The rating stayed. The outlook changed.
S&P Global Ratings revised Meta's credit outlook from stable to negative on October 30 while leaving its AA- rating unchanged. The agency cited uncertainty about the duration and financing of Meta's AI infrastructure spending.
Meta reported negative free cash flow of $2.12 billion in the third quarter and guided to $135 billion–$145 billion in full-year 2026 capital expenditure. S&P's separate free operating cash flow measure is also expected to remain under pressure. Reports of the agency's detailed forecasts disagree on the 2026 and 2028 figures, but both Reuters and other coverage identify a projected $71 billion deficit in 2027.
That is the credit concern: Meta's investment program could require substantial external financing for longer than S&P previously expected. The figures are forecasts, not realized losses, and Meta's reported free cash flow should not be treated as identical to S&P's adjusted measure.
Leverage is the next test
S&P says Meta's adjusted leverage could exceed 1.0 times as early as 2027, a threshold relevant to its current AA- issuer credit rating. That is a warning about future credit pressure, not a prediction that a downgrade will automatically occur when the ratio crosses 1.0.
The agency also points to the financing demands of Meta's expanding data-center footprint, including lease commitments. Those obligations matter to credit analysis alongside conventional borrowing. Meta reported $80.92 billion in long-term debt at September 30, but that balance alone does not capture every obligation considered in S&P's adjusted leverage calculations.
The distinction matters: the outlook revision reflects concern about how quickly investment commitments may grow relative to cash generation, not simply the size of Meta's existing debt balance.
Meta's equity financing plans add another dimension to the credit picture. The company announced approximately $35 billion in common-stock and mandatory-convertible preferred-stock offerings on October 26. The launched offering was subsequently enlarged to approximately $37.5 billion, bringing the total announced financing program to about $97.5 billion when combined with a proposed $60 billion at-the-market stock program. The latter is not a completed sale: Meta has not finalized its timing or terms, and has warned that it may not proceed. Equity financing can reduce the need for additional borrowing, but the announced program should not be treated as $97.5 billion of cash already received.
The disagreement is about AI returns
S&P argues that Meta has less direct ability than some peers to monetize its AI investments, and questions when the associated revenue will materially exceed rising costs. Meta disputes that assessment. A spokesperson said the company sees substantial product and business opportunities from AI and believes those opportunities support its strong credit profile.
The disagreement is difficult to settle with a single revenue figure. Meta says AI already improves engagement, advertising performance and monetization across its existing products. Those benefits may be economically meaningful without appearing as a separate AI revenue line. S&P's concern is whether the resulting cash generation will be sufficient, and timely enough, to support the scale of planned infrastructure investment.
The outlook revision therefore raises a financing question rather than proving that Meta's AI investments lack returns.
Sources
- [1] Reuters, “S&P Global revises Meta's outlook to ‘negative’ on AI spending, cash flow worries”, October 30, 2026, 21:14 UTC, read first-hand via Reuters syndication: the outlook revision from stable to negative, the unchanged AA- rating, leverage above 1.0x as early as 2027 as the threshold for the AA- issuer credit rating, long-term debt of $80.92 billion at September 30, Meta's spokesperson quote, and the $71 billion 2027 free operating cash flow deficit on which published accounts agreeRead source
- [2] Meta Platforms, third-quarter 2026 results, October 21, 2026: 2026 capital expenditure guidance of $135–145 billion and a third-quarter free cash flow deficit of $2.12 billion; figures as verified against Meta's release in ALFW's October 22 coverageRead source
- [3] Meta Platforms, financing announcements, October 26–27, 2026: approximately $35 billion of concurrent common-stock and mandatory-convertible preferred-stock offerings launched October 26 alongside a proposed $60 billion at-the-market program, with the launched offerings subsequently enlarged to approximately $37.5 billion at pricing; the October 26 launch as documented in ALFW's same-day coverageRead source
- [4] On the conflicting free operating cash flow estimates: Reuters' October 30 report gives deficits of $39 billion in 2026 and $71 billion in 2027 and no 2028 figure, while detailed accounts of S&P's report published elsewhere (including Investing.com's, and PPC Land's account of the report, read first-hand) give $22 billion in 2026, $71 billion in 2027 and $39 billion in 2028. S&P's own research note is paywalled and was not read first-hand; this article carries only the 2027 figure both accounts agree onRead source