Is Sea Limited's Aggressive Growth Strategy Hitting a Wall?

Sea Limited’s digital finance ambitions face mounting headwinds as credit risk threatens to undermine profitability. The company’s Q3 2025 financial results reveal a troubling divergence: while DFS revenues surged 60.8%, credit loss provisions exploded 76.3% year-over-year—nearly double the 38.3% overall revenue expansion. This gap signals that aggressive growth is coming at an increasingly steep cost.

The Credit Risk Challenge

The problem stems from SE’s strategy of rapid customer acquisition in lending. Consumer and SME loan portfolios nearly doubled with 70% year-over-year growth, bringing in a wave of first-time borrowers with limited credit histories. While management maintains that the NPL90+ ratio sits at a stable 1.1%, the surge in provisioning tells a different story—management is bracing for potential losses as the portfolio balloons.

Simultaneously, DFS cost of revenues climbed 37.5% year-over-year, driven by heightened collection efforts, transaction fees, and infrastructure investments. As lending becomes more central to DFS profitability, the margin compression becomes harder to ignore. The key question: can SE control credit deterioration as its loan book continues expanding at this velocity?

Intensifying Competitive Pressure

SE’s growth narrative faces competition from well-capitalized rivals. Grab Holdings leverages its super-app advantage, with Financial Services revenue growing 39% year-over-year in Q3 2025, powered by stronger lending and digital banking offerings through GrabFin. Meanwhile, PayPal—a global heavyweight operating across 200+ markets—posted approximately 7% revenue growth to $8.4 billion with robust transaction momentum, underscoring the challenge SE faces from established players with global scale and trusted brands.

Stock Performance Reflects Market Concerns

Sea Limited shares have declined 14.8% over the past six months, lagging the Zacks Computer and Technology sector’s 20.9% advance and underperforming the Internet - Software industry’s 4.6% decline. The stock trades at a forward 12-month P/E of 22.76, below the sector’s 27.87X multiple, suggesting the market has already priced in growth concerns.

Consensus estimates for 2025 and 2026 earnings stand at $3.54 and $5.64 per share respectively—down 1.4% and 3.3% over 30 days—though these still imply substantial year-over-year growth of 110.71% and 59.32%. However, rising credit risk and margin pressure cast doubt on whether SE can deliver on these elevated expectations.

The verdict: SE’s digital finance expansion carries material execution risks that investors should monitor closely.