S&P cuts Meta outlook to negative on rising AI spending

S&P Global Ratings lowered its outlook on Meta from stable to negative on October 30, 2026, while keeping the company's AA- credit rating, according to aitimes.com. The agency warned that a downgrade is possible within the next two years.

S&P tied the decision to weaker cash flow disclosed in Meta's third-quarter results. Revenue rose 26% year-on-year to $64.6 billion, but operating income fell 37% to $13 billion, a figure that includes a $9.9 billion settlement cost tied to a youth mental health lawsuit.

Operating cash flow for the quarter was $32.8 billion against capital expenditure of about $34.9 billion, leaving a free cash flow deficit of $2.12 billion. Meta expects full-year capital expenditure of $135 billion to $145 billion.

S&P projects Meta's capital expenditure next year will exceed $225 billion, with a free cash flow deficit of $71 billion. The agency said Meta's long-term debt stood at $80.9 billion at the end of September, and forecast its leverage ratio could pass 1.0x as early as 2027, up from about 0.1x last year.

A Meta spokesperson said the company disagrees with S&P's assessment of its AI monetization capability. Before the Meta action, S&P had cut Oracle's credit rating to BBB- and revised Broadcom's outlook from positive to stable, and The Wall Street Journal recently reported that lenders and investors in AI infrastructure financing are scrutinizing profitability and risk more strictly.