Celestica, Inc.
CLS · NYSE
Next quarter
Reports Oct 26, 2026.
Consensus is $2.88 EPS for Sep 2026 across 3 estimates, ranging $2.85 to $2.91.
CLS Jun 2026
- 13.68%
- +10.04%
- $2.12
- $2.41
- —
- $4.70B
Reported results
- $4.70B
- 12.29%
- $458.30M
- 9.75%
- $368.80M
- $3.17
Highlights
- Demand: Q2 revenue rose 62% year over year to $4.70 billion, exceeding the company’s $4.15-$4.45 billion guidance range, with CCS revenue up 84% to $3.81 billion.
- Earnings: GAAP diluted EPS was $3.17 versus $1.82 a year ago and $1.83 in Q1; adjusted EPS was $2.54 versus $1.39 a year ago and above the $2.14-$2.34 guidance range. Reported EPS exceeded the $2.12 consensus by $0.29, or 13.68%.
- Margin expansion: Adjusted operating margin reached a company record of 8.2%, up from 7.4% a year ago and 7.4% in Q1; GAAP operating margin was 9.8% versus 9.4% a year ago.
- AI infrastructure: Communications revenue increased 62% year over year to $2.65 billion, while Enterprise revenue jumped 167% to $1.16 billion on hyperscaler AI/ML compute and storage programs. Hardware Platform Solutions revenue rose 58% to approximately $1.9 billion.
- Outlook: Celestica raised 2026 revenue guidance to $20.5 billion from $19.0 billion, adjusted EPS to $11.30 from $10.15, adjusted operating margin to 8.4% from 8.1%, and free cash flow to $600 million from $500 million.
- 2027 visibility: Management expects 2027 revenue growth to accelerate beyond the 65% growth rate expected for 2026 and expects adjusted EPS growth to outpace revenue growth through further margin expansion.
- ATS improvement: ATS revenue grew 8% to $888.3 million, while segment margin expanded to 6.3% from 5.3% a year ago on better mix and operating leverage.
- Investment and cash: First-half capital expenditures were $493.3 million versus $69.2 million a year ago, primarily for CCS capacity; first-half free cash flow still rose to $285.0 million from $213.5 million.
- Concentration: The top 10 customers represented 83% of Q2 revenue, with three CCS customers contributing 32%, 17%, and 14% individually.
Analysis
Celestica’s June 2026 quarter was a material upside print driven by accelerating hyperscaler and AI infrastructure demand. Revenue of $4.70 billion was 62% above Q2 2025 and 16% above Q1 2026, while GAAP net income rose 75% year over year to $368.8 million and 74% sequentially from $212.3 million. GAAP diluted EPS was $3.17, up from $1.82 a year ago and $1.83 in Q1, while reported EPS exceeded the $2.12 consensus by $0.29. Adjusted EPS of $2.54 also cleared the company’s guidance high end of $2.34.
The main story was CCS, which grew 84% to $3.81 billion and accounted for 81% of revenue. Communications benefited from networking switch programs, while Enterprise rose 167% on an AI/ML compute ramp and storage demand. Operating leverage lifted adjusted margin to a record 8.2%, despite lower GAAP gross margin of 12.3% versus 12.8% a year ago. The quarter also benefited from a $104.1 million total-return-swap gain, including a $0.90 pre-tax per-share GAAP EPS benefit, making adjusted measures important for assessing underlying performance. Management raised its 2026 outlook again and pointed to faster growth in 2027, but the expansion is working-capital and capital-intensive, with first-half capex of $493.3 million and inventory of $3.40 billion at quarter-end.
AI infrastructure demand
Celestica’s growth remained concentrated in data center infrastructure, particularly hyperscaler networking and compute programs. CCS revenue increased 84% year over year to $3.81 billion, lifting its share of company revenue to 81% from 72%.
- Communications: Revenue increased 62% to $2.65 billion, driven by data center networking demand and continued growth in switch programs. CCS segment margin rose to 8.7% from 8.3%, and segment income increased 93% to $329.9 million.
- Enterprise: Revenue increased 167% to $1.16 billion, reflecting the ramp of an AI/ML compute program with a hyperscaler and stronger storage demand. Enterprise revenue rose 39% sequentially.
- Hardware Platform Solutions: Revenue increased 58% to approximately $1.9 billion, representing 41% of total Q2 revenue. First-half HPS revenue was approximately $3.6 billion, up 60% year over year.
- ATS: Revenue grew 8% to $888.3 million, with segment margin improving to 6.3% from 5.3%. Growth was spread across ATS businesses, with management citing improved mix and operating leverage.
Operating leverage
The quarter combined strong volume growth with higher core profitability. Adjusted operating earnings rose to $386.3 million from $214.7 million, and adjusted operating margin reached 8.2%, above the 8.0% guidance midpoint and the prior company high.
- GAAP results: Gross profit increased 56% to $577.5 million, operating income rose 68% to $458.3 million, and net income increased 75% to $368.8 million.
- Sequential performance: Revenue rose 16% from $4.05 billion in Q1, while operating income increased 68% from $272.1 million and net income increased 74% from $212.3 million.
- Underlying adjustments: Q2 GAAP EPS included a $0.90 pre-tax per-share benefit from the total return swap and $0.28 per share of pre-tax charges for stock compensation, intangible amortization, and restructuring. Adjusted EPS was $2.54 versus $1.39 a year ago.
- Tax: The GAAP effective tax rate was 16%, compared with 18% a year ago, while the adjusted rate was 20%, helped by favorable profit mix.
Raised annual outlook
Management raised its full-year targets on stronger customer forecasts, better demand visibility, and improved component supply. The updated outlook implies that the first-half performance is being followed by a stronger second half rather than a near-term normalization.
- 2026 revenue: Guidance increased to $20.5 billion from $19.0 billion, implying 65% year-over-year growth.
- 2026 earnings: Adjusted EPS guidance increased to $11.30 from $10.15, implying 87% growth, while adjusted operating margin rose to 8.4% from 8.1%.
- Cash generation: Free cash flow guidance increased to $600 million from $500 million.
- Near term: Q3 revenue guidance is $5.25-$5.55 billion, adjusted EPS guidance is $2.88-$3.08, and adjusted operating margin is expected at 8.4% at the midpoint.
- 2027: Management expects revenue growth to accelerate beyond the 65% expected for 2026 and adjusted EPS to grow faster than revenue as margins expand.
Capacity and working capital
Supporting the growth trajectory is requiring a substantial increase in inventory, receivables, and manufacturing capacity. Celestica is funding that expansion with operating cash flow and external liquidity while maintaining positive free cash flow.
- Capital spending: First-half property, plant, and equipment purchases were $493.3 million, versus $69.2 million in the prior-year period. The company continues to expect approximately $1.0 billion of 2026 capital spending.
- Cash flow: Q2 operating cash flow was $410.9 million versus $152.4 million a year ago, and free cash flow was $147.1 million versus $119.9 million. First-half free cash flow rose to $285.0 million from $213.5 million.
- Balance sheet investment: Inventory increased to $3.40 billion at June 30 from $2.19 billion at year-end 2025, while accounts receivable rose to $3.34 billion from $2.64 billion. Customer inventory deposits increased to $481.4 million from $407.1 million.
- Efficiency: Cash cycle days improved to 47 from 55 in Q1 and 65 a year ago, despite inventory days increasing to 67 from 61 in Q1.
- Liquidity: Cash was $535.7 million, term-loan borrowings were $740.0 million, and $1.74 billion was available under the expanded $1.75 billion revolving facility.
Concentration and volatility
The growth profile is powerful but increasingly dependent on a small number of CCS customers and on the continuation of hyperscaler AI infrastructure spending. Celestica’s filings also highlight exposure to program timing, component availability, tariffs, data center constraints, and customer roadmap changes.
- Customer concentration: The top 10 customers accounted for 83% of Q2 revenue, up from 78% a year ago. Three customers individually represented 32%, 17%, and 14% of revenue.
- Mix risk: CCS accounted for 81% of revenue, while ATS fell to 19% from 28% a year ago as CCS expanded much faster.
- TRS volatility: The total return swap produced a $104.1 million fair-value gain in Q2, compared with a $97.4 million gain a year ago and a $7.5 million loss in cost of sales in Q1. The company excludes these non-cash movements from adjusted results.
- External risks: Management continues to identify AI adoption, hyperscaler capital spending, power and data center constraints, supply-chain availability, tariffs, and program ramps as material variables for future results.
