Alibaba Group Holding (HKG:9988) will continue to have large net cash reserves despite a planned increase in capital expenditure for cloud and artificial intelligence, S&P Global Ratings said in a Wednesday release.
The rating agency expects the company to offset the surge in spending with robust cash flow from core e-commerce operations, potential noncore asset sales, and reduced share buybacks.
The e-commerce company plans to invest at least 380 billion yuan in the next three years to boost its cloud and AI capabilities amid intense competition, although the move could strain its near-term cash flow, S&P said.
The rating agency revised its capital expenditure forecasts upward to 93 billion yuan for fiscal 2025 and 122 billion yuan for fiscal 2026.
The increase would slash adjusted free operating cash flow to between 66 billion yuan and 86 billion yuan for fiscals 2025 and 2026.
Still, S&P believes Alibaba's adjusted net cash, including long-term treasury investment, will remain above 200 billion yuan.
Moderate share buybacks and better-than-expected Q3 fiscal 2025 results should support the company's strong cash position, S&P said.
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