What happened

Shares of Sea Limited (SE 0.35%) were up 37% as of 11:29 a.m. ET on Tuesday after the company reported better-than-expected earnings for the third quarter.

The e-commerce leader reported a net loss per share of $0.66, which was better than the loss of $0.99 expected by analysts. Revenue of $3.2 billion also beat the consensus estimate of $3.05 billion. 

Worries over slowing growth sent the stock down over 70% year to date, but the company's shift to improving margins could turn things around.

So what

Revenue increased by 17% year over year in the quarter, which looks good enough but is much lower than the 64% rate of growth reported at the start of the year. But with the stock trading at a lower price-to-sales valuation of less than 3 compared to 12 times annual sales a year ago, it's all about expectations.

One thing investors likely jumped on with enthusiasm in the report was management's focus on improving efficiency and profitability. CEO Forrest Li made it clear that the company is adapting to the weaker economic climate to ensure that the business thrives over the long term. 

On this score, Sea was able to show progress, with gross profit up 22% year over year, growing faster than revenue. 

Now what

The company expects the Shopee marketplace to reach breakeven on an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) basis by the end of 2023.

Sea's digital entertainment business is seeing weaker revenue in the near term, causing management to lower its guidance for the segment by $300 million to between $2.6 billion to $2.8 billion for the full year.

Overall, the market cares more about management's tune around profitability. With the stock trading at a significantly lower valuation, it certainly bolsters the bullish case for the stock if management delivers on its goal.