S&P Global Ratings has revised Meta’s financial outlook downward, pointing to mounting concerns over the technology giant’s cash flow and heavy spending on artificial intelligence. The credit rating agency announced on Friday that the updated outlook reflects uncertainty regarding Meta’s elevated capital expenditures and its negative free cash flow.
Rating Revision and AI Monetization Doubts
S&P lowered Meta’s credit rating outlook from stable to negative while keeping the rating itself at AA-, which sits comfortably above the junk bond threshold where anything below BBB falls. The agency raised questions regarding Meta’s capacity to monetize its artificial intelligence investments compared to industry competitors, who are similarly dedicating massive resources to data center construction and experiencing negative cash flow.
While Meta recently introduced its Muse AI agent application along with associated foundation models, S&P noted that it remains uncertain when these revenue streams will produce substantial contributions that surpass their escalating costs in the upcoming years. In response to the decision, a company spokesperson pushed back against the agency’s assessment during a statement, expressing respectful disagreement with S&P’s perspective on Meta’s ability to monetize AI and pointing to significant upcoming product and business opportunities that support its robust credit profile.
Financial Results and Capital Plans
Meta reported in its third-quarter earnings report that it anticipates full-year capital expenditures to land between $135 billion and $145 billion. The tech firm also recorded a negative free cash flow of $2.12 billion, marking its first time entering negative territory. Following the release of the report, investors drove Meta shares down by 7% despite the company beating revenue expectations, culminating in a 15% drop for October—its worst monthly performance in four years.
To support its artificial intelligence initiatives, the company announced plans to raise $95 billion, starting with a $35 billion underwritten public equity offering followed by another $60 billion through an at-the-market program. S&P stated that although it projects Meta’s capital expenditure growth to begin flattening out by 2028, the agency remains less confident that the company will scale back its spending as originally expected.
