S&P puts Meta's credit rating on notice over AI spending

S&P Global Ratings on Friday, Oct. 30, 2026, revised its outlook on Meta Platforms to negative from stable and affirmed its 'AA-' rating, citing "significant uncertainty" around how long Meta's capital spending stays elevated and its free operating cash flow stays negative.

Meta didn't borrow its way into this; it leased its way in. Signing decades-long leases for giant data centers keeps debt off the headline balance sheet, and S&P just said, politely, that it counts those leases anyway. AA- is still a very good rating, and nothing was downgraded. But when the agency says your AI is harder to cash in on than everyone else's, and Meta's own rebuttal is "we respectfully disagree," the AI capex boom has officially reached the part where the people who price risk start asking for receipts.

S&P Global Ratings on Friday revised its outlook on Meta to negative from stable and affirmed the company's ratings, including the 'AA-' issuer credit rating. An outlook is the agency's watch on where a rating might go. Negative means a downgrade is possible later. It is not itself a downgrade: AA- stayed AA-. AA- is still a high rating, near the top of what S&P calls investment grade. Those lines are S&P's research update.

S&P forecasts that Meta's S&P-adjusted leverage could rise above 1.0x as early as 2027, up from about 0.1x in 2025. Leverage, in this note, is S&P's way of comparing debt-like obligations with earnings. At 1.0x, those obligations match a year of the earnings S&P counts, and 1.0x is the line S&P set for keeping the AA- rating. S&P says the climb comes mainly from Meta leasing data-center capacity, including the mega-data-center projects Beignet, the Louisiana joint venture with Blue Owl, and Sopaipilla, the proposed project in El Paso, Texas, rather than from Meta issuing bonds. A lease here is a long contract to pay for buildings and equipment the company does not put on the books as ordinary debt. S&P counts those future payments anyway. Those lines are S&P's.

Meta's 10-Q, the quarterly report filed with securities regulators, showed future lease obligations of $355.7 billion as of Sept. 30, 2026, up from about $279 billion the prior quarter. That comparison is S&P's, drawn from the filing.

S&P's capital-spending forecasts are $140 billion in 2026, inside Meta's own guide of $135 billion to $145 billion; over $225 billion in 2027, up from a previous forecast of $163 billion; and $252 billion in 2028, up from $178 billion. Capital spending, or capex, is money for long-lived assets such as data centers. S&P says it is "less certain" Meta will curtail spending the way the agency used to expect, and it notes that Meta has not disclosed 2027 spending plans. Those forecasts are S&P's.

S&P now forecasts free operating cash flow deficits of $22 billion in 2026, $71 billion in 2027, and $39 billion in 2028. Free operating cash flow is the cash left after running the business and paying for buildings and equipment. A deficit means more cash going out than coming in. S&P had previously expected that number to turn positive again in 2028. It no longer does. Separately, Meta posted its first quarterly deficit of this kind in the third quarter of 2026, about $2.1 billion. Capex that quarter, including the principal on finance leases, was $34.9 billion. The $22 billion figure is the full-year 2026 forecast. The $2.1 billion is the third quarter alone. Both are S&P's.

Count the $37.5 billion Meta just raised, $25 billion of Class A stock and $12.5 billion of mandatory convertible preferred, and S&P expects adjusted leverage of 0.3x at the end of 2026, 1.1x in 2027, and 1.3x in 2028. Class A stock is ordinary Meta shares. A mandatory convertible preferred starts as a special share and must turn into common stock on a schedule. If the planned $60 billion at-the-market Class C stock program, beginning January 2027, is counted as well, leverage would be 0.7x in 2027 and 1.1x in 2028. At-the-market means shares dribbled into the market over time, not sold in one block. S&P called the capital raise credit positive, meaning it helps the case for the rating. Those paths are S&P's.

S&P's line on the business: "In our view, Meta's ability to monetize its AI investments is more limited than that of its peers." It notes that some peers already lease compute capacity to outside customers, and that it is unclear when new revenue, including the Muse agentic app, will bring in more than those rising costs. Agentic, here, means the software can take steps on a person's behalf, not only answer a question. S&P still calls Meta's business position strongly favorable: 3.64 billion engaged users, and the second-largest digital advertising company after Alphabet. Those lines are S&P's.

S&P said it could lower the rating if leverage rises above 1x and stays there, and if free operating cash flow is still negative after 2028. That condition is S&P's. It has not been met, and the rating was not lowered on Friday.

A Meta spokesperson told CNBC: "We respectfully disagree with S&P's assertion about Meta's AI monetization capabilities. We see significant product and business opportunities ahead of us, supporting our very strong credit profile." That quotation is Meta's, via CNBC. CNBC also reported that Meta shares fell 7% after third-quarter earnings and finished October down 15%, the stock's worst month in four years. Those market lines are CNBC's.

The picture is Meta CEO Mark Zuckerberg on stage in a gray-blue sweater, a lapel microphone on, against a bright blue backdrop. It is a 2019 photograph from F8. The credit is Anthony Quintano (CC BY 2.0), via Wikimedia Commons. It is a photograph of him, not of Friday's ratings note.

In plain terms, S&P left Meta at AA- and changed the outlook from stable to negative. The agency's worry is leased data centers, not a pile of new bonds: it thinks those leases can push leverage past the AA- line as early as 2027, and it now expects free operating cash flow to stay in the red through 2028, including a $22 billion deficit in 2026. S&P also said Meta's AI is harder to turn into revenue than its peers'. Meta said it respectfully disagrees. The shares had already had their worst month in four years.