Sea's Cloud Segment Could Weigh on Profit

Dow Jones10-22 18:06

1006 GMT - Sea Cloud as a new business segment could weigh on group-level profitability, says Citi Research analyst Alicia Yap in a note. The launch came as an unexpected development for Yap, though the move closely resembles the path taken by Alibaba Cloud and other hyperscalers, which initially built the infrastructure for internal workloads before commercializing their space capacity. However, building a competitive artificial-intelligence enterprise cloud platform requires significant capex, Yap notes. Even though Sea had $7.8 billion in net cash as of June, scaling aggressively could mean that existing cash reserves and organic cash flow from core businesses might face funding constraints without external financing or disciplined capital allocation, Yap adds.

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