S&P turns negative on Meta’s outlook as AI buildout strains cash flow

S&P Global Ratings has revised Meta Platforms’ credit outlook to negative from stable, keeping its AA- issuer rating in place. The agency said the change reflects uncertainty over how long Meta’s capital spending will remain elevated and whether its artificial-intelligence investments will generate enough revenue to offset rising costs.

AI investment raises financial pressure

Meta said in its third-quarter results that 2026 capital expenditure, including principal payments on finance leases, is expected to total $135 billion to $145 billion. The company also reported negative free cash flow of $2.12 billion for the quarter, its first quarterly deficit on that measure, while quarterly capital expenditure reached $34.91 billion.

S&P’s research update forecasts free operating cash-flow deficits of $22 billion in 2026, $71 billion in 2027 and $39 billion in 2028. It said free operating cash flow could remain negative beyond 2028 if spending stays high. The agency also expects Meta’s adjusted leverage to rise above its 1.0-times threshold for the current rating as early as 2027, largely because of future data-center lease obligations.

Rating agency questions timing of returns

S&P said Meta’s ability to monetize its AI investments appears more limited than that of some peers, although it acknowledged potential benefits from improved advertising tools and new products. The agency said it remains unclear when those revenue streams will make a material contribution beyond their associated costs.

Meta has pushed back on that assessment. A company spokesperson told Reuters that Meta “respectfully disagree[s]” with S&P’s view of its AI monetization capabilities and sees significant product and business opportunities ahead that support its credit profile.

Equity plans offer some support

Meta’s investor release said its board approved a new non-voting Class C share class to support capital raising and other corporate purposes. S&P said Meta had announced an aggregate $37.5 billion in underwritten equity offerings and planned an additional $60 billion through an at-the-market program beginning in early 2027. The agency views those plans as credit-positive, but said its forecast still assumes Meta will use debt to cover its expected 2028 cash shortfall.

Sources: Reuters report; S&P Global Ratings research update; Meta third-quarter 2026 results.

Image: Meta’s headquarters entrance sign in Menlo Park, California (file photo). Photo: Josh Edelson/AFP via Getty Images. Axios image source.