CELESTICA Q4 FY25 earnings call CLS

Q4 revenue was $3.65B, up 44% and above the high end of guidance, with adjusted EPS of $1.89 (up 70%) also topping guidance. Non-GAAP operating margin of 7.7% (+90 bps) was the strongest quarter in company history, adjusted gross margin was 11.3% (+30 bps), the adjusted effective tax rate was 19%, and adjusted ROIC reached 43% (+14 pts). For full-year 2025, revenue was $12.4B (+28%) and adjusted EPS $6.05 (+56%), with adjusted operating margin of 7.5% marking a second consecutive year of ~100 bps improvement; every key financial metric surpassed the annual outlook.

CCS revenue was $2.86B, up 64% and 78% of total revenue, with segment margin of 8.4% (+50 bps) on strong operating leverage. Communications grew 79%, above the high-60s% guide, driven by ramping 800G switch programs across the largest hyperscalers; the HPS business hit $1.4B (+72%), 38% of total revenue. Management runs 400G (resilient), 800G (strong) and 1.6T (ramping in H2 2026) concurrently, with the generations not cannibalizing one another. Celestica secured a 1.6T design & manufacturing award with a third hyperscaler and has 10 active 1.6T programs, five ramping in H2 2026 into 2027; 3.2T samples are due at end of 2026.

Enterprise end-market revenue grew 33%, above the low-20s% guide, driven by a meaningful ramp of a next-generation AI/ML compute program with a large hyperscaler; Q1 enterprise growth is guided to a very strong (high-teens per ASR) rate. Celestica has already won the next generation of that program, expected to ramp into 2027. A separate digital-native customer program is progressing to plan — samples ship in 2026 with a ramp starting early 2027 — and is expected to be a meaningful 2027 contributor. Management emphasized HPS/JDM design-led compute engagements as an area of increasing opportunity.

Following deeper capacity-planning discussions with key CCS customers since October's Investor Day, 2026 capex was raised to ~$1B (6% of revenue) from $201M (1.6%) in 2025, funded entirely through operating cash flow. Investments target booked business for 2027–2028: over 700,000 sq ft added in Texas (Richardson campus and a new Fort Worth site with expanded power, online in 2027), over 1M sq ft in Thailand with advanced liquid-cooling manufacturing/testing (online end-2026 into 2027), and new lines in Mexico and Japan for geographic diversification. New HPS design centers are planned in Austin and Taiwan. Maintenance capex remains ~$70M–$80M, with the balance growth capex.

Management stressed a decade-long partnership with Google and its role as preferred manufacturing partner for Google's custom-silicon TPU systems, committing long-term capacity and capability investments for current and future TPU generations. Celestica said it is not sole/single source on TPU programs (customers keep a second source for BCP), but is the primary source and share is awarded on performance. Management dismissed reports of new entrants, saying its Google relationship 'has never been stronger,' and noted broader adoption of Google's TPU would flow through Google's supply chain where Celestica expects to participate.

ATS revenue was $795M, down 1% and in line with the low-single-digit decline guide, on lower Capital Equipment volumes and previously communicated A&D portfolio reshaping, partly offset by other end markets; ATS margin improved 70 bps to 5.3% on better A&D profitability. ATS is 22% of revenue. For 2026, ATS is guided flat to up mid-single-digits, second-half weighted^⚖️, led by a Capital Equipment recovery as market tailwinds arrive and as A&D reshaping laps in H1. Industrial and HealthTech are expected to grow on new program ramps.

Management raised 2026 to $17B revenue (+37%) and $8.75 adjusted EPS (+45%) while maintaining $500M free cash flow, calling it a high-confidence view with customer forecasts already above $17B. Q1 revenue is guided to $3.85B–$4.15B (+51% midpoint). The balance sheet is strong: quarter-end cash $596M, gross debt $724M, net debt $128M, ~$1.3B liquidity, and 0.7x leverage. Buybacks were modest at 132,000 shares/$36M in Q4 (1.36M shares/$151M for the year at ~$111 avg), and a new NCIB for up to ~5% of public float runs through November 2, 2026. Margins are guided to expand at least 30 bps in 2026.