Sea group shares dropped 16% – what happened to Shopee?

On 3 Mar 2026, Shopee’s parent company Sea Group released their Q4 2025 earnings. Net income for the quarter rose 72.9% to US$410.9 million, and the company targets 25% GMV growth for Shopee in 2026. 

Yet the stock market reacted violently. The price plunged as much as 27%, before closing at 16.53% down at the end of the trading day. 

What happened? Analyst questions during the earnings call were pretty mild. No tough questions, or dramatic moments such as Alex Yao’s question during Alibaba Q2 2025 earnings call.  

Many analysts also thought the market had overreacted, and the war in the Middle East might have amplified that reaction. 

We do not comment on short-term market reactions, but a few observations on the business and competitive landscape may help frame the discussion: 

1. The real worry for many observers here is the same as the previous quarter – raised take rates while margins remain flat. In addition, margins in Monee – Sea’s digital financial services arm – also softened slightly compared with previous quarters. A few analyst reports prior to the earnings already suggested this.
   
   For investors, the concern is not just competition, but whether Shopee’s margin expansion story may pause if competitive intensity remains high;
2. A key reason for the profitability pressure is the competition from TikTok Shop, which can be underestimated by observers not on the ground. The first of our 10 Predictions for Southeast Asia 2026 is “TikTok Shop catches up with Shopee on parcel volume”. This is already playing out in a few markets in Southeast Asia;
3. The pressure on margins likely reflects Sea Group’s active defense of Shopee’s market position. The focus of the defense is quite clear: on the consumer value propositions of (delivery) Speed and Savings.
   
   The savings objective is often achieved through vouchers, with Sales & Marketing costs growing 33.6% YoY; 
4. Is this defence effective? It certainly has expanded the market. Shopee’s Q4 GMV grew 28.6% YoY. However, in absolute market share TikTok Shop was still catching up (do look out for our upcoming Ecommerce in Southeast Asia 2026 for the numbers!);
5. While Shopee has great localisation in Southeast Asia, TikTok Shop has a far more efficient organisational design, greater financial resources, and consumers spending 100s of millions of hours on TikTok (i.e. traffic). It would be hard to stop TikTok Shop’s advances if ByteDance continues to prioritise ecommerce in this region, and avoid major strategic mistakes;
6. Can Shopee afford not to put an active defence? This question is actually debatable. Shopee could choose to reduce the vouchers, let the market share slide in the short term, while building up core capabilities beyond Monee and logistics.
   
   That would make Sea as a group much more profitable for the next few quarters, and the moat deeper for the long term.
   
   That would, however, also require the Shopee organisation to adjust to the new reality, and change a lot of the ways it currently does things;
7. The second of our 10 Predictions for Southeast Asia 2026 is: Shopee’s defence put more focus on instant delivery. Shopee has enabled instant delivery (4 hours) in four countries, leveraging fleets of ShopeeFood, which has become the 2nd largest platform by GMV in Southeast Asia.
   This in our opinion is correct and necessary. With Lazada also launching dark stores, and Grab expanding into ecommerce, the quick commerce battle in Southeast Asia is heating up, as we had predicted;
8. AI is also a tricky area. TikTok Shop parent ByteDance has far superior resources dedicated to AI. It is very hard for Shopee to match such capabilities, but on the other hand, Shopee probably can’t afford not to dedicate resources into AI to stay competitive.
   
   The key here might not be AI capabilities, but how to put those limited resources in the sharpest way possible (for example, ensuring price competitiveness).

At the end of trading on 3 March – SEA’s P/E ratio stood at 39, compared to Amazon’s 29, Alibaba’s 18 and PDD’s 10. 

The company has seen two waves of drastic surge and subsequent fall of share prices. It remains the largest ecommerce platform in Southeast Asia by scale, with a robust fulfilment network and a very strong digital financial services arm. 

How the leadership transforms its organisation effectively will determine which role it plays in Southeast Asia and Brazil’s digital ecosystem in the future.