Singapore's Sea Ltd’s quarterly profit missed analysts’ estimates after the company boosted spending to battle competitors in Southeast Asia’s cut-throat e-commerce market.

Shares of Sea Ltd fell 7% after the company reported net income of $375 million for the three months through September, short of the $433 million analysts estimated on average. Revenue rose 38% to $6 billion, topping the $5.65 billion analysts predicted.

Chief Executive Officer Forrest Li has focused on strengthening Sea’s logistics arm, winning over consumers with cheap deliveries. The effort has cemented Shopee’s position atop the regional market, which is expanding as more consumers go online and turn to shopping apps for anything from iPhones to daily groceries. Shopee’s gross merchandise value, or the total value of goods sold, is set to increase more than 25% this year rather than the 20% projected previously, Sea said.

Shares of Sea have more than quadrupled from 2024 lows as its earnings performance has improved. But they’ve lost more than 20% in the past two months over concerns its valuation has become too high given the increasing competition. Emerging players like Shein and PDD Holdings Inc.’s Temu are also looking to break into the rapidly growing market of 675 million people.

Li said last month that artificial intelligence is set to help Sea with its next growth phase. The company has boosted investment in the technology, integrating AI into its daily operations in areas such as customer service and gaming. Its gaming business Garena boosted bookings by 51% in the quarter, the most since 2021.

To attract more online shoppers, Sea has also focused on improving customer experience by building its own in-house delivery network, called SPX Express. SPX now handles the majority of Shopee’s billions of parcels annually.