S&P shifts Meta outlook to negative while keeping AA- rating
S&P Global Ratings kept Meta’s AA- rating but moved its outlook to negative, citing heavy AI spending and uncertainty over future cash flow.
By Maya Okafor · Markets Writer
· 3 min read
S&P Global Ratings has moved Meta’s outlook to negative from stable while retaining its AA- credit rating, according to CNBC’s report on the action. For investors, the distinction matters: Meta was not downgraded, but S&P sees a possibility that the rating could be lowered over its intermediate-term outlook period.
S&P attributed the outlook change to uncertainty over Meta’s elevated capital expenditures, future cash flow and the company’s ability to turn its AI investments into revenue that outweighs their growing cost, CNBC reported. Meta’s AA- rating was maintained; CNBC noted that ratings below BBB are considered junk.
Why did S&P put Meta’s outlook at negative?
The immediate issue is the scale of Meta’s investment in computing infrastructure. Capital expenditures, or capex, are funds spent on long-lived assets such as data centers and equipment. Meta reported $34.91 billion in third-quarter capex, including principal payments on finance leases, in its results for the quarter ended Sept. 30.
The company generated $32.79 billion in operating cash flow during that quarter, according to its earnings release. But its reported capex exceeded that amount, resulting in negative free cash flow of $2.12 billion. Free cash flow is the cash remaining after a company’s operating cash generation and capital spending.
Meta ended the quarter with $82.45 billion in cash, cash equivalents and marketable securities, the company said. Still, S&P’s concern, as reported by CNBC, centers on how long the spending will stay elevated and when newer AI products might make a material financial contribution.
Meta has forecast 2026 capex of $135 billion to $145 billion, narrowed from an earlier range of $130 billion to $145 billion. The company also said it expects to keep investing aggressively in its core business and emerging AI initiatives.
What does a negative S&P outlook mean for Meta?
S&P says a ratings outlook reflects its view of the potential direction of a long-term rating over an intermediate term, typically six months to two years. A negative outlook means the rating may be lowered, while an outlook alone does not necessarily lead to a rating change or CreditWatch action.
CNBC reported that S&P expects Meta’s capex growth to begin flattening in 2028, but is less certain the company will reduce spending as previously expected. That is an assessment of future financial conditions, not a confirmed rating cut.
Meta disputed S&P’s view of its AI monetization prospects. A company spokesperson told CNBC that Meta disagreed with S&P’s assertion and saw significant product and business opportunities ahead that it said supported the company’s credit profile.
Meta also said in its quarterly release that its AI investments are already contributing incremental advertising revenue through engagement, recommendations and monetization improvements. Those are the company’s claims about the returns from its spending, while S&P’s outlook reflects its stated uncertainty about the pace and scale of those returns.
This story draws on original reporting from CNBC.
