S&P Global Ratings has cut its outlook on Meta Platforms to negative, a warning that the Facebook and Instagram owner’s huge spending on artificial intelligence could strain its finances for years.
The rating itself did not change. S&P kept Meta’s AA- credit rating, one of the strongest grades a company can hold. But the outlook moved from stable to negative on Friday, October 30. In plain terms, that means S&P now sees a real chance of a downgrade within the next couple of years, not that a downgrade has already happened.
What Happened
S&P said it was worried about two things: how long Meta’s capital spending will stay very high, and how long its free operating cash flow will stay negative. Free operating cash flow is, simply, the cash left after a company pays for the things it needs to run and grow. When that number is negative, the company is spending more cash than it brings in from its operations.
S&P now expects Meta’s capital spending — money spent on long-term assets such as data centres — to reach about $140 billion in 2026 and rise above $225 billion in 2027, reaching $252 billion in 2028. It also expects a free operating cash flow deficit of $71 billion in 2027.
Meta’s own guidance points in the same direction. Last week the company forecast full-year 2026 capital spending of $135 billion to $145 billion, after reporting a third-quarter free cash flow deficit of $2.12 billion. That was its first negative quarter for free cash flow in more than a decade.
Why It Happened
The reason is the AI buildout. Meta is building data centres and buying computing power so its AI tools can run and improve. That costs a fortune, and the payoff is not instant.
S&P put it bluntly: “Meta’s ability to monetise its AI investments is more limited than that of its peers.” Microsoft and Google can sell AI computing directly to other companies through their cloud businesses. Meta has no equivalent product. Its bet is that better AI will make its ads and apps more valuable, which is harder for a credit analyst to measure.
S&P also pointed to leverage, which compares debt with earnings. It said Meta’s leverage could climb above 1.0 times as early as 2027, up from about 0.1 times last year. That 1.0 level is the threshold S&P watches for the AA- rating. Much of the rise comes from leases on data centres, which S&P counts in a similar way to debt.
Why It Matters
A credit rating affects how cheaply a company can borrow. A lower rating usually means higher borrowing costs. Meta is not in trouble today — AA- is still a very strong rating, and even a one-notch downgrade would leave it firmly in high-grade territory. But the warning matters because it shows that even the biggest tech companies are now being judged on whether their AI spending pays for itself.
This is not just a Meta story. Investors spent October asking the same question about Alphabet, Amazon, Microsoft and others: how much are they spending, and when will it come back as profit? That worry helped drive the Nasdaq down 5.3% in October, its worst month since March 2025.
What Happens Next
Meta disagreed with S&P. A spokesperson said: “We respectfully disagree with S&P’s assertion about Meta’s AI monetisation capabilities. We see significant product and business opportunities ahead of us, supporting our very strong credit profile.”
S&P said it could still downgrade Meta if spending stays high and free cash flow stays negative past 2028, or if leverage stays above 1.0 times. On the other side, if Meta shows it can slow its spending or turn its AI tools into clear revenue, the outlook could steady again.
Final Thoughts
Think of it like a household that takes on a big mortgage to build an extension. The house may be worth more in the end, but while the building work goes on, the monthly bills are high and there is less cash spare. S&P is not saying Meta cannot afford the extension. It is saying the building phase may last longer, and cost more, than it first expected — and lenders are starting to notice.
Key figures:
- Meta’s credit rating: AA-, affirmed; outlook cut to negative from stable (October 30, 2026)
- S&P’s expected capital spending: about $140 billion in 2026, above $225 billion in 2027, $252 billion in 2028
- Meta’s own 2026 capital spending guidance: $135 billion to $145 billion
- Meta’s third-quarter free cash flow: negative $2.12 billion
- S&P’s expected 2027 free operating cash flow deficit: $71 billion
- Leverage: about 0.1 times last year, could pass 1.0 times as early as 2027
Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.
Sources: CNBC report on S&P’s Meta outlook change (via CNBC TV18: https://www.tradingview.com/news/cnbctv:4903003dd094b:0/); Reuters report on S&P’s action (https://941theduke.com/2026/10/30/sp-global-revises-outlook-on-meta-to-negative-on-cashflow-concerns/)
Related: Nasdaq Ends October With Its Worst Month Since March 2025 as Tech Sell-Off Deepens
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