The Zhitong Finance App learned that on Friday, S&P Global Ratings lowered Meta (META.US)'s credit rating outlook from “stable” to “negative” because the company continues to expand artificial intelligence (AI) capital expenditure, leading to negative free cash flow, and there is still uncertainty about whether huge AI investments can generate sufficient returns in the next few years.
Notably, S&P did not downgrade Meta's credit rating this time, but instead kept its “AA-” rating unchanged and only adjusted the rating outlook to a negative one. This means that Meta currently still has a high credit rating, but there is a risk that the rating will be downgraded in the future.
S&P said the adjustments mainly reflect uncertainty brought about by Meta's high capital expenditure and negative free cash flow. Compared to other tech giants that also invest heavily in AI data centers, S&P is particularly concerned about whether Meta can effectively turn AI investments into revenue.
Although Meta recently launched the Muse AI agent application and related basic models, S&P believes that it is currently unclear when these new businesses will generate sufficient revenue to cover the investment costs that will continue to grow over the next few years.
S&P pointed out that although Meta's capital expenditure growth rate is expected to level off starting in 2028, the agency's confidence in whether the company can control spending according to previous expectations has weakened.
According to Meta's third-quarter earnings report previously released, the company expects capital expenditure to reach 135 billion to 145 billion US dollars for the full year of 2026, reflecting that the scale of its investment in AI infrastructure construction is still huge. Meanwhile, Meta's free cash flow for the third quarter was negative $2.12 billion, showing a negative value for the first time. Although the company's revenue for the quarter exceeded market expectations, huge capital expenditure and deteriorating cash flow still raised concerns among investors, causing its stock price to drop 7% after the announcement of its earnings report.
Meta's stock price fell 15% cumulatively in October, the worst monthly performance in four years.
To support the continued expansion of AI investments, Meta announced on Monday that it plans to raise $95 billion through equity financing. Among them, the company plans to first raise 35 billion US dollars through underwriting the public offering of shares, and then raise 60 billion US dollars through the market price issuance plan. This financing arrangement further highlights that as AI infrastructure construction costs continue to rise, Meta is seeking external funding to support its long-term development strategy.
However, Meta objected to S&P's judgment. A Meta spokesperson said in a statement: “We disagree with S&P's judgment on Meta's ability to commercialize artificial intelligence. We believe the company has huge product and business opportunities in the future, and these opportunities will continue to support our very strong credit position.”
The spokesperson further stated that Meta believes the technology and infrastructure currently being built will create new revenue streams, bring long-term value to shareholders, and drive the company's vision of making personal superintelligence accessible to everyone.
As large technology companies continue to invest huge sums of money to develop AI, Wall Street is paying more and more attention to the impact of related investments on corporate cash flow and financial conditions. For Meta, how to improve free cash flow while maintaining high-intensity AI investments and prove that new products can generate sufficient commercial returns will be the key to influencing its future credit ratings and market confidence.