Key points
- S&P keeps Meta's AA- rating but turns its outlook negative
- S&P expects a $71 billion cash-flow shortfall in 2027
- Meta has nearly $356 billion in leases that haven't started
S&P Global Ratings changed its outlook on Meta Platforms (META) to negative from stable on October 30, citing uncertainty over how long the company's heavy capital spending will last and its negative free operating cash flow. S&P kept Meta's AA- credit rating, its fourth-highest grade.
The negative outlook means S&P may lower the rating. For an investment-grade company like Meta, a rating outlook generally looks up to two years ahead, according to S&P's definitions.
S&P posted the change at 5:01 p.m. ET, after the market closed. Meta shares had closed down 1.5% at $614.99 and traded at $611.05 at 5:36 p.m. ET.
S&P expects the cash shortfall to peak in 2027
S&P expects Meta's capital spending to reach $140 billion this year, more than $225 billion in 2027, and $252 billion in 2028, according to Investing.com's account of the report. Its previous forecasts for 2027 and 2028 were $163 billion and $178 billion.
The higher spending changes S&P's cash-flow outlook. It expects Meta's free operating cash flow to be negative by $22 billion this year and $71 billion in 2027, before the shortfall narrows to $39 billion in 2028. Before October 30, S&P had expected the measure to turn positive again in 2028.
Free operating cash flow is broadly the cash a business generates from operations minus capital spending. Meta's own measure turned negative in the third quarter: operations brought in $32.8 billion, while the company spent $34.9 billion on data centers, servers, and other equipment. That left negative free cash flow of $2.1 billion by Meta's calculation, which differs from S&P's adjusted measure.
Meta expects capital spending of $135 billion to $145 billion this year and hasn't given a 2027 budget.
S&P also said Meta has fewer ways than some peers to earn money directly from AI infrastructure. Meta expects returns from better ad tools and new products such as its Muse AI agents, but S&P said the timing of a material contribution is unclear. Some competitors already rent data center capacity to other companies, the firm noted.
Leases push S&P's leverage forecast past its limit
Meta had about $355.73 billion of data center and other leases that hadn't started yet as of September 30, according to its third-quarter 10-Q. That's up from about $278.99 billion at the end of June. The leases start between now and 2036, and some run as long as 30 years.
S&P's leverage measure counts leases as debt. It compares that debt with EBITDA, a common measure of operating earnings. It expects Meta's adjusted leverage to be 0.3 times at the end of 2026. As the leases start, S&P expects that to rise to 1.1 times in 2027 and 1.3 times in 2028. S&P's downgrade threshold for Meta's current rating is 1.0 times.
S&P could lower the rating if Meta's leverage stays above 1.0 times on a sustained basis and its free operating cash flow is still negative after 2028, according to Investing.com's account of the report. Meta had $84 billion of bonds outstanding and $82.45 billion of cash and marketable securities at the end of September, the 10-Q shows.
Meta has turned to stock sales
Meta priced $37.5 billion of stock offerings on October 26. That included $25 billion of Class A shares sold through forward agreements at $625 each and $12.5 billion of preferred stock that converts into common stock. Meta also plans to sell up to $60 billion of nonvoting Class C shares starting in early 2027, though it hasn't signed an agreement for that program.
Its two most recent bond sales, $30 billion in October 2025 and $25 billion this spring, are on our AI debt tracker. On October 30, Meta's stock closed 1.6% below the $625 price of its October offering.
