Core Insights - Celestica reported strong financial performance for fiscal year 2025, with revenue of $12.4 billion and adjusted EPS of $6.05, reflecting growth of 28% and 56% respectively [1] - The company achieved an adjusted operating margin of 7.5%, marking the second consecutive year of 100 basis points improvement, driven by AI-related demand and operational execution [1] Financial Performance - For Q4 2025, Celestica's revenue reached $3.65 billion, a 44% increase year over year, exceeding guidance [3][4] - Adjusted EPS for Q4 was $1.89, up 70% from the previous year, also surpassing the top end of guidance [3][4] - The adjusted operating margin for Q4 was a record 7.7%, up 90 basis points [3][4] Segment Performance - The Connectivity & Cloud Solutions (CCS) segment drove growth, with revenue increasing 64% to $2.86 billion, accounting for 78% of total revenue [6][7] - The Advanced Technology Solutions (ATS) segment saw a slight decline of 1% to $795 million, attributed to lower volumes in capital equipment and portfolio reshaping [8] Capital Expenditure and Growth Plans - Celestica plans to significantly increase capital expenditures to approximately $1 billion in 2026, up from $201 million in 2025, to expand operations in Texas, Thailand, and other locations [5][10] - The company raised its 2026 revenue guidance to $17 billion and adjusted EPS to $8.75, representing year-over-year growth of 37% and 45% respectively [15] Market Demand and Future Outlook - Demand from hyperscalers for networking and AI compute systems is expected to support CCS segment revenue growth of approximately 50% in 2026 [17] - Celestica has secured a design and manufacturing award for a 1.6T networking switch platform, with production expected to begin in 2027 [18] - Customer visibility extends into 2027 and beyond, with Celestica being viewed as a technology leader rather than just a supply chain partner [20]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved revenue of $3.65 billion, a 44% increase year-over-year, exceeding guidance [10] - Adjusted EPS for the quarter was $1.89, a 70% increase compared to the previous year [10] - Full-year revenue for 2025 was $12.4 billion, representing a 28% growth year-over-year, while adjusted EPS was $6.05, up 56% [7][8] - Adjusted operating margin for Q4 was 7.7%, marking the strongest performance in company history [7] Business Line Data and Key Metrics Changes - Revenue in the ATS segment for Q4 was $795 million, a 1% decline year-over-year, while the CCS segment revenue was $2.86 billion, up 64% [11][12] - The CCS segment accounted for 78% of total company revenue in Q4, with communications end market revenue increasing by 79% [12] - The ATS segment margin improved to 5.3%, while the CCS segment margin was 8.4% [13] Market Data and Key Metrics Changes - The company anticipates revenue growth in the communications end market to be in the low sixties percentage range, driven by ongoing ramps in 800G programs [23] - The enterprise end market is expected to see very strong growth in the high teens percentage range, supported by AI/ML compute program ramps [23] Company Strategy and Development Direction - The company is significantly increasing capital investment plans for 2026 and 2027 to support long-term capacity planning and growth opportunities [16][17] - Investments will focus on expanding manufacturing capabilities in the U.S. and Thailand, aligning with customer demand for data center infrastructure and AI capabilities [18][19] - The company aims to maintain a strong balance sheet while funding increased capital expenditures through operating cash flow [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2026 outlook, raising revenue guidance to $17 billion and adjusted EPS to $8.75, reflecting a 37% and 45% growth year-over-year, respectively [25] - The company is focused on securing supply and managing macro uncertainties while anticipating strong demand from hyperscalers and digital native customers [37][41] - Management highlighted the unprecedented level of demand and the strategic importance of investments in new capacity to support future growth [30][31] Other Important Information - The company generated $156 million in free cash flow in Q4, with total annual adjusted free cash flow of $458 million for 2025 [15] - The company has a healthy cash balance of $596 million and a net debt position of $128 million, indicating strong liquidity [20] Q&A Session Summary Question: Concerns about potential slowdown in fiscal second half - Management reassured that customer forecasts for 2026 are higher than the guidance, indicating a pragmatic approach to outlook [36][37] Question: Risk management regarding funding for AI-related projects - Management stated that the build-out is based on booked business with minimal risk of programs not materializing, emphasizing strong demand [40][41] Question: CapEx investment and its impact on revenue - Management clarified that current CapEx investments are tied to booked business and will support revenue growth in 2027 and beyond [49] Question: Updates on digital native customer relationship - Management confirmed a solid relationship with the digital native customer, with preparations for ramping production in early 2027 [88] Question: Expected returns on new programs compared to existing ones - Management indicated that new programs are becoming more complex, with a focus on strong profitability and disciplined investment [95][96]

Financial Data and Key Metrics Changes - In Q4 2025, the company achieved revenue of $3.65 billion, a 44% increase year-over-year, exceeding guidance [10] - Adjusted EPS for the quarter was $1.89, up 70% from the previous year [10] - For the full year 2025, total revenue reached $12.4 billion, representing a 28% growth, while adjusted EPS was $6.05, a 56% increase [7][8] - The adjusted operating margin for Q4 was 7.7%, marking the strongest performance in company history [7][10] Business Line Data and Key Metrics Changes - The ATS segment reported revenue of $795 million, a 1% decline, while the CCS segment revenue was $2.86 billion, up 64% [11][12] - The CCS segment accounted for 78% of total revenue in Q4, with communications end market revenue increasing by 79% [12] - The ATS segment margin improved to 5.3%, while the CCS segment margin was 8.4% [13] Market Data and Key Metrics Changes - The company anticipates revenue growth in the communications end market to be in the low sixties percentage range, driven by ongoing ramps in 800G programs [23] - The enterprise end market is expected to see very strong growth in the high teens percentage range, supported by AI/ML compute program ramps [23] Company Strategy and Development Direction - The company is significantly increasing capital expenditures to approximately $1 billion in 2026 to support long-term capacity planning and growth opportunities [16][17] - Investments will focus on expanding manufacturing capabilities in the U.S. and Thailand, aligning with customer demand for data center infrastructure and AI capabilities [18][19] - The company aims to maintain a strong cash flow while funding these investments, projecting $500 million in free cash flow for 2026 [25][43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2026 outlook, raising revenue guidance to $17 billion and adjusted EPS to $8.75, reflecting a 37% and 45% year-over-year growth, respectively [25] - The demand outlook is expected to extend beyond the typical four-quarter view, indicating strong customer engagement and future growth potential [36] Other Important Information - The company achieved an adjusted ROIC of 43%, up 14 percentage points year-over-year, reflecting strong profitability and disciplined working capital management [11] - The cash balance at the end of the quarter was $596 million, with a net debt position of $128 million [20] Q&A Session Summary Question: Concerns about potential slowdown in growth - Management clarified that the guidance reflects a pragmatic view, focusing on securing supply and accounting for macro uncertainties, while customer forecasts for 2026 are higher than the guidance [34][36] Question: Risk management regarding funding for AI-related projects - Management indicated that the build-out is based on booked business with minimal risk of programs not materializing, supported by strong demand and a healthy balance sheet [40][41][43] Question: CapEx investment and its impact on revenue - The company stated that current CapEx investments are tied to booked business and will support revenue growth in 2027 and beyond, with ongoing evaluations based on market demand [49] Question: Updates on digital native customer relationship - Management confirmed a solid relationship with the digital native customer, with preparations for ramping production in early 2027 [88][89] Question: Expected returns on new programs compared to existing ones - The company emphasized a disciplined investment approach, focusing on strong profitability and expanding ROIC, while competitive intensity is increasing as programs become more complex [94][96]

Financial Data and Key Metrics Changes - In Q4 2025, revenue reached $3.65 billion, a 44% increase year-over-year, exceeding guidance [8][9] - Adjusted EPS for the quarter was $1.89, up 70% from the previous year [9] - Full-year revenue for 2025 was $12.4 billion, representing a 28% growth, while adjusted EPS was $6.05, a 56% increase [5][6] - Adjusted operating margin for Q4 was 7.7%, marking the strongest performance in company history [5][9] - Adjusted ROIC was 43%, up 14 percentage points compared to the prior year [10] Business Segment Data and Key Metrics Changes - ATS segment revenue was $795 million, a 1% decline, while CCS segment revenue was $2.86 billion, up 64% [10] - Communications end market revenue increased by 79%, driven by demand for 800G networking switches [11] - Enterprise end market revenue grew by 33%, supported by AI/ML compute programs [11] - ATS segment margin improved to 5.3%, while CCS segment margin was 8.4% [12] Market Data and Key Metrics Changes - The CCS segment accounted for 78% of total company revenue in Q4 [10] - Three customers accounted for 36%, 15%, and 12% of total revenue in Q4 [12] - Inventory balance at the end of Q4 was $2.19 billion, a sequential increase of $141 million [13] Company Strategy and Development Direction - The company plans to increase capital expenditures to approximately $1 billion in 2026 to support growth [14][15] - Investments will focus on expanding capacity in the U.S. and Thailand to meet customer demand [16][17] - The company aims to align its global footprint with customer capacity roadmaps, particularly in data center infrastructure and AI capabilities [15][18] - The outlook for 2026 revenue is raised to $17 billion, with adjusted EPS expected to be $8.75, reflecting strong demand [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2026 outlook, citing strong customer demand and a robust pipeline of growth opportunities [23][25] - The company anticipates continued growth in the CCS segment, driven by hyperscaler demand for networking technologies [26][27] - Management acknowledged macro uncertainties but emphasized a strong demand outlook [35][39] Other Important Information - The company generated $156 million in free cash flow in Q4, totaling $458 million for the year [13] - The gross debt to non-GAAP trailing twelve-month Adjusted EBITDA leverage ratio improved to 0.7 turns [19] - The company repurchased approximately 132,000 shares for $36 million during the quarter [20] Q&A Session Summary Question: Clarification on revenue and EPS guidance for fiscal 2026 - Management confirmed confidence in the 2026 outlook, noting customer forecasts exceed guidance [34] Question: Concerns about funding for future AI-related projects - Management stated that the build-out is based on booked business, with minimal risk of programs not materializing [37] Question: CapEx investment and its impact on revenue growth - Management indicated that current investments are based on booked business and will support growth into 2027 [47] Question: Margin trajectory with enterprise growth - Management expects strong operating leverage and does not foresee significant margin compression despite enterprise growth [55] Question: Supply chain and inflation impact on margins - Management is comfortable with the supply chain and does not anticipate significant margin compression from inflation [104]

Core Insights - Celestica, Inc. (CLS) has experienced a significant stock surge of 103.4% year-to-date, outperforming the Electronics - Manufacturing Services industry growth of 57.5% and the S&P 500 [1][8] - The company has outperformed peers such as Jabil, Inc. (JBL) and Flex Ltd (FLEX), with Jabil's shares increasing by 45.2% and Flex's by 30% [2] Demand and Revenue Growth - Celestica is benefiting from strong demand in the Connectivity & Cloud Solutions (CCS) segment, with revenues rising 28% year-over-year to $2.07 billion in Q2 [3] - The Hyperscaler Portfolio Solutions (HPS) business saw an impressive 82% year-over-year revenue increase, generating $1.2 billion, driven by demand for 800G networking switches [3] - The CCS segment is projected to achieve 30% year-over-year revenue growth by 2025 [3] AI Infrastructure Market Position - Celestica is establishing itself as a key player in the rapidly growing AI infrastructure market, projected to reach $223.45 billion by 2030 with a CAGR of 30.4% from 2024 to 2030 [4] - The company is expanding its portfolio to capitalize on this market trend [4] Product Innovation - The introduction of the SC6110, a next-generation all-flash storage controller, is designed to support mission-critical applications, enhancing performance and energy efficiency [5] Financial Health - As of June 30, 2025, Celestica reported $313.8 million in cash and cash equivalents, with a current ratio of 1.44, indicating strong liquidity compared to the industry average of 1.15 [9] - In Q2 2025, the company generated $152.4 million in cash from operations, a significant increase from $99.6 million year-over-year, with free cash flow rising 82.8% to $119.9 million [10] Earnings Estimates - Earnings estimates for Celestica for 2025 and 2026 have been revised upward over the past 60 days, reflecting growing investor confidence [11][14] Valuation Metrics - Celestica's shares are currently trading at a premium with a price/earnings ratio of 30.91 compared to the industry average of 22.59 [12] Strategic Positioning - The company benefits from a globally diversified manufacturing network, mitigating geopolitical risks and tariff uncertainties, and has established strategic relationships with leading hyperscaler customers [14] - Collaborations with industry leaders like AMD and Broadcom enhance Celestica's competitive edge in the Electronics Manufacturing Industry [14]