GSK plc (GSK) Cash Flow Statement

The OCF/NI ratio swung dramatically from 5.83 in 2026Q2 to 0.66 in 2026Q1, suggesting that quarterly net income is heavily influenced by non-cash items and working capital swings. The 2024Q3 net loss of $58M against $2.2B operating cash flow underscores that reported earnings understate cash generation in some periods. This volatility implies that investors should focus on annualized cash conversion rather than quarterly snapshots, as the underlying business appears to generate robust cash flows.

The FCF margin trajectory shows a clear seasonal pattern, with strong second-half performance offset by weaker first quarters, likely due to working capital dynamics and capex timing. Despite the volatility, cumulative FCF over the past year remains healthy, supporting the dividend and bolt-on acquisitions. However, the 2026Q1 FCF of $698M was barely above the quarterly dividend of $643M, indicating that in some quarters, external financing may be needed to sustain shareholder returns.

The elevated capex in 2025Q3 and 2025Q4 (11.6% of revenue) suggests a deliberate expansion of manufacturing capabilities, likely to support Arexvy and long-acting HIV injectables. The lower capex in 2026Q1 (2.9%) may indicate a pause or completion of certain projects, but the overall capital intensity is consistent with a high-fixed-cost biologic manufacturer. This investment is essential to maintain the moat, but it also pressures near-term FCF, warranting monitoring for returns on this spending.

The large positive working capital change in 2024Q4 likely reflects strong collections and favorable payment terms, while the negative changes in most other quarters suggest ongoing investment in receivables and inventory. This pattern is typical for a company with government tenders and seasonal vaccine sales, but it creates lumpy cash flows. Investors should expect continued volatility in operating cash flow as working capital normalizes, but the underlying efficiency appears stable.

The company consistently pays dividends, with quarterly payments around $600-700M, and has resumed buybacks in 2025, though they were absent in 2024. Acquisition spending has been substantial, particularly in 2025Q4 ($2.7B) and 2026Q1 ($1.2B), suggesting a focus on pipeline enhancement. This deployment strategy appears aligned with the 'New GSK' pivot, but the high acquisition outlay may strain FCF if not offset by operational improvements.

The persistent gap between operating cash flow and net income suggests that reported earnings understate the company's cash-generating ability, likely due to large non-cash charges like depreciation and amortization. This divergence is a positive signal for cash flow quality, but it also implies that earnings quality may be affected by one-time items and provisions. The cumulative FCF of $13.2B over the same period supports the dividend and investment program, reinforcing the view that the business is fundamentally cash-generative.