S&P puts Meta on negative outlook as 2027 cash deficit could hit $71 billion

S&P Global Ratings changed its outlook on Meta Platforms to negative from stable Friday, warning that the company's artificial-intelligence buildout could push leverage higher and keep free operating cash flow below zero beyond 2028. The agency did not cut Meta's AA- issuer credit rating, according to Reuters. The change instead signals greater downgrade risk if Meta's financial cushion deteriorates further.

S&P forecasts a $71 billion free operating cash flow deficit in 2027. It also expects leverage could rise above 1.0 times as early as next year, the agency's threshold for Meta's AA- rating. Reuters said the agency sees uncertainty over when new AI revenue will exceed the rising costs of chips, data centers and related infrastructure.

The number behind the warning

Meta reported $82.45 billion of cash, cash equivalents and marketable securities at September 30. S&P's projected 2027 deficit is equal to about 86% of that balance. That comparison does not mean Meta will exhaust its cash: the company generated $96.87 billion of operating cash flow in the first nine months of 2026 and can use debt, equity and other financing. It shows the scale of the spending cycle relative to the liquidity already on the balance sheet.

The company's own quarterly filing makes the longer tail visible. Meta had $355.73 billion of leases that had not yet begun as of September 30, mostly for data centers, energy infrastructure, colocation and networks. It also disclosed $454.52 billion of non-cancelable contractual commitments, with $121.41 billion due in 2027.

Meta still has a powerful cash engine

The negative outlook is not a claim that Meta's core business has stopped growing. Third-quarter revenue rose 26% from a year earlier to $64.60 billion. Operating cash flow was $32.79 billion, according to the company's earnings release. But $34.91 billion of capital spending and finance-lease principal left free cash flow at negative $2.12 billion for the quarter.

Meta expects 2026 capital expenditures of $135 billion to $145 billion. Its filing says $83.06 billion of property and equipment purchases in the first nine months went toward servers, data centers and network infrastructure. Research and development expense rose 32% in the third quarter, partly because of infrastructure, compensation and third-party AI-token costs.

What investors should watch

The credit question is now different from the quarterly earnings question. Advertising growth can remain strong while cash flow weakens if infrastructure spending and fixed commitments rise faster. S&P said in August that the six hyperscalers it studied were expected to produce negative free operating cash flow in both 2026 and 2027, with recovery not projected until 2029. Friday's Meta action turns that sector-wide concern into a company-specific warning.

The next evidence will be whether Meta can convert its spending into enough incremental advertising and new-product revenue to slow the cash drain, and whether it moderates investment before leverage crosses S&P's threshold. Until then, the AA- rating remains in place, but the stable-outlook cushion is gone.

Sources: S&P Global Ratings, Meta Platforms' Form 10-Q and third-quarter release, and Reuters. This is market information, not investment advice.