The Facebook and Instagram parent faces growing investor concerns over its $135 billion to $145 billion spending plan, while multibillion-dollar settlements and social media lawsuits add financial pressure.
Meta Platforms is facing mounting financial pressure as its ambitious artificial intelligence investments, weakening cash flow and costly legal disputes raise concerns among investors. On Friday, October 30, 2026, S&P Global Ratings revised the company’s credit outlook from stable to negative, citing uncertainty over its ability to finance increasingly expensive AI development.
The decision followed Meta’s October 21 earnings report, which revealed plans to spend between $135 billion and $145 billion on capital investments during 2026. The Facebook and Instagram parent also reported a $2.12 billion free cash flow deficit during the third quarter.
Meta’s shares declined approximately 15% during October as investors questioned whether the company’s expanding AI infrastructure would generate sufficient returns. The financial concerns come as Meta faces billions of dollars in legal costs involving allegations that its social media platforms harm children and teenagers.
S&P Revises Meta’s Credit Outlook to Negative
S&P Global Ratings announced its revised outlook on October 30, warning that Meta’s spending plans could place additional pressure on its financial position.
The agency cited the company’s substantial investments in data centers, advanced computing chips and other infrastructure needed to develop artificial intelligence systems.
Reuters reported that S&P expects Meta’s free operating cash flow to remain negative as spending increases. The agency projected deficits of approximately $39 billion in 2026 and $71 billion in 2027.
S&P also warned that negative free operating cash flow could continue beyond 2028 if capital investments remain elevated.
The negative outlook does not mean Meta’s credit rating has already been downgraded. The company retains its AA- issuer credit rating, which remains well within investment-grade territory.
Instead, the revised outlook indicates that S&P sees increased risks to the company’s creditworthiness over the coming years.
The agency expressed particular concern about Meta’s ability to turn its AI investments into profitable products and services.
Unlike some technology competitors that generate substantial revenue by selling cloud computing services, Meta primarily earns money through advertising across Facebook, Instagram and its other applications.
S&P questioned how quickly the company’s newer AI projects could produce additional revenue sufficient to offset infrastructure costs.
Meta disagreed with that assessment, maintaining that artificial intelligence offers major opportunities to strengthen its existing business and develop new products.
Quarterly Revenue Rises Despite Spending Concerns
Meta’s latest earnings report presented a mixed picture of strong sales growth and rising expenses.
The company reported third-quarter revenue of $64.60 billion, an increase of 26% from the same period in 2025.
Advertising activity remained strong. Meta reported that the number of advertisements delivered across its family of applications increased by 10%, while the average price per advertisement rose by 14%.
However, total quarterly costs and expenses increased 68% to $51.61 billion.
Operating income fell 37% to approximately $12.99 billion, while the operating margin declined from 40% a year earlier to 20%.
A major factor was a $9.89 billion charge related to Meta’s agreement with state attorneys general over allegations involving youth mental health and social media.
Without that legal charge, the company said its quarterly operating income would have reached approximately $22.88 billion.
Net income nevertheless rose to $9.86 billion, compared with $2.71 billion a year earlier, partly reflecting differences in tax expenses between the two periods.
The results show that Meta’s advertising business continues to expand even as investment and litigation costs affect its financial performance.
Artificial Intelligence Expansion Requires Billions
Chief Executive Officer Mark Zuckerberg has made artificial intelligence a central part of Meta’s long-term strategy.
The company has invested heavily in computing infrastructure designed to train and operate increasingly advanced AI models.
During the October earnings announcement, Meta highlighted the introduction of its Muse and Muse Wonder AI systems.
Zuckerberg said the company was making progress toward its goal of developing increasingly capable personal AI assistants.
Meta also announced plans for a new class of common stock as part of a broader effort to finance its investments.
According to Reuters, the company plans to raise approximately $97.5 billion through a stock sale connected with its AI expansion.
The proposed fundraising comes as Meta already carries substantial long-term debt. At the end of September, the company reported approximately $80.92 billion in long-term borrowing.
Supporters of the strategy argue that AI technology could improve advertising performance, generate new services and strengthen Meta’s competitive position.
Investors remain concerned about how much additional spending will be required before those investments produce meaningful financial returns.
Meta Reaches Multibillion-Dollar Social Media Settlement
Legal costs represent another significant challenge for the technology company.
In August 2026, Meta reached an agreement with attorneys general from nearly every U.S. state and several territories to resolve litigation concerning alleged harm to young social media users.
California Attorney General Rob Bonta announced a proposed settlement on August 26 that included substantial financial payments and changes to Facebook and Instagram.
Meta’s subsequent financial disclosures placed the potential total payments at approximately $18.59 billion, including amounts subject to additional conditions.
The agreement includes approximately $12.7 billion in payments to participating states over ten years, as well as other expenses and conditional obligations.
Some payments depend on whether competing platforms introduce comparable child-safety protections and face similar financial requirements.
The settlement also requires changes intended to reduce potentially harmful social media use by minors.
These include default daily time limits, restrictions on overnight access, expanded parental supervision tools and stronger systems for identifying underage users.
An independent auditor is expected to monitor compliance with the agreed requirements.
The settlement addresses allegations that Meta designed features encouraging compulsive use among children while failing to adequately communicate potential risks.
Meta has disputed allegations that it intentionally designed its products to harm young users.
Los Angeles Lawsuits Continue Against Social Media Companies
Meta has also faced individual lawsuits alleging that social media features contributed to depression, anxiety, eating disorders and other mental health difficulties.
On October 30, Reuters reported that Meta settled claims brought by an 18-year-old plaintiff identified as K.D.B. during jury selection in a Los Angeles trial.
The company had previously reached an agreement with another teenage plaintiff involved in the same proceedings.
Those settlements removed Meta from the immediate trial, which was expected to continue against Snapchat parent Snap.
The case is part of a much larger collection of lawsuits accusing social media companies of designing products that encourage excessive use among children and teenagers.
Plaintiffs have questioned features including endless scrolling, personalized recommendations, notifications and systems that reward frequent engagement.
Snap has faced allegations involving Snapchat features such as Snapstreaks and Snap Scores, which plaintiffs argue encourage repeated use.
The companies have denied that their platforms were intentionally designed to cause addiction or psychological harm.
Earlier Jury Verdict Adds to Legal Pressure
Meta’s recent settlements follow a major Los Angeles jury decision in March 2026.
In that case, jurors found Meta and Google’s YouTube negligent in the design or operation of their platforms and determined that their conduct contributed to harm experienced by a young woman.
The jury awarded $3 million in compensatory damages and recommended another $3 million in punitive damages.
Jurors assigned 70% of the responsibility to Meta and 30% to YouTube.
The companies disputed the verdict and indicated that they would challenge the decision.
The case attracted attention because plaintiffs focused on the design and operation of social media platforms rather than solely on content posted by individual users.
Similar lawsuits remain pending in courts across the country, although individual outcomes will depend on the evidence and legal arguments presented.
Investors Watch AI Spending and Legal Exposure
Meta now faces two substantial financial challenges: investing heavily enough to compete in artificial intelligence while managing the costs of litigation and regulatory compliance.
Its core advertising business continues to generate substantial revenue, but expanding infrastructure expenses have reduced free cash flow.
The company must also implement youth safety changes under its settlement agreements while defending remaining legal claims.
S&P’s negative outlook places additional attention on Meta’s borrowing, spending decisions and ability to generate cash from future investments.
The next important financial indicators will include spending guidance for 2027, progress in financing AI infrastructure and evidence that the company’s new technology is contributing to revenue growth.
For now, Meta retains a strong investment-grade credit rating, but investors and rating agencies are closely watching whether its enormous AI investments can be supported by future earnings.
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