S&P global revises Meta’s outlook to ‘negative’ on AI spending, cash flow worries

S&P Global Ratings on Friday revised its outlook on Meta Platforms to “negative” from “stable”, citing significant uncertainty around the social media giant’s capital spending and free operating ​cash flow.

Big Tech has historically spent heavily on cloud computing, online advertising and e-commerce, but the AI boom has ‌pushed capital expenditure to dizzying levels, ‌stoking investor concerns about whether the sector can generate returns quickly enough.

Last week, Meta forecast annual capital expenditure between $135 billion-$145 billion after reporting a free cash flow deficit of $2.12 billion in the ​third quarter. Meta is also planning to tap public markets and sell $97.5 billion in stock to fund the AI buildout.

Meta’s ability to monetize its AI investments is more limited than that of its peers, S&P said, adding it was ​unclear when its revenue streams would generate material contributions exceeding their rising costs over the next few years.

S&P now forecasts Meta will generate FOCF deficits ​of $39 billion in 2026 and $71 billion in 2027.

The agency said elevated spending could keep FOCF negative ​beyond 2028 and expects Meta to fund its 2028 cash shortfall entirely with debt.

“Given the lack of clarity around the company’s future capex and its very ambitious multi-year AI investment plans, we are less certain that it will curtail its spending as previously anticipated,” S&P said.

The ratings agency said it believes Meta’s leverage could rise to above 1.0x as early as 2027, which is S&P Global’s threshold for the “AA-” issuer credit rating.

“We respectfully disagree with S&P’s assertion about Meta’s AI monetization capabilities,” a Meta spokesperson told Reuters, adding that the company sees “significant product and business opportunities ahead of us, supporting our very strong credit profile.”

Meta’s leverage increased from 0.1x in 2025, primarily due to its strategy of leasing data-center capacity rather than issuing debt, S&P said.

“If capex remains elevated and continues to grow at a faster pace than we expect, credit profiles will continue to weaken and cash flows will be negative,” Naveen Sarma, US media and telecom sector lead at S&P Global Ratings, said.

The company reported long-term debt of $80.92 billion as of September 30.

S&P on Thursday also lowered its outlook on Broadcom to stable from positive, saying the chipmaker’s rapid AI growth was increasing its exposure to a few big customers.

Earlier this year, S&P lowered cloud computing giant Oracle’s credit rating to “BBB-”, ​one notch above “junk”, due to its heavily leveraged balance sheet.

Markets have long been stuck in a wait-and-see mode ahead of the US midterm elections, another potential round of fighting in Iran and the latest sweep of AI earnings. With answers now set to come on all these fronts, the next few weeks could be some of the most consequential of the year. And in 2026, that’s saying something.

Let’s begin with the AI narrative. Over the past week, a serious case of “cash ​burn” has upset stomachs across Wall Street.

Chip stocks and hyperscalers initially got a boost early in the week amid a wave of AI-related funding announcements from SpaceX, Meta, Broadcom and, most notably, Anthropic, which on Monday officially filed for its IPO, revealing eye-popping 1,368% year-on-year revenue growth in the second quarter.

There were also some positive tech ‌earnings. South Korea’s SK Hynix leapt 13% on Wednesday after announcing a ‌more than sevenfold jump in quarterly profit, while Microsoft reported a hefty cash flow beat and a robust outlook for cloud growth.

But the reprieve didn’t last long, as concerns about AI cash burn mounted.

First, Alphabet released disappointing search advertising results and negative free cash flow, sending its shares down more than 12% on Thursday.

Amazon shares also tumbled in after-hours trading on Thursday after it reported that it had burnt through $42.4 billion on a trailing 12-month basis in the third quarter, largely due to capex that was roughly $20 ​billion above estimates. And then there was Intel, which fell over 20% after-market following, you guessed it, more revelations of cash burn, driven by hefty spending, faltering PC demand and capacity constraints.

Away from equities, Friday morning’s news of a $6.3 billion cryptocurrency heist at Binance, the world’s biggest cryptocurrency exchange, probably won’t help market sentiment.

Moving to central banks, this was a packed week for monetary policymaking. The biggest surprise came from the Reserve Bank of New Zealand, which kept interest rates on hold at 2.75%. Traders had been pricing in a roughly 70% chance of a rate hike.

While this was a reminder that central banks don’t always follow the market’s lead, the rest of ​the big ones mostly did.

The Bank of Canada increased its policy rate by 25 basis points to 2.5%, as expected, reflecting energy-driven inflation concerns. Otherwise, “hawkish holds” were the order of the day, with the European Central Bank, Federal Reserve and Bank of Japan all keeping rates unchanged while signalling the potential for tightening ahead.

At the ECB, the big news came before the meeting, when President Christine ​Lagarde announced that she would be stepping down from her post in February before her term is up so that she can speak freely on matters beyond monetary policy.