Celestica Inc. CLS reported third-quarter 2026 adjusted earnings of $3.30 per share, which increased 108.9% year over year and beat the Zacks Consensus Estimate of $3.02 by 9.3%. Revenues surged 82.5% to $5.83 billion, surpassing the consensus mark of $5.50 billion by 6%.
Robust demand for artificial intelligence (AI) and data center infrastructure fueled growth in the Connectivity & Cloud Solutions (CCS) business. CCS revenues increased 102% year over year, while Hardware Platform Solutions revenues climbed 70%. Strong execution and operating leverage supported profitability, prompting management to raise its 2026 outlook and introduce an ambitious 2027 forecast.
CLS Delivers Strong Earnings Growth
GAAP net earnings increased to $397.2 million, or $3.26 per share, from $267.8 million, or $2.31 per share, in the year-ago quarter. Higher revenues supported earnings growth despite a decline in GAAP operating margin.
GAAP earnings from operations rose to $460 million from $325 million a year earlier. However, operating margin contracted to 7.9% from 10.2%, reflecting differences in total return swap fair value adjustments between the two periods.
Celestica, Inc. Price, Consensus and EPS Surprise
Celestica, Inc. price-consensus-eps-surprise-chart | Celestica, Inc. Quote
Celestica Expands Adjusted Operating Margins
Adjusted operating earnings increased to $496.1 million from $242.2 million in the third quarter of 2025. Adjusted operating margin expanded to a company record of 8.5% from 7.6%, reflecting stronger operating leverage as revenues scaled.
GAAP gross profit increased to $640.8 million from $416.1 million, although gross margin contracted to 11% from 13%. Selling, general and administrative expenses increased to $118.2 million from $38.4 million, while research and development expenses rose to $51.2 million from $36.4 million.
The adjusted effective tax rate was 18%, below management's anticipated 20%, primarily due to favorable profit mix and a discrete tax benefit.
CLS’ CCS Business Benefits From AI Infrastructure Demand
Connectivity & Cloud Solutions revenues reached $4.87 billion, up from $2.41 billion in the prior-year quarter. Segment income increased to $433.2 million from $199.4 million, while segment margin improved to 8.9% from 8.3%.
Within CCS, Networking revenues increased to $3.26 billion from $1.94 billion. Compute & Storage revenues surged to $1.61 billion from $470.1 million, highlighting the accelerating demand for infrastructure supporting AI workloads.
Management attributed the stronger-than-anticipated quarterly performance to higher customer demand and effective operational execution. The company continues to support hyperscale data center customers through advanced networking and compute platforms.
Celestica ATS Business Records Margin Improvement
Advanced Technology Solutions (ATS) revenues increased 22.6% year over year to $957.4 million from $781 million. The segment accounted for approximately 16% of total quarterly revenues.
ATS segment income increased to $62.9 million from $42.8 million, while segment margin expanded to 6.6% from 5.5%. The business comprises Aerospace and Defense, Industrial, HealthTech and Capital Equipment operations, providing diversification beyond Celestica's rapidly expanding cloud infrastructure business.
CLS Invests Heavily to Support Future Growth
Cash provided by operating activities rose to $389.7 million from $126.2 million in the year-ago quarter. Purchases of property, plant and equipment totaled $274.1 million compared with $37.3 million previously.
Free cash flow increased to $127.5 million from $88.9 million. Cash and cash equivalents stood at $3.96 billion at quarter-end, supported by approximately $3.39 billion in net proceeds from the company's August public offering.
Inventories increased to $4.51 billion from $2.19 billion at the end of 2025, reflecting substantial working capital requirements associated with expanding operations.
Celestica Raises 2026 Outlook, Unveils 2027 Targets
For the fourth quarter of 2026, Celestica expects revenues between $6.275 billion and $6.575 billion. Adjusted earnings per share are projected to be in the range of $3.37 to $3.57, with adjusted operating margin expected to reach 8.7% at the midpoint of its guidance range.
Management raised its 2026 revenue outlook to $21 billion from $20.5 billion and adjusted earnings guidance to $11.55 per share from $11.30. The adjusted operating margin forecast remains unchanged at 8.4%. However, the free cash flow outlook was reduced to $460 million from $600 million due to targeted working capital investments supporting future growth.
For 2027, Celestica expects revenues of $40 billion, suggesting approximately 90% growth, adjusted earnings of $21.50 per share and an adjusted operating margin of 9%. Capital expenditures are projected between $1.5 billion and $2 billion, implying planned capacity expansion to support accelerating AI infrastructure demand.
Zacks Rank
Celestica currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Releases
Arista Networks Inc. ANET is scheduled to release third-quarter 2026 earnings on Nov. 3. The Zacks Consensus Estimate for earnings is pegged at $1.08 per share, suggesting growth of 44% from the year-ago reported figure.
Arista has a long-term earnings growth expectation of 22.75%. The company delivered an average earnings surprise of 8.88% in the last four reported quarters.
Motorola Solutions, Inc. MSI is set to release third-quarter 2026 earnings Nov. 4. The Zacks Consensus Estimate for earnings is pegged at $4.41 per share, implying growth of 8.62% from the year-ago reported figure.
Motorola has a long-term earnings growth expectation of 10.55%. The company delivered an average earnings surprise of 7.17% in the last four reported quarters.
HubSpot, Inc. HUBS is scheduled to release third-quarter 2026 earnings on Nov. 4. The Zacks Consensus Estimate for earnings is pegged at $3.28 per share, suggesting growth of 23.31% from the year-ago reported figure.
HubSpot has a long-term earnings growth expectation of 20.93%. The company delivered an average earnings surprise of 6.13% in the last four reported quarters.
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Celestica, Inc. (CLS): Free Stock Analysis Report
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