Moody's Ratings has affirmed the Ba1 corporate family rating for ON Semiconductor Corporation while revising the outlook from positive to stable, the ratings agency said Thursday. The decision follows softer-than-expected top-line performance, although Moody's noted early signs that the company's end markets are beginning to stabilize.
Moody's tied the change in outlook to the broader semiconductor market downturn and ON Semiconductor's substantial exposure to the automotive and industrial sectors - areas that have experienced slower recoveries than anticipated. The ratings agency pointed to ongoing inventory adjustments and subdued demand in those markets as contributing factors to the firm's recent results.
Looking ahead, Moody's expects only modest growth for ON Semiconductor in the coming quarters. The agency projects that Moody's-adjusted debt to EBITDA will stay above 2x over the next 12-18 months, a meaningful shift from prior expectations that had anticipated leverage in the low- to mid-1x range.
At the same time, Moody's highlighted that ON Semiconductor continues to generate strong free cash flow. The company has signaled an intent to return 100% of that cash to shareholders and its board recently authorized a $6 billion share repurchase program. Moody's also observed that ON Semiconductor has not established a formal leverage target and has shown a willingness in the past to pursue large-scale acquisitions.
The Ba1 rating itself reflects Moody's assessment of ON Semiconductor's solid market position and its growing exposure to higher-margin analog end markets. Despite that underlying strength, the slower-than-expected recoveries in automotive and industrial segments have weighed on performance and kept revenue under pressure.
Moody's forecasts revenue growth in the mid-single-digit percentage range for 2026, following a mid-double-digit percentage decline over the twelve months ending October 3, 2025. As of that October date, ON Semiconductor held about $2.8 billion in cash, cash equivalents and short-term investments, which Moody's described as very good liquidity.
The company also maintains a $1.5 billion revolving credit facility that matures in 2028, with $375 million drawn as of October 3, 2025. These liquidity resources factor into Moody's view of the firm's ability to manage its obligations while navigating a slow recovery in key end markets.
Sector impacts
- Semiconductor industry - demand cycles and inventory adjustments are central to near-term performance.
- Automotive and industrial markets - slower recoveries in these sectors have been a primary drag on ON Semiconductor's results.
- Credit markets - elevated leverage expectations influence the company's ratings trajectory and investor outlook.