Good morning. After last week’s tech earnings, Wall Street is increasingly questioning the sustainability 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
This story was originally featured on Fortune.com
