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S&P Turns Negative on Meta as AI Spending Fuels Cash Burn Fears

David Coleman

• November 1, 2026 • 0 Comments

S&P Global Ratings has turned negative on Meta Platforms, warning that the social media giant’s huge artificial intelligence spending spree and weakening cash flow could put pressure on its credit profile. The agency kept Meta’s AA- credit rating unchanged, but the shift in outlook, announced on Friday, October 30, signals to bond investors that the next rating move is more likely to be down than up.

The decision lands at a nervous moment for Wall Street. Big Tech stocks sold off sharply on Friday, capping a brutal October for the Nasdaq, and investors are asking how long the largest technology companies can keep pouring money into AI data centres before the returns arrive. For Meta, S&P’s answer is that the uncertainty is now large enough to matter.

What S&P actually changed

S&P revised its outlook on Meta to “negative” from “stable” and affirmed the company’s AA- long-term rating, according to Reuters. An outlook is not a rating change: it is the agency’s view of the likely direction of the rating over the next year or two, and a negative outlook means a downgrade is possible, though not certain.

Meta’s rating remains near the top of the investment-grade scale, backed by tens of billions of dollars in cash and securities and a large advertising business. What changed is the balance between that strength and a spending plan that has grown far larger, far faster, than S&P previously expected. The agency cited “significant uncertainty” around Meta’s capital spending and free operating cash flow, the cash left after day-to-day operations and investment in buildings and equipment.

Why AI spending triggered the warning

Meta’s third-quarter results, reported on October 22, set the scene. The company forecast annual capital expenditure of $135 billion to $145 billion for 2026, after reporting a free cash flow deficit of $2.12 billion in the third quarter. Capital expenditure in the quarter alone reached $34.9 billion, while Meta held $82.45 billion in cash and securities at the end of September.

S&P’s own forecasts are even more aggressive: about $140 billion of capital spending in 2026, more than $225 billion in 2027 and $252 billion in 2028, with free operating cash flow in deficit for three straight years, at $22 billion, $71 billion and $39 billion respectively. Because S&P counts data centre leases as well as debt in its leverage measure, it warned it could cut the rating if adjusted leverage stays above 1.0 times and cash flow remains negative beyond 2028.

S&P also said Meta’s ability to monetise its AI investments is more limited than that of some peers, which can earn money by leasing computing capacity to others. Meta’s AI products are largely built to strengthen its own apps and advertising business, rather than to be sold as cloud services.

Meta pushes back

Meta has rejected S&P’s assessment, saying it disagrees with the agency’s view and that significant product and business opportunities lie ahead, which will support a very strong credit rating. On October 26, the company announced plans to raise $95 billion to finance AI infrastructure, including data centres. Supporters argue the spending is a long-term bet on the next computing platform. Critics are not questioning whether AI matters, but whether the pace leaves enough room if returns are delayed or advertising weakens.

Why the timing matters for investors

The outlook change did not arrive in isolation. On Friday, October 30, the S&P 500 fell 1.82 percent to 7,580.07, the Nasdaq Composite dropped 2.86 percent to 25,437.00 and the Dow Jones Industrial Average shed 1.09 percent to 51,770.31. Intel plunged nearly 26 percent for the week after weak guidance, Alphabet fell 12.2 percent for the week, and ServiceNow tumbled nearly 27 percent in a single day after its earnings report.

For October as a whole, the Nasdaq fell 5.30 percent, its worst month since March 2025, while the Dow rose 1.70 percent. Meta closed on October 30 at $614.99, down 15 percent for October, its worst monthly performance in four years, after already falling 7 percent on its earnings announcement even though revenue grew 26 percent. Gold also fell about 3.6 percent on Friday to around $3,875 an ounce, as investors raised cash to cover technology losses.

What investors should watch next

Three things will decide whether S&P’s warning proves prescient or premature. The first is Meta’s fourth-quarter earnings call, when it is expected to give its first guidance for 2027 capital spending: close to S&P’s forecast of more than $225 billion would intensify pressure, while a slower path could stabilise the outlook. The second is the week ahead, with Apple reporting on Monday, November 2, Americans voting in the midterms on Tuesday, and the October jobs report landing on Friday, November 6. The third is cash flow itself, where S&P’s forecast $71 billion deficit for 2027 is far darker than Wall Street’s consensus of roughly $43 billion.

For now, S&P’s message is measured, not alarming. Meta has not been downgraded, its rating remains strong, and the agency expects capital spending growth to begin flattening from 2028. But the era in which Big Tech could spend without limit and keep a pristine credit outlook is, at least for Meta, over.

Frequently asked questions

Has Meta been downgraded?

No. S&P kept Meta’s AA- rating unchanged. Only the outlook changed, from stable to negative, meaning a downgrade is possible, not that one has happened.

Why did S&P change Meta’s outlook?

S&P cited significant uncertainty around capital spending and free operating cash flow. Meta forecast 2026 capital expenditure of $135 billion to $145 billion after a $2.12 billion free cash flow deficit in the third quarter.

How much is Meta spending on AI?

Meta spent $34.9 billion on capital expenditure in the third quarter and guided full-year spending to $135 billion to $145 billion. S&P forecasts more than $225 billion in 2027 and $252 billion in 2028.

What does this mean for Meta stock?

A negative outlook does not directly change the share price, but it can raise borrowing costs over time. Meta shares closed on October 30 at $614.99, down 15 percent for October.

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