Sea Ltd (SE.US) reported third-quarter revenue that exceeded Wall Street estimates, driven by robust discretionary spending on its e-commerce platform Shopee.

The company posted Q3 revenue of $5.986 billion, up 38.3% year-over-year (YoY) and surpassing analysts' expectations of $5.65 billion. Gross profit rose 39.7% YoY to $2.599 billion, while net income jumped 144.6% to $375 million. Earnings per share (EPS) stood at $0.59, a 145.8% YoY increase but below the consensus estimate of $0.77.

Shopee’s revenue grew 35% to $4.3 billion, outperforming the projected $3.99 billion and serving as the key growth driver. Gross merchandise volume (GMV) increased by 28%. Despite fierce competition from rivals like TikTok Shop and Alibaba, Shopee attracted budget-conscious shoppers through pre-holiday discounts, flash sales, faster logistics, and financial incentives such as cashback, buy-now-pay-later options, and loyalty rewards.

Sea now expects Shopee’s GMV to grow over 25% this year, up from its prior 20% forecast. CEO Forrest Li recently highlighted artificial intelligence as a catalyst for Sea’s next growth phase, with increased investments in AI integration across customer service and gaming operations.

Garena, Sea’s gaming unit, saw bookings surge 51%—the highest growth since 2021. Improved profitability has lifted Sea’s stock over fourfold from its 2024 lows, though shares have declined more than 20% in the past two months amid valuation concerns and intensifying competition.