S&P Global revises Meta's credit outlook to negative over AI spending and cash flow concerns
S&P downgraded Meta's credit outlook from stable to negative, citing uncertainty around its AI investments and negative free cash flow.
At a glance
- S&P revised Meta's credit outlook from AA- stable to AA- negative on Friday.
- Meta reported negative free cash flow of $2.12 billion in Q3 2026, its first cash flow deficit.
- The company plans to raise $95 billion to fund AI initiatives through equity offerings.
S&P downgrades Meta's credit outlook
S&P Global Ratings revised Meta Platforms' credit outlook from AA- stable to AA- negative on Friday, citing concerns over the company's elevated capital expenditures and negative free cash flow.
The rating agency stated the outlook revision reflects "uncertainty" about Meta's ability to monetize its AI investments relative to peers facing similar data center buildout costs.
Financial performance and AI spending
Meta posted negative free cash flow of $2.12 billion in the third quarter, marking the first time the company has reported a cash flow deficit. The company expects full-year capital expenditures to range between $135 billion and $145 billion.
Following the earnings report, Meta shares declined 7% despite beating revenue estimates. The stock finished October down 15%, its worst monthly performance in four years.
Meta's response and funding plans
A Meta spokesperson said the company "respectfully disagrees" with S&P's assessment of its AI monetization capabilities, citing "significant product and business opportunities ahead of us."
The company announced plans to raise $95 billion to fund its AI initiatives, beginning with $35 billion in underwritten public equity offerings, followed by an additional $60 billion through an at-the-market program.
S&P's long-term perspective
S&P indicated it expects Meta's capital expenditure growth to begin flattening in 2028, but noted it is "less certain that it will curtail its spending as previously anticipated."
The agency's highest credit rating is AAA, with anything below BBB classified as junk bonds. Meta's AA- rating remains investment grade.
Market reaction
The credit outlook revision comes amid broader investor concerns about Meta's AI strategy and its impact on profitability. Analysts have been watching closely as the company navigates one of the largest equity raises in corporate history.
Sources: CNBC.
Questions and answers
- Why did S&P revise Meta's credit outlook?
- S&P cited uncertainty around Meta's elevated capital expenditures and negative free cash flow, questioning its ability to monetize AI investments.
- What is Meta's current credit rating?
- Meta maintains an AA- rating, which remains investment grade, though the outlook was changed from stable to negative.
- How much is Meta planning to raise and why?
- Meta plans to raise $95 billion through equity offerings to fund its AI initiatives and data center buildouts.
