S&P Global Ratings revised Meta’s credit outlook from AA- stable to AA- negative on Friday.
The agency pointed to uncertainty around Meta’s elevated capital expenditure, or capex, and its negative free cash flow. It also cited pressure on the company’s balance sheet from the cost of building artificial intelligence infrastructure.
Meta expects full-year capex of between $135 billion and $145 billion. Its third-quarter free cash flow was negative $2.12 billion, marking the first time the company had gone into the red on that measure.
S&P’s concern is less about whether Meta can spend the money than whether its AI investments will earn enough quickly enough. The agency questioned Meta’s ability to monetise those investments against its peers. It said the timing remained unclear for AI revenue streams to make material contributions greater than their rising costs over the next few years.
The agency also said it had become less certain that Meta would reduce spending as previously expected. Rising leverage, which measures debt against earnings, was another key factor in the decision, S&P said.
Meta announced on Monday that it planned to raise $95 billion to help finance its AI initiatives. The plan includes $35 billion in underwritten public equity offerings and a further $60 billion through an at-the-market programme.
Investors have already reacted sharply to the scale of the spending. Meta shares fell 7% after its earnings report, despite a revenue beat. The stock ended October down 15%, its worst month in four years.
A Meta spokesperson said the company respectfully disagreed with S&P’s assessment of its AI monetisation capabilities. The spokesperson said Meta saw significant product and business opportunities ahead that supported a very strong credit profile.
Meta has recently introduced its Muse AI agent app and related foundation models. S&P expects the growth in Meta’s capex to begin flattening in 2028.
The negative outlook leaves Meta at AA- for now. S&P’s action is an early step that could lead to a downgrade of the credit rating itself within the next two years.
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