Sea Lifts Shopee Profit Outlook as Ad Revenue Surges 70 Percent

Forecast Upgrade Signals E-Commerce Momentum

Sea raised its 2026 adjusted EBITDA forecast for Shopee to US$1 billion, up from a prior projection of at least US$880.6 million. The Singapore-based group announced the revised guidance after reporting second-quarter revenue of US$7.8 billion, a 48 percent increase that exceeded the average analyst estimate of US$7.1 billion.

Adjusted EBITDA for the three months ended June climbed 11 percent to US$917 million. Shopee, the group's e-commerce arm, generated US$255 million in adjusted EBITDA during the quarter, a 12 percent gain. Analysts had expected the full-year figure to reach US$980.7 million on average.

The US-listed stock rose as much as 13 percent following the results, erasing year-to-date losses. Through August 10, shares had fallen 10 percent in 2026 amid investor concerns about competitive pressure and rising oil costs.

Advertising Drives Margin Expansion

Sea's advertising business delivered 70 percent more revenue in the second quarter compared with the prior-year period, driven primarily by higher seller fees. Chief executive Forrest Li told analysts the company sees further room to increase its take rate, the portion of merchandise sales captured as revenue.

The shift toward advertising reflects Shopee's effort to widen margins while contending with intense competition from ByteDance's TikTok, Alibaba's Lazada, and newer entrants such as Temu across Southeast Asia. The region's e-commerce market continues to expand rapidly, but profitability remains under pressure as platforms invest in logistics, marketing and regional expansion.

Sea is also pushing into Brazil and navigating potential regulatory headwinds in Indonesia, the region's largest economy. Cost increases tied to the Middle East conflict have added further complexity to operations.

AI Pivot and Structural Shifts

Li has declared that a trillion-dollar market capitalization is achievable if Sea doubles down on artificial intelligence. The company increased development spending and made organizational changes to support that ambition, betting AI can underpin the next phase of growth much as earlier waves of personal computing and smartphones propelled Shopee and gaming unit Garena.

In early 2026, Sea introduced Migoo, a generative AI chatbot, across multiple regions including the United States. The rollout marked one of the company's most visible steps into the technology. More broadly, Sea has embedded AI in product recommendations, seller tools, and through partnerships with third-party providers.

The approach mirrors moves by rivals including Alibaba, which are investing in AI to drive growth as core business competition intensifies. Yet the shift carries costs. In June, Shopee eliminated hundreds of developer positions globally, roughly 8 percent of such roles within the unit. It remains unclear whether the cuts are directly tied to AI initiatives, though they coincide with broader debates about automation's impact on employment.

Regional Competition Remains Fierce

Despite the improved outlook, Shopee faces persistent challenges in Southeast Asia's crowded online retail landscape. TikTok has aggressively expanded its e-commerce operations, leveraging its social media reach to attract younger consumers. Alibaba's Lazada continues to hold significant market share, while Temu has entered the region with a low-cost model that pressures pricing across the board.

Sea's strategy hinges on maintaining growth in gross merchandise value while gradually improving unit economics through advertising and value-added services. The company has also leaned into cross-border trade, connecting sellers in China with consumers across Southeast Asia and Latin America.

Regulatory scrutiny adds another layer of uncertainty. Indonesia, which accounts for a substantial portion of Shopee's regional volume, has introduced measures aimed at protecting local merchants and limiting the influence of foreign platforms. Sea has responded by increasing local partnerships and adjusting its marketplace policies, though the long-term impact on profitability remains to be seen.

The revised forecast suggests Sea's management believes the current trajectory is sustainable, at least through the remainder of 2026. Investors will be watching whether the company can convert top-line growth into durable margin expansion without sacrificing market share in key geographies.