S&P Global Ratings revised its outlook on Meta Platforms (Nasdaq: META) to negative from stable on Friday, October 30, and kept the company's AA- rating, Reuters reported at 5:15 p.m. ET, citing significant uncertainty around Meta's capital spending and free operating cash flow. A negative outlook is not a downgrade; it tells bondholders that one has become more likely.
The move follows a quarter in which Meta spent more on infrastructure than its business brought in. Meta's free cash flow was negative $2.12 billion in the third quarter, against positive $10.63 billion a year earlier, according to its third-quarter results release.
What S&P said
S&P believes Meta's adjusted debt, measured against its earnings, could rise above 1.0 times as early as 2027, the agency's threshold for the AA- rating, Reuters reported. S&P forecast a free operating cash flow deficit of $71 billion in 2027 and said negative free operating cash flow could last beyond 2028. Reports of its 2026 figure differ: Reuters gave a $39 billion deficit, and Investing.com $22 billion.
Investing.com reported more of S&P's numbers. The agency now projects Meta's capital spending at $140 billion in 2026, more than $225 billion in 2027 and $252 billion in 2028, up from its earlier estimates of $163 billion and $178 billion for the last two years. It expects that debt ratio to be 0.3 times at the end of 2026, 1.1 times in 2027 and 1.3 times in 2028. S&P also said Meta's ability to monetize its AI investments is more limited than its peers', according to Investing.com.
S&P could lower the rating if the debt ratio stays above 1.0 times, or if free operating cash flow is still negative after 2028, Investing.com reported. In a passage Reuters quoted, the agency said of Meta: "we are less certain that it will curtail its spending as previously anticipated." S&P's full research update is available only to its subscribers.
Meta's own numbers
Meta narrowed its 2026 capital expenditure forecast, including principal payments on finance leases, to $135 billion to $145 billion on October 21, from $130 billion to $145 billion. A SaasBuzz calculation from the release shows what that implies: Meta spent $85.82 billion in the first nine months, which leaves $49.18 billion to $59.18 billion for the fourth quarter. The midpoint is 55% more than the $34.91 billion it spent in the third quarter.
Meta ($B) | Q3 2026 | Q3 2025 |
|---|---|---|
Operating cash flow | 32.79 | 30.00 |
Capex and leases | 34.91 | 19.37 |
Free cash flow | -2.12 | 10.63 |
Capex per $1 of operating cash flow | $1.06 | $0.65 |
Source: Meta's third-quarter 2026 results release; capex includes principal payments on finance leases; ratios are SaasBuzz calculations.
Over the first nine months, free cash flow was $11.05 billion, down 63% from $29.51 billion a year earlier. Meta held $82.45 billion of cash, cash equivalents and marketable securities on September 30, and its total consolidated indebtedness was $83.7 billion, according to a prospectus supplement filed October 28. In that offering of mandatory convertible preferred stock, Meta said it expected net proceeds of about $12.5 billion, alongside forward sale agreements covering 40 million Class A shares.
Meta had not commented publicly on S&P's action by 6:15 p.m. ET on Friday. Its third-quarter release set out its case for the spending:
While these investments will take longer to generate returns than those in our core business, the breadth of monetization opportunities and internal efficiencies gives us confidence in their long-term potential.Meta Platforms, third-quarter 2026 results release, October 21, 2026
Meta's shares were little changed after hours on Friday and fell more than 4% for the week, their fifth straight weekly decline, Reuters reported.
What it means for software
S&P has now put numbers on how far it will let one hyperscaler's AI build-out run before it cuts the rating: debt above 1.0 times earnings, or cash burn past 2028. That matters to software companies because the data centers Meta, Amazon, Microsoft and Alphabet are paying for are the capacity AI software runs on, and more of that spending is now financed by lenders and bond buyers rather than by operating cash alone.
The same week, Amazon disclosed it can borrow up to $80 billion against the infrastructure it buys, and Microsoft priced $25 billion of bonds, its first US bond sale since 2017. Our analysis of how Big Tech is financing its capex tracks the shift. By SaasBuzz's calculation, S&P's new projections put Meta's 2027 capital spending at least 38% above the agency's earlier estimate, and 2028's 42% above.
The next checkpoint is Meta's fourth-quarter report, which will show where 2026 spending landed against the $135 billion to $145 billion range, and any 2027 spending forecast Meta gives with it.
