S&P Global revises Meta's outlook to 'negative' on AI spending, cash flow worries

A US federal judge certified four classes of Facebook users in a lawsuit against Meta, alleging improper collection of sensitive medical data. Judge William Orrick rejected Meta's arguments against classwide litigation, but narrowed some claims. The case involves California's wiretapping law and unauthorized device intrusion.

S&P downgraded Meta's credit rating outlook to negative, citing high AI spending and expected leverage rise above 1.0x by 2027. Meta disputes this, highlighting future opportunities. Q3 free cash flow was -$2.12B, with $35B share sale planned for AI investments.

The UK's Competition and Markets Authority (CMA) is investigating Meta Platforms' commercial terms, which could unfairly harm companies on its platforms. The CMA is concerned about Meta's ability to use publishers' material without consent to develop its own products, including AI features. Meta has delayed changes to its terms until further notice. The CMA is also seeking details on Meta One, a subscription service for businesses, but has not decided on further action.

The UK's CMA is investigating whether Meta's commercial terms breach competition law, focusing on potential abuse of a dominant position. Meta has paused changes to its terms until 2026. The CMA is also seeking information about Meta's new Meta One service. The investigation could impact Meta's operations and relationships with publishers and advertisers.

S&P Global Ratings revised Meta Platforms' outlook to negative, citing concerns over heavy AI-related capital expenditures and potential impacts on free cash flow. The agency warns of risks to Meta's credit profile if investments do not yield sufficient returns or spending remains high. Meta's financial flexibility may be tested by balancing AI spending with shareholder returns.

S&P Global Ratings changed Meta Platforms Inc.'s credit outlook to negative, citing high AI-related capital expenditures and uncertainty about monetization. The agency doubts Meta's ability to generate significant revenue from these investments. This follows a broader tech sector downturn, with the Nasdaq 100 dropping 3.5% on Friday.