S&P turns negative on Meta as AI spending eats into its cash

S&P lowered the outlook on Meta’s AA- credit rating to negative from stable, citing heavy AI spending. It expects Meta’s leverage to rise above 1.0x as soon as 2027, from about 0.1x last year. Meta says it disagrees.

S&P Global Ratings has cut its outlook on Meta’s AA- credit rating to negative from stable, warning that the company’s AI spending may be slow to pay off, Bloomberg reported. The agency announced the change on Friday.

“ Meta’s ability to monetize its AI investments is more limited than that of its peers, ” S&P said.

Unlike Amazon, Microsoft and Google, Meta has no cloud business yet that rents out computing power. S&P said it is unclear when the spending will bring in more revenue than it costs. Mark Zuckerberg has admitted Meta bet $200B on AI without knowing it would work.

The agency expects Meta’s leverage, its debt measured against earnings, to rise above 1.0x as soon as next year, from about 0.1x last year. That would breach the limit for its current rating.

Meta posted a free cash outflow of $2.12B in the third quarter, and it has $825B in commitments lined up. Earlier this week, it began a $35B share sale to help pay for the build-out.

“ We respectfully disagree with S&P’s assertion about Meta’s AI monetization capabilities, ” said Meta spokesperson Kamran Mumtaz.

“ We see significant product and business opportunities ahead of us, supporting our very strong credit profile, ” he added.

S&P has already downgraded Oracle over its data centre bills, and Big Tech has now committed more than $3T to the build-out. The Nasdaq 100 fell 3.5% this week and briefly entered correction territory after disappointing tech earnings.

I am the Editor in Chief for TNW, covering technology not as a parade of launches and valuations, but as a system of influence, persuasion, (show all) I am the Editor in Chief for TNW, covering technology not as a parade of launches and valuations, but as a system of influence, persuasion, and change. I write about startups, venture capital, digital policy, and Europe ecosystem, with an eye on the larger story beneath them: who gets to build the future, who profits from it, and how Europe is learning to speak in a louder voice of its own. Before moving into senior editorial leadership, I've built my career for over +10 years across journalism, storytelling, content strategy, SEO, and digital publishing, with experience in SaaS, hospitality, art, and culture.

Get the most important tech news in your inbox each week.

Thanks! Check your inbox to confirm your subscription.

By subscribing you agree to our Privacy Statement.