Meta Credit Rating Outlook Cut to Negative by S&P Over AI Spending

S&P Global Ratings revised its outlook on Meta Platforms to negative from stable on October 30 and kept the company's credit rating at AA-, citing heavy AI spending and free cash flow that has turned negative. A negative outlook is not a downgrade, but it signals a higher chance of one. For the AI trade, it matters because it puts a credit agency's name behind a worry stock investors have voiced all week: the bill for AI is arriving before the revenue.

The trigger was Meta's third-quarter report. Free cash flow came in at negative $2.12 billion, the first time it has gone into the red, CNBC reported, while Meta guided full-year 2026 capital spending to $135 billion to $145 billion. Shares fell 7% after the report despite a revenue beat and ended October down 15%, their worst month in four years, according to CNBC.

AA-

Rating kept, outlook now negative

-$2.12B

Meta Q3 2026 free cash flow

$135B to $145B

Meta 2026 capex guidance

-$71B

S&P's projected 2027 cash shortfall

What S&P expects from Meta's cash flow

S&P projects Meta's free operating cash flow at a deficit of about $71 billion in 2027, according to Implicator, Startup Fortune and Finimize. Reports differ on the 2026 figure: Finimize and CXO Digital Pulse put it at $39 billion, while Startup Fortune reported $22 billion. Either way, the agency expects the gap to widen next year before it narrows.

The reason is spending. S&P projects Meta's capital spending at more than $225 billion in 2027 and $252 billion in 2028, according to Implicator and Startup Fortune, and expects growth in that spending to start flattening out only from 2028. The agency said it is now less certain Meta will curtail spending as it had previously expected, CNBC reported.

Why debt is the key number

AA- is the fourth-highest grade on S&P's scale. If cash flow stays negative, the agency expects the 2028 shortfall to be funded entirely with debt, according to Implicator and CXO Digital Pulse. Implicator reported that S&P sees Meta's adjusted leverage rising from 0.3 times at the end of 2026 to 1.1 times in 2027 and 1.3 times in 2028.

The 1.0 times level is the line to watch. S&P could lower the rating if leverage stays above 1.0 times on a sustained basis and free operating cash flow remains negative beyond 2028, according to Implicator and Startup Fortune. Even a one-notch cut would leave Meta well inside investment grade, but it would mark a shift for one of the largest corporate borrowers funding the AI build-out.

Meta is also turning to shareholders. Earlier in the week it outlined a plan to raise about $95 billion by selling stock, $35 billion through underwritten offerings and $60 billion through an at-the-market program, CNBC reported.

How Meta responded

A Meta spokesperson pushed back on the revision and said the company disagrees with S&P's view of its ability to make money from AI. In a statement quoted by CNBC, the company said: "We see significant product and business opportunities ahead of us, supporting our very strong credit profile." The company's third-quarter revenue beat expectations, CNBC noted, even as cash flow turned negative.

What the AI Bubble Index says

The AI Bubble Index read 43.4 in the Neutral band on its latest reading, compared with 43.6 a week earlier. Capital flows is the highest of its five components at 64.9, followed by sentiment at 59.6 and systemic risk at 41.4, while valuation reads 32.9 and adoption 20.1. A rating agency's outlook is not an index input, and a single company's credit view does not move it on its own. The dashboard shows each component over time, and the methodology explains how they are built.

Meta is one of five companies whose combined 2026 capital spending plans reach as much as $828 billion, by Fortune's count. We break that down, company by company, in our analysis of AI capex and cash flow. For how debt-funded spending fits into the wider risk picture, see our guide to AI investment risks.