Fitch upgrades Broadcom to ’BBB+’ with positive outlook

Investing.com -- Fitch Ratings has upgraded Broadcom Inc. and its subsidiaries to ’BBB+’ from ’BBB’ while maintaining a Positive outlook, the rating agency announced Monday.

The upgrade reflects Fitch’s confidence that Broadcom’s focus on AI semiconductor growth will strengthen its financial profile, despite the company’s opportunistic financial policies. The rating agency highlighted Broadcom’s growing free cash flow and successful integration of VMware Inc. as factors supporting its capacity for deal-making while maintaining strong investment rating levels.

Fitch affirmed Broadcom’s Short-Term Issuer Default Rating and commercial paper rating at ’F2’ and assigned a ’BBB+’ rating to the company’s proposed senior notes.

The rating agency noted that positive momentum from AI semiconductor demand and VMware’s virtualization products has increased Broadcom’s annual free cash flow to an expected $15 billion-$20 billion over the next few years, up from less than $10 billion in recent years.

Broadcom’s EBITDA leverage was estimated at 1.7x for the last twelve months ended August 3, 2025, and Fitch expects it to remain in the 1.5x-2.0x range over the next few years, even accounting for the possibility of another large debt-funded acquisition similar to VMware.

The company’s revenue profile has strengthened considerably due to robust demand for its accelerators and network solutions that build infrastructure for large language models. Additionally, Broadcom’s more strategic engagement with Apple Inc. will benefit semiconductor revenue while reducing product volatility.

Fitch expects AI semiconductor revenue to grow to more than the combined revenue from non-AI semiconductor and infrastructure software over the coming years. This shift, along with the VMware addition, reduces Broadcom’s historical Apple revenue concentration, which previously exceeded 20% of revenue.

The rating agency projects more than 20% revenue growth in fiscal year 2025, driven by AI semiconductor demand and momentum in the infrastructure software segment. Fitch expects AI investment trends to continue through FY27, resulting in low- to mid-teens revenue growth, followed by potential contraction in FY28 during an AI investment digestion period.

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