S&P Global expects aggressive infrastructure investments to cause free operating cash flow deficits of $39 billion in 2026 and $71 billion in 2027. Meta's annual capital expenditures are projected to reach between $135 billion and $145 billion, with cash deficits potentially persisting past 2028. To help finance this expansion, the company plans to raise $97.5 billion through public stock sales. Meanwhile, shares have dropped over 4 percent in the past week, marking five consecutive weeks of declines.
Key points
Heavy artificial intelligence investments are eroding Meta's cash reserves faster than th…: Heavy artificial intelligence investments are eroding Meta's cash reserves faster than the company can generate new monetization streams.
S&P expects massive cash flow deficits through at least 2027, potentially extending beyon…: S&P expects massive cash flow deficits through at least 2027, potentially extending beyond 2028.
Meta faces a potential credit rating downgrade if its leverage exceeds the 1.0x threshold…: Meta faces a potential credit rating downgrade if its leverage exceeds the 1.0x threshold around 2027.
Sources checked by our analysis pipeline: 1
Oct 30 : S&P Global Ratings on Friday revised its outlook on Meta Platforms to "negative" from "stable", citing significant uncertainty around its capital spending and free operating cash flow.
Meta has been pouring money into advanced chips and data centers to compete more aggressively with AI market leaders, eroding its historically strong free cash flow.
The company's ability to monetize its AI investments is more limited than that of its peers, S&P said, adding it was unclear when its revenue streams would generate material contributions exceeding their rising costs over the next few years.
Meta last week forecast annual capital expenditure between $135 billion and $145 billion after reporting a free cash flow deficit of $2.12 billion in the third quarter, compared with positive free cash flow a year earlier.
"Given the lack of clarity around the company's future capex and its very ambitious multi-year AI investment plans, we are less certain that it will curtail its spending as previously anticipated," S&P said.
The ratings agency said it believes Meta's leverage could rise to above 1.0x as early as…
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