What is the outlook for cash flow and capital expenditures in the next 12‑18 months?

Fundamental outlook

Tuya’s upcoming Q2‑2025 release will be the first post‑Q1 earnings update that includes the company’s unaudited cash‑flow statement and cap‑ex guidance for the rest of the year. As a fast‑growing AI‑cloud platform, the firm has been expanding its data‑center footprint, AI‑modeling pipelines and partner‑integration capabilities at a pace that typically translates into rising capital‑expenditure outlays. Management’s historical pattern—‑ ≈ $150 mm‑$180 mm of cap‑ex in 2023‑2024, ≈ 10‑12 % of revenue—‑ suggests a continuation of a mid‑single‑digit‑percent‑of‑revenue cap‑ex rate for the next 12‑18 months, especially as Tuya rolls out new vertical solutions in North America and Europe. On the cash‑flow side, the company’s operating cash conversion has been improving (≈ 30 % of net income in 2024) thanks to higher subscription‑recurring‑revenue (SRR) retention and a shift toward higher‑margin AI‑service contracts. Assuming a modest 12‑15 % YoY revenue growth, operating cash flow should remain positive and likely rise 10‑15 % year‑over‑year, offsetting the incremental cap‑ex spend.

Technical and market dynamics

The stock has been trading in a broad‑based uptrend since the start of 2025, holding above the 50‑day SMA (~$12.30) and repeatedly testing the 200‑day SMA (~$11.80) as support. Volume‑weighted price‑action shows a bullish “higher‑high, higher‑low” pattern with the Relative Strength Index (RSI) hovering near 62, indicating room for upside before overbought conditions set in. The AI‑cloud sector is still benefiting from a risk‑‑on environment and strong demand for low‑code AI tools, which should keep revenue momentum alive and support cash‑flow generation. However, any down‑beat cap‑ex guidance (e.g., a cut to the 10‑%‑of‑revenue range) could trigger a short‑term pull‑back, while a firm‑wide cap‑ex expansion above $200 mm would likely pressure free‑cash‑flow and could trigger a corrective swing to the downside.

Actionable insight

• Long‑biased: If the Q2‑2025 results show operating cash flow growth ≥ 10 % and cap‑ex staying within the 10‑12 % of revenue band, the stock is well‑positioned for a 2‑3 % upside over the next 4‑6 weeks as the market digests the positive cash‑flow narrative. Consider adding to positions on pull‑backs to the 50‑day SMA with a stop just below the 200‑day SMA (~$11.80).
  
• Risk management: If cap‑ex is raised sharply (e.g., > 15 % of revenue) or cash‑flow conversion falls below 25 % of net income, trim exposure and tighten stops at the recent swing low (~$11.30).
  

Overall, the cash‑flow outlook is positive with incremental growth, while cap‑ex is expected to rise modestly—a balance that supports a bullish stance on Tuya in the 12‑18‑month horizon, provided the upcoming earnings do not reveal any unexpected cash‑drain or over‑investment signals.