SPGlobalRatings News & Analysis

Meta (META) Outlook Cut by S&P on $2.12B Negative Cash Flow and Capex

S&P Global Ratings downgraded Meta Platforms' (META) credit outlook from AA- stable to AA- negative due to concerns about the company's elevated capital expenditures (capex) and negative free cash flow. The downgrade reflects uncertainty over Meta's ability to monetize its AI investments, despite recent launches like the Muse AI agent app. Meta reported negative free cash flow of $2.12 billion for the first time and expects full-year capex between $135 billion and $145 billion. Investors reacted by pushing Meta's shares down 7% after the latest earnings report, with the stock finishing October down 15%. Meta plans to raise $95 billion to fund AI initiatives, including $35 billion through public equity offerings and an additional $60 billion via an at-the-market program. S&P expects capex growth to flatten starting in 2028 but doubts Meta will reduce spending as previously expected. This downgrade matters for investors because Meta's rising costs and cash flow deficits could pressure its credit profile and funding costs, especially amid plans to raise substantial capital for AI projects, influencing the company's future financial stability and stock performance.