S&P cuts Meta outlook to negative over elevated capex and cash flow risks
Derick Hudson
S&P Global Ratings lowered its outlook on Meta Platforms (META) to “negative” from “stable,” citing uncertainty surrounding the company’s capital expenditure and free operating cash flow.
"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.
“This dramatic increase in the company's leverage, from about 0.1x in 2025, primarily stems from its strategy of leasing data center capacity (including its mega-data center projects Beignet and Sopaipilla) rather than from issuing debt.”
The negative outlook reflects the agency’s expectation that the company's leverage could exceed 1.0x and free operating cash flow (FOCF) could remain negative for longer than expected if capital expenditure remains elevated and the monetization of its AI investments is delayed or fails to materialize.
Meta projected annual capital expenditures of $135B to $145B after reporting a $2.12B free cash flow deficit in the third quarter. The company also plans to raise $97.5B through stock sales in public markets to finance its AI expansion.
S&P also believes elevated capital expenditures could result in FOCF remaining negative beyond 2028, and expects Meta to post free operating cash flow deficits of $39B in 2026 and $71B in 2027.
The agency said it could restore the outlook to stable if Meta (META) maintains adjusted leverage below its 1.0x downgrade threshold and returns to positive FOCF in 2028, potentially through lower capital spending, improved monetization of AI investments or additional non-debt funding.
S&P has also recently lowered its outlook on Broadcom (AVGO) 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 (ORCL) credit rating to "BBB-", one notch above "junk", due to its heavily leveraged balance sheet.
KioskNews shows a cleaned-up reading view extracted from the publisher’s page — the original always lives on their site, not ours.