CLS — Celestica Inc.

Summary of Celestica Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Revenue: $4.05 billion, up 53% year-over-year, exceeding guidance.
• Adjusted Operating Margin: 8.0%, a 90 basis point improvement.
• Adjusted EPS: $2.16, an 80% increase from the prior year, surpassing guidance.
• Adjusted Gross Margin: 11.3%, up 30 basis points.
• Adjusted ROIC: Approximately 50%, up over 18 percentage points year-over-year.
• Free Cash Flow: $138 million generated in Q1.
• Capital Expenditures: $230 million, with a full-year guidance of approximately $1 billion.

2. Strategic Updates and Business Highlights

• Strong demand from hyperscaler customers, particularly in the CCS segment, which accounted for 80% of total revenue.
• CCS segment revenue grew 76%, driven by communications (up 69%) and enterprise (up 101%) end markets.
• ATS segment revenue was $806 million, flat year-over-year, with growth in HealthTech offset by challenges in A&D and capital equipment.
• Significant new program wins, including collaborations with AMD and a landmark award for a co-packaged optics Ethernet switch.
• Enhanced visibility into long-term demand and capacity alignment with customers, supported by long-term contracts.

3. Forward Guidance and Outlook

• Q2 2026 Revenue Guidance: Projected between $4.15 billion and $4.45 billion, representing 49% growth at the midpoint.
• Adjusted EPS Guidance: Expected between $2.14 and $2.34, a 61% increase year-over-year.
• 2026 Annual Revenue Outlook: Raised from $17 billion to $19 billion, indicating strong growth of 53%.
• Adjusted EPS Outlook for 2026: Increased from $8.75 to $10.15, representing 68% growth.
• 2027 Outlook: Anticipated revenue growth significantly exceeding $6.5 billion, with strong contributions from new programs.

4. Bad News, Challenges, or Points of Concern

• Ongoing supply chain constraints, particularly for custom silicon and memory, impacting the ability to meet demand.
• Component shortages are more pronounced than 90 days ago, leading to extended lead times.
• The ATS segment faced challenges in capital equipment and A&D, which could affect future performance.
• Potential headwinds on gross margins due to rising input costs, particularly for memory and silicon.

5. Notable Q&A Insights

• Management emphasized strong long-term visibility and planning due to extended lead times and contractual agreements with customers.
• The company is confident in its ability to execute and gain market share amid supply constraints, leveraging its operational strengths.
• Clarifications on the nature of new programs, with the CPO Ethernet switch being a significant win for an existing customer, expected to ramp in late 2027.
• Discussions highlighted the importance of R&D investments and the growth trajectory of the HPS business, which is integral to future revenue growth.
• Management remains disciplined in capital allocation while expressing readiness to invest further to support growth opportunities.

Overall, Celestica reported robust financial performance in Q1 2026, driven by strong demand in its CCS segment, while also navigating supply chain challenges and maintaining a positive outlook for the remainder of the year and into 2027.