Fitch Elevates Broadcom's Rating to 'BBB+' Amid AI Growth Optimism

Fitch Ratings announced Monday that it has elevated Broadcom Inc. and its subsidiaries to 'BBB+' from 'BBB', while sustaining a Positive outlook for the technology giant.

The rating enhancement underscores Fitch's belief that Broadcom's strategic emphasis on artificial intelligence semiconductor expansion will bolster its financial standing, notwithstanding the company's opportunistic financial approach. The rating firm emphasized Broadcom's expanding free cash flow generation and the effective integration of VMware Inc. as key drivers supporting its acquisition capabilities while preserving robust investment-grade credit metrics.

Fitch maintained Broadcom's Short-Term Issuer Default Rating and commercial paper rating at 'F2' and designated a 'BBB+' rating for the company's planned senior note issuance.

The agency observed that favorable trends driven by AI semiconductor demand alongside VMware's virtualization solutions have elevated Broadcom's projected annual free cash flow to $15 billion-$20 billion over the coming years, representing a substantial increase from the sub-$10 billion levels recorded in prior periods.

Broadcom's EBITDA leverage ratio stood at 1.7x for the trailing twelve months through August 3, 2025, with Fitch anticipating the metric to stay within the 1.5x-2.0x band in the foreseeable future, even considering potential major debt-financed acquisitions comparable to the VMware transaction.

The company's revenue composition has improved markedly due to strong demand for its accelerator chips and networking solutions that support large language model infrastructure development. Furthermore, Broadcom's enhanced strategic relationship with Apple Inc. is expected to boost semiconductor revenues while diminishing product-related volatility.

Fitch anticipates AI semiconductor revenues will surpass the combined contributions from traditional semiconductor and infrastructure software businesses in the years ahead. This transformation, coupled with the VMware acquisition, mitigates Broadcom's historical dependence on Apple revenues, which previously represented over 20% of total revenue.

The rating agency forecasts revenue growth exceeding 20% for fiscal year 2025, propelled by AI semiconductor demand and strength in the infrastructure software division. Fitch expects AI investment momentum to persist through FY27, generating low-to-mid-teens revenue expansion, followed by possible revenue decline in FY28 as the market enters an AI investment consolidation phase.