0001030894-26-000011
SEC filingCelestica's 2025 revenue surged 28% to $12.4B driven by 42% CCS growth and margin expansion, while ATS remained flat.
Celestica Inc. is a technology leader with deep expertise in design, engineering, manufacturing, supply chain, and platform solutions. The company enables critical data center infrastructure for AI, cloud and hybrid cloud, and advances technologies in high-growth markets. Incorporated in Ontario, Canada on September 27, 1996, Celestica was originally an IBM manufacturing unit before being purchased by an investor group led by Onex Corporation in 1996. The company completed its initial public offering in 1998. As of the filing, Onex is no longer a controlling shareholder.
Celestica operates two reportable segments: Connectivity and Cloud Solutions (CCS) and Advanced Technology Solutions (ATS). The CCS segment consists of Communications and Enterprise end markets, with Enterprise comprising servers and storage businesses. CCS revenue for 2025 increased 42% to $9.19 billion compared to $6.49 billion in 2024. The ATS segment consists of Aerospace and Defense (A&D), Industrial, HealthTech, and Capital Equipment businesses. ATS end market revenue represented 26% of total revenue in 2025, down from 33% in 2024 and 42% in 2023. Communications end market revenue represented 57% of total revenue in 2025, up from 41% in 2024. Enterprise end market revenue represented 17% of total revenue in 2025, down from 26% in 2024.
Celestica offers a comprehensive range of products and services covering the entire technology product lifecycle. Key products include networking switches, optical systems, data center racks, servers and storage products used primarily by cloud-based and other service providers for AI workloads and cloud computing. The Hardware Platform Solutions (HPS) offering within CCS enables customized technology platforms, including hardware and systems-level design, software solutions, and supply chain management. HPS revenue for 2025 increased 81% compared to 2024 and accounted for 41% of total revenue. ATS products include government-certified manufacturing for A&D customers, high-precision semiconductor equipment, industrial automation, surgical instruments, and energy management products.
Celestica engages customers as an original design manufacturer (ODM) and electronics manufacturing services (EMS) provider. The company structures business development teams by end market, with customer-focused teams headed by group general managers. CCS segment customers include cloud-based service providers, hyperscalers, digital native companies, hardware OEMs, and enterprise customers. Named customers include Amazon Fulfillment Services, Inc., Meta Platforms, Inc., Google Inc., Ciena Corporation, Dell Technologies, Hewlett-Packard Enterprise, IBM Corporation, Applied Materials, Inc., LAM Research, and Honeywell Inc. Customer concentration is significant: top 10 customers represented 79% of total revenue in 2025, with three CCS customers individually representing 32%, 14%, and 12% of total revenue.
The contract design and manufacturing industry is highly competitive. EMS competitors include Benchmark Electronics, Inc., Flex Ltd., Hon Hai Precision Industry Co., Ltd., Jabil Inc., Plexus Corp., and Sanmina Corporation. ODM competitors include Quanta Computer Inc., Wiwynn Corporation, and Accton Technology Corp. In data center switching, Celestica also faces competition from OEMs such as Arista Networks, Inc. and Cisco Systems, Inc. The CCS segment is characterized by aggressive bidding from EMS providers and increased competition from ODMs as they attempt to gain share in the large data center customer market.
Celestica's strategy focuses on six pillars: increasing penetration in end markets with emphasis on HPS and high-value EMS programs; selectively pursuing acquisitions and strategic transactions; continuously improving operational performance through mix management, supply chain leverage, and digital factory investments; developing trusted customer relationships; expanding service offerings and investing in engineering and supply chain solutions; and enhancing R&D capabilities to support HPS business, including investments in AI/ML compute, advanced networking, and storage solutions.
As of December 31, 2025, Celestica employed 29,591 permanent and temporary employees worldwide, up from 26,865 in 2024. Of these, 5,788 were temporary (contract) employees. By geography, 6,485 employees were in the Americas, 2,714 in Europe, and 20,392 in Asia. Some employees in China, Japan, Mexico, Romania, Singapore, and Spain are represented by unions or covered by collective bargaining agreements. The company conducts global employee engagement surveys every two years and offers comprehensive compensation, benefits, and recognition programs.
Celestica delivered a strong financial performance in 2025, with revenue reaching $12.4 billion, a 28% increase from $9.6 billion in 2024. Gross profit grew 45% to $1.49 billion, outpacing revenue growth and expanding gross margin by 140 basis points to 12.1%. The margin improvement was driven by stronger productivity, operating leverage, and a more favorable mix of higher-margin programs. GAAP operating income rose 74% to $1.04 billion, corresponding to an operating margin of 8.4% compared to 6.2% in the prior year. Net earnings more than doubled to $832.5 million (95% increase), and diluted EPS surged 98% to $7.16. Non-GAAP free cash flow improved to $458.3 million from $305.9 million, reflecting higher cash earnings partially offset by increased capital expenditures.
The Connectivity and Cloud Solutions (CCS) segment was the primary growth engine, with revenue increasing 42% to $9.19 billion. Within CCS, the Communications end market soared 81% due to robust demand for data center networking switches from hyperscaler customers, while hardware platform solutions (HPS) revenue grew 81% to $5.0 billion (41% of total revenue). The Enterprise end market declined 19% due to a technology transition in an AI/ML compute program with one hyperscaler customer. CCS segment margin improved to 8.2% from 7.4%, aided by operating leverage and favorable mix.
The Advanced Technology Solutions (ATS) segment grew modestly, with revenue up 1% to $3.20 billion. Growth in Capital Equipment and Industrial businesses was largely offset by a decline in Aerospace & Defense due to the discontinuation of a margin-dilutive program. ATS segment margin increased to 5.3% from 4.6%, driven by improved profitability in A&D.
Management expects CCS segment revenue to continue growing in 2026, supported by strong hyperscaler demand for networking switches and a rebound in AI/ML compute programs. ATS segment revenue is anticipated to remain relatively flat or slightly increase compared to 2025, with growth in Industrial and HealthTech partially offset by lower volumes in Capital Equipment and the impact of the discontinued A&D program. To support anticipated growth, Celestica plans capital expenditures of approximately $1 billion (about 6% of anticipated revenue) in 2026, focusing on capacity expansions in Thailand, Malaysia, the U.S., Mexico, and Japan, as well as new HPS design centers. The company remains committed to evolving its revenue portfolio, improving margins, and maintaining a balanced approach to capital allocation.
As of December 31, 2025, total debt including finance leases was $776.5M, down from $796.7M a year earlier. The decrease reflects mandatory principal repayments on term loans ($17.5M) with no new borrowings. Shareholders' equity improved to $2,216.3M from $1,896.0M, primarily due to net earnings of $832.5M offset by share repurchases and SBC activities. Inventory increased to $2,188.0M, reflecting higher raw materials and finished goods. Accounts receivable (net) stood at $2,638.1M with an allowance of $30.5M. Cash and equivalents are not disclosed in the notes but are reported in the consolidated balance sheet at $595.6M.
Note 20 (Commitments, contingencies and guarantees) is referenced but its details are not included in the provided text; thus no purchase commitments were extracted. The notes disclose customer cash deposits of $407.1M within accrued liabilities, which mitigate inventory risk. Off-balance-sheet commitments such as the A/R sales program ($450M limit) and supplier financing programs are also noted but no outstanding balances exist at year-end.
In 2025, Celestica repurchased 1.3M common shares for cancellation at a weighted-average price of $111.27, totaling $150.7M. Additionally, $221.6M was spent on treasury stock for SBC delivery obligations. A new Normal Course Issuer Bid (NCIB) was launched on October 29, 2025, authorizing the repurchase of up to 5.7M shares through November 2, 2026; as of December 31, 2025, approximately 5.6M shares remained available. No dividends were declared. The company also made SBC cash settlements of $224.8M for withholding taxes. Debt repayment was limited to mandatory term loan installments, reducing total borrowings by $17.5M. No capex figures are explicitly stated in the notes; depreciation was $130.1M.
The notes identify two reportable segments: Connectivity and Cloud Solutions (CCS) and Advanced Technology Solutions (ATS). However, no segment-level revenue, operating income, or geographic breakdown is provided in the extracted notes (Note 21 is not included). Goodwill is allocated to four reporting units: Capital Equipment ($131.1M), Aerospace & Defense ($66.3M), PCI Private Limited ($123.8M) under ATS, and NCS ($11.9M) under CCS. The acquisition of NCS in 2024 added $19.4M of goodwill and $28.6M of customer/brand intangibles. Overall, the Notes emphasize balance sheet strength and increased liquidity through improved retained earnings and reduced leverage.
Customer concentration remains the most acute risk: the top 10 customers generated 79% of 2025 revenue (up from 73% in 2024). Three CCS customers each exceeded 10% (32%, 14%, 12%). The filing explicitly notes that revenue decline or loss of any major customer could materially harm results. This concentration also amplifies sensitivity to customers' investment cycles, particularly hyperscalers whose AI spending priorities may shift based on technology deployment, component access, and data center capacity constraints.
The long-term trajectory of AI adoption is uncertain. Demand for CCS products (74% of consolidated revenue) depends on hyperscaler and OEM programs that could be delayed or cancelled due to power, water, and grid interconnection limitations, regulatory changes, or rapid technology shifts (e.g., open-source models). The company warns that evolving AI regulations, export controls, or constraints on specialized accelerators could increase compliance costs or restrict commercial use, reducing demand.
A critical new disclosure is the planned ~$1B capex for 2026 (6% of revenue), a large step up from historical 1.5-2%. This investment is to support expected growth, particularly from hyperscalers. The risk is that if demand, mix, or utilization falls short, the added capacity could be underutilized, increasing depreciation and lowering returns. Delays in construction, utility interconnections, or regulatory approvals could also impede realization of expected capacity.
The risk factors detail significant exposure to US trade policies, particularly reciprocal tariffs and export controls on advanced computing items. These actions have already adversely impacted the Capital Equipment business and CCS segment. The company notes that tariffs could increase costs for US customers using non-US manufacturing sites, and retaliatory measures could disrupt supply chains. Tensions between China and Taiwan pose additional supply-chain risks for semiconductors.
The company is dependent on third-party suppliers and has experienced past material shortages that increased inventory levels. Customer order volatility and cancellations can lead to excess inventory and write-offs. Quality issues, while generally resolved, could damage reputation and reduce demand. Global operations are subject to disruption from natural disasters, pandemics, cybersecurity attacks, and geopolitical conflicts (e.g., Russia/Ukraine, Middle East).
The credit agreement contains financial covenants that could limit share repurchases or accelerate debt. The company is exposed to foreign exchange fluctuations, counterparty risk (pension annuities, TRS agreement), and rising labor costs. Tax risks include potential loss of incentives (e.g., in Romania and Thailand), Pillar Two global minimum tax, and audits. Cybersecurity risks are highlighted with emphasis on increasing sophistication and reliance on third-party IT systems.
The EMS/ODM industry is highly competitive with aggressive pricing. Competitors with greater scale, vertical capabilities, or ability to shift to lower-cost regions could win business. The HPS offering may compete with customers' own products, potentially straining relationships. Technology changes could render current capabilities obsolete.
Celestica's operating cash flow (CFO) of $1,012.5 million in 2025 significantly exceeded net income (not provided in excerpt), indicating strong cash generation. CFO grew 22.5% year-over-year from $826.5 million in 2024. Capital expenditures (capex) increased to $161.8 million from $131.0 million, reflecting moderate investment intensity. Free cash flow (FCF) of $850.7 million comfortably covered share repurchases of $300.0 million and no dividends, leaving ample cash for debt reduction or other uses. No major working capital swings or one-time items were noted in the excerpt. The investing cash flow of -$161.8M matches capex, with no other investing activities disclosed. Financing cash flow of -$300.0M reflects only share repurchases, with no debt or equity issuances or dividends. Overall, cash flow quality is high, with CFO growth outpacing capex growth, and FCF providing strong coverage of capital returns.