Meta's free cash flow turned negative last quarter, its first such turn since 2012, as operating expenses grew faster than 26% revenue growth. Investors have accepted the end of Meta's cash-generating era, though the company's creation of non-voting stock to let CEO Mark Zuckerberg retain control has drawn criticism. In the AI-driven data centre debt boom, issuance has surged to over $450bn in 2024.
S&P Global projects hyperscalers will spend $1.3tn in 2027, with the six major players—Alphabet, Amazon, Meta, Microsoft, Oracle and SpaceX—spending an amount equivalent to the Netherlands' annual GDP. While S&P expects leverage to level off, risks include accelerating issuance, delayed revenue recognition, and environmental regulations. Spain's draft royal decree on data centres could impose stricter environmental requirements, potentially halting projects.
Complex financing structures and guarantees from established firms for newer neocloud players add further credit risk.
Source: Financial Times Companies · Summarized by HeadlinesBriefing