S&P Expects Meta Cash Deficit of $71 Billion in 2027
Key Facts
On October 30, S&P Global Ratings revised its outlook on Meta Platforms to negative from stable and affirmed its credit rating at AA-. The agency expects the company to post a free operating cash flow deficit of $39 billion in 2026, rising to $71 billion in 2027. The decision puts spending on artificial intelligence infrastructure at the center of credit concerns, as the agency sees the scale and timing of investment potentially pressuring the cash available to the company. S&P said, "Meta's ability to generate revenue from AI investments is lower than that of its peers." It added that the timing of these revenues making a material contribution toward covering rising costs remains unclear.
The agency expects Meta's capital spending to exceed $225 billion in 2027, then reach $252 billion in 2028. These figures represent a significant increase from its previous estimates of $163 billion and $178 billion for the same years. Meta also raised its 2026 capital spending estimate to a range of $135 billion to $145 billion, from a previous range starting at $130 billion and ending at $145 billion. The spending expansion comes as the company recorded negative free cash flow in the third quarter, according to reports on its results. S&P linked its review of the company's prospects to a lack of clarity around multiyear capital spending plans, saying it is "less certain that Meta will limit its spending as previously expected."
On the revenue front, Meta's third-quarter sales grew 26% to $64.60 billion, compared with $51.24 billion in the same period a year earlier. But total expenses rose 68% to $51.61 billion, including charges related to a multistate legal settlement. An S&P official said continued high capital spending at a faster-than-expected pace "will weaken credit profiles and keep cash flows negative." The agency estimated that free operating cash flow could remain negative beyond 2028 if spending continues at elevated levels. It also expects Meta to finance its cash deficit in 2028 entirely with debt, linking the investment path to greater reliance on external financing.
S&P said Meta's leverage ratio could exceed 1.0 times in 2027, the threshold the agency associates with an AA- issuer rating. The forecast comes as the company plans to issue $97.5 billion in shares to fund its expansion of AI infrastructure. A Meta spokesperson objected to the agency's assessment of the company's ability to turn AI investments into revenue, saying, "We respectfully disagree with S&P's assertion about Meta's ability to generate returns from AI." The spokesperson added that the company has significant product and business opportunities that support its strong credit profile. Chief Executive Mark Zuckerberg said after the third-quarter results were announced that "our investments are paying off, and our core business is strong."
On the trading screen, Meta shares closed at $614.99 on October 30, down from $624.52 in the previous session. In an earlier session during the week, the stock fluctuated after the company announced its financing plan for AI expansion; it first fell more than 2%, then rebounded to a gain before ending the session down 1.9%. Meta expects fourth-quarter revenue to range between $73 billion and $76 billion, according to the Associated Press. The range puts the company's near-term financial guidance alongside S&P's expectations for cash flows and spending in subsequent years. The investment's ability to support revenue, alongside the path of capital spending, will remain central to the agency's assessment of the rating and outlook.