Celestica Inc. Q1 FY2026 earnings call

Kicked off the year with solid results in Q1 with revenue over $4B and adjusted operating margin 8%. Adjusted EPS $2.16 exceeded guidance range. Awarded backlog and opportunity pipeline strongest in tenure. Second quarter revenue projected between $4.15B - $4.45B. 2026 annual revenue outlook raised from $17B to $19B, adjusted EPS from $8.75 to $10.15, adjusted operating margin 8.1%. CCS segment expected ~70% revenue growth in 2026. ATS segment full year revenue outlook mid to high single digits percentage growth. In CCS, communications end market expected ~50% growth, enterprise end market ~130% growth. Announced collaborations with AMD and secured 1.6T co-packaged optics ethernet switch program. Primary focus on execution to meet accelerating demand.

First quarter revenue surpassed $4 billion with adjusted operating margin of 8%. ATS segment revenue for the quarter was $806 million, flat year over year, accounting for 20% of total company revenue. CCS segment revenue was $3.24 billion, up 76%, accounting for 80% of total company revenue. HPS business generated revenue of $1.7 billion, representing growth of 63% and accounted for 42% of total company revenue. ATS segment margin was 6.0%, up 100 basis points. CCS segment margin in the first quarter was 8.6%, an improvement of 60 basis points.

Second quarter revenue projected $4.15B - $4.45B, midpoint growth 49%. Adjusted EPS anticipated $2.14 - $2.34. 2026 annual revenue raised from $17B to $19B, adjusted EPS from $8.75 to $10.15, adjusted operating margin 8.1%. 2027 growth outlook significantly more than $6.5B growth in 2026.

Supply environment highly dynamic with component shortages including custom silicon, memory, PCBs, power components, optical components. Demand growth causing supplier capacity lag. But have long-term visibility from customers and commitments from suppliers to secure outlook.

Q: Samik Chatterjee with JP Morgan asked about market share and visibility on AI ML compute programs and follow-up on CPO win.

A: Visibility into next gen programs is long, executing well, component issue with AI ML compute resolved.

Q: Michael Ng with Goldman Sachs asked about 2027 CCS revenue growth and program contributions.

A: Strong growth expected, programs like 1.6T, digital native, AI ML compute driving growth.

Q: Tim Long with Barclays asked about HPS business progression.

A: HPS business underpins growth, R&D spend up, design engineers up, working on next year's programs.

Q: Carl Ackerman with BNP Paribas asked about drivers for revised outlook and marginal trajectory.

A: Growth overwhelmingly driven by CCS, including enterprise and networking programs.

Q: Mehdi Hosseini with Susquehanna Financial Group asked about sizing Helios project opportunities.

A: Program in development, samples this year, market multi-billion dollar.

Q: David Vogt with UBS asked about gross margin progression.

A: Mixed impacts on gross margin, operating leverage seen, focused on EPS growth.

Q: George Nodder with Wolf Research asked about CPO win customer and deal size.

A: Existing customer, no cannibalization, ramp in second half of 2027.

Q: John Hsiao with TD Cowan asked about implication of Google's new architecture.

A: Systems level, manufacturing, design important, continue to innovate with customers.

Q: Ruben Roy with Stifer asked about supply commentary and caps on shipping.

A: More component shortages now, suppliers adding capacity, constrained on custom silicon, memory, etc., but visibility from customers is positive.

Q: Rupalu Bhattacharya with Bank of America asked about free cash flow and scale up vs scale out.

A: Maintained free cash flow outlook of $500M, disciplined on capital allocation, CPO win scale out, Helios track scale up.

Q: Robert Young with Canaccord Genuity asked about component constraints and competitive impact.

A: Execution strength, key strengths in execution, constraints in networking and compute differently.

Q: Thanos Moscapoulos with BMO Capital Markets asked about digital native customer ramp.

A: Still on track, shipping samples this year, production start in late first quarter next year.

Q: Paul Treiber with RBC Capital Markets asked about long-term visibility and contractual terms.

A: Aligned physical capacity with supply chain and CapEx plans, contractual terms protect, comfortable with long-term growth trajectory.

Q: Todd Coupland with CIBC asked about switch ramps dynamics between 2026 and 2027.

A: Switch ramps in back half of 2026 going as planned, 800G strong throughout year.

Q: Michael Ng with Goldman Sachs asked about CapEx beyond 2026.

A: Expect CapEx to ramp up, rough number of $1.5B placeholder, tied to business cases and program specifics.