Full Breakdown
Meta’s Credit Outlook Shift to Negative Amid AI-Driven Spending Surge
By Drooid · · How we work
In this breakdown
01
Outlook Revision and Immediate Implications
On October 30, 2026, S&P Global Ratings changed the outlook on Meta Platforms Inc.’s AA- rating from “stable” to “negative.” The rating itself was left unchanged, but the agency warned that the company’s aggressive AI-related capital spending could erode its credit profile and trigger a downgrade if the trend continues.
02
Background: AI-Focused Capital Expenditure
Meta has raised its full-year 2026 capital-expenditure guidance to $135 billion–$145 billion, up $5 billion at the low end from the prior quarter. The firm expects capex to climb to about $140 billion in 2026, accelerate to over $225 billion in 2027, and reach $252 billion in 2028. Most of the outlay funds data-center capacity, specialized AI chips, and related infrastructure.
Visual evidence
Images from the story
03
Financial Projections and Leverage
- Free operating cash-flow deficits: S&P projects a $22 billion deficit in 2026 and a $71 billion deficit in 2027, narrowing to $39 billion in 2028.
- Leverage: Adjusted debt-to-earnings is expected to rise from 0.3× at year-end 2026 to 1.1× in 2027 and 1.3× in 2028, surpassing the 1.0× threshold that underpins the current AA- rating.
- Long-term debt: Meta reported $80.92 billion of long-term debt as of September 30.
- Lease obligations: Future lease commitments grew to $355.7 billion by September 30, up from roughly $279 billion in the prior quarter.
These figures illustrate a shift from historically strong cash generation to a multi-year period of negative cash flow, prompting S&P’s outlook downgrade.
04
Official Statements & Responses
S&P’s assessment was articulated by Naveen Sarma, U.S. media and telecom sector lead at the rating agency, who warned that sustained high-level capex could further weaken Meta’s credit profile.
Meta’s leadership disputed the agency’s view.
05
Verbatim Quotes
- “We expect to continue investing aggressively to support both our core business and emerging AI initiatives,” — CFO Susan Li
- “If capex remains elevated and continues to grow at a faster pace than we expect, credit profiles will continue to weaken and cash flows will be negative,” — Naveen Sarma, S&P Global Ratings
06
Why It Matters
The negative outlook signals heightened credit risk for investors and bondholders. While Meta’s AA- rating remains high-grade, the agency’s warning that leverage could exceed 1.0× and that free cash flow may stay negative beyond 2028 creates a pathway to an outright downgrade. The outlook change coincided with a 7 % drop in Meta’s shares after earnings and a 15 % decline for October, the worst monthly performance in four years.
07
Conflicting Reports & Gaps
Sources differ on the earliest year leverage could breach the 1.0× threshold: some indicate 2027, others suggest 2028 when lease contracts commence. S&P references “as early as 2027” and “by 2028,” reflecting uncertainty in timing.
08
What’s Next
S&P has indicated that a sustained adjusted leverage ratio above 1.0× combined with continued negative free cash flow after 2028 could trigger a downgrade. Meta plans to fund its AI buildout through additional equity raises, including a $97.5 billion stock sale already announced and a $60 billion Class C at-the-market program slated for early 2027. Monitoring the company’s leverage trajectory and cash-flow performance through 2028 will be critical for investors assessing credit risk.