S&P cuts Meta outlook to negative over AI spending and cash flow concerns

S&P Global has revised its outlook on Meta to negative from stable, pointing to negative cash flow and uncertainty around the company's capital expenditure plans. The move, announced late Friday, signals that the rating agency sees growing financial risk in the artificial intelligence spending push that has defined Big Tech's recent strategy. The agency affirmed Meta's AA- credit rating, but warned that the company's leverage could exceed 1.0x as early as 2027, the threshold for its current rating.

According to S&P, Meta's leverage has climbed from about 0.1x in 2025. The increase is largely tied to the company's strategy of leasing data-center capacity rather than relying solely on traditional debt financing, which means lease commitments are feeding into the leverage picture alongside conventional borrowing. The agency projects Meta's capital expenditures will reach $140 billion this year, exceed $225 billion in 2027 and hit $252 billion in 2028 before flattening out. It also expects free operating cash flow to remain negative: negative $22 billion this year, negative $71 billion in 2027 and negative $39 billion in 2028.

The timing of the revision comes as Wall Street reassesses the sustainability of the AI spending boom following last week's tech earnings. Investors have been watching closely how large technology companies convert their enormous infrastructure budgets into returns, and the S&P action adds a formal credit-market voice to those concerns.

S&P noted that other hyperscalers are also running cash deficits. What distinguishes Meta, the agency said, is its ability to monetize its investments. Rival companies can lease computing capacity to frontier model labs and enterprise customers, creating a direct sales channel for their data-center spending. Meta is instead betting on better advertising tools and new revenue streams from agentic applications such as Muse. S&P, however, said it is « unclear when these revenue streams will generate material contributions that exceed their rising costs. »

Meta disagrees with that assessment. A spokesperson told Fortune that the company's AI investments are already delivering stronger engagement and greater returns for businesses, a claim that places the company's current results at odds with the agency's forward-looking doubts about payback timing.

The broader backdrop is also shifting. OpenAI has reportedly cut its latest fundraising target to $20 billion from $30 billion, a development that suggests capital for AI ventures is becoming more selective. Alphabet, meanwhile, had its worst day on record after reporting negative free cash flow for a second consecutive quarter, a sign that investor patience with heavy spending is being tested across the sector.

For chief financial officers, the lessons extend beyond Big Tech. Lease commitments count toward leverage, and investors increasingly want a credible timeline for turning AI spending into revenue. Market veteran Ed Yardeni offers a counterpoint, arguing that constraints on capital, power and politics could actually make the boom last longer, since limits on available resources may slow the pace of overbuilding.

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Derek Weston

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Derek Weston covers public affairs, politics, business, culture and daily news for Core Memo. The role focuses on verification, context, and clear explanations for readers.

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