S&P cuts Meta’s credit outlook to negative as AI spending outruns its cash

For years, Meta was one of the safest bets in corporate finance. The company behind Facebook, Instagram and WhatsApp made far more money than it spent, piled up cash, and borrowed very little. Its credit rating sat near the top of the scale, and lenders barely worried about getting their money back.

That picture changed on Friday, 30 October 2026. S&P Global Ratings, one of the world’s biggest credit rating agencies, cut its outlook on Meta from “stable” to “negative”. The rating itself — AA- — was left unchanged, so this was not a downgrade. But it was a formal warning: if Meta keeps spending on artificial intelligence at its current pace, and the money coming back stays slow, a downgrade could follow within about two years.

The reason is simple. Meta is spending enormous sums building the data centres and buying the computer chips needed to run AI systems, and the spending has now grown so large that it is swallowing the cash its business generates. In the third quarter of 2026, Meta’s free cash flow — the cash left over after paying for its day-to-day business and its big investments — turned negative for the first time in more than a decade.

Meta disagrees with the rating agency, and the story of why — and what happens if S&P is right — is the first formal credit warning of the AI spending boom.

At a glance

What happened: On 30 October 2026, S&P Global Ratings cut its outlook on Meta Platforms from “stable” to “negative”, keeping the AA- credit rating but warning that heavy AI spending and negative free cash flow could lead to a downgrade.

Why it matters: Meta is forecast to spend about $140 billion on capital expenditure in 2026 and more than $225 billion in 2027, while S&P expects its free operating cash flow to be in deficit by $39 billion in 2026 and $71 billion in 2027. A downgrade would raise Meta’s borrowing costs and signal that even the richest technology companies cannot spend without limit.

What happens next: S&P will watch whether Meta slows its spending, whether its AI investments start earning more money, and whether its debt keeps rising. Meta plans to raise money by selling shares, and it has said it will keep investing aggressively in AI.

What S&P actually did

A credit rating is a judgement about how likely a borrower is to repay its debts. S&P’s scale runs from AAA at the top down to D, for borrowers that have stopped paying. Meta’s AA- rating is the fourth-highest investment-grade score, which means lenders still regard it as a very safe borrower. Even a one-notch downgrade would leave it firmly in high-grade territory.

The “outlook” is the agency’s view of where the rating is heading. “Stable” means it is expected to stay put; “negative” means it could be cut, usually within one to two years. It is a warning, not a punishment, and Bloomberg reported that S&P was not actively considering a downgrade at the time.

S&P said it was acting because of “significant uncertainty around the social media giant’s capital spending and free operating cash flow”. In plain terms, the agency is no longer sure how long Meta’s spending will stay this high, or when the money it spends on AI will start earning more than it costs. It also warned that Meta’s leverage — its debt measured against its earnings — could rise above 1.0 times as early as 2027, the threshold for the AA- rating.

S&P’s language was unusually direct. “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,” the agency said. Capex is short for capital expenditure: spending on long-term assets such as data centres, buildings and equipment.

Naveen Sarma, S&P’s lead analyst for the US media and telecom sector, added a warning that applied beyond Meta. “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,” he said.

Meta pushed back. “We respectfully disagree with S&P’s assertion about Meta’s AI monetisation capabilities,” a spokesperson, Kamran Mumtaz, told Reuters. “We see significant product and business opportunities ahead of us, supporting our very strong credit profile.” Meta’s chief financial officer, Susan Li, had already told analysts that the company expected “to continue investing aggressively to support both our core business and emerging AI initiatives”.

Why the bill is so big

To understand S&P’s concern, it helps to look at the numbers behind Meta’s third-quarter results, reported on 21 October 2026.

The business itself is still growing fast. Revenue rose 26% from a year earlier to $64.6 billion in the quarter, and advertising revenue rose 26% to $63.06 billion. About 3.64 billion people used one of Meta’s apps every day in September, up 3% on a year earlier. Meta also guided to revenue of $73 billion to $76 billion for the final quarter of the year.

But the spending grew even faster. Meta spent $34.91 billion on capital expenditure in the quarter, including purchases of property and equipment and payments on finance leases. That was more than the $32.79 billion it generated from its day-to-day operations. The result was free cash flow of negative $2.12 billion, compared with positive $10.63 billion in the same quarter of 2025.

That was not the only pressure on the quarter’s profit. Meta also recorded a $9.89 billion legal charge linked to an agreement with 52 US state attorneys general to settle a lawsuit over teen mental health and social media, which cut reported operating income by 37% to $12.99 billion. The charge is a one-off; the spending on data centres is not. It is planned to continue for years.

S&P went further, forecasting about $140 billion this year, more than $225 billion in 2027, and about $252 billion in 2028.

The commitments stretch even further into the future. Earlier in October, Meta disclosed more than $800 billion in future spending commitments, almost half of them tied to leases that had not yet begun, largely for data centres and energy infrastructure. Those promises do not all show up as debt on the balance sheet today, but they are real obligations that will have to be paid. S&P said Meta’s leverage had already risen from about 0.1 times in 2025, mainly because of its strategy of leasing data-centre capacity rather than borrowing to buy it. Meta reported long-term debt of $80.92 billion as of 30 September 2026.

S&P also warned that the cash shortfall could last beyond 2028, and that it expected Meta to fund its 2028 shortfall entirely with debt.

The monetisation gap

Microsoft and Google both run large cloud computing businesses — Azure and Google Cloud. When they build a data centre, they can rent out the computing power inside it to other companies. Meta has no equivalent business. Its AI products, including its personal AI agent Muse, are mostly offered free to users. The return comes indirectly: better AI is supposed to make Facebook and Instagram more engaging, and more engaging apps are supposed to attract more advertising.

That is a reasonable business idea, and Meta says its AI investments are already “delivering substantial incremental advertising revenue”. But it is much harder for a credit analyst to put a number on it than it is to count cloud rental income. S&P said it was unclear when Meta’s AI revenue streams would “generate material contributions exceeding their rising costs over the next few years”. Meta itself has said that its larger infrastructure investments will take longer to generate returns.

How Meta plans to pay for it

Meta is not short of money today. Its advertising business is still one of the most profitable in the world, and it has options for raising cash that smaller companies do not. The question is how much of the AI bill it will have to fund by selling shares or taking on debt, and what that will cost its existing shareholders and lenders.

Reuters reported that Meta was planning to tap public markets and sell $97.5 billion in stock to fund the AI buildout. Selling new shares brings in cash without adding debt, but it dilutes existing shareholders: each existing share becomes a slightly smaller slice of the company. Meta has also announced plans for a new, non-voting Class C stock, effective 19 January 2027, with current shareholders receiving one Class C share for each share they hold — in effect a two-for-one stock split with no change in voting power.

Meta’s shares fell about 7% after its third-quarter results, before the S&P announcement. The Nasdaq 100 index fell 3.5% on Friday 30 October, briefly entering correction territory — a fall of 10% or more from a recent high — after disappointing technology earnings.

A warning for the whole AI boom

S&P’s move did not happen in isolation. It landed at the end of a brutal week for technology shares, and it was not the only credit warning of its kind.

On Thursday 29 October, S&P also lowered its outlook on Broadcom, the chipmaker, to “stable” from “positive”, saying the company’s rapid AI growth was increasing its exposure to a few big customers. Earlier in 2026, S&P lowered Oracle’s credit rating to BBB-, one notch above “junk” status, because of its heavily leveraged balance sheet. Oracle, like Meta, has borrowed heavily to fund its AI data-centre ambitions. Alphabet reported negative free cash flow in the third quarter as its capital spending rose, and Amazon reported negative free cash flow over the past 12 months. OpenAI, the maker of ChatGPT, cut the target for its latest fundraising round by $10 billion to about $20 billion, according to the Financial Times, as investors grew more cautious about AI spending.

What happens next

The next test comes when Meta reports its fourth-quarter results and updates its spending plans for 2027. Investors and rating agencies will watch three things: whether Meta raises its spending guidance again, whether its AI investments bring in visibly more advertising revenue, and how it pays for the gap — through share sales, bonds or leases. S&P has said it could downgrade Meta outright if its adjusted debt ratio climbs above 1.0 times on a sustained basis and free cash flow stays negative beyond 2028. That gives Meta roughly two years to show that the spending is under control, or that the returns are arriving.

Frequently asked questions

What did S&P actually do to Meta?

S&P Global Ratings cut its outlook on Meta Platforms from “stable” to “negative” on 30 October 2026. It kept Meta’s credit rating at AA-, so this was a warning about the direction of the rating, not a downgrade. A negative outlook means S&P could cut the rating within about one to two years if Meta’s finances do not improve.

What is a credit rating, and why does it matter?

A credit rating is an agency’s judgement about how likely a borrower is to repay its debts. Higher ratings mean lower risk, and lower risk means cheaper borrowing. Meta’s AA- rating is the fourth-highest investment-grade score. A downgrade would not stop Meta borrowing, but it would probably make borrowing more expensive and signal to investors that the company’s finances are weakening.

Why is Meta spending so much money?

Meta is building data centres and buying computer chips to run artificial intelligence systems, including its AI agent Muse and the AI features built into Facebook, Instagram and WhatsApp. It forecast capital expenditure of $135 billion to $145 billion in 2026, and S&P expects the figure to exceed $225 billion in 2027. The company says the spending is needed to stay competitive in AI.

What is free cash flow, and why did it turn negative?

Free cash flow is the cash a company has left after paying for its day-to-day business and its big investments. In the third quarter of 2026, Meta generated $32.79 billion from its operations but spent $34.91 billion on capital expenditure, leaving free cash flow of negative $2.12 billion. A year earlier, free cash flow was positive $10.63 billion. S&P expects the deficits to continue into 2027 and beyond.

How is Meta different from Microsoft and Google on AI?

Microsoft and Google sell cloud computing services, so they can rent out the data-centre capacity they build to other companies and earn money directly from it. Meta has no large cloud business. Its AI products are mostly free to users, so the return has to come indirectly, through better advertising on Facebook and Instagram. S&P said Meta’s ability to make money from AI was “more limited than that of its peers”.

Is Meta in financial trouble?

No, not in the sense of being unable to pay its bills. Meta reported revenue of $64.6 billion in the third quarter, up 26% on a year earlier, and it reported long-term debt of $80.92 billion at the end of September. It can still borrow, and it plans to raise money by selling shares. S&P’s warning is about the direction of travel: if spending keeps outrunning cash flow for years, the company’s credit strength will weaken.

Conclusion

S&P’s decision to cut Meta’s credit outlook to negative is a small event in itself — a one-word change, from “stable” to “negative”, on a rating that did not move. Its importance lies in what it represents. For the first time, a major rating agency has said in writing that one of the world’s richest technology companies may be spending more on artificial intelligence than its business can currently support, and that it is not sure when the money will come back.

Meta disagrees, and it has good reasons to. Its advertising business is growing fast, its apps are used by billions of people every day, and it has ways to raise money that most companies can only dream of. The AI bet may yet pay off handsomely, and if it does, this warning will be remembered as a footnote. But the warning also captures a change in the wider mood: for three years, investors treated ever-larger spending plans as a sign of confidence. Now the rating agencies, the bond markets and shareholders are all asking when the spending will earn its keep. Meta has about two years to give them a convincing answer.

This article is for general information and education only. It is not legal or financial advice.

Sources

• https://dukecountry.fm/2026/10/30/sp-global-revises-outlook-on-meta-to-negative-on-cashflow-concerns/ (Reuters syndication via Duke Country FM, 30 October 2026)
• https://www.tradingview.com/news/cnbctv:4903003dd094b:0/ (CNBC TV18, 31 October 2026)
• https://startupfortune.com/sp-global-cuts-metas-credit-outlook-to-negative-over-ai-spending/ (Startup Fortune, 31 October 2026)
• https://stockanalysis.com/news/meta-q3-2026-earnings/ (StockAnalysis, 22 October 2026)