S&P Global Ratings on Friday revised its outlook on Meta Platforms to negative from stable, citing uncertainty about Meta's elevated capital spending and negative free cash flow. The rating itself stays at AA-. S&P now expects Meta to post a free operating cash flow deficit of $71 billion in 2027.

The agency said Meta's ability to monetize its AI investments is more limited than that of its peers. It also expects Meta to fund its 2028 cash shortfall entirely with debt.

What Changed

AI-generated summary, reviewed by an editor. More on our AI guidelines.

The spending forecast jumps

Meta forecast full-year capital expenditure of $135 billion to $145 billion last week, when it reported third-quarter results. S&P projects $140 billion for 2026. Its forecasts for the next two years moved much higher: over $225 billion in 2027 and $252 billion in 2028, up from previous estimates of $163 billion and $178 billion.

Capex in the third quarter alone reached $34.9 billion. Meta posted negative free cash flow of $2.12 billion for the quarter, going into the red for the first time.

S&P previously projected that Meta would return to positive free operating cash flow in 2028. It now says elevated spending could keep it negative beyond that year. Every deficit figure after the third quarter is an S&P projection, not a reported result.

Leases push leverage toward the line

Meta's leverage increased from 0.1x in 2025, primarily because it leased data-center capacity rather than issuing debt, S&P said. Its future lease obligations reached $355.7 billion as of Sept. 30, 2026, up from about $279 billion in the second quarter. Long-term debt stood at $80.92 billion on the same date.

S&P expects Meta's adjusted leverage to be 0.3x at the end of 2026, 1.1x in 2027 and 1.3x in 2028, when the leases commence. The threshold for the current rating is 1.0x. The agency could lower the rating if leverage stays above that level on a sustained basis and free operating cash flow remains negative beyond 2028. S&P's highest rating is AAA, and anything below BBB is junk.

"If capex remains elevated and continues to grow at a faster pace than we expect, credit profiles will continue to weaken and cash flows will be negative," said Naveen Sarma, US media and telecom sector lead at S&P Global Ratings.

Meta pushes back

A Meta spokesperson pushed back on the revision in a statement. "We respectfully disagree with S&P's assertion about Meta's AI monetization capabilities," the spokesperson said. "We see significant product and business opportunities ahead of us, supporting our very strong credit profile."

Third-quarter revenue rose 26.1%, led by a 25.9% expansion in advertising revenue. S&P said Meta intends to monetize its AI spending through improved advertising tools and new revenue from agentic apps such as Muse. The agency said it is unclear when these revenue streams will generate material contributions that exceed their rising costs over the next few years. Several of Meta's peers already earn money from their data center investments by leasing compute capacity to third parties.

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Shareholders asked to help pay

Investors sent Meta shares down 7% after the earnings report, despite a revenue beat. The stock finished October down 15%, its worst month in four years.

On Monday, Meta said it plans to raise money for its AI initiatives, first through underwritten public equity offerings and then through a $60 billion at-the-market program. That program begins in January 2027.

The day before, S&P lowered its outlook on Broadcom to stable from positive, saying the chipmaker's rapid AI growth was increasing its exposure to a few big customers. Earlier this year it cut Oracle's credit rating to BBB-, one notch above junk, because of a heavily leveraged balance sheet.

The agency still expects Meta's capex growth to start flattening out beginning in 2028. "Given the lack of clarity around the company's future capex and its very ambitious multi-year AI investment plans, we are less certain that it will curtail its spending as previously anticipated," S&P said.

Frequently Asked Questions

Did S&P downgrade Meta's credit rating?

No. S&P Global Ratings revised its outlook on Meta Platforms to negative from stable. The rating itself stays at AA-. S&P's highest rating is AAA, and anything below BBB is junk.

Why did S&P change Meta's outlook?

S&P cited uncertainty about Meta's elevated capital spending and negative free cash flow. It said Meta's ability to monetize its AI investments is more limited than that of its peers.

How much does S&P expect Meta to spend?

S&P projects Meta's capital expenditures at $140 billion for 2026, over $225 billion in 2027 and $252 billion in 2028. Its previous estimates for 2027 and 2028 were $163 billion and $178 billion.

What could lead to an actual downgrade?

S&P could lower the rating if Meta's adjusted leverage stays above 1.0x on a sustained basis and free operating cash flow remains negative beyond 2028. It expects leverage of 1.1x in 2027 and 1.3x in 2028.

How did Meta respond?

A Meta spokesperson said the company respectfully disagrees with S&P's assertion about its AI monetization capabilities and sees significant product and business opportunities ahead, supporting what it called a very strong credit profile.

AI-generated summary, reviewed by an editor. More on our AI guidelines.

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