SE (Trans): Shopee targeting $1bn FY EBITDA

Dolphin Research compiled the transcript for $ Sea.US FY26 Q2.

Key takeaways:

I. Core results recap

1. Guidance

a. Shopee's full-year GMV growth guidance remains at Approx. 25%. The company also flagged two drags: FX headwinds as most local currencies weakened vs. USD, and a higher GMV base in Q3–Q4.

b. Shopee targets full-year Adj. EBITDA above $1 bn. Management confirmed this implies H2 EBITDA will be higher than H1, unlike last year when H2 trailed H1.

c. The EBITDA/GMV margin target of 2%–3% is still within reach, with several markets already well above that range. The current level is Approx. 0.67%, leaving a gap of a little over 1ppt.

2. Group Q2 headline metrics

a. Total GAAP revenue was $7.8 bn (+48% YoY), driven mainly by Shopee and Money. Adj. EBITDA was $917 mn (+11% YoY).

b. Net non-op gain was $66 mn vs. $83 mn a year ago. Net income tax expense was $251 mn vs. $144 mn.

c. Net profit was $458 mn (+11% YoY).

3. Shopee financials

a. Orders reached 4.2 bn (+27% YoY) and GMV was $38.3 bn (+28% YoY). This marked the eighth consecutive QoQ GMV increase, with record highs in both orders and revenue.

b. GAAP revenue was $5.6 bn. Platform revenue was $4.9 bn (+49% YoY) and merchandise revenue was $0.7 bn.Core platform revenue from commissions and ads was $4.3 bn (+66% YoY), while VAS, mostly logistics, contributed $0.7 bn.

c. Adj. EBITDA was $255 mn (+12% YoY).

4. Money financials and asset quality

a. GAAP revenue was $1.4 bn (+59% YoY). Adj. EBITDA was $288 mn (+13% YoY).

b. Loan book reached $11.1 bn (+62% YoY), with $10.0 bn on-balance and $1.1 bn off-balance. The Philippines became the fifth market with loan balances above $1 bn.

c. 90+ DPD NPL was 1.0%, stable.

5. Garena financials: Bookings were $764 mn (+15% YoY). GAAP revenue was $747 mn (+34% YoY), driven by a larger active user base and higher payer penetration.Adj. EBITDA was $430 mn (+17% YoY).

II. Earnings call details

2.1 Management commentary

1. Shopee: user growth and monetization

a. Improved unit economics allow the company to profitably serve a broader user base, enabling heavier investment in acquisition. It is reaching and reactivating multiple cohorts via brand campaigns, expanded content channels, and a broader logistics mix.

b. Avg. monthly new active buyers rose over 35% YoY, a clear acceleration vs. prior quarters. Avg. monthly active buyers grew 18% YoY, and purchase frequency increased 8% YoY.

c. Ad revenue grew over 70% YoY, with ad take rate up more than 90bps YoY. Paying advertiser count rose Approx. 45%, and avg. ad spend per seller increased over 15% YoY.

d. Ad products are becoming 'simpler and smarter'. For example, pairing ads with personalized vouchers improves conversion and seller ROAS.

2. Shopee: logistics and fulfillment

a. Instant and same-day delivery are gaining strong traction to capture more everyday high-frequency purchases. In Indonesia, Instant delivers within as fast as 1 hour in urban areas and is expanding into fresh grocery and pharma.

b. Indonesia Instant delivery orders grew Approx. 80% YoY. Per-order cost fell about 20% on scale and efficiency gains.

c. Fulfillment orders rose over 20% QoQ. In some markets, over 60% of fulfillment parcels are delivered next day, well above platform avg.

d. Fulfillment drove the largest improvements in geographies with tougher conditions. In the mountainous Mindanao region of the Philippines, waiting times shortened by 1–3 days.

e. Across SEA, SKUs switching to fulfillment shipping see over 20% higher orders on avg.

3. Shopee: ShopeeVIP membership

a. Fully rolled out across Asia and Brazil, with total members exceeding 15 mn by end-Jun (+45% QoQ). Adoption is broad-based.

b. In Asia, VIPs contributed 24% of quarterly GMV, with Approx. 80% monthly retention. Spend lifts meaningfully after subscription.

c. Brazil launched in Apr with healthy early uptake. Membership has already surpassed 1 mn.

d. Benefits now extend to travel, dining, and entertainment. More sellers and external partners are co-building perks, improving unit economics in Asia.

4. Shopee: content ecosystem and external traffic

a. Orders from live streaming and short videos grew over 50% YoY, now over 25% of SEA physical goods orders. Unit economics improved QoQ as marketing spend was optimized.

b. Partnerships with YouTube and Meta deepened. On Facebook, creator-linked affiliate orders for Shopee rose over 85% QoQ, and Facebook Reels is proving highly effective.

c. Instagram collaboration now covers all eight core markets. Indonesia, the first launch market, shows encouraging early results.

5. Shopee: Brazil

a. Brazil remained the fastest-growing market in Q2, with GMV growth again outpacing the market. Growth was driven by active buyers, purchase frequency, and higher AOV.

b. End-to-end logistics investments continue, with better utilization. Avg. buyer waiting time fell 15% YoY, and fulfillment penetration doubled YoY.

c. Moving upmarket, Shopee added nearly 500 official brands this quarter. Mall seller GMV more than doubled YoY.

d. The company still sees significant runway and will invest with discipline and profitability in mind.

6. Money: credit and risk

a. Credit remains the primary growth engine. Expansion continues along three lanes: new user acquisition, deeper engagement with existing users, and broader use cases.

b. Risk models were upgraded using a transformer architecture similar to modern LLMs. Pre-trained on ecosystem-wide behavioral and transaction data, the model learns full user behavior sequences to capture richer context, lifting approval rates by Approx. 10% at comparable risk.

c. More external data sources are used to assess new users in-ecosystem. Examples include partnerships with Indonesian telcos and leveraging Brazil's open finance data.

d. AI tools verify income documents across markets, languages, and formats. Review time fell about 95% with high accuracy, enabling near-instant limit increases.

7. Money: product and user expansion

a. New user onboarding accelerated. One-month interest-free SPayLater offers were expanded, allowing repayment within the month or conversion to interest-bearing installments, and promo rates broadened for first-time cash-loan users.

b. Approx. 5.3 mn first-time borrowers were added this quarter. Active credit users rose about 34% YoY to over 40 mn by quarter-end, with avg. loan balance per user up Approx. 20% YoY.

c. Off-platform SPayLater continues to scale via national QR rails and merchant expansion. It now accounts for over 20% of SPayLater balances, reaching as high as 35% in some markets.

d. Thailand is testing the ShopeePay Unlimited Card, enabling SPayLater balances to be used at any card-accepting merchant.

e. The standalone ShopeePay app is a key pillar for Money outside Shopee. It is live in Indonesia, Thailand, Malaysia, and Vietnam, with monthly transacting users more than doubling this quarter.A similar standalone app will launch soon in Brazil.

f. Management emphasized the early stage. Only a small subset of ecosystem users use Money products and credit penetration remains low across markets.

8. Garena: Free Fire and new pipeline

a. Free Fire, now in its ninth year, continues to expand global reach, with DAU consistently above 100 mn. Engagement remains resilient.

b. The evergreen playbook is frequent content and gameplay refreshes with both localization and global appeal. This season's 'Undersea Mystery' took inspiration from Thailand's Songkran and embedded an ocean theme directly into the map, introducing a new underwater map with Hydro Zone and Fishing Ponds for powerful gear.

c. A 'Fire Kickoff' event tied to the World Cup transformed parts of the map into soccer fields. Eliminated players entered 1v1 soccer duels for revival, and a new 'soccer form' let players dash across the map like a ball.Original theme song Booyah Ole generated over 350 mn social views.

d. Two new mobile titles based on global IP were announced. Palworld Online is a self-developed, self-published open-world multiplayer survival adventure under Pocketpair's license, and Monster Hunter Outlanders is developed by Tencent based on Capcom's IP in the survival-hunting action genre.

2.2 Q&A

Q: How does Shopee's GMV growth outlook look? Has the investment peak passed, are VIP and content unit economics improving, and will margins improve in H2 or face seasonal swings?

A: Q2 growth was solid and this trend is continuing into next quarter, with healthy performance in SEA, Taiwan, and Brazil. Full-year remains on track with confidence in achieving Approx. 25% GMV growth.That said, FX headwinds are possible as multiple local currencies weakened vs. USD and Q3–Q4 have a higher base. Even so, management still expects to meet the Approx. 25% target.

Unit economics for key initiatives such as VIP, fulfillment, and logistics are improving QoQ. Content has been invested in for some time and now runs at unit economics similar to the overall platform.New initiatives are still in the investment phase but trending positively. These are not capex-heavy, and even fulfillment follows a capital-light model by renting sites rather than owning centers, supporting growth with lighter capex.On margins, management reiterates the $1 bn full-year Adj. EBITDA target.

Q: Any new developments in AI? How is the buyer-facing AI shopping assistant pilot performing, and what has been done for sellers and with what benefits?

A: On the seller side, an IM assistant has launched in multiple markets. Instead of contacting a KAM, sellers can engage with this digital IM to get answers and store analytics 24/7, which traditional KAM coverage cannot match.This is one example among many seller-side efforts. On the buyer side, work focuses on improving ad conversion, as reflected in the rising ad take rate, and boosting overall search and recommendation conversion via a new GR algorithm for gen-AI driven recommend/search, which has delivered tangible conversion uplift.AIGC is widely used to generate more content for personalized targeting. These are just examples among many ongoing efforts.

Q: How did Brazil, Taiwan, and SEA perform in growth and profitability this quarter, and what is the latest competitive landscape?

A: Performance was broadly solid across markets, not limited to any single country. Competition appears relatively stable.Shopee is holding share in some markets and gaining sequentially in SEA and Taiwan. In Brazil, growth is clearly outpacing the market and likely faster than its closest competitor.

Q: If GMV exceeds the Approx. 25% guidance, does it imply additional upside to H2 EBITDA?

A: Balancing growth and EBITDA is always a trade-off without a simple answer. Management weighs internal optimization, market growth, and the competitive landscape to strike that balance.Given stable competition, the key variables are how fast markets grow through year-end and how much further internal efficiency can improve.

Q: Where are you in the fulfillment center investment cycle? Near completion or still early?

A: There is still significant room to raise fulfillment penetration. SEA, Brazil, and Taiwan are all scaling, with fulfillment orders up over 20% QoQ and already representing a double-digit share in several markets.Compared with other regions in-market, especially Brazil, or with global peers running both fulfillment and marketplace, Shopee's fulfillment scale is still much smaller. Given the benefits in speed, buyer conversion, and seller burden reduction, the company believes continued investment is worthwhile.

Fulfillment economics are improving from three sources. First, cost structure optimization through learning and operational refinement over time.Second, scale effects as more sellers join. Third, increasing buyer acceptance of fulfillment.Shopee is also integrating fulfillment more tightly with SPX to reduce friction in inventory flows across the value chain and to unlock warehousing-delivery cost synergies.

The model remains capital-light: no land or warehouse ownership, with new sites launched on light capex. More automation is being piloted within centers to lower opex, though this is still early and more will be shared as scale grows.

Q: Both Shopee and TikTok Shop raised commissions in multiple ASEAN markets this year. How much further upside is there to take rate, and can you confirm ASEAN e-comm is now profitable and if that drove the full-year guidance update?

A: Take rate is assessed from several angles: how much is reinvested into the ecosystem to support growth, platform price competitiveness after changes vs. peers, the gap between online and offline pricing, and seller profitability.On current evidence, the ecosystem remains healthy even after take rate increases, as a large portion is reinvested and seller efficiency improves over time. Prices remain competitive vs. other platforms and offline channels.

There is further upside ahead, not only from commissions but also from rising paid ad penetration. Fixed commission hikes may proceed more slowly than observed earlier, but by improving seller efficiency, reinvesting some gains into the ecosystem, and lifting buyer conversion, overall take rate still has room to rise.

Q: At what level will Money margins stabilize? S&M is still rising, when will EBITDA growth re-accelerate, and what guardrails govern impairments and NPLs as you acquire new users?

A: On a country basis, EBITDA/loan for Money has been relatively stable, and NPL trends are steady. Operationally, performance is monitored by product, country, and segment, with ROA shifts driven by mix across these dimensions.For example, later-entry but faster-growing markets like Thailand and Malaysia carry slightly lower ROA than early markets, which affects the blended number. Off-platform SPayLater now over 20% of balances carries inherently lower ROA than on-platform, and deeper penetration into prime segments also entails lower rates.

These shifts are intentional. Entering new segments sometimes requires investment, and balances can scale faster at slightly lower ROA than the original prime-focused mix.Management views this as positive, not negative. Guardrails are straightforward: keep NPLs stable in existing segments and markets, and ensure positive asset returns when entering new segments, products, or countries, which is why Money's absolute profits have kept growing QoQ.

Q: Shopee ad take rate rose over 90bps YoY. How much upside remains, and what AI is used to drive further gains?

A: Ad growth is supported by several factors. Smart vouchers pair personalized buyer coupons with ads to improve conversion and seller ROAS.Shop GMV Max uses AI diagnostics to guide sellers on improving ad returns, analyzing performance and driving optimization. BrandMax offers deep audience insights, showing shopper counts by stage in the purchase journey and transitions between stages to enable more algorithmic, lifecycle-based brand marketing.

There have also been many core algorithm upgrades to better match buyer intent with ad inventory. The GR algorithm materially helps with relevance.Content presentation uses extensive AI tools to generate more personalized creatives. Collectively, these lifted ad take rate, and there remains meaningful upside over the next few quarters as tools and algorithms roll out and are further optimized.

Q: What is the strategy for the standalone Money app planned in Brazil? Will it mirror the approach in SEA?

A: Brazil offers significant potential, with strong credit growth over the last two quarters. A ShopeePay-like app will launch in Brazil, positioned similarly to local offerings like Mercado Pago.Brazil's financial services market is large and proven by peers. With an e-comm user base, commerce data, and credit scoring algorithms validated in Asia and adapted for Brazil, Shopee can expand its product line over time.There are many low-hanging fruits relative to peers: get product structures right, onboard the right data for better scoring, and leverage already-obtained licenses that are on par with others in the market.

Q: E-comm margins have stabilized in recent quarters. What is the path and timetable to the mid-term 2%–3% target?

A: The 2%–3% target remains attainable, and some markets are already well above it. Balancing growth and profitability is dynamic, trading off market opportunity vs. extracting more profit from the ecosystem.Numerically the path is straightforward: from Approx. 0.67% today to the target is just a little over 1ppt. Part of the gap closes as programs mature and require less investment, part from cost improvement in logistics and fulfillment, and part from higher take rate via ads and other levers.

Putting these together, the target is not far and has already been achieved in certain markets. Execution will remain dynamic across geographies.

Q: Money's avg. loan balance per user rose Approx. 20% YoY. As ticket sizes grow, is credit risk rising as well, and what are the typical tenors?

A: Higher per-user balances partly reflect reaching new prime segments that naturally qualify for higher limits. It also reflects country mix where faster-growing markets have higher avg. incomes.Within the same country, segment, and product, credit risk is stable. There is no observed correlation between higher per-user balances and higher risk.

Tenor varies by product and country. Some run up to 18 months and some 12 months, but these are smaller shares aimed at high-quality prime users or specific products that require longer terms, such as offline motorcycle loans.

Q: Full-year Shopee EBITDA above $1 bn implies H2 exceeds H1, unlike last year. What drives this, and does it imply better margins in H2?

A: Yes, the $1 bn+ target implies higher absolute EBITDA in H2 vs. H1. Drivers include continued GMV growth, which lifts the H2 base vs. H1, and sustained progress on the aforementioned initiatives.However, the pace and intensity of monetization in e-comm are dynamically adjusted based on multiple parameters. These include optimization progress, growth rates by country, and the competitive environment.

Q: A key competitor in Brazil lowered take rate and free-shipping thresholds, yet Shopee continues to grow rapidly. What is the profitability outlook in Brazil over the next quarters and years?

A: That observation is accurate. Shopee's growth in Brazil still outpaces the market.Even after the competitor's changes, Shopee's price competitiveness remains strong and clearly ahead of regional rivals. The e-comm fundamentals hold: price competitiveness, assortment breadth, underlying service cost structure, and product discovery experience together underpin faster growth.Looking ahead, Brazil still has a long runway. Shopee aims to grow profitably and to sustain above-market growth over the coming quarters.

Q: Which regions are covered by the licenses for the two newly announced games, and when will the Naruto collaboration return?

A: Palworld Online is self-developed and will be launched globally in phases by market. Monster Hunter Outlanders is a Garena-Tencent project developed by Tencent with Capcom's IP, targeting initial launches in familiar markets such as SEA, LatAm, and Taiwan, and potentially the Middle East and more in the pipeline.Both titles target launch this year. (Management did not respond on the Naruto collaboration timing.)

Q: Credit impairment charges rose notably this quarter. What are delinquency trends and what is the impact on future loan growth?

A: The increase was driven by portfolio mix. Two areas inherently carry higher provisions: off-platform SPayLater and Brazil balances.Brazil delivers strong yields but is a higher-rate, higher-risk market. As these shares rose, provisions increased accordingly.

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