S&P Downgrades Meta Outlook Over AI Spending and Cash Flow

S&P Global Ratings lowered its outlook on Meta Platforms to negative on Friday.

The agency cited uncertainty regarding Meta's ability to generate sufficient returns from its artificial intelligence investments. S&P questioned whether the company can monetize its AI efforts relative to competitors who are also spending heavily on data centers. The firm noted that Meta has recently launched its Muse AI agent app and foundation models. However, S&P stated it is unclear when these products will generate revenue that covers their rising costs over the next few years.

Meta’s credit rating remains AA-, but the outlook changed from stable to negative. S&P explained that the revision reflects concerns over elevated capital expenditures and negative free cash flow. The agency noted that Meta posted a negative free cash flow of $2.12 billion in its third-quarter earnings report released last week. This marked the first time the company reported a loss in this metric. Meta expects full-year capital expenditures to range from $135 billion to $145 billion.

A Meta spokesperson disputed the assessment in a statement. "We respectfully disagree with S&P's assertion about Meta's AI monetization capabilities," the spokesperson said. The company added that it sees strong product and business opportunities ahead that support its credit profile.

Investors reacted negatively to the financial results. Meta shares dropped 7% following the earnings report despite a revenue beat. The stock finished October down 15%, marking its worst month in four years.

Meta announced plans on Monday to raise $95 billion to fund its AI initiatives. The company intends to first raise $35 billion through underwritten public equity offerings. It plans to follow this with an additional $60 billion through an at-the-market program.

S&P expects Meta’s capital expenditure growth to begin flattening out starting in 2028. The agency said it is less certain that Meta will curtail spending as previously anticipated.