Key Takeaways
- Strategist Larry McDonald said on Bloomberg Surveillance that Meta has taken its off-balance-sheet financing from $35 billion to $600 billion to protect its free cash flow.
- Meta’s own filings back up the size: $279 billion of signed leases that haven’t started and $349 billion of non-cancelable commitments as of June 30, 2026, compared with $85.1 billion of reported debt at the end of 2025.
- Meta can pay for what it has signed. But those obligations lock in years of AI spending, and its free cash flow fell below $1 billion in the June quarter.
- Neocloud bonds and Oracle’s cash burn are the early warning signs to watch, and Meta’s third-quarter report on Oct. 21 will show whether the commitments kept growing.
Meta Platforms (META) owes a lot more than its balance sheet shows. (As usual, the good stuff is in the footnotes.)
On Monday’s episode of Bloomberg Surveillance, Larry McDonald, founder of The Bear Traps Report, shared what he’d heard at a Silicon Valley dinner:
“the free cash flow burn of, say, Meta, was so significant a year ago, the projection, that they started, they’ve taken the off-balance sheet financing from $35 billion to $600 billion”
Why do it? In his words: “It protects their free cash flow.”
That’s a 17x jump.
Where $600 billion hides
Under US accounting rules, a lease goes on the balance sheet only once it starts. Meta signs data center leases years before the buildings open, and until it moves in, the obligation sits in a footnote. The same is true of its non-cancelable commitments, mostly for third-party cloud capacity, servers and data centers. Those show up on the books only as Meta pays them.
McDonald named the appeal. Meta pays for those buildings as rent over as long as 30 years, which keeps the up-front cost out of its capex line. And with Meta’s ad business standing behind the rent, McDonald says banks will happily lend “against their cash flow from Instagram, Facebook, which is juicy.”
His numbers hold up in Meta’s filings. At the end of March 2025, Meta had about $35 billion of signed leases that hadn’t started yet. By June 30, 2026, that figure was $279 billion, on top of $349 billion of non-cancelable commitments: $628 billion in all. (McDonald’s starting and ending figures count slightly different things, but the size checks out.) Meta then signed another $68 billion of data center leases in July.
Now compare that with the debt Meta actually reports.
Reported debt has grown sixfold since 2021, to $85.1 billion at the end of 2025. That’s still a fraction of what sits in the footnotes.
The cash squeeze is real
The reason McDonald gave holds up too. Capex went from 41% of Meta’s operating cash flow in 2024 to 60% of its $116 billion in 2025.
And 2026 is bigger still. Meta expects $130 billion to $145 billion of capex this year, including finance lease payments, and its free cash flow in the June quarter was under $1 billion.
That’s the backdrop for a note McDonald read out from “a billionaire investor” in the show’s chat: “Meta was a world-class oligopoly, right? They’ve taken, they’re burning the cash and they’re creating products like Muse.”
The timing stings. On Monday, Meta launched Muse Wonder and Muse Wonder Full, which it calls its most capable AI models yet. McDonald’s worry is that everyone will have one: “there’s going to be seven Muses.”
Stopping won’t cancel the leases
The strongest pushback comes from SemiAnalysis’s Dylan Patel. On last week’s episode of the Big Technology Podcast, he said: “Meta at any point can just stop buying new stuff and their cash flow can easily pay for all the stuff that they’ve signed.”
He’s right that Meta can pay. Of its $349 billion in commitments, $53.5 billion comes due in 2026 and $81.7 billion in 2027. Meta brought in $116 billion of operating cash flow in 2025.
But stopping only stops what comes next. The leases Meta signed in July alone run 18 to 20 years, and each new one shrinks the share of spending it could still walk away from. Meta’s debt line understates what its cash flow is on the hook for, for years to come.
Watch the neoclouds
If AI’s financing boom cracks, McDonald expects the weaker borrowers to show it first. As he tells it, Meta and Oracle borrow from banks, while neoclouds like CoreWeave (CRWV) borrow in public bond markets. So “the NeoCloud public bonds are kind of a good leading indicator,” and he says the high-yield market is already pushing those companies toward convertible bonds. “So if that’s tightening, then it’s a sign that we may move upstream with a credit problem.”
That matters for Meta directly, because much of its $349 billion in commitments is for third-party cloud capacity.
Oracle (ORCL), the other company McDonald names alongside Meta, is already further down this road. Its free cash flow went from $11.8 billion in the year ended May 2024 to negative $23.7 billion in the year ended May 2026.
All of these loans rest on the same collateral: GPUs, mostly from NVIDIA (NVDA). McDonald points to Jim Chanos and Michael Burry, who both argue “this is a depreciation game.” Patel counters that the chips are depreciated over six years and “there’s quite a bit of evidence that they’re actually going to last longer than that.” If Patel is right, the collateral holds its value. If the bears are right, lenders to the neoclouds find out first, and NVIDIA’s customers could find it harder to get financing.
Bigger than the balance sheet shows
McDonald’s $600 billion is one strategist’s number, and Meta’s own filings back it up. As Patel says, Meta can pay for what it has signed. But its reported debt no longer tells investors how much of its cash flow is spoken for. Any strain is more likely to show up first in neocloud bonds and at Oracle than at Meta itself.
Of course, that footnote is moving fast. Meta reports third-quarter results on Oct. 21, and with $68 billion of new leases signed in July, the next figure will already be bigger.
So what is Meta stock actually worth?
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