🚨 S&P just put Meta's credit outlook on NEGATIVE, flagging AI spending as the reason.
S&P Global Ratings cut the outlook to negative from stable on Friday, keeping Meta's AA- rating for now. It cited "significant uncertainty" around capital spending and cash flow, and said Meta's ability to monetize its AI investments is more limited than its peers'. Meta has no big cloud business to resell its computing capacity, unlike Microsoft, Alphabet or Amazon.
The numbers are huge. S&P expects capital spending to top $225 billion in 2027 and reach $252 billion in 2028, with a $71 billion free operating cash flow deficit in 2027. It expects Meta to fund its 2028 shortfall entirely with debt. Meta posted its first negative free cash flow last quarter, a $2.12 billion deficit, and its stock fell 15% in October, its worst month in four years.
A downgrade isn't imminent. S&P said it could cut the rating if adjusted leverage stays above 1.0x and cash flow remains negative past 2028. It forecasts leverage of 0.3x this year, rising to 1.1x in 2027 and 1.3x in 2028. Meta also sold $30 billion of bonds the same day with more than $125 billion in orders, so lenders are still lining up.
The precedent is Oracle. S&P gave it a negative outlook in July 2025, then cut it to BBB-, one notch above junk, a year later.
Meta is nowhere near Oracle's position. But the agencies are now asking the same question about the whole AI buildout: who pays for it?
#Meta #AI #CreditRatings #Oracle #BigTech
S&P Global Ratings cut the outlook to negative from stable on Friday, keeping Meta's AA- rating for now. It cited "significant uncertainty" around capital spending and cash flow, and said Meta's ability to monetize its AI investments is more limited than its peers'. Meta has no big cloud business to resell its computing capacity, unlike Microsoft, Alphabet or Amazon.
The numbers are huge. S&P expects capital spending to top $225 billion in 2027 and reach $252 billion in 2028, with a $71 billion free operating cash flow deficit in 2027. It expects Meta to fund its 2028 shortfall entirely with debt. Meta posted its first negative free cash flow last quarter, a $2.12 billion deficit, and its stock fell 15% in October, its worst month in four years.
A downgrade isn't imminent. S&P said it could cut the rating if adjusted leverage stays above 1.0x and cash flow remains negative past 2028. It forecasts leverage of 0.3x this year, rising to 1.1x in 2027 and 1.3x in 2028. Meta also sold $30 billion of bonds the same day with more than $125 billion in orders, so lenders are still lining up.
The precedent is Oracle. S&P gave it a negative outlook in July 2025, then cut it to BBB-, one notch above junk, a year later.
Meta is nowhere near Oracle's position. But the agencies are now asking the same question about the whole AI buildout: who pays for it?
#Meta #AI #CreditRatings #Oracle #BigTech
