Meta Credit Outlook Turns Negative as AI Spending Rises

S&P Global Ratings has lowered the outlook on Meta Platforms Inc.’s AA- credit rating from stable to negative, citing rising Artificial Intelligence spending, increasing leverage and uncertainty over when the company’s investments will generate meaningful financial returns. The decision signals the possibility of a credit rating downgrade within the next two years if financial pressure continues to build.

The ratings agency said Meta’s expanding capital expenditure commitments could weaken its balance sheet as the company invests heavily in data centres, computing infrastructure and energy resources to support its AI ambitions. The outlook change reflects concerns about how long elevated spending will continue and whether the company can maintain strong cash generation during the investment cycle.

Although the outlook has turned negative, S&P has not placed Meta under an active downgrade review. The company’s AA- rating remains unchanged, keeping it among highly rated investment-grade borrowers.

Why S&P Lowered Meta’s Credit Rating Outlook

S&P identified rising leverage and uncertainty surrounding the returns from Meta’s AI investments as key reasons behind its decision. The agency believes the company’s ability to monetise artificial intelligence technology is more limited than that of some industry peers.

In its assessment, S&P said it remains unclear when Meta’s AI expenditure will begin generating material revenue that exceeds the associated costs. The agency also highlighted uncertainty over how long capital expenditure will remain elevated and how long free operating cash flow could stay negative.

These concerns are particularly important for credit rating agencies because they assess a company’s ability to meet its financial obligations while maintaining a sustainable balance sheet. Large investment programmes can increase long-term business opportunities, but they can also create pressure if spending rises faster than revenue and cash generation.

Meta’s AI Capital Expenditure Could Exceed $225 Billion in 2027

Meta’s planned investment in AI infrastructure is a major factor behind the ratings agency’s concerns. S&P forecasts that the company’s capital expenditure could reach $140 billion in 2026 and accelerate to more than $225 billion in 2027.

Such spending reflects the scale of infrastructure required to develop and operate advanced AI systems. Data centres, specialised computing equipment and energy infrastructure require substantial upfront investment, while their financial returns may take time to materialise.

The projected increase also means Meta could face a period in which its investment requirements remain high even as the company works to develop new revenue streams from artificial intelligence.

For investors and lenders, the central question is whether the company’s future AI-related income will justify the scale of its current spending. If monetisation takes longer than expected, pressure on cash flow and borrowing requirements could increase.

Meta’s Leverage Expected to Rise as Borrowing Increases

Rising leverage was another important factor in S&P’s decision. Leverage measures the relationship between a company’s debt and its earnings, helping investors and credit agencies assess the financial risks associated with borrowing.

S&P said Meta’s leverage could rise above 1.0 times as soon as next year, compared with approximately 0.1 times last year. The projected increase reflects the growing financial commitments associated with the company’s expansion plans.

Although Meta currently holds an AA- credit rating, a sustained increase in leverage could affect how rating agencies assess its financial flexibility. Higher debt relative to earnings can reduce a company’s capacity to absorb unexpected financial pressures, particularly when capital expenditure and operating costs are rising.

A one-notch downgrade would still leave Meta within high-grade investment territory. However, a weaker rating could influence how lenders and bond investors assess the company’s credit risk and financing costs.

More Than $800 Billion in Future Spending Commitments

Meta disclosed earlier this month that it had more than $800 billion in future spending commitments. Almost half of these commitments were linked to leases that had not yet commenced, largely involving data centres and energy infrastructure.

These commitments highlight the long-term scale of the company’s AI expansion. Building and operating large data centres requires access to land, electricity, computing equipment and supporting infrastructure, often through multi-year agreements.

Lease commitments can create substantial future financial obligations even before the facilities become operational. As more agreements take effect, Meta could face additional costs associated with maintaining and expanding its infrastructure network.

The scale of these commitments has also attracted scrutiny from Wall Street, with investors seeking greater clarity on how the company intends to generate returns from its AI investments.

Meta Disagrees With S&P’s Assessment of AI Monetisation

Meta has pushed back against the ratings agency’s concerns, arguing that its artificial intelligence investments offer significant opportunities to expand its products and business operations.

Company spokesperson Kamran Mumtaz said Meta respectfully disagreed with S&P’s assessment of its AI monetisation capabilities. He added that the company sees substantial product and business opportunities ahead, which it believes support its strong credit profile.

Chief Financial Officer Susan Li has also indicated that Meta intends to continue investing aggressively in its core business and emerging AI initiatives. The company’s position suggests that management views infrastructure spending as necessary to remain competitive and develop future revenue opportunities.

The difference between the company’s outlook and S&P’s assessment reflects a wider debate across the technology industry: how much investment is justified today when the timing and scale of future AI revenue remain uncertain.

How Meta Plans to Generate Revenue From AI

Meta has made progress with its AI technology in recent months, particularly through its Muse models and personal AI agent. Chief Executive Officer Mark Zuckerberg and other company leaders have outlined several potential ways to turn these products into revenue-generating businesses.

One possible route is subscriptions, which could allow users to pay for access to advanced AI features and services. Transaction fees could provide another source of income, while advertising may offer additional opportunities by connecting AI-powered products with Meta’s existing advertising ecosystem.

Advertising already generates the vast majority of Meta’s revenue through platforms including Facebook, Instagram and WhatsApp. Integrating AI into these services could potentially improve product experiences and create new commercial opportunities for the company.

However, the financial contribution of these initiatives will depend on user adoption, pricing models and the company’s ability to convert technological development into sustainable revenue.

Meta Also Exploring a Cloud Computing Business

Beyond consumer-facing AI products, Meta is developing plans for a cloud business that could create another route to monetisation. The proposed model could involve selling access to AI models hosted on the company’s existing infrastructure or offering customers access to raw computing capacity.

A cloud offering could allow Meta to generate revenue from infrastructure that it is already building for its own AI operations. Selling computing resources or model access to external customers could potentially broaden the company’s business beyond advertising and social media services.

However, entering the cloud computing market would also place Meta in competition with established technology providers. Building a commercially successful service would require reliable infrastructure, competitive pricing and demand from businesses seeking AI computing resources.

Technology Stocks Face Greater Scrutiny Over AI Spending

S&P’s decision comes as investors increasingly examine whether the enormous investments being made across the technology sector will deliver sufficient financial returns. Companies are committing substantial resources to AI infrastructure, but the pace at which these investments translate into revenue remains a key concern.

The broader market environment has also reflected investor sensitivity to technology earnings and spending plans. The Nasdaq 100 fell 3.5% on Friday, briefly crossing the threshold associated with a technical correction, amid disappointing technology earnings.

For technology companies, the challenge is to demonstrate that AI spending can support future growth without weakening financial flexibility. Investors are increasingly looking beyond announcements of new models and infrastructure projects to assess revenue generation, operating costs and cash flow.

What a Potential Meta Downgrade Could Mean

A negative outlook does not mean that Meta’s credit rating has already been downgraded. Instead, it indicates that S&P sees a possibility of a downgrade within the next couple of years if the company’s financial position develops less favourably than expected.

Meta’s current AA- rating remains the fourth-highest investment-grade credit category. Even a one-notch reduction would leave the company within high-grade territory, although it could influence how creditors evaluate its financial strength.

The key factors to watch will include the pace of capital expenditure, changes in leverage, free operating cash flow and the commercial performance of Meta’s AI products. Strong revenue growth from AI could help justify the investments, while prolonged spending without meaningful monetisation could increase pressure on the company’s credit profile.

Meta Faces a Balancing Act Between AI Growth and Financial Discipline

Meta’s negative outlook from S&P highlights the financial challenges associated with its ambitious AI expansion. The company is investing heavily in computing infrastructure, data centres and energy resources while exploring new ways to monetise AI models and services.

Management believes these investments will create significant business opportunities, but S&P has raised questions about the timing and scale of future returns. The projected rise in capital expenditure and leverage makes the company’s cash flow performance particularly important over the next two years.

Ultimately, Meta’s ability to demonstrate sustainable AI revenue growth while managing its financial commitments will play a central role in determining whether its credit outlook improves or a downgrade becomes more likely.