S&P cuts Meta outlook to negative amid capex concerns

On Friday, S&P Global Ratings lowered its outlook for Meta Platforms to negative, signaling concern over the company's capital expenditures and free operating cash flow. The agency now anticipates Meta's capex to reach $140 billion this year, up from the previous estimate of $163 billion in 2027 and $178 billion in 2028. Meta has raised its full-year 2026 capex guidance to $135 billion-$145 billion, a $5 billion increase from the prior quarter.

S&P expects the company to generate free operating cash flow deficits in 2026 and 2027, totaling $22 billion and $71 billion, respectively. The losses are projected to peak at $39 billion in 2028. S&P notes that Meta's capacity to monetize AI investments is less likely than its competitors, and the timing of significant revenue contributions from these initiatives remains uncertain.

Meta's peers are already generating income from leasing compute capacity derived from their data center investments. Despite this, the company reported a free operating cash flow deficit of $2.1 billion during Q3 2026, driven by a $34.9 billion increase in capex. Additionally, Meta faced a $9.89 billion charge related to litigation with state attorneys general.

The company's long-term debt obligations have risen to $355.7 billion as of September 30, 2026, from around $279 billion in Q2. S&P projects Meta's adjusted leverage to increase to 1.3x by 2028, surpassing the 1.0x downgrade threshold for the current rating. The agency raised $37.5 billion through a combination of Class A common stock and Series A mandatory convertible preferred stock and intends to raise an additional $60 billion via a Class C stock at-the-market program starting in January 2027.

S&P could downgrade Meta's rating if adjusted leverage exceeds 1.0x on a sustained basis and free operating cash flow remains negative beyond 2028.