As it turns out, though Sea stayed in the black in the first quarter, net income sequentially fell about 80%, while Sea did not even come close to analysts’ estimates of a profit of US$224.4 million. One of the problems is Garena. The once-ascendant gaming unit of Sea – the first of its units to reach profitability and the one that used to prop up Shopee and SeaMoney – is now a laggard. Garena’s revenue fell 43% sequentially in the first quarter to US$539.7 million, Active users are plummeting, while monetization is not what it used to be. Quarterly paying users fell to 7.7% in the first quarter from 10% a year earlier.

It is becoming increasingly clear that the tripartite Sea ecosystem is not as bulletproof as it once seemed. While gaming does not drag down a platform company in quite the same manner as ride hailing, it can still become an albatross around Sea’s neck.

Gaming has always been somewhat of a niche market compared to e-commerce and digital financial services, and Garena post-pandemic has not been able to equal its pandemic-era growth. Shopee and SeaMoney, on the other hand, are rising in tandem. E-commerce and other services revenues rose 50.7% year-on-year to US$2.26 billion in the first quarter, while digital financial services revenues surged 74.9% on an annual basis to reach US$412.8 million.

A word of caution on Shopee: E-commerce is notoriously hard to make profitable, something to which Amazon can attest. The U.S. e-commerce giant did not make a profit until 2003, eight years after its founding. Shopee has been around since 2015 and has yet to record a full-year profit. Alibaba only needed three years to become profitable, but it was operating in the unique China market – unparalleled in size and with a vast amount of low-hanging fruit and minimal competition compared to the markets where Shopee operates.

Sea’s best bet in the long run is probably its fintech unit SeaMoney. While the company’s digital banking license in Singapore has gotten a lot of attention, we are much more interested in the degree to which Sea’s digital banking units in the Philippines and Indonesia (and to a lesser extent, Malaysia) can scale up. In the long run, these aspects of Sea’s business could be instrumental to its future success.