Meta Faces Negative Outlook as Nasdaq Slides on AI Spending
- The Nasdaq Composite declined by more than 5% during October.
- S&P Global Ratings changed Meta's outlook to negative citing AI spending concerns.
- Meta's capital expenditure is projected to hit $252 billion by 2028.
- Meta reported a 26% revenue increase for the third quarter.
- Meta spokesperson Kamran Mumtaz defended the company's AI monetization strategy.
The Nasdaq Composite declined by more than 5% during October as Wall Street expressed increasing concern regarding the level of capital expenditure hyperscalers are dedicating to artificial intelligence. Meta Platforms shares experienced their worst month in four years during October, recording a 15.2% decline from a $725.18 close.
This monthly performance included a 6.98% drop on October 22. On October 30, Meta shares dropped 1.53% to close at $614.99, reaching a market value of $1.36 trillion.
S&P Global Ratings shifts Meta outlook to negative
S&P Global Ratings maintained an AA- rating for Meta Platforms on October 30, 2026, but changed the company's outlook from stable to negative. The agency noted that "Meta’s ability to monetize its AI investments is more limited than that of its peers".
S&P also cited concerns regarding negative free cash flow and elevated capital spending. The rating agency stated: “it is unclear when these revenue streams will generate material contributions that exceed their rising costs over the next few years”.
Projections for Meta capital expenditure and debt
S&P Global Ratings projects Meta's capital expenditure will reach $140 billion in 2026, $225 billion in 2027, and $252 billion in 2028. These figures represent an increase from previous forecasts of $163 billion for 2027 and $178 billion for 2028.
The rating agency estimates Meta will face a free operating cash flow deficit of $22 billion in 2026, peaking at a $71 billion deficit in 2027. The deficit is expected to remain $39 billion negative in 2028.
This trajectory exceeds the 1.0x downgrade threshold set by the agency. S&P expects the 2028 shortfall will be funded entirely with debt.
Meta reports third-quarter financial results
Meta's revenue for the third quarter climbed 26% to reach $64.6 billion. Following a $9.9 billion legal charge, the company's net income totaled $9.86 billion, translating to $3.83 per share.
Advertising revenue grew 26% during the quarter, driven by a 10% rise in impressions and a 14% increase in price per ad. Totaling $34.91 billion, capital expenditure included finance lease principal.
Free cash flow for the period was negative $2.12 billion. Against $80.92 billion in long-term debt, Meta maintains $82.45 billion in cash. The firm adjusted its 2026 capital expenditure forecast to a range of $135 billion to $145 billion, increasing the previous $130 billion floor.
Capital raising and future lease obligations
Meta issued $25.0 billion in Class A stock alongside $12.5 billion in mandatory convertible preferred stock, which carries a 6.50% interest rate. The forward sale will settle by November 19, 2027.
Commencing in January 2027, the company intends to launch an at-the-market share sale program for Class C stock valued at $60 billion. Meta also holds $355.7 billion in future lease obligations.
Meta responds to S&P rating outlook
Meta spokesperson Kamran Mumtaz responded to the rating outlook by saying, "We respectfully disagree with S&P’s assertion about Meta’s AI monetization capabilities".
Mumtaz added, "We see significant product and business opportunities ahead of us, supporting our very strong credit profile".
Broader market indicators for Alphabet, Mobileye, and Bitcoin
Alphabet priced an $84.75 billion equity offering on the evening of June 1, 2026. Mobileye shows a potential 86% upside from its current stock price based on fair value calculations.
Throughout October, the Bitcoin Fear and Greed Index within the cryptocurrency market dropped from 70 to 36. Bitcoin reached a 30-day low of $76,141 in October.
Historical data shows Bitcoin prices were lower 30 days after a decline in three instances, though a June 2026 drop resulted in a gain over 90 days. Separately, the October 30, 2026, closing price for Meta stock was 1.6% lower than the $625 price the company charged for new stock on October 26.
Frequently Asked Questions
- S&P Says Meta Can’t Make Money From AI as Well as Its Rivals - 24/7 Wall St. (247wallst.com)
- The Nasdaq Just Flashed a Signal Investors Can't Afford to Ignore. History Says the Stock Market Will Do This Next. (finance.yahoo.com)
- Mobileye Stock In Focus After Earnings And Higher 2026 Revenue Outlook - Simply Wall St News (simplywall.st)
- Black Monday (1987) (Wikipedia — background) (en.wikipedia.org)
Add NewsPulse Time as a preferred source on Google