S&P’s negative outlook on Meta underscores the risks of the AI spending boom

Late Friday, S&P Global revised its outlook on Meta to “negative” from “stable,” citing negative cash flow and uncertainty around its capital expenditure plans, Fortune’s Jason Ma reports. The agency affirmed Meta’s AA- credit rating but warned that the company’s leverage could exceed 1.0x as early as 2027.

That’s the threshold for Meta’s current rating. Leverage is up from about 0.1x in 2025, largely because of Meta’s strategy of leasing data-center capacity, rather than relying solely on traditional debt financing.

S&P projects Meta’s capex will reach $140 billion this year, exceed $225 billion in 2027 and hit $252 billion in 2028 before flattening out. It expects free operating cash flow to remain negative: -$22 billion this year, -$71 billion in 2027 and -$39 billion in 2028.

Other hyperscalers are also running cash deficits. According to S&P, what sets Meta apart is its ability to monetize its investments. Rivals can lease compute capacity to frontier model labs and enterprise customers. Meta is betting on better advertising tools and new revenue streams from agentic apps like Muse. But S&P said it is “unclear when these revenue streams will generate material contributions that exceed their rising costs.”

Meta disagrees. A spokesperson said in a statement to Fortune that its AI investments are already delivering stronger engagement and greater returns for businesses.

The broader backdrop is shifting, too. OpenAI reportedly cut its latest fundraising target to $20 billion from $30 billion. And Alphabet had its worst day on record after reporting negative free cash flow for a second consecutive quarter. Read more here.

For CFOs, the lesson extends beyond Big Tech: lease commitments count toward leverage, and the market wants a credible timeline for turning AI spending into revenue. Not everyone sees a bust, though. Market veteran Ed Yardeni argues that constraints on capital, power and politics could actually make the boom last longer.

Sheryl Estrada
Sheryl.Estrada@fortune.com

Leaderboard

Andrew Kang, CFO of Strategy (Nasdaq: MSTR), a Bitcoin-focused business intelligence company, will officially step down on Nov. 5 for personal reasons, not as a result of any operational or policy disagreements, according to the company. Kang will continue serving Strategy in an advisory capacity through Dec. 31. Reza Virasteh, currently EVP of operations, will assume the CFO role on Jan. 1. Strategy President and CEO Phong Le will temporarily oversee the finance organization and manage the transition beginning Nov. 6.

Darby Kopp was promoted to CFO of EBSCO Information Services. Kopp brings more than 25 years of experience across finance, operations, and corporate development. Since joining EBSCO in 2015, he has been a key member of the company’s leadership team. Most recently, he served as EVP of corporate strategy and development. Before joining, Kopp held roles spanning venture capital investing, mergers and acquisitions, and financial leadership in the technology and healthcare industries.

Big Deal

Bank of America Institute’s latest Business Checkpoint highlights resilience among small and mid-sized businesses, with positive third-quarter profitability growth increasingly challenged by logistics costs and supply-chain pressures. 

Nearly half of estimated tariff payments had been refunded by September, providing some relief, although refunds as a share of revenue had peaked. Logistics spending growth per client was four times higher for small businesses than for mid-sized firms, suggesting smaller companies face more pronounced cost pressures. 

Meanwhile, constrained driver availability and tighter trucking capacity are pushing freight rates higher ahead of the holiday season and driving strong transportation-sector payroll growth, particularly among mid-sized businesses. Overall, the report depicts businesses on relatively solid financial footing but facing growing operational headwinds as shipping and distribution pressures intensify. 

Going deeper

In the latest episode of McKinsey Talks Talent podcast, Stanford research psychologist Jamil Zaki talks about the effects of AI on employees and what empathic leaders do differently to strengthen workplace connections and realize growth. Managing change with empathy helps leaders build trust, strengthen relationships, and get the most out of their AI investments, according to Zaki. 

“When people feel connected, they do a lot better at work,” he said. “Disengagement costs the global economy about $10 trillion a year, so anything we can do to make people feel more connected to their work is economically powerful.”

Overheard

“We board planes without understanding how they fly because industry and regulators answer for our safety. We need a similar framework for AI assistants. If companies want our inboxes, accounts and errands, they must earn our trust by clarifying what we’re authorizing, how to regain control, and answer for mistakes their assistants make in our name.”

—Miriam Vogel, president and CEO of EqualAI, writes in a Fortune opinion piece. Vogel is the former chair of the National AI Advisory Committee and a former associate deputy attorney general of the U.S.