The credit agency shifted Meta's rating to AA- negative following third-quarter results that posted a free cash flow deficit of $2.12 billion, marking the first time the company has entered negative territory. Heavy full-year capital expenditure projections between $135 billion and $145 billion contributed directly to the decision, overshadowing a recent revenue beat. Shares experienced a sharp sell-off, dropping 15% through October. In response to these elevated cash needs, Meta intends to tap capital markets for $95 billion to fund its ongoing artificial intelligence roadmap.
Key points
Meta's aggressive capital spending on artificial intelligence has created immediate press…: Meta's aggressive capital spending on artificial intelligence has created immediate pressure on its corporate cash flow profile.
Investor sentiment deteriorated sharply following the earnings report, driving the stock…: Investor sentiment deteriorated sharply following the earnings report, driving the stock down 15% during its worst month in four years.
The company plans to raise $95 billion through public equity offerings and an at-the-mark…: The company plans to raise $95 billion through public equity offerings and an at-the-market program to finance infrastructure costs.
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Meta has been assigned a negative outlook by S&P Global Ratings on concerns surrounding cash flow and AI spending.
The credit agency said Friday that the outlook reflects "uncertainty" surrounding Meta's elevated capex and its negative free cash flow.
Meta's credit rating has thus been reduced from AA- stable to AA- negative, the S&P Global Ratings said. S&Ps highest credit rating is AAA. Anything below BBB falls into the junk bond category.
The social media giant said in its third-quarter earnings report last week that it expects full-year capex to come in the range of $135 billion to $145 billion. The company also posted negative free cash flow of $2.12 billion, going in the red for the first time.
Investors sent Meta shares sinking 7% following last week's earnings report despite though the company beating on revenue. The stock finished October down 15%, its worst month in four years.
The company said on Monday that it plans to raise $95 billion to help fund its AI initiatives, with plans to
first raise $35 billion in underwritten public equity offerings, followed…
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