S&P cuts Meta outlook to negative amid capex concerns

Investing.com -- S&P Global Ratings changed its outlook on Meta Platforms to negative from stable on Friday, citing uncertainty about the duration of elevated capital expenditures and negative free operating cash flow.

The rating agency now projects Meta’s capital expenditures will reach $140 billion this year. Meta recently raised its full-year 2026 capex guidance to $135 billion-$145 billion, a $5 billion increase at the low end from the previous quarter. S&P Global forecasts capex will accelerate to over $225 billion in 2027 and $252 billion in 2028, up from previous estimates of $163 billion and $178 billion respectively.

S&P Global now expects Meta will generate free operating cash flow deficits in both 2026 and 2027, with losses of $22 billion and $71 billion respectively. The agency projects 2027 will mark the high point for losses, with a $39 billion deficit expected in 2028. S&P Global previously projected the company would return to positive free operating cash flow in 2028.

The rating agency said Meta’s ability to monetize its AI investments is more limited than its peers. While Meta intends to monetize these investments through improved advertising tools and new revenue streams from agentic apps such as Muse, the timing of material contributions remains unclear. Several of Meta’s peers are already monetizing their data center investments by leasing compute capacity to third parties.

Meta’s third-quarter 2026 results showed revenue increased 26.1%, led by a 25.9% expansion in advertising revenue. The company generated a free operating cash flow deficit of $2.1 billion during the quarter as capex increased to $34.9 billion. Meta reported a $9.89 billion charge related to litigation resolution with state attorneys general.

Meta’s future lease obligations increased to $355.7 billion as of Sept. 30, 2026, up from approximately $279 billion in the second quarter. S&P Global estimates the company’s adjusted leverage will increase to 1.3x when the leases commence in 2028, exceeding the 1.0x downgrade threshold for the current rating.

Meta raised $37.5 billion through $25.0 billion of Class A common stock and $12.5 billion of Series A mandatory convertible preferred stock. The company plans to raise an additional $60 billion through a Class C stock at-the-market program beginning in January 2027.

S&P Global expects Meta’s adjusted leverage will be 0.3x by year-end 2026, rising to 1.1x by 2027 and 1.3x by 2028. The rating agency could lower Meta’s rating if adjusted leverage rises above 1.0x on a sustained basis and free operating cash flow remains negative beyond 2028.

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