CLS — Celestica Inc.

Celestica Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Revenue: $4.7 billion, up 62% year-over-year, exceeding guidance.
• Adjusted EPS: $2.54, an increase of 83%, also above guidance.
• Adjusted Operating Margin: 8.2%, a record high, up 80 basis points year-over-year.
• Adjusted Gross Margin: 11.5%, down 20 basis points due to product mix.
• Adjusted ROIC: Approximately 55%, up 20 percentage points year-over-year.
• Free Cash Flow: $147 million for the quarter, $285 million year-to-date.
• Inventory: Increased to $3.4 billion, reflecting growth and program ramps.

2. Strategic Updates and Business Highlights:

• Strong demand from CCS (Communications and Cloud Solutions) customers, particularly in networking and AI compute sectors.
• CCS segment revenue reached $3.81 billion, up 84%, driven by hyperscale customer growth.
• ATS (Advanced Technology Solutions) segment revenue was $888 million, up 8%, with profitability improvements noted.
• Significant new programs are ramping, including partnerships with OpenAI and AMD, indicating a robust pipeline for future growth.
• The company is focusing on disciplined capital allocation, with $1 billion in planned CapEx for 2026 to support growth.

3. Forward Guidance and Outlook:

• Q3 2026 Revenue Guidance: Projected between $5.25 billion and $5.55 billion, indicating 69% growth at the midpoint.
• Adjusted EPS Guidance for Q3: Expected between $2.88 and $3.08, representing an 89% increase at the midpoint.
• 2026 Annual Revenue Outlook: Raised from $19 billion to $20.5 billion, reflecting 65% growth.
• Adjusted EPS for 2026: Increased to $11.30 from $10.15, indicating 87% growth.
• 2027 Outlook: Anticipated revenue growth to accelerate beyond 65%, driven by strong customer demand and new program wins.

4. Bad News, Challenges, or Points of Concern:

• Supply Chain Constraints: While manageable, ongoing material supply issues remain a concern, potentially impacting future growth.
• Component Availability: The company is hedged but acknowledges risks associated with securing materials for upcoming programs.
• Gross Margin Pressure: Slight decline in adjusted gross margin due to product mix, with ongoing efforts to maintain margins amidst changing business dynamics.

5. Notable Q&A Insights:

• Customer Demand: Management noted unprecedented demand across AI and networking sectors, with customers increasingly valuing continuity and reliability in supply.
• Market Share Gains: Celestica is gaining market share due to its ability to execute complex products reliably at scale.
• Future Programs: Significant opportunities are anticipated from new programs, including those with OpenAI and AMD, with expectations for revenue growth to ramp in 2027.
• Operational Footprint Expansion: The company is expanding its manufacturing capabilities in North America and Asia to meet customer demands and mitigate geopolitical risks.

Overall, Celestica's strong Q2 performance, coupled with an optimistic outlook for the remainder of 2026 and into 2027, reflects robust demand in key sectors, although challenges related to supply chain constraints and margin pressures remain.