"Heavy Spending, Low Returns"... Meta Faces Negative Credit Outlook

[Anchor]

Global credit rating agency S&P has lowered its credit outlook for Meta, the parent company of Facebook and Instagram. Concerns are growing over whether big tech companies can shoulder the massive upfront investment costs and survive in the market.

This report comes from New York, with correspondent Kim Hyunwoo.

[Reporter]

S&P, one of the world's top three credit rating agencies, has revised its credit outlook for Meta from stable to negative.

This is a signal that Meta's credit rating could be downgraded in the future.

S&P explained the adjustment by stating that Meta's ability to generate revenue through AI investments is more limited compared to other competitors, while its future capital expenditure scale remains unclear and its multi-year AI investment plan is overly aggressive.

The agency judged that cost burdens are steadily growing due to increased AI investments, while future profitability remains uncertain.

In fact, during its third-quarter earnings announcement last month, Meta spent 2.1 billion dollars more on investments than it earned from operations, causing its free cash flow—the cash left over after investments—to turn negative for the first time since its initial public offering in 2012.

Despite this, Meta announced plans to spend up to 145 billion dollars on capital expenditures alone this year. S&P projected that as Meta's investments continue to grow, its cash shortfall could swell to 71.0 billion dollars next year, which is approximately 95 trillion won in Korean currency.

If the credit rating is actually downgraded, Meta would have to pay higher interest rates when borrowing money, further increasing its funding burden.

[Matt Kennedy / Senior Strategist, IPO-focused investment firm: Everyone knows that growth is possible, but the core of an investment decision is whether it can translate into actual profits.]

Meta stated that it disagrees with S&P's assessment and countered that the company remains robust. However, market concerns are mounting as other digital big tech companies ramping up AI investments, such as Alphabet and Amazon, are also seeing their cash flows turn negative one after another.

[Video Editing: So Ji-hye]
※ Please note: This article was translated by AI and may contain errors.