S&P Global Ratings has lowered its outlook on Meta, citing mounting AI costs and cash flow concerns. It changed Meta’s AA- credit rating from stable to negative.
While the rating keeps the tech giant firmly in the upper echelon of companies, comfortably above the BB+ “junk” threshold, the negative tag serves as an official warning of potential downside risk.
In its statement, S&P Global Ratings directly challenged Meta’s AI playbook, arguing that the social media giant has fewer paths to monetisation than its big tech rivals. It emphasised that it’s still unclear when the company’s infrastructure investments will begin generating enough revenue to cover rising expenses.
Meta disagrees with the rating agency’s assessment
The new Meta assessment points to uncertainty over the duration of high capital expenditures and continued negative free operating cash flow, S&P said.
However, Meta has disputed the assessment. “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,” the spokesperson Kamran Mumtaz stated.
In its third-quarter earnings report, the company reported adjusted earnings of $7.40 per share, a 2.1% improvement from the same period last year and 13.5% above the consensus forecast. For the quarter, its revenue hit $64.6 billion, marking a 26% annual jump and beating estimates by 1.88%.
Most of that revenue performance was anchored by a healthy advertising market , with advertising volume up 10% and pricing power up 14%.
Meta’s AI investments are already improving its advertising business (better recommendations, more user engagement and better ad targeting), but S&P is concerned whether those improvements will generate enough additional revenue to offset the huge cost of building and running AI infrastructure.
Unlike cloud computing companies which can sell computing capacity and AI services directly to enterprise customers, Meta has traditionally sold advertising on Facebook, Instagram and WhatsApp. Its AI tools could generate new revenue streams, but it hasn’t shown that those opportunities will return at the scale necessary to cover infrastructure costs.
Meta says its investments will create big business opportunities and improve existing products, but the timing and magnitude of those returns are unclear.
Its operating profitability, however, suffered from a dual punch of accelerating capital infrastructure expenses and mounting legal costs. The firm posted negative free cash flow, recording a $2.12 billion shortfall for the first time.
Overall, it also projected full-year capital expenditures of $135 billion to $145 billion. Similarly, according to S&P’s projections, the company’s capital expenditures are on track to reach $140 billion this year, then explode to over $225 billion by 2027.
The rating agency, however, noted in its statement that this massive spending surge could push the tech giant’s leverage ratio above 1.0x as early as next year, a stark jump from the roughly 0.1x recorded last year.
Despite the growing financial pressure, Meta still has considerable resources to support its expansion. As of September 30, 2026, it had $82.45 billion in cash equivalents and marketable securities and $32.79 billion in operating cash flow during the third quarter — so its core business is still generating significant liquidity.
However, its long-term debt was still about $80.92 billion at the end of the quarter, but rising borrowing requirements from infrastructure spending, aggressive infrastructure investments and weaker free cash flow could erode the financial flexibility that has given it a strong credit rating.
Meta plans to raise up to $95 billion through stock sales
Meta recently revealed plans to raise up to $95 billion through stock sales to help build its data centre capacity. The project will start with a series of deals worth $35 billion, the majority of which Meta expects to generate through common stock issuances. Three firms, including Nvidia, Advanced Micro Devices and Broadcom, have already shown preliminary interest in buying up to $5 billion in shares, based on corporate filings.
Additionally, the fundraising program will include $12.5 billion of Series A depositary shares, which consist of a fraction (1/20th) of the Series A mandatory convertible preferred stock of Meta.
These complex securities are to be traded separately on Nasdaq under a special ticker symbol until August 15, 2029, when they will automatically convert into common Meta stock. Still, Wall Street underwriters can increase the deal by purchasing an additional 3.375 billion common shares and 37.5 million depositary units.
Moreover, the technology company will initiate an at-the-market (ATM) program within the first few months of next year to raise around $60 billion in capital through share sales.
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