Celestica, Inc.
CLS · NYSE
Next quarter
Expected to report Jan 27, 2027 — estimated from last year’s reporting date.
Consensus is $3.46 EPS for Dec 2026 across 3 estimates, ranging $3.34 to $3.56.
CLS Sep 2026
- 9.34%
- +12.12%
- $2.89
- $3.16
- —
- $5.83B
Reported results
- $5.83B
- 10.99%
- $460.00M
- 7.89%
- $397.20M
- $3.26
Highlights
- Revenue: Q3 FY2026 revenue was $5.83 billion, up 83% year over year and 24% sequentially, exceeding the company’s $5.25–$5.55 billion guidance range.
- Earnings: The release and 10-Q report diluted GAAP EPS of $3.26, versus $2.31 a year ago and $3.17 in Q2; non-GAAP adjusted EPS was $3.30, up 109% year over year and above the $2.88–$3.08 guidance range. The supplied consensus snapshot lists $2.89 consensus and separately tags reported EPS at $3.16, which does not match the company filing.
- Margins: Adjusted operating margin reached a company record of 8.5%, up from 7.6% a year ago and above the 8.4% guidance midpoint; GAAP operating margin was 7.9%, versus 10.2% a year ago.
- CCS: Connectivity & Cloud Solutions revenue rose 102% to $4.87 billion, or 84% of sales, with segment margin improving to 8.9% from 8.3%. Compute & Storage grew 242%; Networking grew 68%.
- ATS: Advanced Technology Solutions revenue increased 23% to $957 million, with segment margin up to 6.6% from 5.5%, on capital equipment acceleration and stronger demand across its businesses.
- 2027 outlook: Celestica’s initial outlook calls for $40.0 billion revenue, up 90%, adjusted EPS of $21.50, and adjusted operating margin of 9.0%; management says awarded-program demand forecasts for 2028 are meaningfully higher.
- 2026 outlook: Revenue guidance increased to $21.0 billion from $20.5 billion and adjusted EPS to $11.55 from $11.30; the adjusted operating margin outlook remains 8.4%. Free cash flow guidance was cut to $460 million from $600 million to fund working capital for growth.
- Investment and liquidity: Q3 free cash flow was $128 million after $274 million of capital spending. Management expects $1.5–$2.0 billion of capex and net cash use in 2027; the August share offering raised $3.45 billion gross, and quarter-end cash was $3.96 billion.
Analysis
Celestica’s Q3 was defined by a sharp acceleration in AI infrastructure demand and a much larger 2027 outlook. Revenue of $5.83 billion rose 83% from $3.19 billion a year ago and 24% from $4.70 billion in Q2, topping the company’s guidance range. GAAP operating income was $460 million, up from $325 million a year ago and roughly flat with Q2’s $458 million. The release and 10-Q report diluted GAAP EPS of $3.26, versus $2.31 a year ago and $3.17 last quarter; adjusted EPS was $3.30 versus $1.58 a year ago. The supplied consensus snapshot lists $2.89 consensus but tags reported EPS at $3.16, a figure inconsistent with the company filing.
CCS powered the growth, with revenue up 102% and broad strength across networking and AI compute; both CCS and ATS expanded segment margins. Adjusted operating margin reached a record 8.5%, while the company raised its 2026 revenue and adjusted EPS outlook. The larger story was the initial $40 billion 2027 revenue target, implying 90% growth, alongside a 9.0% adjusted margin goal. That expansion requires significant investment: capex is expected at $1.5–$2.0 billion in 2027, with net cash use anticipated as working capital and capacity scale. Management said awarded-program demand forecasts for 2028 already exceed its 2027 revenue outlook, while acknowledging supply, ramp, power and facility constraints as execution considerations.
Q3 operating results
The quarter materially outpaced the company’s own plan: revenue of $5.83 billion exceeded the high end of its $5.25–$5.55 billion range, and adjusted EPS of $3.30 topped the $2.88–$3.08 range. Compared with Q2, revenue increased from $4.70 billion while operating income was nearly unchanged at $460 million versus $458 million; diluted GAAP EPS edged up from $3.17 to $3.26. Year over year, GAAP net income grew 48% to $397 million. Adjusted operating margin rose 90 basis points to 8.5%, though adjusted gross margin fell 50 basis points year over year to 11.2%, primarily from CCS mix. GAAP operating margin declined to 7.9% from 10.2% a year ago, reflecting, among other items, the different effect of total-return-swap fair-value movements.
CCS and AI infrastructure
- Segment scale: CCS generated $4.87 billion, 84% of total revenue, up 102% year over year; its margin expanded 60 basis points to 8.9% on operating leverage.
- Networking: Revenue grew 68%, supported by 800G deployments, early 1.6T program volumes and 400G demand. Management expects 1.6T revenue to exceed 800G in 2027 as new programs ramp.
- Compute & Storage: Revenue rose 242% to $1.61 billion on hyperscale AI compute ramps and stronger storage demand. Celestica expects further growth from custom compute programs, including Google TPU and OpenAI’s Jalapeño, with the OpenAI ramp expected to be second-half weighted in 2027.
- Design-led portfolio: Hardware Platform Solutions revenue was approximately $2.3 billion, up 70% and equal to 40% of company revenue. Management plans to invest more than $300 million in HPS R&D in 2027, up from over three times lower annual spending in 2023, and expects its HPS engineering team to grow from over 1,600 to over 2,000.
2027 growth outlook
The initial 2027 outlook is $40.0 billion of revenue, 90% above the company’s $21.0 billion 2026 outlook, with adjusted EPS of $21.50 and adjusted operating margin of 9.0%, a 60-basis-point expansion. Management expects CCS revenue to grow approximately 110% and ATS approximately 10%; within CCS, networking and compute are both expected to contribute, with multiple large program ramps driving sequential growth and a stronger second half. Celestica said the $40 billion forecast incorporates risks around component supply, program ramps and execution. Its awarded-program demand forecast for 2028 is meaningfully above the 2027 revenue outlook, but management also cited data-center land and power availability and geopolitical factors as potential constraints.
Capacity and cash needs
- 2026 revision: Revenue guidance rose to $21.0 billion from $20.5 billion and adjusted EPS to $11.55 from $11.30; the 8.4% adjusted operating margin outlook was unchanged. Free cash flow guidance fell to $460 million from $600 million, mainly because of working capital investments to support 2027 growth.
- 2027 investment: Capex is expected to be $1.5–$2.0 billion, versus approximately $1.0 billion in 2026. Management expects net cash use in 2027 as the company funds both capacity additions and working capital, and targets a return to positive free cash flow in 2028.
- Quarter-end position: Q3 free cash flow was $127.5 million, compared with $88.9 million a year earlier, after $262.2 million of net purchases of property and equipment. Cash was $3.96 billion and term-loan borrowings were $735.6 million; management described the company as having approximately $3.2 billion of net cash and $1.75 billion of available revolver capacity.
- Working capital: Inventory reached $4.51 billion, up $1.1 billion sequentially, as Celestica prepared for demand ramps. Cash-cycle days improved to 42 from 47 in Q2 and 61 a year ago. The company completed an 11.1-million-share offering in August for $3.45 billion gross proceeds.
ATS and customer mix
- ATS performance: Revenue increased 23% to $957 million, while segment margin expanded 110 basis points to 6.6%. Capital equipment led the growth, supported by higher demand across the segment’s other businesses.
- Forward growth: Management expects ATS to return to double-digit growth in 2026, with revenue of $3.6 billion, up 13%, and a record 6.4% segment margin; it expects approximately 10% growth in 2027. Engineering services revenue has grown at more than 30% CAGR since 2023, and new wins have a 50% attach rate.
- Concentration: The three largest customers accounted for 35%, 17% and 14% of Q3 revenue; the top 10 represented 85%, compared with 80% a year earlier. Management cited strong customer demand and longer planning visibility, while the filing notes that customer concentration is a business risk.
