Sea Limited (SE) Q4 2025 Earnings Report, Transcript and Summary

Good morning, and good evening to all, and welcome to the Sea Limited Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I would now like to welcome Mr. Elson Choi to begin the conference. Please go ahead, sir.

Hello, everyone, and welcome to Sea's 2025 Fourth Quarter and Full Year Earnings Conference Call. I'm Elson 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 the 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 fourth quarter and full year of 2025. 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. 2025 has been a great year for Sea. We generated a record $23 billion in revenue, representing 36% year-on-year growth, an acceleration from 2024. At the same time, we improved our bottom line profit. Our full year net income reached $1.6 billion and adjusted EBITDA reached $3.4 billion, representing a 260% and a 75% year-on-year increase, respectively. All our businesses scaled well in 2025, exceeding our initial growth expectations. This broad-based robust growth is healthy and sustainable, underpinned by the growing scale of users that we serve. In 2025, Shopee served around 400 million active buyers and 20 million sellers, achieving $127 billion in GMV. Monee gained over 20 million unique first-time borrowers and grew its loan book beyond $9 billion, while maintaining stable risk. And Garena connected with over 100 million players on average every day throughout the year, generating almost $3 billion in bookings. We were successful in 2025 because we chose the right set of strategies and we executed them well. 2026 will be a continuation of this approach. Our strategies will be consistent and execution remains key. We will double down on operational excellence and work towards delivering another year of strong growth and healthy profit. With that, let me take you through each business' performance. First, starting with Shopee. Shopee achieved another record second quarter with new highs in GMV, gross order volume and revenue. Our full year GMV grew 27% year-on-year alongside significant profit improvement. We generated a full year adjusted EBITDA of over $880 million in 2025. Our strong GMV growth was driven by tangible improvements we made for both buyers and sellers. We made product discovery easier, broadened our assortment of offerings at competitive prices and widened access to fast, reliable shipping. We also improved our monetization further in the fourth quarter. Ad-paying sellers increased by more than 20% and their average ad spend increased by more than 45% year-on-year. As a result, ad revenue grew over 70% and ad take rate increased by more than 80 basis points year-on-year. The strong set of 2025 results is a validation of the effectiveness of our strategic choices for Shopee. We have shown our ability to enhance monetization as demonstrated by our consistently improving take rate over the past 2 years. For the near term, we choose to prioritize growth while upholding financial discipline. For 2026, we aim to grow Shopee's annual GMV by around 25% year-on-year with its full year adjusted EBITDA no lower than 2025 in absolute dollars. We believe this is the right strategy to optimize Shopee's long-term profitability. Let me highlight a few areas where we are investing to further enhance our scale and market leadership. This includes our continued efforts into logistics, Shopee VIP membership program and expansion of our content ecosystem. The objective is clear. We want to serve more users and engage them better. In 2025, monthly active buyers and average monthly purchase frequency increased by 15% and 10%, respectively, compared to a year ago. In 2026, we will remain focused on executing these priorities well. It will benefit us with deeper structural moats that can further differentiate Shopee from its peers. First, logistics. Our logistics capabilities have become an increasingly important differentiator for Shopee. SPX Express now processes on average over 30 million parcels every day, making it one of the largest e-commerce logistics solution providers in our market. In 2025, we improved speed and cost efficiency across our markets while customizing delivery options for different user needs. In dense urban areas, we scaled instant and same-day delivery for buyers who value speed and convenience. We expanded instant delivery into additional use cases, including partnering with local supermarkets and suppliers to deliver fresh groceries in Thailand in as little as 1 hour. Our faster delivery services reached a double-digit share of order volume in greater metropolitan areas such as Bangkok and Jakarta by the end of 2025. Buyers using instant and same-day delivery also spend around 15% more on average after adoption. At the same time, we scaled economical shipping to serve buyers seeking affordability. In Indonesia, orders using economical shipping more than doubled year-on-year in the fourth quarter. With our delivery capability well scaled, we started to roll out fulfillment service in various markets across 2025. We are seeing encouraging adoption trends from both buyers and sellers with double-digit order penetration in some markets. In 2026, we plan to expand fulfillment further across all our markets and aim to double our fulfillment order penetration by the end of the year. Second, the Shopee VIP membership program. In 2025, we introduced this program to deepen engagement among our most active buyers. This paid program gives subscribers more generous free shipping entitlements, daily vouchers and exclusive discounts. We have now rolled out Shopee VIP to all our Asian markets. Total subscribers surpassed 7 million at the end of the year, more than double the number from a quarter ago. Across every market where it has launched, the program has consistently produced double-digit spending uplift by members after they join. In Indonesia, VIP members have been spending about 30% to 40% more than before joining. In some markets, VIP members already contributed more than 15% of total GMV in the fourth quarter. Building on Shopee VIP's success in Asia, we plan to launch it in Brazil in the coming months. Third, our content ecosystem. We strengthened our content and affiliate ecosystem in 2025, making discovery more engaging and supporting higher purchase conversion. We saw strong momentum in our partnership with YouTube, with orders driven by YouTube content more than tripling in the fourth quarter year-on-year. Our collaboration with Meta has also scaled well since its launch in October. By the end of the year, more than 3 million affiliates had linked their Shopee and Facebook accounts. This partnership has extended our ecosystem coverage across multiple channels to the benefit of both our buyers and sellers. I would also like to highlight our strong achievements in Taiwan and Brazil. In Taiwan, GMV growth accelerated to double digits in 2025. Our wide product assortment, highly competitive pricing and differentiated logistics have made us the clear e-commerce leader there. In particular, our large-scale network of Shopee collection points, including automated locker stores, has reinforced our popularity in Taiwan. It addresses Taiwanese buyers' desire for convenience while lowering our cost to serve, allowing us to offer free shipping at a much lower minimum spend. By the end of the year, our network has grown to over 2,800 locations. This last-mile delivery model has contributed to broader user adoption and stronger repurchase behavior while creating a structural moat that is difficult for any peers to replicate at scale. We still see much headroom to strengthen our market leadership and improve e-commerce penetration in Taiwan. Brazil was our fastest-growing market in 2025, delivering robust GMV growth and market share gains while remaining profitable. Mass market penetration improved, thanks to our ability to offer free shipping at the lowest cost structure in the market. Upmarket penetration also improved as our fast, reliable delivery made us more attractive in higher-value categories. In the fourth quarter, buyer waiting time improved by around 1.5 days year-on-year. Over the same period, we onboarded more than 300 new brands to Shopping Mall and Shopping Mall GMV more than doubled year-on-year. With these efforts, newer buyer cohorts are showing higher average spend levels. In 2026, we will accelerate the rollout of our fulfillment capability in Brazil. This will enable us to attract and serve even more sellers, especially in higher-value categories and keep improving our average basket size. Shopee delivered an exceptional 2025, setting new growth records every quarter. This has proven the effectiveness of our strategic choices. It has also validated the efforts we made across the year to constantly improve our execution capabilities. In 2026, we will remain consistent on both our strategies and our focus on high-quality execution. We believe our strong growth momentum and healthy profitability will continue into the year ahead. Next, moving to Monee. We are very proud of the progress Monee has made in both growth and profit while maintaining a healthy risk profile. In 2025, Monee's annual revenue reached $3.8 billion, representing 60% year-on-year growth. Adjusted EBITDA exceeded $1 billion, representing 43% year-on-year growth. Credit business remains our primary driver of growth and profit. In 2025, we grew our credit business in three ways: acquiring more new users, deepening engagement with existing users and expanding credit use cases. First, we acquired many more new users by shifting from a whitelist-based approach to a broader all-can-apply approach. We progressively rolled this out across our markets for both SPayLater Pay and personal cash loans. New user cohorts scaled well with generally positive unit economics. In the fourth quarter, we added 5.8 million unique first-time borrowers. Our active credit users crossed 37 million at the end of the quarter, up more than 40% year-on-year. Second, we deepened our engagement with existing credit users for borrowers with longer credit track record. We offered access to higher loan limits and longer tenure. To target more prime users, we introduced differentiated pricing and more product features, such as first-month interest-free loans. By the end of the fourth quarter, average loan outstanding per user was around $240, a 27% increase year-on-year. Third, we expanded credit use cases beyond Shopee into more consumer spend scenarios, letting us penetrate a much larger addressable market. Off-Shopee SPayLater has evolved from a nascent offering into a meaningful contributor to our overall loan portfolio. By the end of 2025, off-Shopee SPayLater loans grew over 300% year-on-year, accounting for over 15% of our total SPayLater portfolio. In Malaysia, close to 30% of SPayLater usage was already off-Shopee. Our success with off-Shopee SPayLater has been driven by the close attention we pay to user experience. We took great efforts to ensure that SPayLater could be activated in seconds and used seamlessly for in-store purchases. We integrated SPayLater with national QR payment systems across key markets, making it much easier for consumers to use in day-to-day purchases. We also expanded the use of SPayLater into higher ticket offline categories such as electronics and 2-wheelers. We are encouraged by the early traction we are seeing with off-Shopee SPayLater and see substantial headroom to expand its use cases. Our credit business expansion in 2025 was made possible by improvement in our risk underwriting capabilities. This improvement tapped on our rich ecosystem data and advancement in AI. Over the year, we made good progress training our risk models to better understand and map how user behavior evolves over time. We are better able to access individual repayment capacity alongside evolving market risk and dynamically adjust the credit limits as needed. Enhancing our models precision and performance enabled us to scale rapidly in 2025, while still maintaining a stable risk profile. Our 90-day NPL ratio held steady at 1.1% as of the end of the fourth quarter. Looking ahead, I'm incredibly excited about Monee's growth potential. Many of our initiatives are still in early stage with huge opportunities we have yet to capture. We are also making good progress growing our products and services beyond credit from digital banking to insurance and more. We believe Monee will be a significant long-term profit contributor for us. Next, turning to Garena. 2025 was a blockbuster year for Garena. Bookings grew 37% year-on-year and adjusted EBITDA grew 38% year-on-year. Free Fire expanded its reach and scale globally, and we saw solid momentum across our broader portfolio from Arena of Valor to new titles such as Delta Force and EA SPORTS FC Mobile. Free Fire's journey over the last 8 years has been truly special. It is remarkable for a franchise of this vintage to still be growing so fast. Free Fire has now achieved two consecutive years of bookings growth exceeding 30%, with 2025 bookings nearly double the level reported in 2023. Even at this massive scale, average daily active users in 2025 continued to grow year-on-year. Free Fire's success is driven by our ability to consistently deliver high-impact experiences that bring communities together. 2025 was a defining year in this regard, showcasing our excellent execution across a full spectrum of major in-game and real-world initiatives. We delivered a content pack year. In Q1, we launched NARUTO SHIPPUDEN Chapter 1. In Q2, we released our eighth anniversary map, Solara. And in Q3, we launched the Squid Game collaboration and NARUTO SHIPPUDEN Chapter 2. This blockbuster year was the product of more than 2 years of intense preparation, collaboration and game development. We started working on the NARUTO SHIPPUDEN project in 2023 when the global game industry was struggling with the post-pandemic headwinds. We knew this project required a long development time line. In that difficult time, the easier path would have been to focus on smaller shorter-term wins, but we were convinced that this was the right thing to do and remain committed to the long-term vision we had for the project. Our conviction, patience and hard work has been hugely rewarded with the collaboration's resounding success. Garena's culture of always prioritizing what is best for our players even through hard times has sustained Free Fire's popularity and relevance, making it an evergreen game. 2025 was also a big year for our Esports ecosystem. The Free Fire World Series Global Finals held in Jakarta in November marked a historical moment for the franchise. More than 600,000 players competed worldwide across grassroots qualifiers, regional leagues and global finals. This earned Free Fire the Guinness World Records title for the Largest Mobile Team-Based Esports Tournament. Over the past 8 years, we have built Free Fire into more than just a game. It is now a global franchise spanning gameplay, social engagement and real-world experiences. This approach has deepened the game's emotional connection with players and continues to fuel its organic growth. We are already laying the groundwork for Free Fire's next phase, including preparation for its landmark 10th anniversary in 2027. Beyond Free Fire, EA Sports FC Mobile has delivered a strong early performance. Since its launch in October, it has become the most downloaded mobile game in Vietnam according to Sensor Tower. We hosted FC Pro Festival 2025, a flagship esports and fan event in Ho Chi Minh City. The event was incredibly popular, reaching 18 million viewers online. To build excitement for event, we brought in global football icons, Luis Figo and Ricardo Kaka to play with local footballers and influencers in a friendly match. Our success with this game demonstrates our ability to localize the global franchise through deep engagement with fan communities on the ground. We look forward to further strengthening our long-standing partnership with EA. We are very proud of Garena's sustained success across Free Fire, our long-standing published games and the exciting new titles we have added to our portfolio. Garena is entering 2026 with strong momentum. We will keep delivering high-quality content and experiences to our global gaming community. As we enter 2026, we see exciting opportunities across our businesses and markets. Our excellent performance in 2025 has strengthened our conviction in our operational strategies. We will double down on executing these strategies with excellence in the year ahead. As always, we greatly appreciate your trust and support along the way. We look forward to delivering another strong 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 38% year-on-year to $6.9 billion in the fourth quarter of 2025 and 36% year-on-year to $22.9 billion for the full year of 2025. This was primarily driven by growth in Shopee and Monee. Our total adjusted EBITDA was up by 33% year-on-year to $787 million in the fourth quarter of 2025 and up by 75% year-on-year to $3.4 billion for the full year of 2025. On Shopee, gross orders increased 30% year-on-year to $4 billion in the fourth quarter of 2025 and GMV increased by 29% year-on-year to $36.7 billion in the fourth quarter of 2025. Our fourth quarter GAAP revenue of $5 billion included GAAP marketplace revenue of $4.3 billion, up 36% year-on-year and GAAP product revenue of $0.6 billion. Within GAAP marketplace revenue, core marketplace revenue, mainly consisting of transactional fees and advertising revenues was $3.6 billion, up 50% year-on-year. Value-added services revenue, mainly consisting of revenues related to logistics services was $0.7 billion. For the full year of 2025, GAAP revenue of $17 billion included GAAP marketplace revenue of $15 billion, up 34% year-on-year and GAAP product revenue of $2 billion. Shopee adjusted EBITDA was up by 33% year-on-year to $202 million in the fourth quarter of 2025. Full year adjusted EBITDA was $881 million for 2025 compared to a full year adjusted EBITDA of $156 million for 2024. Monee GAAP revenue was up by 54% year-on-year to $1.1 billion in the fourth quarter and up by 60% year-on-year to $3.8 billion for the full year of 2025. Adjusted EBITDA was up by 25% year-on-year to $263 million in the fourth quarter of 2025 and up by 43% year-on-year to $1 billion for the full year of 2025. As of the end of December, our consumer and SME loans principal outstanding reached $9.2 billion, up 80% year-on-year. This consists of $8.2 billion on book and $1 billion of booked loans principal outstanding. Nonperforming loans past due by more than 90 days as a percentage of total consumer and SME loans was 1.1% at the end of the quarter. Garena bookings grew 24% year-on-year to $672 million in the fourth quarter and grew 37% year-on-year to $2.9 billion for the full year of 2025. GAAP revenue was up by 35% year-on-year to $701 million in the fourth quarter and up by 26% year-on-year to $2.4 billion for the full year of 2025. The growth was primarily due to the increase in our active user base as well as the deepened paying user penetration. Garena adjusted EBITDA was up by 26% year-on-year to $364 million in the fourth quarter and up by 38% year-on-year to $1.7 billion for the full year of 2025. Returning to our consolidated numbers. We recognized a net nonoperating income of $62 million in the fourth quarter of 2025 compared to a net nonoperating income of $28 million in the fourth quarter of 2024. For the full year of 2025, nonoperating income was $296 million compared to nonoperating income of $117 million for the full year of 2024. We had a net income tax expense of $210 million for the fourth quarter of 2025 compared to net income tax expense of $89 million in the fourth quarter of 2024. For the full year, our net income tax expense was $651 million compared to $321 million for the full year of 2024. As a result, net income was up by 73% year-on-year to $411 million in the fourth quarter of 2025. For the full year, net income was $1.6 billion as compared to net income of $448 million for the full year of 2024.

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

[Operator Instructions] Your first question comes from the line of Pang Vitt from Goldman Sachs.

Two questions from me. The first question is on Shopee. Can you provide more details on how you plan to achieve the target growth in 2026, while maintain at least flat year-on-year absolute EBITDA? What assumption in specific are you making regarding the competitive landscape? And given the trajectory of lower year-on-year margin potentially, what are the key investment areas? And how long should we expect the investment to last? That's question number one. Question number two, this will be on Monee. The loan book grew very strongly, closing the year more than 80% year-on-year. Can you elaborate on the key drivers of this strong performance? Was this primarily driven by new products, new market pricing or stronger demand? Or how should we think particularly about growth in this year, 2026? Likewise, how should we think about the EBITDA margin trend going forward as well for the segment?

If we start from the Shopee side, the first question, I think the -- as Forrest mentioned in the opening, there are a few areas we are investing for growth. If you start with the South Asia, essentially, there are kind of two core elements of this. The first element is to increase the share of wallet of the core users. Second is to increase the buyer base. If you start with the first one, the thing we are doing essentially are kind of similar to what we did before, but further enhanced in 2026 is to have better user experience through our logistics. For example, the instant delivery, same-day delivery, so users have a better experience. On top of the general improvement of our delivery qualities, if you're in South Asia, if you try our services, you will see a general faster deliveries and better reliability over the year. We want to continue to do that. The second part is to have a bigger fulfillment network. And I think this will both, reducing the speed of user will receive item because we can move the items closer to the users before the user actually ordered the items. I think in South Asia, most of countries have seller concentrated in the capital regions. So if you're after capital regions, having a warehouse closer to your area is a big speed improvement. But not only the speed, but also the reliabilities of the services and also helping the seller to offload many of their work, essentially to make it easier for sellers to sell our platforms. The other area is to increase the wallet share of the VIP programs, not only sort of like offering better service for our own -- through our own platforms, we are working with many different external partners to offer benefit to the VIP users as well. As you probably can see that we work with OpenAI and ChatGPT. We are also working with many local partners in different countries, and there are many global and local partners pending in the process. The -- again, this is on top of the many other things we are doing, for example, the price initiatives to make sure that our platform is always price competitive. We also continued the effort on the content side. Our content share of businesses has been growing over the years, more than 20% already. And I think that trend still will continue, not only for our own content, but we work with external partners like YouTube, like Facebook apps, and we are discussing more collaboration for the external content providers as well for this. Again, this is a broader segment of increasing the wallet share for our core users. Another part of the effort, as I shared earlier, to increase the buyer base. I think the -- if you look at where we are right now versus, let's say, a year ago, one of the difference, you will see that our gross unit economics has been improved meaningfully with the high take rate through the ad effort and also part of the commission effort, we have essentially a higher take rate on the top line, but also reduce our cost to serve essentially for the logistics plus payment. Essentially, this is the raw cost to serve with the better gross margins, there are more and more users we can serve in a profitable way. So this enables us to be able to essentially serve a larger group of users. And what we are doing in 2026 is essentially to reach out those users to convert them to our platforms and hence, enhance the overall -- the MTUs -- the MAUs for our platforms. So that's kind of a broader theme of what we are doing in South Asia. In Brazil and Taiwan, many things are similar, but I just want to highlight a few things that's specific to the market as well. In Brazil, we have been operating with a much efficient logistics network compared to what's available to our -- to the other players in the market with much lower cost. And we are able to run the businesses profitably with sort of a much lower basket size. With this, we would like to essentially build on top of this to serve the high-end customers well over time in a higher basket size categories. In order to do that, there are essentially three things that's important. One is to increase the speed of deliveries. I think as Forrest mentioned in the opening, we have reduced the shipping speed over time meaningfully. -- like if you compare Q4 this year versus Q4 the year before -- sorry, I mean 2025 versus 2024, you will see 1 to 2 days difference on the delivery time in Brazil. I think that's very important to make sure that the user gets the item faster with a lower cost without impacting the cost. That's very important. Second one is the fulfillment network that we are building in Brazil. We have been ramping up this in the past quarter, but 2026 is really time that we're going to grow this much larger. I think we spent quite a few months to get all the detail right, the system right, get the location right, get the process right. I think it's a time to actually to grow this much faster. The third one is to make sure we have all the right sellers for certain particular categories, like, for example, auto electronics, et cetera, but also for the more branded sellers coming to our platform. I think with all the three elements coming in place, I think this will enable us to reach out to a new segment that we are not able to serve in the market, right? I think in Taiwan, we have a kind of quite special network we built for our deliveries. I think in order for us to capitalize on that, we also start building the fulfillment part as well to have an integrated operation. So not only sort of just, but it's an integrated operation with our local networks. So we are able to serve the users in a much lower cost end-to-end, but also faster speed compared to what they experience before with the other networks in the market. Yes. So all in all, this is kind of the things we are doing. And many of this has an investment cycle as well. If you look at the fulfillment network, there will be a period of time we build it up, but there's a clear investment cycle come with it rather than that is ongoing perpetual investment that, for example, if you look at the faster deliveries we're building, I think there is a pure time that we will scale the delivery fleet, et cetera. It's a separate fleet from the typical SPX services. For example, if you look at the VIP program, there's a pure time that we will kind of educate the market, but -- and also attract our partners. As we get everything in place, I think the cost structure will be a lot better. I think it's been proven in many other markets, as you probably been aware. If you look at the sort of the overall profitability margins, our Q4 EBITDA margin is around 0.55 as you can see. Compared to the year before 2024, we are actually improving on the margins. If you look at over the years, in the early part of the year in 2025, we guided the market to grow around 20% for our top line. Over the year, we actually realized that we are able to grow the businesses much faster. We end up with much higher than that. If you look at the year-to-year growth, if you look at Q4 growth, we grow much larger, much higher than 20%. I think essentially over the year, we've realized that there are areas we are able to drive the market to grow. And we also learned that there are different levers that we can pull to drive the market growth. And 2026 essentially is extension from where we are in Q4 2025. And if you look at sort of like Q4 2025, if you look at the end of the year 2026, I do believe that we are able to expand the profitabilities, the margin there as well. And this trend can continue over the years. And I think we talked about the 2% to 3% margin for e-commerce businesses over time. I think the belief is still clearly there, and we will demonstrate it to the market over the years. And at the same time, we also believe that the market potential is probably larger than kind of many projections before. And the 2026, as we shared earlier, we are able to grow around 25%. And of course, the -- we will observe how the market behave over the years and over the quarters. I think the core thing for us is, I think the business is I think, is in a shape that we are very confident that there are things we can do to drive the business growth and the things are within our control and the things we are doing has a clear investment cycles that we can drive over time. Regarding your question on the competitive landscape, I think what we observed is relatively stable competitive landscape across most of our markets. Yes. And I think that we didn't observe anything very different from what we see from last quarter. I think that's the sort of a question to the e-commerce side. On the Monee businesses, there are multiple drivers driving the growth. On the broader scale, we see that there is a different phase of our businesses that will roll out in different markets. There are also different products we roll out in different markets in different phases. For example, the early market that we start our financial service businesses was Indonesia. So clearly, Indonesia was the first country that grow much faster than others. Then over time, we started kind of like the services in countries like Thailand, Malaysia, et cetera. So these kind of countries will catch up on the growth. And the initial phase of those new market clearly will grow faster than the market has been there for quite a period of time. Another example would be like Brazil. If you look at -- essentially, it's actually our latest market when we launched many of our products, Brazil also in a pretty high growth phase as well. The other drivers on the product side as well. In most of the countries, we started with SPayLater, which is our consumption loans. So that's the first growth driver. And then later, we roll out the cash loans, the personal cash loans. We also roll out the off-Shopee's and then the cash loan and off-Shopee -- off-platform loans will be the growth driver. So if you look at the growth, the on-Shopee side, we still see more penetration possible on Shopee. And even within SPayLater, we have differentiated products for different users, especially for the more higher income segment. We offer a differentiated product with longer tenure, slightly lower interest rates, et cetera, to those segments. So we still see opportunity to grow this segment. And for the off platform lending, I think we shared quite some in the opening as well. For example, in some countries like in Malaysia, we see the off-Shopee SPayLater has been 30% of the overall portfolio already. And I think all these are driving the growth for our loan book. Regarding the margins, I think the margin influenced quite a lot by the country mix, product mix and also whether we see a good opportunity to acquire users. I think it might fluctuate a little bit quarter-to-quarter. But the fundamental of this is how is our risk management capabilities that we see. We are seeing very stable risks. If you look at a particular product for a particular market, the risk is very stable for us. You can see this from our NPL number as well. And we track this very closely internally to make sure that we don't sort of like grow the loan book because we want to grow the loan book on the top line. We want to do it very prudently. At the same time, we actually upgrade our risk management models over the years, especially with many of the new AI technology. We're experimenting with the new AI -- new risk model with the transformer structure as well to do a sort of a long sequence data training fit into our model to utilize many of the e-commerce data that we are not able to use in the traditional risk modeling, and it has been showing us very good performance. And so many of this will help us to manage our risks to reach out to the user base we are not able to serve before so that we can grow the loan books over time.

Your next question comes from the line of Piyush Choudhary of HSBC.

First question is on Shopee. You have elaborated on various investment buckets. Could you also elaborate on how long these investment cycle could last in the context of how we should think about margins for 2027? And what are the likely deliverables from your partnership with Google to deepen AI-powered solutions for Shopee? And second question is on Garena. Could you talk about the outlook for the booking growth in 2026, pipeline for any IP collaborations which you can share?

For the investment cycle, as I shared earlier, I think for different initiatives, there are different investment cycles and also for different markets, there are different investment cycles. So it's a little bit sort of like tricky to generalize it, I guess, from a top-down perspective. But I -- as we guided in the opening that we do want to make sure, number one, that the total probability in the absolute numbers in 2026 is better than 2025. And also, if you look at the profitability levels, I do believe that if you look at sort of like end of the year -- over the years, I think it will not be worse than Q4 2025 and it should be able to grow over years. And if you look at -- we're not providing guidance, let's say, for FY 2027 yet, but as a medium-term to long-term trend, I think the 2% to 3% EBITDA margin, I think it's well achievable based on what we see so far. It's in a way, our choices on how much we want to draw on the margins versus the growth levers that we have in our hand. From what we see, it's -- we don't have any concern on that. In terms of the partnership for -- with Google, we are still in the process of developing the product. And I think it shouldn't take too long, I believe. I think when we have the product ready, I think we'll be able to share with everyone. It's largely sort of working with -- we've been working with Google for many years on Google Shopping and Google Ads and many other things like YouTube as well, so this is extension of our partnership.

Regarding the outlook for Garena, at this moment, we still see the double-digit growth for Garena for 2026. And in terms of the collaborations pipeline, as we shared, we are super excited and motivated by seeing the success of the collaboration with IP such as NARUTO. Actually, this year, we're going to extend that IP collaboration. So this probably the delivery will be around Q3, so based on our current time line. And we are also actively working with other potential like IP collaboration. Meanwhile, this year is a big football year for FIFA World Cup. So -- and we realized actually the global football community has a very, very high overlap with our global gamer community. So during the FIFA World Cup time, so we're going to have a lot of like football-related promotion as well.

Next question comes from the line of Alicia Yap of Citi.

Two questions here. Number one, could management provide some insights into the retentions and also the renewal rates for your VIP member subscription program? And then furthermore, if you can give us how does the VIP members influence the different purchasing frequencies and also the preferred product category? And also, are there any difference between the behavior in the customer profile across the different countries? And how does this affect your strategy? And then second question is on AI. So I wanted to ask, given like can management share with us on your investment priority given how are you prioritizing your investment given -- so how are you prioritizing investment between the e-commerce, Fintech and AI amid the latest competitive environment, and also the importance of the AI initiative. So if management can share how you are leveraging your synergies between your three core business to strengthen your competitive advantage and also to enhance your ecosystem value?

For the Shopee VIP program, it has been growing quite a lot over the past few months. In some countries, it has been more than 15% of our total GMV for the VIP members. I think we do believe that this will grow further to double or triple from where we are right now. The retention has been pretty good actually. The renewal rate -- so one of the core challenge historically for similar program in our region is the payment success rate sort of when they roll from sort of 1 month subscription to another, many people drop off simply because there's no credit card available for many of our users in our region versus if you look at the more credit card market. I think we saw this by working closely between Shopee and Monee to enable the smooth payment process for our VIP program. And as a result, our kind of the subscription retention rate has grown from 40% to 70%, let's say for Indonesia over the past few quarters. This is a big achievement for us in terms of how we can retain the VIP members on an ongoing basis. And in term -- for most of the VIP members, if you look at the average purchasing, we do see that much higher frequent purchase and sometimes with a higher basket as well. I think overall, if you look at the general number, the VIP members spend 30% to 40% more than the average. For different markets, actually, we see quite similar behaviors in different market. I think probably the difference, I guess, in the market is probably the offerings because there are different preferences in different market in terms of user behaviors and what people care about. So we actually tailor the VIP offering quite customized tailored for each of the local market. I think that's probably more the difference than the sort of the other behaviors. On the investment front, so if you look at our different businesses, our Monee businesses is a very profitable businesses. And for most of the new user growth or for most of the new initiatives, it comes with a quite positive customer life cycle value. So it's kind of like -- so in a way, every initiative has a positive ROI. I think if you look at the e-commerce side, we do spend quite a lot of effort on the AI. I think you mentioned about AI investment there. For every -- for the investment on the e-commerce for AI, we also look at the positive return of investment across the initiatives. For example, if you look at one of the area we spend on AI is our search recommendation and also ad systems. The uplift on our ad take rate is a consequence of many of our AI efforts. For example, how do we actually expand the description for our products, we can understand the product better. For example, how can we expand the queries from the users, we can understand user intention better. Recently, we also rolled out a multimodal search in our platform as well. So user can search a picture plus a long description, and we are able to serve that just similar to how Gemini or ChatGPT would do. I think all those AI investment has a clear ROI. We also spent quite a lot of effort using AI to help our sellers. For example, if you go to many of our countries, you can talk to the sellers with the help of AI already. So we built an AI chatbot for our sellers. Our sellers can customize it for their own purposes. This will help the seller to reduce their manpower and also make it not only reduce cost, but also have the better upsell for the buyers. And we also have tools for the seller to create videos and picture descriptions for their products, et cetera. All those typically come with a fairly positive return on investment for our ecosystems. For the synergy across our businesses, clearly, there is a lot of synergy between e-commerce and financial service businesses. The financial services are essentially leveraging a lot of data, a lot of user behaviors from Shopee to be able to risk assess the users. And we still believe, as I shared earlier on the previous questions, we still believe there's a sizable room for the money to penetrate the Shopee user base there, not only for credit, but also for our banking businesses, insurance businesses, our payment business, et cetera. Our payment -- our Monee business also work with our game site to help the game on the payment process as well that is a collaboration with gaming business from Shopee as well in terms of the merchandising, in terms of the user acquisition side. So there are different type of collaboration among our businesses.

Your next question comes from the line of Divya Gangahar of Morgan Stanley.

My first question is on the Brazil space. So could you comment if you expect GMV growth in Brazil to accelerate this year given all that we are doing on the fulfillment capability? And what kind of impact would that have on our AOVs? Are the AOVs still significantly lower or 1/3 of the market leader? And what kind of gap do you expect to be able to cover with this fulfillment uplift? Could you also comment on what the penetration levels for Shopee PayLater in Brazil are? And should that also see a significant uplift this year? So that's my first question on Brazil. And my second question is on the content ecosystem that you alluded to. Could you comment on where do you see the e-commerce content ecosystem plateauing in ASEAN specifically? And what are the unit economics now versus shelf e-commerce for us? And how is our market share trending in this?

For Brazil, we come with a pretty high growth rate in 2025. We do believe the growth will continue in 2026. We don't have a guidance for a particular country on the growth rate. But in general, we will see pretty good growth in the market. We also believe that we will outgrow the overall market in Brazil. On the AOV, we do believe that the AOV will, over time, grow. The gap with [indiscernible], I think it will still have, but I think we will narrow down the gap over time. For the SPayLater penetration in Brazil, it's still in a very early stage, honestly. I think we grew quite a lot in Brazil. And the penetration in Brazil is still -- I think essentially, we start Brazil a lot later in other countries. And the penetration level in Brazil is still similar to the early time of what we observed in our early markets. So we believe the trend will continue in terms of the penetration of SPayLater in Brazil in 2026, similar to what we observed in other Asian markets. For the content ecosystem, we don't think it's plateauing yet for our platform. I wouldn't comment on other platforms, but for our platform, we do believe there are further room to grow in the coming quarters. The unit economics has been improving over years. I mean, sometimes there's a slight fluctuation from month-to-month, but general direction is the economics still improving over the time. I think the gap between the content ecosystem and the non-content unit economics will be narrow over time, and it will not be too much difference in the future.

This concludes our question-and-answer session. I would like to turn the conference back to Mr. Elson Choi for any closing remarks.

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

Thank you for attending today's call. You may now disconnect. Goodbye.