US High Grade – Fundamentals Wrap-Up: Capex climbs, IG strength holds, sector dispersion widens

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US High Grade – Fundamentals Wrap-Up: Capex climbs, IG strength holds, sector dispersion widens

US High Grade – Fundamentals Wrap-Up

01 July 2026 Citi Research

Non-Financial Issuer Fundamentals

Update, Q1 2026

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The headline story for Q1 2026 is the continued acceleration of the capex

supercycle alongside persistent balance sheet strength. US IG T12M capex as a

share of EBITDA reached 49.2%, a level 5.6 standard deviations above the average

since 2015, up from 41.9% in Q4 2025. Trailing 12-month capex growth hit 50.2%,

3.6 standard deviations above average. This marks the eighth consecutive quarter

of increases in the capex/EBITDA ratio. Despite this massive reallocation of cash

toward investment, the broader market's leverage and profitability profile remains

remarkably healthy. Gross leverage stands at 1.64x, only 0.02x above the Q4 2025

number, and sitting 2 standard deviations below the historical average. Net

leverage fell to 1.09x, a level 2.4 standard deviations below average, as strong

EBITDA growth continues to outpace net debt accumulation. EBITDA margins

reached 26.0%, 3.7 standard deviations above the historical mean, reinforcing a

strong earnings environment that is thus far absorbing elevated capex spending.

The tension between aggressive capex and strong credit quality defines the current

credit cycle. Total debt growth sits at 1.5 standard deviations above average and

accelerated to 18.8% YoY, up sharply from 9.3% in Q4 2025 and 0.3% in Q1 2025.

However, EBITDA growth of 14.8% YoY and revenue growth of 10.4% YoY have so far

absorbed the debt increase, preventing any deterioration in leverage. Cash

balances grew 24.0% YoY for the third consecutive quarter of improvement, up

from a decline of 0.3% in Q2 2025.