Meta’s Credit Rating Outlook Cut to Negative by S&P Over Rising AI Spending

S&P Global Ratings has revised its outlook on Meta Platforms from stable to negative, citing concerns about the company’s rapidly increasing artificial intelligence spending, weakening cash flow and rising financial leverage. The decision puts the Facebook and Instagram parent at greater risk of a potential credit-rating downgrade over the next two years.

The rating agency has retained Meta’s existing AA- credit rating, but warned that the company’s ambitious AI infrastructure plans could put pressure on its balance sheet if spending continues to rise faster than the financial returns generated by its investments. The development comes as Meta prepares to spend as much as $145 billion on capital expenditure in 2026, much of it connected to AI infrastructure.

Key Takeaways

• S&P Global Ratings changed Meta’s credit rating outlook from stable to negative.
• Meta’s existing AA- credit rating has not been downgraded.
• The company expects 2026 capital expenditure of $135 billion to $145 billion.
• Meta reported a $2.12 billion free cash flow deficit in the third quarter of 2026.
• S&P expects substantial free operating cash flow deficits in 2026 and 2027.
• The agency believes Meta’s financial leverage could exceed 1.0x in 2027.
• Meta disagrees with S&P’s assessment of its ability to monetise AI investments.

S&P Changes Meta’s Credit Rating Outlook

S&P Global Ratings revised Meta’s outlook from stable to negative on October 30, 2026. The decision reflects uncertainty about how long the company’s capital expenditure will remain elevated and how quickly its AI investments will generate sufficient financial returns.

The distinction between a credit rating and its outlook is important.

Meta still holds an AA- issuer credit rating, which indicates a strong capacity to meet financial obligations. The negative outlook signals that S&P could lower the rating if the company’s financial position deteriorates further.

It does not mean that a downgrade has already happened or that one is guaranteed.

S&P specifically raised concerns about Meta’s ability to turn its AI investments into material revenue that exceeds the associated costs. The agency considers that monetisation challenge less established at Meta than at some of its technology-sector peers.

Meta’s AI Spending Is Increasing Rapidly

Meta is investing heavily in data centres, advanced chips, computing infrastructure and other resources needed to develop and operate increasingly sophisticated AI systems.

The company has forecast capital expenditure of between $135 billion and $145 billion for 2026. That spending is intended to support its AI ambitions as well as its broader technology infrastructure.

The scale of the investment has raised questions about how quickly the company can recover its costs.

Financial indicator	Reported figure
2026 capital expenditure forecast	$135 billion–$145 billion
Q3 2026 free cash flow	-$2.12 billion
Long-term debt at September 30, 2026	$80.92 billion
Reported future spending commitments	More than $800 billion
S&P’s projected 2026 free operating cash flow deficit	$39 billion
S&P’s projected 2027 free operating cash flow deficit	$71 billion

These figures refer to different financial measures. Capital expenditure is spending on long-term assets, while free cash flow measures cash remaining after capital expenditure and other relevant cash movements. S&P’s free operating cash flow measure is its own credit-analysis metric.

S&P Warns of Growing Cash Flow Pressure

One of the central reasons behind the negative outlook is Meta’s expected cash flow position.

Meta reported a free cash flow deficit of $2.12 billion in the third quarter of 2026. This represents a significant change from the company’s earlier cash-generation profile, as infrastructure investments absorb increasing amounts of capital.

S&P expects Meta to record free operating cash flow deficits of approximately $39 billion in 2026 and $71 billion in 2027.

The agency also warned that elevated spending could keep cash flow negative beyond 2028. It expects Meta to finance its projected 2028 cash shortfall entirely through debt.

This forecast highlights the financial challenge facing the company: it must continue investing in computing infrastructure while maintaining enough financial flexibility to meet its existing obligations.

The projections are S&P’s estimates, not confirmed future results from Meta.

Rising Leverage Could Put the AA- Rating Under Pressure

S&P is also concerned about Meta’s rising financial leverage.

Leverage measures how much debt a company carries relative to its earnings or cash-generating capacity. A higher ratio can indicate greater financial risk, particularly when a business is simultaneously facing large investment requirements.

According to S&P, Meta’s leverage increased from approximately 0.1x in 2025. The agency believes it could rise above 1.0x as early as 2027.

S&P identified 1.0x as the relevant threshold for Meta’s existing AA- issuer credit rating.

The company’s financing strategy also involves leasing data-centre capacity rather than relying exclusively on conventional borrowing. Such arrangements can create substantial future financial commitments even when they do not appear as conventional debt in the same way.

Meta disclosed more than $800 billion in future spending commitments earlier in October, with a substantial portion associated with leases that have not yet commenced, largely for data centres and energy infrastructure.

Why Meta Is Spending So Much on AI

Meta is competing to build advanced AI models and integrate AI capabilities across Facebook, Instagram, WhatsApp and its other products.

The company has been expanding its data-centre capacity and investing in computing infrastructure to support this strategy.

Its AI ambitions include several potential sources of revenue:

• AI-powered advertising: Improving ad recommendations and targeting could increase advertising performance and revenue.
• AI assistants: Meta could eventually generate revenue through subscriptions, transactions and other paid services.
• Business AI tools: Companies could use AI assistants and automated customer-service tools across Meta’s platforms.
• AI infrastructure services: Meta could explore selling access to computing capacity or AI models to external customers.

The company has also reported improvements in its advertising systems from AI-related investments. However, S&P’s concern is whether these gains will eventually be large enough to offset the cost of the wider infrastructure expansion.

Meta Disagrees With S&P’s Assessment

Meta has pushed back against the rating agency’s assessment of its AI monetisation potential.

A company spokesperson said Meta respectfully disagrees with S&P’s position and believes there are significant product and business opportunities ahead.

The company maintains that its existing business provides a strong financial foundation for its AI investments.

This is an important part of the debate. Meta already operates a large advertising business across Facebook, Instagram and WhatsApp. It can potentially use AI to improve the performance of that established business, rather than relying exclusively on new AI subscriptions or standalone products.

Nevertheless, the financial benefits of these investments will need to be measured against the substantial costs of building and operating the infrastructure.

What a Negative Outlook Means for Meta

A negative outlook can affect how investors and lenders assess a company’s credit risk.

If S&P eventually downgrades Meta, the change could influence borrowing costs, debt-market sentiment and the terms on which the company accesses financing.

However, Meta’s AA- rating remains investment grade. A potential one-notch downgrade would not automatically move the company into speculative-grade or junk territory.

The decision also reflects a broader shift in how credit agencies assess technology companies. Large AI infrastructure commitments are increasingly being evaluated not only as growth investments but also as potential sources of financial risk.

The Bigger Picture

The development highlights a growing tension in the AI industry. Technology companies are racing to secure computing capacity, build advanced models and develop new AI products. But the infrastructure required for this expansion is becoming increasingly expensive.

Meta’s existing advertising business gives it several ways to benefit from AI, but the timing and scale of those returns remain uncertain. S&P’s decision shows that strong revenue and a valuable technology business do not automatically remove concerns about cash flow, leverage and future financial commitments.

Looking Ahead

Investors will closely monitor Meta’s capital expenditure, free cash flow, borrowing requirements and the commercial performance of its AI products over the coming quarters. A meaningful improvement in cash generation or clearer evidence of AI monetisation could help address S&P’s concerns. Continued spending increases without corresponding financial returns could put additional pressure on the company’s credit profile.

For Meta, the challenge is to maintain its position in the AI race without allowing infrastructure spending to weaken its financial flexibility. The next two years could be important in determining whether its large AI investments translate into sustainable business growth or require a longer period of substantial external financing.

Frequently Asked Questions

1. Why did S&P cut Meta’s rating outlook to negative?

S&P cited rising AI infrastructure spending, weaker free operating cash flow, increasing leverage and uncertainty about how quickly Meta can generate returns from its AI investments.

2. Has Meta’s credit rating been downgraded?

No. Meta retains its AA- credit rating. S&P changed only the outlook from stable to negative.

3. How much is Meta planning to spend on AI infrastructure?

Meta forecast total capital expenditure of $135 billion to $145 billion for 2026. This includes spending on AI infrastructure and other long-term technology assets.

4. What is Meta’s expected cash flow deficit?

S&P projects free operating cash flow deficits of approximately $39 billion in 2026 and $71 billion in 2027.

5. What does AA- mean?

AA- is a high investment-grade credit rating. It indicates a strong capacity to meet financial obligations, although it is below the highest rating categories.

6. Could S&P downgrade Meta in the future?

Yes. The negative outlook indicates that a downgrade is possible over the next couple of years if financial risks increase. However, it is not an automatic or guaranteed outcome.

7. How does Meta plan to make money from AI?

Meta could monetise AI through improved advertising performance, AI assistants, business tools, subscriptions, transaction fees and potentially external access to AI models or computing infrastructure.