S&P Lowers Meta’s Credit Outlook Amid Soaring AI Spending

S&P Global Ratings lowered its credit rating outlook on Meta Platforms to negative from stable, saying the company’s ability to monetize its fast-rising AI investments is “more limited than that of its peers.”

The announcement Friday comes after Meta last week reported negative free cash flow of $2.1 billion for the third quarter, compared with positive free cash flow of $10.6 billion a year earlier. The company’s expenses surged 68% to nearly $52 billion, while operating income fell 37% to nearly $13 billion.

S&P said it expects Meta’s deficit in what the ratings agency labels free operating cash flow to total $22 billion this year and $71 billion in 2027 before narrowing to $39 billion in 2028 as the company’s capital expenditures stabilize. S&P said continued heavy spending could keep its cash flow negative beyond 2028, when it expects Meta will need to rely entirely on borrowing to cover its cash deficit.

“We respectfully disagree with S&P’s assertion about Meta’s AI monetization capabilities,” a spokesperson for Meta said in a statement, adding that it sees “significant product and business opportunities ahead of us, supporting our very strong credit profile.”

Most of Meta’s new AI driven products, such as its Muse agent and its AI models, are too new for there to be clear signals of their future financial prospects, although Meta has said it’s seen early signs that some of its AI investments are paying off, particularly in its core advertising business. On its third-quarter earnings call, Chief Financial Officer Susan Li said AI-powered improvements to its ad systems were driving measurable gains, including a nearly 2% increase in conversions from a new ad recommendation system and a 9.6% increase in app ad conversions from improvements to its ad-ranking model.