Celestica Racks Up Another Blowout Quarter

Celestica’s second-quarter results gave investors another reason to believe the AI hardware boom still has plenty of room left in the rack. Revenue surged 62% from a year earlier to $4.70 billion, topping both the company’s $4.45 billion guidance ceiling and the approximately $4.35 billion analysts expected. Adjusted earnings jumped 83% to $2.54 per share from $1.39 and comfortably exceeded the $2.29 consensus, while adjusted operating margin reached a company record of 8.2%. Shares rose 4.3% Monday to $318.24 before the report and initially climbed about 8% to roughly $344 after hours. That gain had completely evaporated by early Tuesday, with shares indicated approximately 3.8% lower at roughly $306.

Most of that growth came from the equipment powering cloud computing and AI data centers. Revenue in Celestica’s Connectivity and Cloud Solutions segment soared 84% to $3.81 billion, accounting for more than four-fifths of the company’s total. Hardware Platform Solutions revenue increased 58% to approximately $1.9 billion, driven by strong demand for networking switches from hyperscaler customers, while a hyperscaler AI and machine-learning compute program continued to ramp and storage demand increased. AI may live in the cloud, but the road to the cloud runs through a crowded data-center loading dock.

The rapid growth also arrived with more profit attached. The Connectivity and Cloud Solutions segment’s margin improved to 8.7% from 8.3%, while its segment income nearly doubled to $329.9 million. Celestica’s smaller Advanced Technology Solutions business, which serves aerospace, defense, industrial, healthcare and semiconductor-equipment customers, also contributed. Its revenue increased 8% to $890 million, while its margin widened to 6.3% from 5.3%. GAAP earnings reached $3.17 per share, although that figure included a $0.90-per-share pretax benefit from a total-return swap. Even without that financial boost, Celestica showed it is getting better at keeping more of the money packed inside every shipment.

With customer forecasts strengthening, Celestica raised its full-year revenue outlook to $20.5 billion from $19 billion and its adjusted earnings forecast to $11.30 per share from $10.15. It also increased its adjusted operating-margin target to 8.4% from 8.1% and its free-cash-flow projection to $600 million from $500 million. Third-quarter revenue is expected to reach $5.25 billion to $5.55 billion, accompanied by adjusted earnings of $2.88 to $3.08 per share. Management expects its revenue growth rate to accelerate in 2027 beyond the 65% projected for this year, with adjusted earnings growing even faster than revenue. Celestica is discovering that the cloud may sound weightless, but building it requires an increasingly heavy pile of hardware.

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