S&P Flags Meta’s AI‑Heavy Spending as Credit Risk
S&P Global shifts Meta’s outlook to negative, citing sustained cash deficits and rising leverage tied to its AI push.
Late Friday, S&P Global moved Meta’s outlook to negative from “stable,” pointing to a continued negative cash‑flow trajectory and uncertainty around capital‑expenditure plans, Fortune’s Jason Ma reports.
The rating agency left Meta’s AA‑ credit rating unchanged but warned that the company’s leverage could climb above the 1.0× ceiling that defines its current rating as early as 2027. Leverage, currently projected at about 0.1× in 2025, is expected to rise largely because Meta is leasing data‑center capacity instead of relying on traditional debt financing.
S&P forecasts Meta’s capex to hit $140 billion this year, surge past $225 billion in 2027, and reach $252 billion in 2028 before leveling off. Correspondingly, free operating cash flow is projected to stay negative at –$22 billion this year, –$71 billion in 2027, and –$39 billion in 2028.
Other hyperscalers are also showing cash deficits, but S&P notes Meta’s edge lies in its ability to monetize investments. Rivals can lease compute capacity to frontier‑model labs and enterprise customers, whereas Meta is betting on enhanced advertising tools and new revenue streams from agentic apps such as Muse.
The agency says it’s “unclear when these revenue streams will generate material contributions that exceed their rising costs.”
Meta pushed back, stating in a spokesperson’s comment to Fortune that its AI investments are already delivering stronger engagement and greater returns for businesses.
The broader AI spending backdrop shows signs of strain: OpenAI reportedly trimmed its latest fundraising target to $20 billion from $30 billion, and Alphabet recorded its worst day on record after reporting negative free cash flow for a second straight quarter.
For CFOs, the lesson is that lease commitments now count toward leverage, and the market demands a credible timeline for turning AI spend into revenue.
Not everyone predicts a bust; market veteran Ed Yardeni argues that constraints on capital, power and politics could actually extend the AI boom.
Sheryl Estrada contributed to this report.
