Meta credit default swaps hit record 114.79 bps on AI spending

Key takeaways

• Meta's five-year credit default swaps (CDS), the price of insuring its debt against default, rose to a record on 22 October 2026, according to Reuters and Bloomberg.
• Reuters, citing Markit data, put the spread at 114.79 basis points, up 7.6 bps. Bloomberg, citing ICE Data Services, reported an intraday high of about 119.3 bps.
• The move came a day after Meta reported negative third-quarter free cash flow of $2.12 billion and raised the bottom of its 2026 capital spending range to $135 billion.
• A record spread does not mean anyone expects a default. Meta is still rated Aa3 by Moody's and AA- by S&P. The move shows the bond market asking for more compensation as AI spending is increasingly paid for with debt.
• Credit protection costs also rose for other AI spenders. Oracle's CDS were near a record and Amazon's were near their highest level since March 2020, according to Reuters.

Why Meta's credit default swaps hit a record

Meta credit default swaps hit a record on Thursday, 22 October 2026, as bond investors reacted to Meta's larger AI spending plan. Reuters, citing Markit data, said the five-year spread widened 7.6 basis points to 114.79 bps. For how CDS spreads are quoted and turned into default odds, see our credit default swap explainer.

Bloomberg's figures, based on ICE Data Services and summarised by Seeking Alpha, were a little higher. Bloomberg said the spread rose about 8.9 bps to roughly 119.3 bps, the highest intraday level since the contracts began actively trading about a year ago. The two numbers differ because the data providers and snapshot times differ. Both reports agree that the level was a record.

Shares moved the same way. Reuters said Meta stock was last down 6.1% at $655, its lowest level in about six weeks. Our coverage of the chip-stock slump on the same day describes how worries about AI costs spread across the sector.

Meta credit metrics on 22 October 2026

What a CDS spread measures, and what it does not

A credit default swap works like an insurance contract on a company's bonds. The buyer pays an annual premium. In return, the seller covers losses if the issuer defaults or goes through another defined credit event. The premium is quoted in basis points per year on the amount insured. One basis point is 0.01%.

At 114.79 bps, insuring $10 million of Meta debt for five years costs about $114,790 a year. That figure is simple arithmetic on the Reuters quote and ignores the upfront payment conventions used in actual trades. The premium was about $107,000 a year before Thursday's move.

A record spread does not mean the market expects Meta to default. At the end of September the company held $82.45 billion in cash and marketable securities, and third-quarter revenue was $64.60 billion, according to its earnings release filed with the SEC. Its credit ratings are among the highest of any US company. What the spread does show is that investors want more compensation for holding Meta credit risk than at any time since these contracts began trading actively. It also means more investors are using CDS to hedge their exposure to Meta's bonds and its lease commitments.

Why the bond market is pricing more risk

Spending is running ahead of cash flow

Meta's third-quarter results, released on 21 October, showed $32.79 billion of operating cash flow. That was less than the $34.91 billion it spent on capital expenditures, including principal payments on finance leases. The gap left free cash flow at minus $2.12 billion. Reuters described it as the first negative free cash flow since 2012. A year earlier, free cash flow was $10.63 billion, and in the second quarter of 2026 it was $784 million, according to Bloomberg via Seeking Alpha.

Meta also narrowed its 2026 capital expenditure outlook to $135-145 billion from $130-145 billion, which raised the bottom of the range. Management said it expects "to continue investing aggressively" in its core business and AI.

More debt, on and off the balance sheet

Meta's long-term debt was $80.92 billion on 30 September 2026, up from $58.74 billion at the end of 2025, according to the company's filing. Net proceeds from long-term debt issuance were $24.91 billion in the first nine months of the year. Most of that came from a $25 billion, six-tranche bond sale priced on 30 April 2026, shown in a free writing prospectus filed with the SEC. One of those tranches, the 5.25% notes due 2036, is the bond whose spread widened on Thursday.

Other commitments sit outside reported debt. Bloomberg reported that Meta's future obligations for leases and contracts, many tied to AI computing and data centres, reached about $825 billion, up from nearly $700 billion reported in July. When partners finance a data centre and Meta leases it, the lease payments work much like debt service, even though they do not appear in the long-term debt line. Credit analysts often count such payments when they judge how much a company really owes.

Equity dilution and legal costs add to the picture

The selloff also reflected Meta's plan for a new class of non-voting shares, which we explain in our guide to the Class C dividend. Steve Sosnick, chief market analyst at Interactive Brokers, told Reuters that investors see the shares "as a backdoor for issuing more stock." He also said the market has been questioning whether AI spending is producing the returns it should. Third-quarter results included a $9.89 billion legal charge. A separate New Mexico court order this week adds to the list of legal risks credit investors are watching.

How Meta compares with Oracle and other Big Tech borrowers

Meta was not the only company affected. Reuters reported, citing S&P Global Market Intelligence data, that Oracle's five-year CDS were close to a record and Amazon's were near their highest since March 2020. Bloomberg, via Seeking Alpha, said credit risk gauges also rose for Oracle, Microsoft and Broadcom. That suggests the concern is about debt-funded AI infrastructure across the sector, not just Meta.

Oracle has been the most-watched name in this trade. S&P Global Ratings cut Oracle to BBB-, the lowest investment-grade rating, on 9 July 2026, according to a Newsquawk headline and other reports. Meta's credit standing is several notches stronger.

We could not verify Oracle's exact CDS level for 22 October from a reliable source, so it is not given here. Absolute spreads also depend on rating, maturity profile and how actively each name trades, so a direct comparison of levels says less than the direction of change.

What it means

For Meta, the immediate funding impact is small. The company still has strong ratings, large cash reserves and revenue growing 26% a year. What has changed is how the market prices it. Bond investors now treat Meta less like a cash-rich platform that hardly needs to borrow and more like a heavy builder of infrastructure, closer to a utility or telecom operator during an expansion phase. If spreads stay wide, future bond sales and lease-backed project financings will be more expensive.

For the AI trade more broadly, the CDS market is giving its own reading on whether the spending is sustainable. Equity investors ask whether AI will earn a return. Credit investors ask whether the cash flows will cover the obligations if it does not, or if the return comes later. Thursday's moves in Meta, Oracle and Amazon credit, together with the recent swings in US stocks, show that both questions are now being asked together.

Several things are still unknown. Meta has not given a 2027 capital spending figure in its release, and has said it is not providing a full-year 2027 revenue outlook. It has not said how much of future spending will come from bonds, partner financing or the new share class. The cause of any further moves in Meta's spreads has not been confirmed beyond the results and the reports cited here.

Sources

• Reuters via AOL: Meta's credit risk indicator hits record high on increased AI spending plan (22 Oct 2026)
• Reuters via Investing.com: Meta's credit risk indicator jumps to record high after results
• Seeking Alpha via TradingView: Meta's AI spending push sends credit risk to fresh highs (citing Bloomberg and ICE Data Services)
• Meta Platforms: Third Quarter 2026 Results, Form 8-K Exhibit 99.1 (SEC EDGAR)
• Meta Platforms: Free writing prospectus for $25 billion senior notes, 30 Apr 2026 (SEC EDGAR)
• Newsquawk: S&P downgrades Oracle to BBB-, outlook stable
• Meta Investor Relations

This article is for information only and is not investment advice.