Facebook, the social media giant that owns popular platforms like Facebook, Instagram, and WhatsApp, is a massive and highly profitable company. However, like many other large corporations, Facebook does carry some debt on its balance sheet. Here is an in-depth look at Facebook’s current debt levels and how they have changed over time.
What is Facebook’s total debt?
According to Facebook’s most recent quarterly earnings report, as of June 30, 2022, the company had $15.78 billion in total debt outstanding. This debt load is made up of the following components:
- $15 billion in unsecured senior notes, issued between 2020 and 2022 at interest rates ranging from 0.0% to 4.1%. These notes have maturity dates ranging from 2024 to 2052.
- $749 million drawn from a $2 billion revolving credit facility. This debt has a variable interest rate based on LIBOR.
- $28 million in finance lease obligations.
In total, Facebook carries a significant debt load, but one that is still smaller than its cash reserves. As of June 30, 2022, Facebook had $40.49 billion in cash and cash equivalents, meaning it has ample liquidity to service its debt and meet other financial obligations.
How has Facebook’s debt changed over time?
Facebook has consistently taken on more debt over the past several years. Here is a look at how Facebook’s total debt has grown since 2018:
| Date | Total Debt |
| December 31, 2018 | $3.32 billion |
| December 31, 2019 | $4.98 billion |
| December 31, 2020 | $11.99 billion |
| December 31, 2021 | $15.36 billion |
| June 30, 2022 | $15.78 billion |
As the table shows, Facebook’s debt has increased nearly five-fold over the last 3.5 years. The biggest debt increase came in 2020, when the company raised $10 billion in senior unsecured notes. This jump in debt coincided with the COVID-19 pandemic, as Facebook shored up its liquidity during a period of economic uncertainty.
Why has Facebook taken on more debt?
There are a few key reasons why Facebook continues to raise debt capital even as it generates strong profits:
- Extremely low interest rates make debt cheap – Interest rates in the US and globally have been at historically low levels since the Great Recession, making it very inexpensive for companies to borrow.
- Flexibility – Having unused debt capacity gives Facebook flexibility to make acquisitions, invest in new technologies, or weather downturns.
- Tax benefits – Interest payments on debt are tax deductible, providing a small benefit to Facebook’s bottom line.
- Bond investor demand – With interest rates so low, demand for corporate bonds issued by financially strong companies like Facebook is very high.
Essentially, Facebook is taking advantage of favorable market conditions to build up a war chest of cheap debt financing. This doesn’t indicate financial distress for the company – it is a strategic move by management to increase financial flexibility.
How does Facebook’s debt level compare to other tech giants?
Here is a look at how Facebook’s current debt level compares to other top technology companies as of June 30, 2022 (in billions):
| Company | Total Debt |
| $15.78 | |
| Apple | $120.22 |
| Microsoft | $58.52 |
| Alphabet (Google) | $14.77 |
| Amazon | $37.43 |
So Facebook’s debt is relatively in line with Alphabet but substantially lower than other Big Tech peers like Apple, Microsoft, and Amazon. Those companies have taken on large debt loads to finance growth initiatives, capital returns to shareholders, and acquisitions.
Is Facebook’s debt level concerning?
Given Facebook’s strong profitability, cash flow generation, and liquidity, its current debt level is not concerning. The company earned $28.8 billion in net income in 2021, giving it plenty of cushion to service its debt.
Some key metrics indicate Facebook’s debt level remains very manageable:
- Debt/equity ratio = 23.5% (low leverage)
- Net debt/EBITDA = 0.77x (very low relative to cash flows)
- Interest coverage = 22.9x (very high)
As long as Facebook maintains its dominant position in social media and digital advertising, it should have no issues managing its debt load. Of course, any major decline in Facebook’s earnings power could change this calculus. But under current conditions, Facebook has room to safely take on more debt if needed.
How does Facebook’s balance sheet compare to other tech giants?
Here is a comparison of key balance sheet metrics for Facebook vs. its Big Tech peers:
| Company | Cash & Equivalents | Total Debt | Debt/Equity | Current Ratio |
| $40.5B | $15.8B | 23.5% | 3.9x | |
| Apple | $28.3B | $120.2B | 136.8% | 1.1x |
| Microsoft | $104.8B | $58.5B | 60.5% | 2.5x |
| Alphabet | $125.6B | $14.8B | 9.0% | 3.1x |
| Amazon | $37.3B | $37.4B | 98.4% | 1.2x |
This comparison shows that Facebook maintains very strong financial health, with high cash levels and low leverage compared to the other tech leaders. Its current ratio is particularly robust, indicating it has ample liquidity to cover short-term liabilities.
Conclusion
In summary, while Facebook has rapidly built up its debt load in recent years, reaching $15.78 billion as of June 2022, its balance sheet remains very healthy. Given the company’s high profitability and cash flow generation, this debt level is completely manageable.
Compared to other top technology companies, Facebook employs relatively low financial leverage. Under current conditions, Facebook’s debt level is no reason for concern for investors or analysts. Of course, Facebook does face potential headwinds like generational user shift, audience saturation in core markets, and regulation that could impact its future earnings power. But strictly from a balance sheet perspective, the company has plenty of room to take on more debt safely if strategic opportunities arise.