Li’s shock treatment paid off. In March, Sea reported the first quarterly profit in its 14-year history, $427 million in GAAP-sanctioned net income. Its stock soared 22%. Last week, it said it would hand out 5% raises to most staff. Sea has now more than doubled its market value since November.

Like so many tech startups of its generation, Sea had bled red ink for years. In fact, it lost more than $8 billion since its founding to pay for growth in its e-commerce, games and finance operations. For now at least, Sea is setting a different kind of example: It’s demonstrating that if your underlying business is sound and substantial, you can pull back on subsidies and expansions to break even.

That’s proving a challenge for rivals. Among Sea’s regional competitors, Singapore’s Grab Holdings Ltd. is still losing more than $300 million a quarter, while Indonesia’s GoTo Group’s losses exceed $250 million. Sea may also cause trouble for global tech giants like Alibaba Group Holding Ltd. and Amazon.com Inc., which are both seeking growth in emerging markets. 

“What you’re seeing is a separation of proper, monetizable business models from something that is a work-in-progress,” said Amit Kunal, managing partner of Growtheum Capital, a private equity firm in Singapore, speaking broadly about the tech industry. “Sea read the market much earlier, took appropriate steps — and delivered.”

Eoin Treacy's view

In the Big Picture video on Friday I spent a good deal of time talking about the winnowing process currently underway in the high growth markets that dominated performance during the pandemic. Higher rates and tight credit mean tough decisions have to be made. Only the companies capable of both rising to that challenge and simultaneously making money are likely to survive.
Sea Ltd is on the cusp of completing a yearlong base formation. A sustained move above $90 would confirm a return to medium-term demand dominance.
Grab Holdings is also forming a base and will need to sustain a move above $4 to confirm a return to demand dominance.
GoTo has been forming a base since December.

The ARK Innovation ETF has a broadly similar pattern as it continues to trade below the trend mean.