S&P Flags a $71 Billion Cash Burn: Meta's AA- Rating Outlook Cut to Negative on AI Spending

S&P Global Ratings on Friday revised its outlook on Meta Platforms to "negative" from "stable," the clearest sign yet that the debt market is losing patience with the company's AI spending trajectory. The AA- rating itself was unchanged, but the move puts the social media giant on a formal path toward a potential downgrade within the next couple of years.

The rating agency's language was unusually blunt for a company of Meta's size. "Meta's ability to monetize its AI investments is more limited than that of its peers," S&P said in its statement, adding that it was unclear when the company's expenditures would start producing material revenue that exceeds their rising costs. The outlook, S&P wrote, "reflects uncertainty around how long capex will remain elevated and free operating cash flow will be negative."

The arithmetic behind the decision is stark. Meta guided 2026 capital expenditure to between $135 billion and $145 billion, and S&P expects it to accelerate past $225 billion in 2027. The agency forecasts free operating cash flow deficits of $39 billion this year and $71 billion next year, and expects leverage to climb above 1.0x as early as 2027 - the threshold S&P considers appropriate for an AA- issuer. Meta reported a free cash flow deficit of $2.12 billion in the third quarter, its first negative reading in years.

Meta has been borrowing and raising to keep pace. Earlier this month the company disclosed more than $800 billion in future spending commitments, almost half of them tied to leases that have not yet begun, largely for data centers and energy infrastructure. On Monday it announced plans to raise $97.5 billion in equity - $35 billion through an underwritten offering followed by a $60 billion at-the-market program - one of the largest equity raises ever attempted.

Investors had already voted. Meta shares fell more than 15 percent in October, their worst month in four years, capping a fifth consecutive weekly loss. The Nasdaq 100 briefly crossed into technical correction territory on Friday as tech earnings disappointed across the board.

Meta pushed back on the assessment. "We respectfully disagree with S&P's assertion about Meta's AI monetization capabilities," company spokesperson Kamran Mumtaz said in a statement. "We see significant product and business opportunities ahead of us, supporting our very strong credit profile." CFO Susan Li told analysts the company expects "to continue investing aggressively to support both our core business and emerging AI initiatives."

A one-notch downgrade would still leave Meta comfortably investment grade, and S&P is not actively considering one now. But the symbolic weight is hard to miss: weeks after Blackstone told investors to expect Anthropic to exit its IPO with a high junk-grade rating, the credit market is now formally questioning whether even the most profitable consumer internet company on earth can earn a return on its AI buildout. The era of unconditional faith in AI balance sheets is over.