Sea Ltd (SE) 2026 Q2 法說會逐字稿

Good morning and good evening to all, and welcome to the Sea Limited second-quarter 2026 results conference call. (Operator Instructions) And finally, I would like to advise all participants that this call is being recorded. Thank you.

I'd now like to welcome Mr. KC Ong to begin the conference. Please go ahead.

Hello, everyone, and welcome to Sea's 2026 second quarter earnings conference call. I am KC from Sea's Investor Relations team.

On this call, we may make forward-looking statements, which are inherently subject to risks and uncertainties and may not be realized in the future for various reasons as stated in our press release.

Also, this call includes the discussion of certain non-GAAP financial measures such as adjusted EBITDA. We believe these measures can enhance our investors' understanding of the actual cash flows of our major businesses when used as a complement to our GAAP disclosures. For a discussion of the use of non-GAAP financial measures and reconciliation with the closest GAAP measures, please refer to the section on Non-GAAP Financial Measures in our press release.

I have with me Sea's Chairman and Chief Executive Officer, Forrest Li; President, Chris Feng; and Chief Financial Officer, Tony Hou. Our management will share strategy and business updates, operating highlights, and financial performance for the second quarter of 2026. This will be followed by a Q&A session in which we welcome any questions you have.

With that, let me turn the call over to Forrest.

Hello everyone, and thank you for joining today’s call.

Our strong momentum from the first quarter has continued into the second. Sea generated $7.8 billion in revenue, up 48% year-on-year, and over $917 million in adjusted EBITDA. Our investments have enabled Shopee and Monee to continue to strengthen our market leadership while improving our user penetration. Many of our initiatives’ unit economics continue to improve, a testament to our strong financial discipline and operational efficiency. We will continue to invest prudently in serving more users and serving them better, broadening our foundation for profitable growth into the future.

With that, let me take you through each business’s performance. Starting with Shopee. Shopee continued its strong momentum into the second quarter. GMV grew 28% year-on-year, marking eight consecutive quarters of sequential growth, and we again achieved new highs in gross order volume and revenue. We generated an adjusted EBITDA of more than $250 million during the second quarter.

Our improving operational efficiency and growing scale have strengthened our unit economics. We can now profitably serve a wider range of users, enabling us to lean further into user acquisition. We have engaged and re-engaged several user groups through brand awareness campaigns, expanding our content channels, and broadening our logistics offerings to cater to different preferences. This drove remarkable new buyer growth in the second quarter.

Average monthly new active buyers grew more than 35% year-on-year, a significant acceleration from previous quarters. Average monthly active buyers increased 18% year-on-year, and overall buyer engagement also continued to improve, with purchase frequency increasing by 8% year-on-year.

Our monetization strengthened further in the second quarter. Ad revenue was up more than 70% and ad take rate improved by over 90 basis points, year-on-year. We continued to make advertising simpler and smarter for sellers. For example, pairing ads with vouchers that are personalized to buyers, to increase purchase conversion and improve the efficiency of sellers’ ad spend.

Ad adoption and spend continued to improve across our seller base. The number of ad-paying sellers rose around 45%, while average ad spend per seller increased more than 15% year-on-year.

Our operational priorities remain consistent: improving price competitiveness, service quality, and our content ecosystem. To keep strengthening our execution across these priorities, we continued to deepen our structural moats across logistics, ShopeeVIP, and content.

Strong logistics capabilities continue to be a key contributor to Shopee’s reputation for excellent service. We continued to make delivery faster and more reliable across a wider product assortment in the second quarter. Instant- and same-day delivery gained strong traction, as we captured more everyday purchases. Our instant service in Indonesia can now deliver in as fast as one hour in urban areas.

We continued to extend our presence in high-frequency categories, such as groceries and pharmacy items, to serve our buyers better. Order volumes using instant delivery grew around 80% year-on-year in Indonesia, while cost-per-order fell by around 20%, driven by economies of scale and efficiency gains.

Beyond delivery, we also made good progress in fulfillment, with order volumes up more than 20% quarter-on-quarter. Fulfillment benefits both sides of our marketplace. Sellers offload operational complexity and scale more efficiently, while buyers enjoy faster, more reliable delivery. In some markets, more than 60% of our fulfilled parcels arrive the next day, meaningfully higher than the platform average.

The gains are especially noticeable in places where geography makes delivery challenging. For example, in Mindanao, a mountain region in the Philippines, fulfillment cuts buyer waiting time by one to three days. Buyers can feel the difference. Listings that converted to fulfillment saw more than a 20% first-month uplift in orders, on average, in Southeast Asia.

Second, our ShopeeVIP program continued to scale strongly. Now live across Asia and Brazil, total membership exceeded 15 million at the end of June, up 45% from the previous quarter. Across Asia, VIP members contributed 24% of GMV in the quarter. Average monthly retention remained strong at around 80%, and members continued to show higher engagement, spending meaningfully more after subscribing. In Brazil, early adoption has been encouraging since our April launch, with membership already surpassing 1 million.

Beyond buyers, we are seeing encouraging support among both Shopee sellers and external partners for our ShopeeVIP program. We have broadened member benefits across travel, dining, and entertainment, improving the program’s value proposition. More sellers and partners have come on board to co-fund benefits, demonstrating the value they see in engaging our ShopeeVIP buyer base. This has helped improve the program’s unit economics in Asia.

Third, we have continued to improve our content ecosystem to make product discovery more engaging. Orders from livestreaming and short-form video grew more than 50% year-on-year, accounting for more than 25% of physical goods orders in Southeast Asia. Unit economics also improved sequentially as we further optimized our marketing spend. We have deepened our relationships with YouTube and Meta to drive order growth.

Shopee affiliate orders generated by linked creators on Facebook increased by more than 85% quarter-on-quarter, with Facebook Reels proving to be a very popular channel to drive purchases. We have now extended our Instagram collaboration to all eight of our core markets, and we are seeing promising early results from Indonesia, the first market where we launched the partnership.

I am particularly happy with our progress in Brazil, which remained our fastest-growing market in the second quarter. We once again outpaced the broader market on GMV growth, supported by increases in active buyers, purchase frequency, and average basket size. We continued to invest in and optimize our end-to-end logistics capabilities, expanding our network while ramping up utilization. We improved delivery speed, reducing average buyer waiting time by 15% year-on-year, and doubled our penetration of fulfilment orders year-on-year.

These logistics improvements are also supporting our expansion upmarket. We onboarded nearly 500 new official brands during the quarter, while GMV from ShopeeMall sellers more than doubled year-on-year. We still see significant headroom for growth in Brazil, and we will continue to invest in this market in a disciplined and profitable manner.

I am pleased that Shopee has delivered a strong first half of 2026. With this solid momentum, we are optimistic that Shopee will achieve the milestone of $1 billion in adjusted EBITDA for the full year.

Next, moving to Monee. Monee delivered another great quarter, with continued strong growth in both revenue and adjusted EBITDA. Credit remained the primary driver of growth. Our loan book reached $11.1 billion at the end of June, up 62% year-on-year. Asset quality remained stable, with our 90-day NPL ratio at 1.0%. The Philippines has become our fifth market with a loan book exceeding $1 billion. We continue to expand our credit business on three fronts: acquiring new users, deepening our relationships with existing users, and expanding our credit use cases.

One key enabler of our credit business growth has been the ongoing advances we have made in our credit risk capabilities. Our latest risk models are pre-trained on a broad set of behavioral and transactional data across our ecosystem using transformer architecture similar to those following today's large language models. The model learns from the full sequence of a user's actions over time, capturing richer context around how customers interact with our platform. Recent enhancements to our underwriting models have helped lift approval rates by around 10% when compared to previous models, while maintaining a similar level of risk. This further reinforces the scale of our ecosystem as a durable advantage.

To further strengthen this capability, we are also drawing on more external data sources to better assess users who are newer to our ecosystem. For instance, through partnerships with local mobile operators in Indonesia and Open Finance data in Brazil. We have also used AI to build tools to efficiently verify a diverse range of user-submitted income documents across markets, languages, and formats. Review time reduced by around 95% while maintaining a very high level of accuracy, letting us respond to credit limit requests from users almost instantly.

Supported by these improvements in risk underwriting, we have been pushing harder on new user acquisition. We have found that many users begin using SPayLater for convenience, and subsequently generate more value through repeat transactions, installment conversion, and adoption of our other credit products. So we broadened the rollout of one-month interest-free SPayLater loans, giving borrowers the option to either settle their balances within the month, or easily convert purchases into interest-bearing installments. Similarly, we have been more widely offering promotional interest rates for first-time personal cash loans.

Taken together, these efforts contributed to strong new-user growth during the quarter. We added around 5.3 million unique first-time borrowers, and our active credit users grew around 34% year-on-year to over 40 million at the end of the quarter. We also saw deeper user engagement. Average loans outstanding per user grew around 20% year-on-year.

Off-Shopee SPayLater has continued to scale well, driven by integration with national QR payment infrastructure and continued merchant on-boarding. By the end of the quarter, Off-Shopee accounted for over 20% of our total SPayLater portfolio, with this figure as high as 35% in some markets. In Thailand, we are testing a new product: the ShopeePay Unlimited Card. It lets users pay with their SPayLater balance at any merchant that accepts card payments, further expanding SPayLater use cases.

The standalone ShopeePay app remains a key pillar of our strategy to grow Monee beyond Shopee, serving as a one-stop platform for users' payments, credit, insurance, and broader financial needs. In the second quarter, monthly transacting users on the app more than doubled. The ShopeePay app is currently live in Indonesia, Thailand, Malaysia, and Vietnam, and we will launch a similar standalone app in Brazil soon.

In summary, Monee delivered another strong quarter, with broad-based growth across our products and markets. The advances in our risk capabilities are compounding. Each improvement helps us serve more users, serve them better, and reach further beyond Shopee. We are still at an early stage of growth. Only a fraction of the users across our ecosystem are using Monee's financial products today, and credit penetration remains low across our markets. This gives us great confidence in Monee's long-term growth and earnings potential.

Next, turning to Garena. Garena delivered another strong quarter with bookings growing 15% year-on-year, with profitability remaining healthy and growing well year-on-year. Free Fire anchored this strong performance. Now in its ninth year, it is still expanding its reach and scale globally, continuing to draw in over 100 million average daily active users.

Free Fire’s longevity comes from a simple discipline: we keep the experience fresh with new gameplay and content, and we make it feel both local to the communities who play it and enjoyable for a global audience. A great example this quarter was Undersea Mystery, an ocean-themed campaign inspired by Songkran, Thailand's water festival. We integrated the theme into the map itself, creating a gateway into a new Undersea Realm. This extended battleground gave players fresh territory to explore and fight over, and the opportunity to hunt for powerful gear hidden in a Hydro Zone and Fishing Ponds across the map. This continual reinvention of the core gameplay keeps players engaged over time.

We also rode the World Cup wave to build excitement and engagement with our players. Our Fire Kickoff campaign wove football into the map itself, turning part of it into a football field. Eliminated players were sent to a one-on-one football showdown for a chance at rejoining the match, and a new Football Form let players turn themselves into a football to speed across the map and pull off surprise plays. The campaign also resonated well beyond the game. The original campaign song Booyah Olé became a standout organic driver of social engagement, generating over 350 million social media views.

I am also very excited about what lies ahead for our portfolio. We announced two mobile games, both built on strong, globally recognized IP. Palworld Online is an open-world multiplayer survival adventure game, developed and published by Garena under license from Pocketpair. And Monster Hunter Outlanders is a survival hunting action game developed by Tencent based on Capcom's iconic franchise. Taken together, these titles show how Garena is expanding into new genres, strengthening our development, and publishing capabilities, and deepening our relationships with top global partners.

In summary, Garena delivered another strong quarter. Free Fire is still proving itself as an evergreen franchise, and we continue to work towards diversifying our portfolio. We remain committed to delivering the high-quality experiences our players know us for.

In conclusion, this quarter’s strong results underscore both our financial discipline and the strength of our business. This promising momentum gives us greater confidence for the rest of the year.

With that, I invite Tony to discuss our financials.

Thank you, Forrest, and thanks to everyone for joining the call.

For Sea overall, total GAAP revenue increased 48% year-on-year to $7.8 billion in the second quarter of 2026. This was primarily driven by growth in Shopee and Monee. Our total adjusted EBITDA was up by 11% year-on-year to $917 million in the second quarter of 2026.

On Shopee, gross orders increased 27% year-on-year to 4.2 billion in the second quarter of 2026 and GMV increased by 28% year-on-year to $38.3 billion in the second quarter of 2026.

Our second quarter GAAP revenue of $5.6 billion included GAAP marketplace revenue of $4.9 billion, up 49% year-on-year, and GAAP product revenue of $0.7 billion. Within GAAP marketplace revenue, core marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was $4.3 billion, up 66% year-on-year. Value-added services revenue, mainly consisting of revenues related to logistics services, was $0.7 billion.

Shopee adjusted EBITDA was up by 12% year-on-year to $255 million in the second quarter of 2026.

Monee GAAP revenue was up by 59% year-on-year to $1.4 billion in the second quarter of 2026. Adjusted EBITDA was up by 13% year-on-year to $288 million in the second quarter of 2026.

As of the end of June, our consumer and SME loans principal outstanding reached $11.1 billion, up 62% year-on-year. This consists of $10 billion on-book and $1.1 billion off-book loans principal outstanding. Non-performing loans past due by more than 90 days as a percentage of total consumer and SME loans was 1% at the end of the quarter.

Garena bookings grew 15% year-on-year to $764 million. GAAP revenue was up by 34% year-on-year to $747 million. The growth was primarily due to the increase in our active user base and deeper paying-user penetration. Garena adjusted EBITDA was up by 17% year-on-year to $430 million.

Returning to our consolidated numbers, we recognized a net non-operating income of $66 million in the second quarter of 2026, compared to a net non-operating income of $83 million in the second quarter of 2025.

We had a net income tax expense of $251 million in the second quarter of 2026, compared to net income tax expense of $144 million in the second quarter of 2025. As a result, net income was up by 11% year-on-year to $458 million dollars.

Thank you, Forrest and Tony. We are now ready to open the call to questions. Operator?

(Operator Instructions) Piyush Choudhary, HSBC.

Congratulations, management, on a great set of results. Two questions. Firstly, on Shopee, your investments are delivering results on the growth. So can you talk a little bit about outlook for GMV growth. And are we behind the peak investments as margins have improved sequentially? Is the unit economics improving across VIP and content? And should we expect Shopee margins to improve? Or there could be volatility in second half due to seasonality? That is first question.

Secondly, can you give us an update on AI initiatives? Last time you mentioned about AI shopping assistant for buyers. How have the pilots been? And for sellers on your platform, what initiatives you have taken and benefits observed?

I would take this question. If you look at the Shopee outlook for GMV growth, we still see quite good growth in Q2 as we shared in the openings. We still see the trend continues in the coming quarter. The growth has been doing well across our market, in Southeast Asia, Taiwan, and also Brazil.

If we look forward for the full year, we remain well on track and confident of achieving our full year growth outlook of around 25%. That said, we want to make sure that we also anticipate the potential ForEx headwind as well. As you can observe that many of our market has a weaker currency against US dollars. Q3 and Q4 also have a higher GMV base. But again, we still believe that we are able to achieve the guidance we gave before of around 25%.

In term of investment we are doing for the few initiatives that we shared before on the VIPs, on the fulfillment, on our logistics, et cetera. In general, we see our unit economics have been improving quarter-on-quarter. I think for our content businesses, which we shared that we did an investment for a period of time, if you look at the unit economic has been as good as the platform already. The new initiatives, although we are still in the investment phase, but in general, we do see a positive trend on the economic improvement.

And also, in general, what we are doing is less a very CapEx-heavy investment, even with the fulfillment. We usually take a CapEx-light approach that we do not own the fulfillment centers. But usually, we rent a place with relatively light CapEx to enable the growth there.

In term of the margins, I think we shared our full year ambition of achieving $1 billion in adjusted EBITDA. For the AI initiatives, we are doing quite a lot of work over the past few quarters, both on buyer and seller side, as you mentioned. We are launching the IM assistant for sellers in quite a few of markets. Essentially, instead of the seller talk to a key account manager, the IM, as we call it, there is a digital IM that they can talk to, which can help them to answer many questions or many analysis they want to do with their shops. This is also 24 hours available, of course, compared to key account manager usually are not available 24 hours by 7. This is one of the examples that we are working with the sellers among many others.

On the buyer side, we spend a lot of efforts on both helping the ads have better conversions, which reflecting our ad take rate improvement over time, but also just general conversion for our search recommendations. We've been rolling out our new GR algorithm, a generative algorithm for recommendation and search, which give us a meaningful improvement on the conversion rate that we observed. We're also doing follow-up work on AIGC on content.

If you look at our platforms, we have a lot more content that can be generated by AI now, which can be used to do a personalized targeting for our buyers to improve the conversion as well. Many other work we are doing. I'm just sharing a few on top of my mind.

Alicia Yap, Citigroup.

Congratulations on the strong set of results. I wanted to follow up a little bit on the e-commerce, the Shopee question. So can management elaborate a little bit on the performance this quarter, and also the profitability trend, for Brazil, Taiwan, and Southeast Asia, and also the latest competitive landscape there?

And then on your guidance, I know that you mentioned the 25% is unchanged for the GMV growth. So in the case that if the GMV were to further exceed the guided growth rate, does this suggest that there is also further upside on the EBITDA for the second half?

And then lastly, on the fulfillment investment cycle, just wondering, where are we in the timeframe? Are we getting closer to what we wanted to invest? Or are we still in the early stage of the investment cycle for the fulfillment center.

Across the market, we see relatively good performance, both on growth and profitability. I don't think this is a single market’s trend, but relatively across the market.

Regarding the competitive situations, we do observe that competitive situation to be relatively stable, at this point in time. And we are able to maintain our market share. In certain markets, we are able to gain market shares as well, over the quarters, for Southeast Asia and Taiwan. For Brazil, we also observed that our growth is well above the market growth levels. We believe we're growing faster than our close competitors as well there.

Regarding the balance between growth and EBITDA, it's always a question on what’s the best balance between the growth and EBITDA. I don't think there is a simple answer there. I think something we always observe is both on how much we can optimize internally, and also look at how fast is the market growing. And of course, look at competitive landscapes to do this balancing.

At this point in time, we have been seeing the competitive situation to be relatively stable, as I shared. So the main driver of how the balancing work will lie on how we see the market growth rate look like in the rest of the year, and how much we can improve our efficiency internally for this.

For the fulfillment, we believe there are still quite a lot of room for us to improve, to further penetrate on the fulfillment businesses. I think right now, both in Southeast Asia and Brazil and Taiwan, we're still ramping up the fulfillment sizes.

For example, I think we shared that our fulfillment grew more than 20% quarter-on-quarter. In quite a few markets, it's more than double digits already of our businesses. But still, if you compare the size of our fulfillment with some of the other players in our market, especially in Brazil, or compare with the sizes of the peers in other markets, if you look at the few players with fulfillment businesses and marketplace, we're still much smaller as a size compared to them. And with the good benefits we see from the fulfillment, both on reducing the speed of deliveries, and enhance the buyer conversions, and also reduce the effort of sellers selling our platform, we do believe this is a good investment we're taking for our platform.

And also, as I shared in the earlier questions, our fulfillment economy has been improving, quarter-on-quarter, driven both by the fact we are able to optimize the cost structures. I think it's a learning process. Also, just take time to optimize the operations just in general. That's one. As we grow the scale, with more and more sellers joining the fulfillment businesses, essentially we have better scale advantage on that. And number three is also because there are more and more buyers recognizing the fulfillment businesses that we are offering. This give us a better economics over time.

Another thing that's important to point out is that we are also doing a lot more integrations between fulfillment and SPX. Essentially to reduce the frictions between how the items in our warehouse move across the entire value chain. We can realize the cost synergies and cost benefits by running both the warehouse and logistics together. All these things help us to build the fulfillment businesses and help us to gain the advantage of the overall platforms.

Again, we run fulfillment business in relatively light CapEx fashion in that we do not own the land, we do not own the warehouses. When we start a new fulfillment center, we do relatively light CapEx to enable that. We are also experimenting more automation with our fulfillment center recently, which actually reduce our cost to run as well. That is still in the early stage. We will share more when we scale more to our fulfillment centers over time.

Divya Kothiyal, Morgan Stanley.

My first question is on the e-commerce side. We have noticed that both Shopee and TikTok Shop have raised commissions in several Southeast Asian markets this year. Could you talk about how much more upside do you think there is for this? Can you confirm if your Southeast Asia e-commerce is now profitable? Is that something that has specifically driven the guidance upgrade for e-commerce overall for this year?

And my second question is on fintech. Where do you expect Monee's margins to really stabilize? We did see sales and marketing expenses continue to rise. When should we expect Monee's EBITDA growth to re-accelerate to more healthy levels? And could you maybe just talk about any guardrails we should be mindful of in terms of NPLs provisioning, especially as you are acquiring new users?

When we look at the take rate, we look at take rate from multiple angles. I think one is how much the take rate we are reinvesting to grow the ecosystems, which is very important for us to look at. That is number one. Number two is we look at how our price competitiveness is in our platforms. So essentially after take rate, do we still maintain a similar gap of price leadership or not compared to the other platforms?

Number three is we also look at the price of e-commerce, essentially on our platform versus the offline pricing. Number four, we also look at what does it mean for sellers' profitability. I think we put all the things together in term of consideration for the take rate.

From what we observed so far, we have been seeing a very healthy ecosystems, even with the increase of take rate. And the reason for that is that we reinvest a large part of the take rate to the ecosystem growth as well. And also, we are able to help the seller to operate online more efficiently over time. With the combination of all the things, our price is still very competitive, not only compared to the other marketplaces in our market, but also compared to the offline alternatives in the market.

Going forward, we still see opportunities to increase our take rate, not only from commissions, but also from the paid ads that we have been able to penetrate more and more over time. Although you can argue that the pace of the fixed commission increase probably will be less than we observed before, but again there is still room for us to increase the overall take rate by both helping the sellers to operate more efficient, but also helping the sellers grow their volumes by reinvesting part of the things to the ecosystem, and also increase the conversion potentials from the buyer side. With all the things together, I think we are able to grow this even more over time.

On the Monee margin question, if you look at individual countries of the Monee businesses, if you look at the EBITDA over the loan outstanding ratios, it has been relatively consistent. Our NPL has been relatively stable as well over time.

I think typically when we operate, we look at by product, by country, by segment. The shift of the return on asset is primarily driven by the mix of these things. For example, certain countries, for example, let's say in Thailand or in Malaysia, which is a later country that grows more than the previous countries, their overall ROA is slightly lower, so which kind of like, when mixed together, it reflects to the overall number. For example, some of the off-Shopee SPL lending growth, which is quite meaningful, more than 20% of the total SPL already, as Forrest shared in the opening, has naturally a lower ROA compared to the onShopee SPLs.

For example, we have been trying to penetrate more into prime segment users, which naturally have slightly lower interest rates, et cetera. And all those growth are intentional, and as you observed from the numbers, that it does require some investment, sometimes when we grow into the segments, and sometimes it does mean that we are able to grow the outstanding a lot more, but with slightly lower ROA compared to the previous segment or countries or products we focused on. So we actually see this as a positive movement rather than the negative views out of this.

Our guardrail is very simple. We want to maintain a stable NPL for each of the segment, the product, the countries when we look at it. Then when we grow a new segment, new product, new countries, we want to make sure it brings a positive return of assets to us. That is why, as a consequence, we always see that our absolute EBITDA profit from Monee has been growing quarter on quarter.

John Choi, Daiwa.

Congrats on a very strong quarter. I want to focus a little bit on Shopee's advertising take rate. I think Forrest also mentioned in his prepared remarks that ad take rate was pretty strong for a few reasons, but I think it was up by more than 90 basis points. How much further upside do we see? I think that you guys also mentioned the advertisers seem to be more keen and taking up more of this. So what are the AI technologies that we're implementing to further improve this ad take rate? And how much more room do we see?

And my second question is on Monee, particularly for Brazil. I think, also in the slides, you also said you guys are going to launch something, a standalone app in Brazil. What will be the strategy? Should we be expecting somewhat similar to the Southeast Asian market?

On the ads growth, we do see a pretty good growth on the ads, as we shared in the remarks. I think there are a few things helping the ad growth. I'm just listing some of the examples. One of the things, Smart Voucher, which is we combine a personalized voucher for a buyer together with ads, so we enhance the seller's ad traffic, increasing the purchase conversions.

Another example is we have the Shopee GMV Max smart diagnosis tools. So essentially, this AI diagnosis report and tools to help the seller to analyze how can they have better return on the ads. It's leveraging on the AI capability to analyze the ad performance and drive improvement.

We also have an in-depth audience insight for Brand Max. This feature essentially allows more sellers to view the number of shoppers in each stage of their purchase journey. How does the shopper move between stages? This will give them a more robust and algorithm-driven branding solution to capture the buyers better across their life cycles with the seller.

And on top of that, there's also quite a fundamental improvement on the algorithm for the ads. Both on how can we match the buyer's intention to the ad product better. I think that's where the AI-based algorithm, the GI algorithm helps quite a lot when we come to the matching part. The other part is the content presentation. We're using quite a lot of AI tools to create better personalized content for the user when they see the ads. So all this in combination helps our ad take rate to improve.

In the coming quarters, we still see that meaningful potential to increase the ad take rate. Given that many of the tools, many of the algorithms we're implementing are still in progress, we can see a meaningful optimization potential, while we are doing more experiments, while we are optimizing algorithms further in the coming quarters.

For Brazil, on the Monee side, we do believe that Monee has a big potential in Brazil. We are seeing a very good growth in Brazil for our lending businesses in the past two quarters. We are launching an app which is similar to ShopeePay app in Brazil, but with the SCFI license, which means it will be similar to what Mercado Pago or other players in the market can offer in Brazil.

We believe that Brazil is quite a big market for financial services, which is proven by a few other players in the market. With our e-commerce user base, our e-commerce data, and also with our better credit scoring algorithm that's proven in Asia already, but of course, we customize for Brazilian flavor.

We were able to broaden our product in Brazil over time. If you compare what we offer and what the other players offer, there are many low-hanging fruits that we believe that we can capture just by doing the right product structures, integrating the right data in our platforms to better credit score users, and just also with the license we acquired, which is kind of as good as the others already in the market.

Navin Killa, UBS.

Two questions from me. Firstly, on the e-commerce business. We have seen the margins kind of stabilize over the last couple of quarters, after inching down through the later part of last year. I just wanted to understand from here on, and back to your medium-term kind of aspiration of 2% to 3%, if you could help us understand the path, the timeframe, and how you get there. That is, I guess, just a question on longer-term margin evolution for e-commerce.

And secondly, on Monee, you did mention, for example, that the average loan size is up some 20% compared to last year. As your loan ticket size increases, does the credit risk also increase? If I could also just understand what the timeframe of these loans is, the duration of these loans is to get a better sense of how the credit risk is being managed with a larger loan book per customer.

We still believe that 2% to 3% is quite within our reach for the adjusted EBITDA percentage. I think, in fact, some of market are well above that. I think the balance between growth and profitability is something I shared in the previous answers. We do believe this is still a dynamic process on how do we make sure we capture the potential of the growth of the market versus taking more profit out of the ecosystem. I think this is something we will balance over time.

But the path, if you look at the numbers, the path from where we are to 2% to 3% is relatively straightforward. Now we are 0.67% or so, and we are talking about 1%-plus to get where we said. And part of that will come from over time, we do not need to invest as much in many of the things we are investing in. Like many of the programs we are doing right now, it will get mature over time. I think we could invest less into it. Part of that comes from our cost improvement, fundamental cost structure improvements. For example, our logistics, our fulfillment cost structure improvements over time. Part of that comes from better take rates from either ads or other forms. I think if you put that number together, we are really not too far, and we have done this in some markets already for this.

We do see, as you mentioned, the loan outstanding per user increased year to year. I think part of that is because we are reaching out to a new prime segment of users who naturally takes bigger ticket sizes. Part of that is also our country expansion. Some of the countries we grow more recently, faster than the others, has a higher income per capita in the market.

With all that, we do see a stable credit risk within the country, within the segment, within the product. We did not see any correlation between the increase of the loan outstanding per user and the increase of credit risk here. The duration of the larger loans, it slightly depends on the product country. Some can be as long as 18 months, some of them can be 12 months, et cetera. But that is relatively small percentage for very good prime users or for some specific lending products like the offline motorcycles that require a longer period.

Jiong Shao, Barclays.

Please let me add my congrats as well. I have two follow-up questions around e-commerce. The first one is that you talked about a full year of 2026 EBITDA to be over $1 billion. That would suggest a higher EBITDA for the second half than the first half, which is different from last year. I think last year the second half EBITDA was lower than the first half. So I was hoping you can talk about the drivers behind that phenomena this year compared to last year. Does that also imply that perhaps the margins may be a bit better in the second half than the first half as well?

My second question is back to Brazil. One of your key competitors in Brazil talked about the momentum they are seeing by lowering some of the take rates there and lowering the free shipping threshold. That clearly has not stopped you from growing very, very fast. Could you just talk about your profitability outlook in Brazil in the coming quarters and the years?

As you rightly point out, we shared the goal of more than $1 billion EBITDA this year. If you do the math, it does mean that in the absolute terms, our EBITDA for the second half of the year will be higher than the first half of the year. Of course, partially because of the growth of the market, essentially the overall GMV, we believe that we still see quarter-over-quarter growth.

So the second half of the year GMV base will be bigger than the first half of the year. Part of that comes from the continued work of initiatives that we talked about. Again, the e-commerce is a business that we adjust the pace, adjust the monetization based on many parameters, as I shared earlier, based on how we are optimizing the businesses, based on how the overall business growth of the country and also based on how the competitive business is.

For Brazil, yes, I think your observation is absolutely correct. We still see that our growth is well above the market in the country. If you look at the price competitiveness, we are still very price competitive, a lot stronger than the competitors in the region, even after there is change on the take rate and the free shipping threshold.

So we believe that for e-commerce businesses, the fundamental still holds. It is the price competitiveness of our assortment. It is the completeness of our assortment. It is the fundamental structure of cost to serve, and it is experience of how the buyers can discover the product on our platform. All those things help us to grow faster than the market in Brazil.

And if you look forward, we still believe that Brazil has a long way to go in term of e-commerce growth. We are hoping to grow in Brazil in a profitable fashion, with the growth rate outpace the market in the coming quarters.

Ranjan Sharma, JPMorgan.

Two questions from my side. Firstly, on the gaming. We discussed new publishing rights. Can you also help us understand which geographies do they cover? Also, earlier in the year, we talked about a possible Naruto collab coming back, if you can remind us when that's going to be.

The second question is on fintech. We noticed that the provisions for credit losses have increased quite a bit this quarter. What are the trends that you're seeing in delinquencies, and how does that affect your loan growth going forward?

Hi, Ranjan. Thank you for your question. I think for the new publishing games, we specifically talked about two games this quarter. One is the Palworld Online, and since this game is our self-developed game, so we're going to publish it globally, and we probably we’re going to launch the game market by market and gradually. The plan is this will be a global publishing opportunity for us.

And for the Monster Hunter Outlanders, this is a great collaboration between Garena and Tencent. Tencent developed the game and also work together with this fantastic IP owned by Capcom. We’re trying to launch in the markets, like markets we're very familiar with, like Southeast Asia, Latin America, Taiwan, and potentially, we're going also to launch the game in Middle East and some more markets in the pipeline. So the target launch time will be this year.

Yeah. I think for the provision, it's primarily driven by the loan mix. I think there are two components in our loan mix which naturally have high provisions. One is the off Shopee SPL, and second one is the Brazil loan outstanding. Although Brazil we have very good ROA there, it's a high interest, high risk market. The higher mix of these two components contributes to the higher provision you see.

This concludes our question-and-answer session. I would like to turn the conference call back over to Mr. KC Ong for any closing remarks.

Thank you all for joining today's call. We look forward to speaking to all of you again next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.