Celestica
Contract manufacturing + design/systems integration: builds and integrates hardware (networking switches, AI/ML compute servers, storage, plus industrial/aerospace/healthtech products) for OEMs and hyperscalers. Two segments: Connectivity & Cloud Solutions (CCS, includes the higher-value Hardware Platform Solutions / HPS business) and Advanced Technology Solutions (ATS: aerospace & defense, industrial, healthtech, capital equipment).
Earnings, margins, COGS & capex
Celestica's growth has decoupled from the legacy low-margin EMS story: AI-datacenter demand from a concentrated set of hyperscalers drove FY2025 revenue up 28% to $12.4B, and Q1 2026 up 53%, led by the CCS segment (+76% to $3.24B in Q1). The higher-value Hardware Platform Solutions (HPS) business is now ~42% of revenue (up from the low-30s% a year earlier), lifting the blended margin. Management raised FY2026 revenue guidance across the Q4 2025 and Q1 2026 prints, most recently to $19.0B with adj EPS of $10.15 and adj operating margin of 8.1%. Margins remain thin in absolute terms (adj gross ~11%, adj operating ~7.5-8%) as is structural for EMS, but the mix shift and scale are expanding them. Balance sheet is conservative (leverage ~0.8x).
Income statement — where each revenue dollar goes
% of revenueOf every $1 of revenue, ~89¢ is cost of goods and ~3¢ operating expense, leaving ~8¢ of operating profit.
Revenue trend
Margins
gradually expanding on mix shift
rising from ~6-7% in 2023-24
up
stable, cash generative
COGS structure
Cost of goods is dominated by purchased components (semiconductors, GPUs/ASICs, networking silicon, memory, power/thermal hardware) plus manufacturing labor and overhead across a global plant footprint (Asia, N. America, Europe). As a contract manufacturer, COGS runs ~88-89% of revenue, so gross margin is structurally thin; profit leverage comes from higher-value design/HPS content and scale, not component markup.
Capex
Low and demand-linked, ~1-2% of revenue; EMS is asset-light relative to semiconductor or capital-equipment peers. Recent capex tied to expanding datacenter/AI systems-integration and thermal (liquid-cooling) capacity to serve hyperscaler roadmaps.
Latest earnings
Beat on both lines, each ABOVE THE HIGH END of company guidance: revenue $4.70B vs guided $4.15-4.45B; adjusted EPS (non-GAAP) $2.54 vs guided $2.14-2.34 (vs $1.39 in Q2 2025, +83%). GAAP EPS $3.17 (vs $1.82), which includes a $0.90/sh pre-tax POSITIVE impact from the total return swap and a $0.28/sh pre-tax charge for SBC, intangible amortization and restructuring. Company attributes the adj-EPS upside to 'stronger than anticipated operating leverage'; GAAP effective tax rate 16%, adjusted 20%.
FY2026 outlook RAISED for the third consecutive quarter: revenue $20.5B (prior $19.0B), adjusted EPS (non-GAAP) $11.30 (prior $10.15), adjusted operating margin (non-GAAP) 8.4% (prior 8.1%), free cash flow (non-GAAP) $600M (prior $500M) -- implying +65% revenue and +87% adj EPS growth. Q3 2026 guide: revenue $5.25-5.55B, adjusted EPS $2.88-3.08, adjusted operating margin 8.4% at the mid-point. 2027: management expects revenue growth to ACCELERATE beyond the 65% anticipated for 2026, with adjusted EPS growing faster than revenue on higher adjusted operating margin -- driven by 'strengthening second half customer forecasts, improved component supply' and new program wins.
- Q2 2026 revenue
- $4,698.6M (+62% YoY vs $2,893.4M)
- Q2 2026 adjusted EPS (non-GAAP)
- $2.54 (+83% YoY vs $1.39); above the $2.14-2.34 guidance range
- Q2 2026 GAAP EPS
- $3.17 (vs $1.82 Q2 2025)
- Q2 2026 adjusted operating margin (non-GAAP)
- 8.2% -- record high, vs 7.4% Q2 2025
- CCS segment
- revenue $3.81B, +84% YoY, 81% of total; segment margin 8.7% (vs 8.3% Q2 2025)
- ATS segment
- revenue $0.89B, +8% YoY; segment margin 6.3% (vs 5.3% Q2 2025)
- Hardware Platform Solutions (HPS) revenue
- approximately $1.9B, +58% YoY (~40% of Q2 2026 revenue)
- Free cash flow (non-GAAP)
- $147.1M in Q2 2026; $285.0M 1H 2026; FY2026 guide raised to $600M
- Customer concentration
- top-10 customers = 83% of revenue in Q2 2026 AND 1H 2026 (vs 78% in both prior-year periods; 79% in FY2025). Three CCS customers individually >=10%: 32%, 17%, 14% in Q2 2026 (34%, 16%, 15% in 1H 2026)
- Valuation at the 31 Jul 2026 close
- ~29x FY2026E adjusted EPS ($331.44 / $11.30) and ~1.9x FY2026E revenue ($38.02B / $20.5B) -- computed from verified price and verified company guidance
Growth drivers
- Hyperscaler AI-datacenter capex — networking switches (400G/800G), AI/ML compute servers, and full-rack systems integration
- Mix shift to Hardware Platform Solutions (HPS), now ~42% of revenue, at higher value-add and margin than legacy EMS
- CCS segment growth (+76% YoY in Q1 2026) as the clear engine, aligning to customers' multi-year AI capacity roadmaps
- Liquid-cooling / thermal and systems-integration content winning share vs legacy EMS peers
- ATS segment stabilization (aerospace & defense, industrial, healthtech) as a diversifying, less-cyclical base
Reported financials — SEC EDGAR
Audited GAAP figures pulled from SEC filings · latest filing 2026-02-27. The audited primary-source spine — not financial advice.
Revenue — annual (GAAP)
Margins & balance sheet — FY’25
Bull & bear
Q2 2026 turned Celestica's AI-infrastructure story from 'beating a rising bar' into 'raising the bar faster than the price' -- record 8.2% adjusted operating margin, a third straight FY guidance raise to $20.5B / $11.30, and the first explicit signal that 2027 revenue growth ACCELERATES beyond 2026's 65%. The forward multiple compressed to ~29x even as the business compounded.
- Both headline lines cleared the HIGH END of guidance: revenue $4.70B (+62% YoY) vs $4.15-4.45B guided, adjusted EPS $2.54 (+83% YoY) vs $2.14-2.34 guided -- extending the beat streak
- Adjusted operating margin 8.2% is a company record (vs 7.4% Q2 2025), and BOTH segments expanded: CCS 8.3% -> 8.7%, ATS 5.3% -> 6.3%. Margin expansion is no longer a CCS-only mix artifact
- FY2026 raised on all four metrics simultaneously -- revenue $19.0B -> $20.5B, adj EPS $10.15 -> $11.30, adj op margin 8.1% -> 8.4%, FCF $500M -> $600M -- driven by stronger 2H customer forecasts AND improved component supply, which retires part of the 'component supply caps upside' worry
- First forward-visibility statement beyond the guide year: management expects 2027 revenue growth to accelerate past 65%, with adj EPS growing faster than revenue -- unusual multi-year visibility for an EMS
- Valuation de-rated on rising numbers: ~29x FY2026E adj EPS at the $331.44 close, down from ~33x, because guidance was raised more than the stock moved
- CCS +84% YoY to $3.81B with HPS at ~$1.9B (+58%) confirms the higher-value design/systems-integration mix shift is still compounding, not plateauing
The two structural criticisms both got WORSE this quarter, not better: customer concentration climbed to 83% of revenue from the top ten (three names at 32/17/14), and the asset-light premise broke -- capex ran 5.5% of revenue and inventories grew $1.2B in six months. On an 11.5% adjusted gross margin, a single program loss or an AI-capex pause now lands on a bigger, more capital-committed, more concentrated book. The 6% drop into a beat-and-raise says expectations, not results, set the price.
- Concentration DETERIORATED: top-10 customers = 83% of Q2 and 1H 2026 revenue, up from 78% a year earlier and 79% in FY2025; three CCS customers individually at 32%, 17% and 14% (63% combined). One in-sourced or lost program is a cliff, and the cliff got steeper
- The 'asset-light, ~1-2% of revenue capex' description no longer holds: 1H 2026 PP&E purchases were $482.2M (5.5% of revenue) vs $69.2M (1.2%) in 1H 2025, and PP&E net nearly doubled to $1,026.3M -- capital is now committed against customer roadmaps that can change
- Adjusted gross margin FELL 20bps YoY to 11.5% on CCS mix -- scale and HPS are lifting operating margin, but the raw component-pass-through economics are not improving, leaving little cushion
- Working-capital build is large and unhedged against a demand pause: inventories $2,188.0M -> $3,401.7M (+$1.2B) and payables $1,866.1M -> $3,819.7M in six months; FCF of $285.0M on $8.75B of 1H revenue is thin relative to reported earnings
- Expectations now exceed even raised guidance: the stock closed down 6.00% on 2026-07-31 despite beating the high end of guidance on both lines and raising FY2026 -- the same pattern seen after the Q1 2026 print
- Whole thesis remains a derivative of hyperscaler AI capex, which is cyclical and cuttable; at ~29x forward EPS a low-margin manufacturer de-rates hard toward EMS peer multiples (mid-teens) on a single miss
- Leadership change at the segment carrying 81% of revenue: Jason Phillips is retiring at end-2026, with Steven Dorwart succeeding him as President, Connectivity and Cloud Solutions effective 2026-07-06
What it is worth
Forward P/E + reverse-DCF sanity vs EMS/ODM peer set (JBL, FLEX, SANM, FN)
AI-capex digestion, a lost/in-sourced large customer, or a margin miss de-rates a thin-margin manufacturer toward peer EMS multiples (mid-teens P/E), implying substantial downside (potentially back toward the low-$150s 52-week low).
Guidance is met (FY2026 ~$19B rev, ~$10.15 adj EPS); multiple compresses modestly from ~33x as growth normalizes, leaving the stock roughly range-bound to moderately higher, tracking EPS growth.
Sustained AI capex + HPS margin lift keeps 25-30%+ growth beyond FY2026; the market pays a premium multiple on materially higher EPS -> meaningful upside from ~$338.50 (toward/above the 52-week high near $474 if execution continues).
At ~$338.50 and FY2026E adj EPS of $10.15, CLS trades ~33x forward earnings and ~2x FY2026E revenue -- a large premium to legacy EMS peers (Jabil/Flex/Sanmina historically ~12-20x forward P/E). The multiple reflects a re-rating from 'commodity EMS' to 'AI-infrastructure growth,' pricing in sustained 20%+ revenue growth and continued margin expansion for several years. That is defensible while hyperscaler capex and the HPS mix shift keep compounding, but leaves little room for error given ~11% gross margins and 79% top-10 customer concentration.
SWOT
Strengths
- Structural exposure to the fastest-growing IT capex pool (hyperscaler AI datacenter build-out) via CCS/HPS
- Proven design + systems-integration capability (networking, full-rack, liquid cooling) that commands higher value-add than commodity EMS
- Strong execution — multi-quarter EPS beat streak, repeated guidance raises, margin expansion despite EMS-thin baseline
- Conservative balance sheet (~0.8x leverage) and positive free cash flow (~$458M FY2025) funding buybacks
- Diversifying ATS segment (aerospace & defense, healthtech, industrial) provides a less-cyclical counterweight
Weaknesses
- Severe customer concentration — top 10 customers = 79% of 2025 revenue (up from 73% in 2024); three CCS customers individually 32%, 14%, 12%
- Structurally thin gross margins (~11%) inherent to contract manufacturing; limited pricing power on components
- Revenue highly geared to hyperscaler capex cycles, which are lumpy and can be cut quickly
- Design/IP moat is narrower than customers' own silicon or than certification-protected peers (Sanmina in medical/defense)
- Little consumer/brand pull; is a supplier whose fortunes ride its few large customers' roadmaps
Opportunities
- Continued AI infrastructure spend; 800G+ networking and rack-scale integration content growth
- Deeper HPS penetration lifting blended margins toward the high end of EMS economics
- Liquid-cooling/thermal as datacenter power density rises
- ATS recovery and defense/aerospace tailwinds diversifying the revenue base
- Reshoring / supply-chain regionalization favoring diversified global EMS footprints
Threats
- Any single large hyperscaler cutting or in-sourcing (ODM direct, e.g. Wiwynn/Foxconn) would materially hit revenue
- AI-capex digestion or a datacenter capex air-pocket compressing growth and multiple simultaneously
- Component shortages/allocation (GPUs, advanced networking silicon) capping shippable demand
- Intense EMS/ODM price competition from Jabil, Flex, Sanmina, and Taiwan ODMs (Foxconn, Quanta, Wistron/Wiwynn)
- Rich valuation (~33x forward EPS) leaves little room for a growth or margin miss; tariff/trade policy risk on a global footprint
Moats, dependencies & bottlenecks
Moats
Full-rack, networking, and liquid-cooling integration is harder to replicate than box-build assembly and commands higher value-add, but is not IP-defensible against determined ODMs.
Multi-year capacity roadmap alignment and qualified programs create real switching friction, but the same concentration is also the key risk.
Diversified plants across Asia/N. America/Europe aid supply resilience and reshoring, though Jabil and Flex are larger.
Certification-gated ATS work is stickier and less cyclical, but is the smaller, slower-growing part of the story.
Dependencies
Customer concentration Three CCS customers at 32%/14%/12%; loss, cut, or in-sourcing by any one is material.
AMD, Broadcom, Marvell, memory) GPU/ASIC/networking-silicon allocation gates how much Celestica can ship; shortages cap revenue.
Entire growth premium rides one secular-but-cyclical spending wave.
Regulatory/geopolitical Cross-border manufacturing footprint exposed to tariffs and export controls.
Advantages
- First-mover credibility in hyperscaler AI networking + rack integration among Western EMS
- Higher-margin HPS mix differentiates it from commodity box-build peers
- Track record of beats/raises builds forward-guidance credibility
- Clean balance sheet and FCF enabling buybacks
Weaknesses
- Extreme customer concentration (79% top-10; three names >=10%)
- Structurally low gross margin (~11%) and limited component pricing power
- Single-theme (AI capex) revenue gearing
- Narrower design/IP moat than customers' in-house silicon or certification-protected peers
Bottlenecks
- Access to constrained advanced components (GPUs, 800G networking silicon, memory) limits shippable demand
- Skilled systems-integration / thermal-engineering capacity to scale rack-level builds
- Customer qualification cycles for new programs
- Thin margins limit reinvestment relative to the capital-intensity of expanding datacenter capacity
Top signals & trends
Top signals
Bullish while rising · Celestica's demand is a derivative of these budgets; watch for any cut or 'digestion' language.
Bullish if mix + margin keep climbing · The core of the re-rating thesis.
Bullish (repeated raises) · Streak of raises through 2025-26; a pause or cut would be a major tell.
Bearish risk · Any single customer moving toward in-sourcing (ODM-direct) is the key structural threat.
Tight supply can cap upside even with strong demand.
Trends
Primary growth engine; networking, compute, and rack-scale integration demand.
Thermal/liquid-cooling content is a growing, higher-value line.
Switch/interconnect refresh drives CCS content.
Structural threat if large customers bypass EMS for Taiwan ODMs.
Favors diversified global EMS footprints.
A pause in the spending wave hits volume and multiple together.
Ecosystem & competitor graph
Suppliers feed the company; customers pull from it. Line thickness shows the strength of each tie (supply-chain dependency, customer earnings contribution). Hover to isolate a tie.
GPUs/accelerators and networking (NVLink/InfiniBand/Spectrum) integrated into Celestica AI systems.
CPUs/GPUs; also a customer/partner for networking hardware.
Merchant switch silicon (Tomahawk/Jericho) and custom ASICs central to CCS networking builds.
Networking/interconnect and custom silicon for datacenter switches.
Memory (DRAM/HBM adjacent) content in servers.
Upstream foundry for nearly all the advanced silicon Celestica assembles (context).
Hyperscaler AI/cloud datacenter customer class (customers not individually named in filings; hyperscalers are the disclosed 32%/14%/12% cohort).
Hyperscaler datacenter infrastructure customer class.
Hyperscaler AI/cloud capex customer class.
Hyperscaler datacenter build-out customer class.
Networking/hardware customer in addition to being a component supplier.
Legacy CCS networking OEM customers; enterprise/telecom equipment.
Larger diversified EMS (~$28B+ rev) expanding in cloud/AI infrastructure via M&A and scale.
~$26B EMS peer doubling down on platform-led datacenter builds; closest scaled competitor.
EMS peer with a certification-protected moat in medical/defense; competes for AI-server and cooling contracts.
Optical/photonics and datacenter interconnect manufacturing; overlaps in networking/optics content.
Taiwan ODM giant; direct rival for hyperscaler AI-server/rack contracts (context only, not a US-listed own call).
Leading Taiwan ODM in AI/cloud servers, a primary alternative to EMS for hyperscalers (context only).
Taiwan ODMs supplying hyperscaler datacenter hardware directly (context only).