Key Takeaways
- S&P revised Meta’s outlook to negative and kept its AA- rating, forecasting free operating cash flow deficits of $22 billion in 2026 and $71 billion in 2027.
- Third-quarter revenue rose 26% to $64.6 billion, but capex of $34.9 billion outran operating cash flow, leaving free cash flow at negative $2.12 billion.
- Meta plans a record $97.5 billion equity raise and created a new non-voting share class, with Nvidia investing $3 billion.
- The fourth-quarter report, expected around January 27, needs a 2027 capex guide well below S&P’s $225 billion forecast.
Meta Platforms (META) spent most of its public life printing cash. On Friday, S&P Global revised its outlook on Meta to negative, keeping the AA- rating but flagging uncertainty over how long capex stays elevated and free cash flow stays negative.
The stock slipped 1.5% to $615, leaving it 21% below its 52-week high of $780.
Meta’s suppliers have a stake in how this plays out. Nvidia (NVDA) agreed to invest $3 billion in Meta’s equity offering, and Advanced Micro Devices (AMD) advanced a partnership this week that covers 6 gigawatts of its GPUs. So the chipmakers are now helping fund demand for their own chips.
The ad business looks fine. What’s uncertain is how much more it costs to keep Muse, Meta’s AI agent, growing.
S&P puts numbers on the deficit
S&P now forecasts Meta’s capex at:
- $140 billion in 2026
- More than $225 billion in 2027
- $252 billion in 2028
On that path, it sees free operating cash flow deficits of $22 billion in 2026 and $71 billion in 2027. It also expects Meta to fund the 2028 shortfall entirely with debt.
Meta is raising money ahead of that. It plans a record $97.5 billion equity raise, including an upsized $37.5 billion underwritten offering, and it created a new non-voting share class to do it. Non-cancelable contractual commitments reached $454.5 billion at the end of September.
How does the Street’s free cash flow forecast compare?
S&P’s view is that the bottom is still ahead, so watch whether consensus drifts toward it.
The ad machine is still humming
Revenue rose 26% to $64.6 billion in the third quarter. Ad impressions grew 10% and average price per ad rose 14%, so Meta sold more ads and charged more for each one.
Mark Zuckerberg said in the results release that “the core business is strong, and we’re seeing velocity across the board.” Fourth-quarter revenue guidance of $73 billion to $76 billion landed in line with consensus.
Reported EPS of $3.83 includes a $9.89 billion charge tied to the multistate attorneys general settlement. Excluding it, EPS was $7.40. Operating income still fell 37% to $12.99 billion as infrastructure, legal and third-party AI token costs all climbed.
Here’s the top line through the spending surge.
Revenue has kept compounding. The pressure sits entirely below it.
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Cheap on earnings, costly in cash
Meta trades at 18.7x forward earnings, below the 24.3x Amazon fetches, and the Street’s $848 average target implies 38% upside.
Cash is the catch. Third-quarter capex of $34.9 billion topped $32.8 billion of operating cash flow, leaving free cash flow at negative $2.12 billion. Meta also raised the low end of its 2026 capex guidance to $135 billion, with the top at $145 billion.
The multiple has moved like this over five years…
At 18.7x, investors are pricing Meta as an ad company. S&P is grading it as an infrastructure builder.
Regulators keep adding pressure. The UK’s CMA opened an investigation into Meta’s commercial terms this week, and Ofcom is running a formal probe into Online Safety Act compliance.
My take: The ad business is as strong as it has been, and 18.7x earnings is a fair price for that alone. But shareholders now pay for the AI build twice, through negative free cash flow and through dilution from a $97.5 billion raise. I’d stay patient until Muse shows revenue that justifies a 2027 budget anywhere near S&P’s forecast.
The next checkpoint is the fourth-quarter report, expected around January 27. A 2027 capex guide well under $225 billion would ease the pressure, while a bigger one would put the AA- rating to the test.
So what is Meta stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
