Meta has been assigned a negative outlook by S&P Global Ratings on concerns surrounding cash flow and AI spending.
The credit agency said Friday that the outlook reflects “uncertainty” surrounding Meta’s elevated capex and its negative free cash flow.
Meta’s credit rating has thus been reduced from AA- stable to AA- negative, the S&P Global Ratings said. S&Ps highest credit rating is AAA. Anything below BBB falls into the junk bond category.
The credit agency questioned “Meta’s ability to monetize its AI investments” relative to its peers, which are also spending heavily on data center buildouts that have impacted their free cash flow.
Although Meta has recently debuted its Muse AI agent app and related foundation models, the S&P Global Ratings said that “it is unclear when these revenue streams will generate material contributions that exceed their rising costs over the next few years.”
A Meta spokesperson pushed back on the credit agency’s characterization of the company’s AI efforts.
“We respectfully disagree with S&P’s assertion about Meta’s AI monetization capabilities,” A Meta spokesperson said in a statement. “We see significant product and business opportunities ahead of us, supporting our very strong credit profile.”
The social media giant said in its third-quarter earnings report last week that it expects full-year capex to come in the range of $135 billion to $145 billion. The company also posted negative free cash flow of $2.12 billion, going in the red for the first time.
Investors sent Meta shares sinking 7% following last week’s earnings report despite though the company beating on revenue. The stock finished October down 15%, its worst month in four years.
The company said on Monday that it plans to raise $95 billion to help fund its AI initiatives, with plans to
first raise $35 billion in underwritten public equity offerings, followed by an additional $60 billion to be raised via an at-the-market program.
S&P Global Ratings said that while it expects Meta’s capex growth to start “flattening out beginning in 2028,” the credit agency is “less certain that it will curtail its spending as previously anticipated.”
The Meta spokesperson said that the company believes “the technology and infrastructure we’re building now will open new revenue streams, create long-term shareholder value, and bring us closer to delivering personal superintelligence to everyone.”
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