S&P upgraded KLA, cut Salesforce and put Meta on negative outlook as AI debt splits credit
Within five days the rater raised the toolmaker that sells into AI fabs, cut Salesforce over debt-funded buybacks, and put Meta on negative outlook. Credit now treats the AI suppliers as safer than the AI borrowers.
Vincent Jiang · 5 min read
On November 4, S&P Global Ratings$123B — S&P Global Ratings, private, latest valuation $123B, the agency whose credit letters set what large companies pay to borrow, handed down two verdicts minutes apart 1. It cut Salesforce to 'A' from 'A+', blaming debt-funded shareholder returns and large acquisitions 2.
It then raised KLA Corporation, the wafer-inspection and metrology toolmaker that chip fabs depend on to protect yields, to 'A' from 'A-', citing AI infrastructure demand 1. Three days earlier the same agency had put Meta Platforms' rating on negative outlook 3. Across five days it marked the suppliers of the AI build-out up and the borrowers funding it with debt down.
A letter of the alphabet now sets what AI borrowers pay
The letters matter because they set borrowing costs. On the seller's side, S&P projects KLA+7.70% — KLA, up 7.70 percent today revenue up nearly 39% in fiscal 2027 and another 17% in fiscal 2028, EBITDA margins above 50.7%, and leverage under 1.0x even with buybacks 1. On the buyer's side, five-year credit default swaps, insurance against a missed payment, cost about 116 basis points on Meta against roughly 54 basis points on Microsoft 4. Meta+1.39% — Meta, up 1.39 percent today then sold $15 billion of bonds on November 3, days after the outlook change 5.
The same day as the Meta action, S&P trimmed Broadcom's+5.30% — Broadcom, up 5.30 percent today outlook to stable from positive on its growing dependence on a few big customers. Earlier this year it cut Oracle+3.46% — Oracle, up 3.46 percent today to 'BBB-', one notch above junk 3. The pattern holds across the week's actions: the company that supplies AI equipment gained a rating notch, while the companies funding AI with debt lost standing or outlook.
S&P Global's fee base is the borrowing its ratings desk warns about
The rater's own accounts tie it to the same wave. On its October 30 third-quarter call, S&P Global−2.33% — S&P Global, down 2.33 percent as of its last quote reported billed issuance up 8% and investment-grade issuance up 28%, helped by large merger-and-acquisition and hyperscaler transactions, where a hyperscaler means the largest cloud companies such as Meta, Microsoft−0.29% — Microsoft, down 0.29 percent today and Oracle 6.
Hyperscaler issuance ran about $240 billion through the first nine months, the strongest on record, with $250 billion to $300 billion expected for the full year 6. Ratings revenue grew just 2% against that 6. The fee base is the AI bond wave, and the downgrade list names who is riding it.
Salesforce sits past its 2x line
Salesforce−1.98% — Salesforce, down 1.98 percent as of its last quote crossed its line with a $25 billion debt-financed buyback plus takeovers of Informatica ($9.5 billion), Braze−1.15% — Braze, down 1.15 percent as of its last quote ($5.7 billion) and Fin ($3.6 billion), pushing pro forma net debt to EBITDA above the agency's previous 2x downgrade threshold 2. S&P still expects leverage to hold below 2.5x, and warns that further debt-funded buybacks or bigger deals bring more pressure 2.
Three takeovers worth $18.8 billion took Salesforce past S&P's 2x line
Three takeovers worth $18.8B took Salesforce past S&P's 2x line
Data
| Value | |
|---|---|
| Informatica | $9.5B |
| Braze | $5.7B |
| Fin | $3.6B |
Meta's deficits reach $71 billion by 2027
Meta's math is heavier. S&P forecasts free operating cash flow deficits of $39 billion in 2026 and $71 billion in 2027 against capex guidance of $135 billion to $145 billion 3, long-term debt of $80.92 billion at September 30, and leverage that could pass 1.0x as early as 2027, the threshold attached to its 'AA-' rating 7.
On S&P's free-operating-cash-flow basis Meta ran a third-quarter deficit of about $2.12 billion; company filings show free cash flow of about negative $1.2 billion on the narrower company basis, the first negative quarter in more than a decade, and the stock fell 7% on results 8.
Meta's capex quadrupled in two years while free cash flow turned negative
Capex quadrupled in two years while free cash flow slipped below zero
- Free cash flow
- Capex
Data
| Free cash flow | Capex | |
|---|---|---|
| Q2 '24 | $11.2B | $8.2B |
| Q3 '24 | $16.5B | $8.3B |
| Q4 '24 | $13.6B | $14.4B |
| Q1 '25 | $11.1B | $12.9B |
| Q2 '25 | $9B | $16.5B |
| Q3 '25 | $11.2B | $18.8B |
| Q4 '25 | $14.8B | $21.4B |
| Q1 '26 | $13.2B | $19B |
| Q2 '26 | $1.7B | $30.1B |
| Q3 '26 | -$1.2B | $33.9B |
KLA's upgrade rests on margin, not borrowing
KLA's upgrade rests on margin rather than borrowing: recurring services were 23% of fiscal 2026 revenue, leverage has held below 1.0x across several chip cycles without material net debt issuance since 2022 1, and the company's own fiscal first quarter brought record revenue of $4.14 billion with the wafer-fab equipment market expected to exceed $200 billion in calendar 2027 9.
Meta and Moody's push back, but the arithmetic is on the rater's side
Meta rejects the read. "We respectfully disagree with S&P's assertion about Meta's AI monetization capabilities," a Meta spokesperson said, pointing to "significant product and business opportunities ahead of us" 7. Moody's−6.69% — Moody's, down 6.69 percent as of its last quote, a second referee, rated the November 3 bonds Aa3 and expects conservative financial policies and positive net cash 5.
Salesforce's exhibit is a 14% year-over-year rise in remaining performance obligations, and Data360 plus Agentforce at $3.9 billion of annual recurring revenue, with agentic adoption able to lift customer spending 1.5x to 2.0x 2. Agentforce is also the harness Salesforce bundles into its stack, the subject of this October report. These arguments are real, but they do not settle the arithmetic, because S&P puts material AI revenue contributions at least two fiscal years out 2 and expects Meta's 2028 cash shortfall to be funded entirely with debt 3.
Meta's leverage against S&P's 1.0x line decides the next move
One ratio settles the next chapter: Meta's leverage against S&P's 1.0x threshold, with a $71 billion forecast deficit already on the 2027 calendar 7. KLA's tell is the mirror image, leverage under 1.0x while revenue compounds at 39% 1.
S&P Global itself reports next at its February earnings call, where the first meaningful update is due on the strategic review of Capital IQ, its financial-data unit serving more than 15,000 clients 6. The ratings-fee line is the number to watch there, after 2% growth in a quarter when investment-grade issuance grew 28% 6.
The 116-basis-point Meta credit default swap spread in late October suggests bond traders had already priced the gap between AI sellers and AI borrowers before the letters moved 4. What changed this week is that the referee made the gap official.
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