E-commerce and gaming company Sea (NYSE:SE) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 29.6% year on year to $4.84 billion. Its GAAP profit of $0.65 per share was 7.1% above analysts’ consensus estimates.
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Sea (SE) Q1 CY2025 Highlights:
- Revenue: $4.84 billion vs analyst estimates of $4.90 billion (29.6% year-on-year growth, 1.2% miss)
- EPS (GAAP): $0.65 vs analyst estimates of $0.61 (7.1% beat)
- Adjusted EBITDA: $946.5 million vs analyst estimates of $724.2 million (19.6% margin, 30.7% beat)
- Reaffirmed guidance: "Our strong start to the year gives us more confidence of achieving our full-year guidance"
- Operating Margin: 9.4%, up from 1.9% in the same quarter last year
- Paying Users: 64.6 million, up 15.7 million year on year
- Market Capitalization: $84.33 billion
“We have delivered another great quarter of strong growth with improving profitability across all three businesses. Our strong start to the year gives us more confidence of achieving our full-year guidance.” said Forrest Li, Sea’s Chairman and Chief Executive Officer.
Company Overview
Founded in 2009 and a publicly traded company since 2017, Sea (NYSE:SE) started as a gaming platform and has since expanded to offer a variety of services such as e-commerce, digital payments, and financial services across Southeast Asia.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last three years, Sea grew its sales at a solid 17.5% compounded annual growth rate. Its growth surpassed the average consumer internet company and shows its offerings resonate with customers, a great starting point for our analysis.
This quarter, Sea generated an excellent 29.6% year-on-year revenue growth rate, but its $4.84 billion of revenue fell short of Wall Street’s high expectations.
Looking ahead, sell-side analysts expect revenue to grow 22.8% over the next 12 months, an acceleration versus the last three years. This projection is eye-popping for a company of its scale and implies its newer products and services will spur better top-line performance.
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Paying Users
User Growth
As an online marketplace, Sea generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.
Over the last two years, Sea’s paying users, a key performance metric for the company, increased by 10.2% annually to 64.6 million in the latest quarter. This growth rate is solid for a consumer internet business and indicates people are excited about its offerings. 
In Q1, Sea added 15.7 million paying users, leading to 32.1% year-on-year growth. The quarterly print was higher than its two-year result, suggesting its new initiatives are accelerating user growth.
Revenue Per User
Average revenue per user (ARPU) is a critical metric to track because it measures how much the company earns in transaction fees from each user. ARPU also gives us unique insights into a user’s average order size and Sea’s take rate, or "cut", on each order.
Sea’s ARPU growth has been exceptional over the last two years, averaging 11.7%. Its ability to increase monetization while growing its paying users at an impressive rate reflects the strength of its platform, as its users are spending significantly more than last year. 
This quarter, Sea’s ARPU clocked in at $74.94. It declined 1.9% year on year, worse than the change in its paying users.
Key Takeaways from Sea’s Q1 Results
We were impressed by how significantly Sea blew past analysts’ EBITDA expectations this quarter. We were also excited its number of paying users outperformed Wall Street’s estimates by a wide margin. It was also comforting that full-year guidance was maintained. On the other hand, its revenue slightly missed. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 9.7% to $156.50 immediately after reporting.
Sea had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.