S&P Global Ratings lowered its outlook on Meta from stable to negative on Friday, pointing to the company's heavy capital expenditures and concerns over its free cash flow, according to a CNBC report. The agency kept Meta's credit rating at AA- but changed the outlook to negative, citing "uncertainty" about the company's elevated capex and negative free cash flow.
The move adds a fresh signal of stress to the AI spending race among Big Tech giants. Meta's stock fell 15% in October, its worst month in four years, after the company reported negative free cash flow of $2.12 billion in its third-quarter earnings — its first time in the red on that measure.
S&P flags uncertainty over Meta's AI monetization
S&P questioned Meta's ability to monetize its AI investments compared with peers that are also spending heavily on data center buildouts and going cash flow negative. While Meta recently launched its Muse AI agent app and related foundation models, the agency said it is unclear when those revenue streams will generate material contributions that exceed their rising costs over the next few years.
The agency also said that while it expects Meta's capex growth to start flattening out beginning in 2028, it is less certain that the company will curtail spending as previously anticipated. S&P's highest credit rating is AAA, and anything below BBB falls into the junk bond category; Meta's AA- rating remains in investment grade territory.
Meta's AI spending plans and cash flow pressure
Meta said in its third-quarter earnings report last week that it expects full-year capital expenditures to come in the range of $135 billion to $145 billion. The company also posted negative free cash flow of $2.12 billion, going in the red for the first time. Investors sent Meta shares down 7% following the report despite a revenue beat.
