Meta raised $37.5 billion, then S&P cut its credit outlook to negative on $71 billion of 2027 cash deficits

The verdict landed one day after the money

S&P Global RatingsPVT$123B — S&P Global Ratings, private, latest valuation $123B cut Meta▼−1.65% — Meta, down 1.65 percent today Platforms' credit outlook to negative on Friday October 30↗, from stable, and left the AA- rating itself standing ¹². The language went further than most outlook cuts: "Meta's ability to monetize its AI investments is more limited than that of its peers," with no clear date for when the spending earns more than it costs ¹.

The agency's own arithmetic is blunt: free operating cash flow deficits of $39 billion this year and $71 billion in 2027↗, leverage passing its 1.0x AA- threshold as early as 2027, and a 2028 shortfall funded entirely with debt ³.

The raise was the rating defense

The timing is the point. On October 29 Meta closed $12.5 billion of 6.50% Series A mandatory convertible preferred↗, fixed-dividend stock that automatically converts into common shares around August 2029 ⁴⁵. Alongside it came $25 billion of common stock sold at $625 a share through forward agreements, contracts that pay Meta about $24.9 billion only when they settle, due by November 19, 2027 ⁴⁵. Preferred adds capital without adding debt. In a market repricing AI credit, that is what a rating defense looks like, and S&P moved anyway.

Capex outran the cash engine

The third quarter forced the issue: free cash flow printed negative $2.12 billion, Meta's first red quarter since 2012, on capital spending of $33.9 billion ²⁶⁷. Full-year capex guidance runs to $135–145 billion ². Advertising revenue still grew 26% ⁸.

The same strain is showing across the big spenders. The four biggest have outlined more than $740 billion of 2026 capital spending ⁸; Microsoft▼−1.38% — Microsoft, down 1.38 percent today has not published one full-year figure, and that four-company total implies its plan also tops Meta's. The five largest, Oracle▼−6.21% — Oracle, down 6.21 percent today included, raised $326 billion of debt this year, triple 2025 ⁸. Alphabet▼−0.82% — Alphabet, down 0.82 percent today logged a second straight negative quarter, Amazon▼−1.20% — Amazon, down 1.20 percent today a $42.4 billion trailing outflow; only Microsoft stayed positive, at $18.6 billion ⁸. The Nasdaq 100 fell 3.5% on Friday and briefly crossed into correction ¹.

The next raise is the tell

Meta's answer is blunt. "We respectfully disagree with S&P's assertion about Meta's AI monetization capabilities," a spokesperson said, pointing to a "very strong credit profile" ². Equity buyers keep showing up: the common sale drew roughly $125 billion of orders, five times the stock offered↗, including $3 billion from Nvidia▼−3.89% — Nvidia, down 3.89 percent today and $1 billion from AMD▼−10.15% — AMD, down 10.15 percent today, chip suppliers funding their own customer ⁶.

Yet insuring Meta's debt cost a record 127 basis points on October 23, the week before the sale ⁶. Shareholders carry the bill: they supplied the $37.5 billion, and they wear the dilution when the forwards settle and when Class C shares arrive, a new non-voting share class Meta created this month ⁴⁶. The $60 billion at-the-market program, a facility to sell shares gradually into the market, is still only an intention and cannot start before early 2027 ²⁶.

The downgrade path runs through leverage

Bondholders hold the other watch: S&P's path to a one-notch downgrade runs through leverage, and the agency already dates the crossing to 2027 ³. The form of the next dollar raised is the tell: more preferred means the debt door is closing, and a rush on the common means it never reopened. Until then the calendar does the watching: Class C debuts in late January 2027, the sales program cannot open before the first quarter, and the forwards pay out by November 19, 2027 ⁶.