S&P Global cuts Meta Platforms ratings outlook to negative

7 hours ago

(AWP Alliance News) - Meta Platforms Inc - Menlo Park, California-based owner of Facebook, Instagram and WhatsApp social media platforms - S&P Global Ratings on Friday lowers its outlook on Meta's credit rating to 'negative' from 'stable', citing Meta's high capital expenditure, lease obligations for data centres, and concerns about Meta's ability to monetise its high spending on artificial intelligence.

Meta's AI spending threatens to push debt leverage above the downgrade threshold for its current AA- rating as early as next year, S&P says, noting that Meta's debt leverage has leapt from 0.1x as recently as last year toward the AA- downgrade threshold of 1.0x. Meta's debt leverage will increase to 1.3x when the lease for the proposed Sopaipilla data centre in El Paso, Texas commences in 2028, the ratings agency estimates. What's more, elevated capital expenditure will cause Meta to have negative free operating cash flow in 2026, 2027 and 2028, S&P says, having previously expected the company to swing back to positive cash flow in 2028.

"We could lower our rating on Meta if we expect S&P Global Ratings-adjusted leverage rises above 1x on a sustained basis and its FOCF remains negative beyond 2028," S&P says." In addition, we could lower the rating if we take a negative view on Meta's AI strategy due to ongoing uncertainty about the monetization of its AI investments."

Current stock price: USD616.45, up 0.2% in New York pre-market on Monday

12-month change: down 3.6%

By Tom Waite, Alliance News editor

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