Sea Limited's Gaming Growth Accelerates: Can Garena Push It Higher?

Sea Limited’s SE digital entertainment division, Garena, delivered an impressive first quarter of 2025, driven by the success of its flagship game, Free Fire, which is expected to sustain momentum in the gaming segment throughout the year.

Garena’s revenues grew 8.2% year over year to $495.6 million, while bookings soared 51.4% to $775.4 million. These improvements were supported by strong user engagement, with 661.8 million active users and an improvement in monetization per user. A key driver was the Free Fire and NARUTO SHIPPUDEN collaboration, which significantly drove user retention and marked Garena’s largest anime IP partnership to date.

Garena’s first-quarter operational performance was marked by resilience and efficiency, as evidenced by a robust 59% adjusted EBITDA margin. Free Fire’s engagement remained exceptionally high, with average DAUs approaching pandemic highs, highlighting its popularity and dominance in the global mobile gaming landscape. Beyond Free Fire, titles like Ring of Valor, EA Sports FC Online, and Call of Duty Mobile also delivered solid performances, supporting Garena’s well-rounded growth.

Garena expects to maintain double-digit year-over-year growth in both user base and bookings. SE continues to expand its portfolio, launching Delta Force Mobile across Southeast Asia, MENA and Latin America, already crossing 10 million downloads. Meanwhile, pre-registration for Free City has begun, with a phased launch from May, further supporting a robust 2025 outlook.

SE Faces Strong Rivals in Gaming Segment

SE’s closest competitors are Take-Two Interactive TTWO and Roblox RBLX.

Both Sea Limited and Take-Two Interactive are major forces in the global gaming industry, with solid monetization strategies and strong positions in mobile and online gaming. Sea Limited, through Garena, leads in mobile-first markets with titles like Free Fire, while Take-Two’s strength lies in blockbuster franchises like Grand Theft Auto and NBA 2K. Take-Two’s consistent game updates and new releases keep audiences engaged and drive recurring revenue growth.

Roblox’s strength lies in its platform model, where nearly 100 million daily users (up 26% in first-quarter 2025) create and engage in user-generated experiences. Its bookings rose 31% to $1.21 billion by focusing on large demographics, AI tools and advertising, which enhances monetization. Unlike Garena’s IP-driven model, Roblox thrives on scalability and creator-driven content across global markets.

SE’s Price Performance, Valuation & Estimates

Shares of Sea Limited have rallied 55.1% year to date compared with the Zacks Internet – Software industry’s return of 13.3%.

SE's YTD Price Performance Chart

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From a valuation standpoint, SE appears overvalued, trading at a forward 12-month price-to-earnings ratio of 33.18, higher than the sector’s 26.22X. SE carries a Value Score of D.

SE's Forward 12-Month Valuation Chart

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for SE’s 2025 earnings is pegged at $4.23 per share, which increased 7.4% over the past 30 days. This marks a strong 151.79% growth in earnings compared to fiscal 2024.

Image Source: Zacks Investment Research

SE stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Take-Two Interactive Software, Inc. (TTWO): Free Stock Analysis Report
 
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