,408,668 )
Net cash generated from financing activities 366,011 1,684,493 1,623,183
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash (7,964 ) (83,139 ) 98,844
Net (decrease) increase in cash, cash equivalents and restricted cash (3,366,727 ) (162,072 ) 2,337,882
Cash, cash equivalents and restricted cash at beginning of year 7,610,384 4,243,657 4,081,585
Cash, cash equivalents and restricted cash at end of year 4,243,657 4,081,585 6,419,467
Operating Activities
Net cash generated from operating activities amounted to US$5.0 billion in 2025 compared to net cash generated from operating activities of US$3.3 billion in
2024. The difference was mainly due to increase in net income of US$1.2 billion, and increase in change in assets and liabilities of US$196.4 million.
The main drivers for the increase in net income are:
● higher e-commerce gross profits in 2025 due to growth of GMV and increase in the rate of monetization on the GMV;
● higher digital financial services gross profits in 2025 due to growth of the credit business as our lending activities increased and our loans receivable grew;
● higher digital entertainment gross profits in 2025 due to increase in our active user base as well as deepened paying user penetration; and
● partially offset by higher sales and marketing expenses in 2025 primarily driven by increased promotional activities and advertising through third-party channels for e-commerce, and investments in user acquisition and retention for digital financial services.
The main drivers for the increase in change in assets and liabilities are:
● increase in change in deferred revenue due to stronger bookings in 2025 for digital entertainment;
● increase in change in income tax payable in line with growth in profit and timing of payments;
● increase in change in accrued expenses and other payables and accounts payable primarily due to increase in logistics costs and sales and marketing expenses and timing of payments; and
● the preceding three items are partially offset by increase in change in prepaid expenses and other assets primarily due to increase in receivables by our platform consistent with growth in business scale and timing of collections.
Bookings refer to GAAP revenue for the digital entertainment segment plus change in digital entertainment deferred revenue and are used as an approximation of cash spent by our users.
Net cash generated from operating activities amounted to US$3.3 billion in 2024 compared to net cash generated from operating activities of US$2.1 billion in 2023. The difference was mainly due
to increase in net income of US$285.1 million and increase in change in deferred revenue of US$607.1 million.
The main drivers for the increase in net income are:
● higher e-commerce and digital financial services gross profits in 2024 due to growth of GMV from our e-commerce business and growth of the credit business;
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● partially offset by higher sales and marketing expenses in 2024 primarily driven by online marketing efforts, user acquisition and retention, and higher marketing incentives as we continue to grow our businesses; and
● higher general and administrative expenses in 2024 primarily due to an increase in staff cost from higher staff headcount, as well as one-time expenses related to the settlement of two securities class actions in 2024.
The increase in change in deferred revenue is due to stronger bookings in 2024 for our digital entertainment business.
Investing Activities
Net cash used in investing activities amounted to US$4.4 billion in 2025. This was primarily attributable to investments of US$12.6 billion mainly consisting of time deposits and sovereign and
corporate debt securities, an increase in loans receivable of our credit business of US$4.7 billion and purchase of property and equipment of US$513.8 million. These were partially offset by proceeds from maturity and disposal of investments of
US$13.4 billion, mainly consisting of time deposits and sovereign and corporate debt securities.
Net cash used in investing activities amounted to US$5.0 billion in 2024. This was primarily attributable to investments of US$9.6 billion mainly consisting of time deposits and sovereign and
corporate debt securities, an increase in loans receivable of our credit business of US$2.5 billion and purchase of property and equipment of US$318.1 million. These were partially offset by proceeds from maturity and disposal of investments of
US$7.4 billion, mainly consisting of time deposits and sovereign and corporate debt securities.
Net cash used in investing activities amounted to US$5.8 billion in 2023. This was primarily attributable to investments of US$8.3 billion mainly consisting of time deposits and sovereign and
corporate debt securities, an increase in loans receivable of our credit business of US$1.0 billion and purchase of property and equipment of US$241.6 million. These were partially offset by proceeds from maturity and disposal of investments of
US$3.5 billion, mainly consisting of time deposits and sovereign and corporate debt securities.
Financing Activities
Net cash generated from financing activities amounted to US$1.6 billion in 2025. This was primarily attributable to an increase in bank customer deposits of US$1.1
billion and settlement of capped call for the 2025 convertible notes of US$582.4 million.
Net cash generated from financing activities amounted to US$1.7 billion in 2024. This was primarily attributable to an increase in bank customer deposits of US$1.3 billion and settlement of capped
call for the 2024 convertible notes of US$429.0 million.
Net cash generated from financing activities amounted to US$366.0 million in 2023. This was primarily attributable to an increase in bank customer deposits of US$389.3 million, as well as net
proceeds from other funding sources related to the credit business of US$223.8 million, partially offset by the cash used in repurchase of convertible notes of US$204.6 million and repayment of bank borrowings of US$49.0 million.
Material Cash Requirements
Our material cash requirements as of December 31, 2025 and any subsequent interim period mainly include our convertible notes obligations, capital expenditures, other short-term working capital
commitments, bank customer deposits, and other contractual cash obligations. We believe that our cash and cash equivalents, together with cash generated from operating and short-term investments, will be sufficient to meet our anticipated cash
needs and obligations for the next 12 months.
Convertible Notes
Our convertible notes obligations, including scheduled interest, were approximately US$1.1 billion as of December 31, 2025, based on the contractual maturity
assuming no conversion subsequent to December 31, 2025.
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In May 2020, we completed an offering of 2.375% convertible senior notes in an aggregate principal amount of US$1.15 billion, or the 2025 convertible notes. These 2025 convertible notes were offered
to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and certain non-U.S. persons in compliance with Regulation S under the Securities Act. These 2025 convertible notes matured in December 2025. In 2025, holders of
an aggregate of approximately US$1.15 billion principal amount of our 2025 convertibles notes elected to convert prior to the notes’ maturity in December 2025, while the remaining US$64,000 principal amount of our 2025 convertible notes was
unconverted and repaid in cash at maturity.
In connection with the pricing of the 2025 convertible notes, we have entered into capped call transactions with certain financial institutions. During the year
ended December 31, 2025, we settled such capped call transactions of the 2025 convertible notes. The proceeds received were recorded as an increase in additional paid-in capital.
In September 2021, we completed a registered offering of 0.25% convertible senior notes in an aggregate principal amount of US$2.875 billion, or the 2026 convertible notes. The notes will mature in
September 2026. Note holders have the right, at their option, to convert the outstanding principal amount in whole or in part in integral multiples of US$1,000 principal amount (i) upon satisfaction of one or more of the conversion conditions
as defined in the indenture prior to the close of business on the business day immediately preceding June 15, 2026; or (ii) anytime on or after June 15, 2026 until the close of business on the second scheduled trading day immediately preceding
the maturity date. On or after September 15, 2024, we may redeem for cash all or any part of the notes, if certain conditions are met, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and
unpaid interest. We may also redeem for cash all but not part of the notes at any time if less than US$250 million aggregate principal amount of notes remains outstanding at such time. Unless otherwise converted or redeemed, we will repay the
full outstanding and unpaid principal amounts in full on the maturity date. The notes may be converted, in whole or in part, into our ADSs at an initial conversion rate of 2.0964 ADSs per US$1,000 principal amount (equivalent to approximately
US$477.01 per ADS), subject to certain anti-dilution and make-whole fundamental change adjustments. Upon conversion, we have the right, at our option, to pay or deliver, either cash, ADSs, or a combination of cash and ADSs to converting
holders. During fiscal year 2025, we repurchased US$432.3 million aggregate of principal amount of our 2026 convertible notes. As of March 31, 2026, approximately US$996.7 million aggregate of principal amount of our 2026 convertible notes
remained outstanding.
For further information, refer to Note 13 – Convertible Notes in the accompanying notes to consolidated financial statements included in “Item 17. Financial
Statements.”
Capital Expenditures
Our capital expenditures amounted to US$258.3 million, US$321.6 million and US$524.5 million in 2023, 2024 and 2025, respectively. Capital expenditure was incurred for purchases of property and
equipment and software, and costs for developing software for internal use. We will continue to make capital expenditures to meet the needs of our business and expect that our cash and cash equivalents, together with cash generated from
operating and short-term investments will meet our capital expenditure needs in the foreseeable future.
Deposits Payable
As of December 31, 2025, our consolidated balance sheets had deposits payable of US$3.8 billion, which are customer deposits from our banking business.
Other Contractual Cash Obligations
Our operating lease obligations, including imputed interest, were US$1.8 billion as of December 31, 2025, of which US$380.6 million is payable within the next 12 months. Our obligations for leases
that have not yet commenced, including imputed interest, were US$358.6 million as of December 31, 2025, of which US$42.6 million is payable within the next 12 months. For further information on our leases, refer to Note 9 – Leases in the
accompanying notes to consolidated financial statements included in “Item 17. Financial Statements.”
We have purchase commitments of US$110.9 million as of December 31, 2025, including US$64.1 million to purchase property and equipment and hosting services, US$5.2 million committed licensing fee
payable for the licensing of game titles, and US$41.6 million commitment to invest in certain companies. The aggregate of our purchase commitments payable within the next 12 months is US$82.4 million. For further information, refer to Note 24 –
Commitments and Contingencies in the accompanying notes to consolidated financial statements included in “Item 17. Financial Statements.”
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We have commitments to pay a minimum guarantee of royalty fees to game developers for certain online games we licensed. As of December 31, 2025, the minimum guarantee commitment amounted to US$35.8
million for launched games as well as licensed but yet to be launched games, of which US$18.4 million is payable within the next 12 months. For further information, refer to Note 24 – Commitments and Contingencies in the accompanying notes to
consolidated financial statements included in “Item 17. Financial Statements.”
Our banking business in Singapore, Indonesia and the Philippines have commitments to extend credit to our respective customers under committed facilities.
Holding Company Structure
Sea Limited is a holding company that does not have substantive operations. We conduct our operations primarily through our subsidiaries, branch offices and our consolidated affiliated entities. As
a result, our ability to pay dividends depends upon, among others, dividends paid by our subsidiaries. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may
restrict their ability to pay dividends to us.
In addition, as determined in accordance with local regulations, our subsidiaries and VIEs in certain of our markets may be restricted from paying us dividends offshore or from transferring a
portion of their assets to us, either in the form of dividends, loans or advances, unless certain requirements are met, and regulatory approvals are obtained.
See “Item 3. Key Information—D. Risk Factors—Markets Related Risks—The ability of our subsidiaries to distribute dividends to us may be subject to restrictions under the laws of their respective
jurisdictions.” Even though we currently do not require any such dividends, loans or advances from our entities for working capital and other funding purposes, we may in the future require additional cash resources from them due to changes in
business conditions, to fund future acquisitions and development, or merely to declare and pay dividends or distributions to our shareholders.
Certain of the markets in which we have significant subsidiaries or principal operating entities, including Indonesia, Thailand, Taiwan and Brazil,
require those subsidiaries to establish and fund statutory reserves. Indonesian laws require a limited liability company to reserve a certain amount from its net profit each year as a reserve fund until such fund amounts to at least 20% of
its issued and paid-up capital. Thailand regulations require a private limited liability company to allocate at least 5% of its profits into a legal reserve fund at the time the dividend is paid until and unless the legal reserve fund reaches
10% of the company’s registered capital (or such higher proportion if stipulated in the articles of association of the company). The legal reserve is not available for dividend distribution. Taiwan laws
require a limited liability company to set aside 10% of annual net income (less prior years’ losses, if any, and applicable taxes) as legal reserve until the accumulated legal reserve equals the paid-in capital of such company before such
company can distribute any dividend. Under Brazilian law, corporations (sociedades por ações) are required to allocate at least 5% of their net
profit for each fiscal year to a legal reserve until such reserve reaches 20% of the company’s share capital. Such legal reserve is not available for dividend distribution.
C. Research and Development, Patents and Licenses, etc.
Research and Development
Costs incurred in connection with the planning and post-implementation phases of the development of software for internal use are expensed. Costs incurred in the application development phase are capitalized when
certain criteria are met. Capitalization ceases and the costs are amortized over the software’s estimated useful life when the software is ready for its intended use.
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Costs incurred internally in researching and developing a software product are charged to expense as research and development costs prior to technological feasibility being established for the product. Once
technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Technological feasibility is established upon completion of all the activities that are necessary to
substantiate that the software product can be produced in accordance with its design specifications, including functions, features, and technical performance requirements. None of such costs were capitalized for any of the periods presented.
Intellectual Property
See “Item 4. Information on the Company—B. Business Overview—Intellectual Property.”
D. Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2025 that are reasonably likely
to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial
conditions.
E. Critical Accounting Estimates
We prepare our consolidated financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect our reporting of, among other things, assets
and liabilities, disclosure of contingent assets and liabilities and revenue and expenses. We regularly evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and other factors
that we believe to be relevant under the circumstances. Since our financial reporting process inherently relies on the use of judgments, estimates and assumptions, our actual results could differ from what we expect.
We believe that the following accounting policies reflect the significant judgments, estimates and assumptions used in the preparation of our consolidated financial statements. For additional
information, see the disclosure included in Note 2 – Summary of Significant Accounting Policies in the accompanying notes to consolidated financial statements included in “Item 17. Financial Statements.”
Recognition of Digital Entertainment Revenue
We distribute online games, including self-developed games and licensed games from game developers, through our PC and mobile based applications and certain app stores. We offer many ways for users
to purchase in-game items, including through online payment gateways, bank transfers, credit cards, mobile phone billing and prepaid cards (including our own prepaid cards which are sold through agents). As we control the service of providing
games to the users and have a direct contractual arrangement with our paying users and have the right to determine the price to be paid by such users, the gross proceeds collected from these channels represent revenue to be recognized, and the
amounts retained by these channels based on a predetermined percentage represent our cost of revenue to be recognized.
Revenue is recognized over the performance obligation period. We recognize an implied obligation to the paying users to continue to provide hosting services and access to the purchased virtual items
within the online games over an estimated performance obligation period. Such performance obligation period is determined in accordance with the estimated average lifespan of the paying user or virtual items sold.
● Item-based revenue model. Virtual items have different lifespan patterns: time-based, consumable and durable.
● Time-based virtual items are items with a stated expiration time. Revenue attributable to a time-based virtual item is recognized ratably over the period based on the time unit of the item.
● Consumable virtual items are items that can be consumed by a specific user action and have limitations on repeated use. Revenue attributable to a consumable virtual item is recognized upon consumption.
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● Durable virtual items are items that provide the user with continuing benefits over an extended period of time. Revenue attributable to a durable virtual item is recognized ratably over its average lifespan.
● User-based revenue model. We track paying users’ activeness within each game where the user-based revenue model is used to estimate paying users’ average lifespan. Paying users are defined as inactive when they have reached a period of inactivity such that it is reasonable to believe that these users will not return to a specific game.
Determining the estimated performance obligation period requires management’s judgment and thus involves uncertainty. Future users’ usage patterns and playing behaviors may change and differ from
the historical usage patterns and playing behaviors, leading to a change in the estimated performance obligation period.
Our weighted-average performance obligation period for our paying users used for the purposes of revenue recognition was 17 months as of December 31, 2025. Based on the deferred revenue and payment
channel costs amounts as at December 31, 2025, a one-month decrease in the average paying user lifespan for each of our online games would result in an approximately US$45.4 million decrease in deferred revenue balance and US$8.0 million
decrease in deferred payment channel costs. Conversely, a one-month increase in the average paying user lifespan for each of our games would result in an approximately US$33.9 million increase in deferred revenue balance and US$6.0 million
increase in deferred payment channel costs balance.
Investment in Equity Securities
Our investments in equity securities for which (1) we do not have the ability to exercise significant influence and (2) are without readily determinable fair value, are carried at cost minus
impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment in the same investee.
We evaluate these securities at each reporting period to determine whether there are indicators that the investment may be impaired (i.e. whether the fair value of these equity securities is less
than the current carrying value). Such evaluation includes reviewing the investee’s cash position, recent financings, projected and historical financial performance, cash flow forecasts and current and future financing needs. If, based on this
evaluation, we have a reason to believe that the fair value of the investment is less than the carrying value, we then estimate the fair value and record an impairment loss equal to the difference between the fair value of the investment and
its carrying amount.
In such circumstances, the fair value of the investment is measured using the Market Approach Option Pricing Model allocation, which is determined by using information including but not limited to the liquidity
factors and a selection of comparable companies. As at December 31, 2025, a 5 percentage points increase in the discount for lack of marketability would have resulted in an increase in the impairment charges by approximately US$0.7 million.
Conversely, a 5 percentage points decrease would have resulted in a decrease in the impairment charges by approximately US$0.7 million.
Share-based Compensation – share options
Share-based compensation from share option grants is measured at fair value on grant date and recognized as compensation expense over the requisite service period (which is generally the vesting period) in the
consolidated statements of operations. We applied the Black-Scholes option pricing model in determining the estimated fair value of the share options on grant date. This model requires the input of assumptions,
most of which are not subject to significant estimation uncertainty. The expected term of the option for which employees are likely to exercise their share options is
based on the simplified method due to insufficient relevant historical exercise data to provide a reasonable basis to estimate expected term. The risk-free rate used is based on the US Treasury Yields at the time of grant which is generally
objectively determinable.
The estimated stock price volatility assumption used in the Black-Scholes option pricing model is judgmental and changes to the volatility assumption could significantly affect the estimated fair value of our share
options and hence the amount of compensation expense that we recognize in our consolidated financial statements.
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There were no new share options granted during the year ended December 31, 2025.
Income Taxes
We account for income taxes using the liability method. We determine deferred tax assets and liabilities based on the difference between the financial reporting and tax bases of assets and liabilities using enacted
tax rates that are in effect in the period in which the differences are expected to reverse. Determining the likelihood that our net deferred tax assets will be realized from future taxable income may require certain judgment. The accounting
for deferred tax represents our best estimates of certain future events. We record a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the
deferred tax assets will not be realized. Changes in estimates, due to unanticipated events or otherwise, could have a material effect on our consolidated financial statements.
Goodwill Impairment
Goodwill is tested for impairment annually, or whenever events or changes in circumstances indicate that it might be impaired. For the impairment assessment on goodwill, we make a qualitative
assessment to determine whether quantitative impairment testing is necessary. The qualitative assessment includes a review of macroeconomic conditions, industry and market considerations, and overall financial performance of the reporting
unit, among other factors. If the qualitative assessment indicates that it is more likely than not that the carrying value of the reporting unit exceeds its fair value, we then perform a quantitative test to calculate the estimated fair value
of the reporting unit. We record goodwill impairment if the carrying amount of the reporting unit exceeds its fair value.
We performed qualitative assessment on our annual goodwill impairment testing in the fourth quarter of 2025 and evaluated that it is more likely than not that
the fair value of our reporting units is higher than their carrying amount. Accordingly, no further quantitative assessment is conducted.
Allowance for Credit Losses
We established allowances for credit losses for accounts receivable, loans receivable, off-balance sheet loan commitments and available-for-sale investments, the most significant of which is the allowances
associated with our consumer and SME loans receivable from our digital financial services business.
For our consumer and SME loans receivable, we identify portfolio segments by factors such as geographic region and products that are considered to have similar credit characteristics and risk of loss. We compute
our allowance for credit loss based on our historical lifetime credit loss experience, adjusted for current conditions and forward-looking factors specific to the receivable and economic environment. We utilize models such as transition matrix
method based on roll rates and then transformed, taking into account expected future delinquency rate to estimate the likelihood that a loan will default over a given period of time, net of any estimated recoveries. These models utilize
information that is available at the reporting date about past events, current conditions, estimated recovery rate and macro-economic forecasts considering probability weighted economic scenarios. As at December 31, 2025, a relative 5% decrease
in the estimated recovery rate would have resulted in an increase in the allowance for credit losses by approximately US$26.7 million. Conversely, a relative 5% increase in the estimated recovery rate would have resulted in a decrease in the
allowance for credit losses by approximately US$39.3 million.
Recent Accounting Pronouncements
The recent accounting pronouncement adopted during the year ended December 31, 2025 is discussed and included in Note 2(ab) – Summary of Significant Accounting Policies – Recently adopted accounting
pronouncements in the accompanying notes to consolidated financial statements included in “Item 17. Financial Statements.”
The recently issued accounting pronouncements not yet adopted during the year ended December 31, 2025 are discussed and included in Note 2(ac) – Summary of Significant Accounting Policies – Recently
issued accounting pronouncements not yet adopted in the accompanying notes to consolidated financial statements included in “Item 17. Financial Statements.”
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