What happened

Shares of Sea Ltd. (NYSE:SE) dropped on Wednesday following a mixed fourth-quarter report. The internet company beat analyst expectations for revenue, but the bottom line fell well short. The stock was down about 11% at 3:40 p.m. EST.

So what

Sea Ltd. reported fourth-quarter adjusted revenue of $164.5 million, up 72.8% year over year and $54.4 million higher than the average analyst estimate. Digital entertainment adjusted revenue rose 59.2% to $141.9 million, and e-commerce adjusted revenue jumped 61.6% to $9.3 million. Gross merchandise value in the e-commerce business more than tripled to $1.6 billion, while gross transaction value in the digital financial services business more than quadrupled to $1 billion.

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Image source: Getty Images.

Earnings per share was a loss of $0.90, down from a loss of $0.42 during the prior-year period and $0.24 below the average analyst estimate. Operating expenses soared 98% year over year, driven by a 153% increase in sales and marketing spending, which pushed down the bottom line.

The company launched its first self-developed mobile game, Free Fire, during the fourth quarter. It has reached 6 million daily active users, and the company plans to further expand its game development capabilities.

Now what

Sea Ltd. grew revenue at a blistering pace during the fourth quarter, but it was driven by a massive increase in spending. That led to a bigger-than-expected loss, which seems to be the culprit behind the sinking stock price. The same story played out following its third-quarter report in November. Since Sea Ltd. went public last year, its shares are down about 33%.