S&P cuts Meta outlook over AI spending — Channel NewsAsia

Ratings agency S&P Global Ratings revised its outlook for Meta Platforms from “stable” to “negative,” citing significant uncertainty regarding the company’s capital expenditures and free operating cash flow. Channel NewsAsia reports.

Spending on AI infrastructure

Meta is investing in advanced chips and data centers to compete more actively with leaders in the artificial intelligence market. S&P noted that these expenditures are weakening the company’s historically strong free cash flow.

According to the agency’s assessment, Meta’s ability to monetize its AI investments is more limited than that of its competitors. S&P also said it remains unclear when new revenue sources will be able to make a substantial contribution exceeding the growth in expenditures in the coming years.

Cash flow forecasts

Last week, Meta forecast annual capital expenditures of between $135 billion and $145 billion. Before that, the company reported a free cash flow deficit of $2.12 billion in the third quarter, while this figure had been positive a year earlier.

More current news is available on the UA.News Telegram channel Telegram.

S&P expects Meta’s free operating cash flow deficit to amount to $39 billion in 2026 and $71 billion in 2027. According to the agency’s forecast, high capital expenditures could keep this figure negative after 2028 as well.

Debt burden

S&P allows that Meta’s debt burden ratio could exceed 1.0 as early as 2027. This is the agency’s threshold for an issuer credit rating of AA-.

The company also announced its intention to sell $97.5 billion in shares to raise funds on public markets for expanding AI infrastructure. In after-hours trading on Friday, Meta shares were almost unchanged, while over the week they lost more than 4%, extending a streak of five consecutive weekly declines.