Mitrade Insights is dedicated to providing investors with rich, timely and most valuable financial information to help investors grasp the market situation and find timely trading opportunities.

2021

Best News & Analysis Provider

FxDailyInfo

2022

Best Forex Educational Resources Global

International Business Magazine

Insights

News

Celestica (CLS) Q3 2026 Earnings Call Transcript

Source The Motley Fool

Image source: The Motley Fool.

DATE

Tuesday, Oct. 27, 2026

CALL PARTICIPANTS

Head of Investor Relations - Matthew Pallotta
Chair of the Board and Chief Executive Officer - Rob Mionis
Chief Financial Officer - Todd Ankenmann
Group President of Global Markets - Mandeep Chawla
President of our Connectivity and Cloud Solutions segment - Steven Dorwart
President of our Advanced Technology Solutions segment - Todd Cooper
Senior Vice President, CCS Engineering - Gavin Cato

TAKEAWAYS

Revenue -- $5.83 billion, up 83% and exceeding the high end of the guidance range due to demand in the CCS and ATS segments.
Non-GAAP Operating Margin -- 8.5%, representing a 90 basis point increase driven by operating leverage in both segments.
Adjusted EPS -- $3.30, an increase of 109% compared to $1.58 in the prior year quarter.
Connectivity & Cloud Solutions (CCS) Revenue -- $4.87 billion, growing 102% driven by demand in the networking and compute markets.
Compute & Storage Revenue -- Up 242% year over year, reflecting ramping volumes in hyperscale and AI compute programs.
Networking Revenue -- Up 68% year over year, supported by growth in 800G programs and early volumes from 1.6T programs.
Hardware Platform Solutions (HPS) Revenue -- $2.3 billion, accounting for 40% of total company revenue.
Advanced Technology Solutions (ATS) Revenue -- $957 million, up 23% due to acceleration in capital equipment and higher demand across all businesses.
Full-Year 2026 Revenue Outlook -- Raised to $21.0 billion, up from the previous forecast of $20.5 billion.
Full-Year 2026 Adjusted EPS Outlook -- Increased to $11.55 from $11.30.
2027 Revenue Guidance -- $40.0 billion, representing a 90% increase compared to the 2026 outlook.
2027 Adjusted EPS Guidance -- $21.50, up 86% over the 2026 outlook.
Capital Expenditures -- $274 million in the third quarter, with a full-year 2026 projection of approximately $1 billion.
2027 Capital Expenditures Guidance -- $1.5 billion to $2.0 billion to support manufacturing capacity for awarded programs.
Free Cash Flow Outlook -- Revised to $460 million for 2026, down from $600 million due to targeted working capital investments.
Inventory Balance -- $4.5 billion, a sequential increase of $1.1 billion to support anticipated growth in 2027.
Cash and Liquidity -- $4 billion in cash and $1.75 billion in available revolver capacity at quarter end.
Customer Concentration -- Three customers accounted for 35%, 17%, and 14% of total revenue respectively.
Net Cash Position -- $3.2 billion, following a public offering that generated $3.45 billion in gross proceeds.
Adjusted ROIC -- 64.7%, an improvement of approximately 27 percentage points compared to the prior year period.
Fourth Quarter 2026 Revenue Guidance -- $6.275 billion to $6.575 billion, representing 76% growth at the midpoint.
Non-GAAP Operating Margin Outlook -- 8.7% for the fourth quarter and 9.0% for the full year 2027.
Market Share in Networking -- 31% of revenue in 800G segments and a 58% share of custom Ethernet switch revenue, driven by HPS design engagements.
1.6T Networking Program Wins -- 10 awards confirmed, consisting of four scale-up and six scale-out programs to be ramped starting in 2027.
Engineering Headcount -- Adding 500 to 600 engineers annually to support expanding project portfolios in Taiwan, Austin, and Silicon Valley.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

Ankenmann stated, "the level of net cash usage will be a function of the sheer magnitude and velocity of our revenue ramp," as the company invests in working capital for 2027.
Steven Dorwart warned that "the constraints are likely to be more in the areas of land and power and maybe some geopolitical forces," which could impact the company's ability to exceed its 2027 projections.

SUMMARY

Celestica Inc. (NYSE:CLS) reported third quarter results and provided an initial outlook for 2027 that projects a 90% increase in annual revenue. Management reported that demand is being driven by an investment cycle in artificial intelligence infrastructure, particularly among hyperscale customers and frontier labs. The company is expanding its manufacturing capacity in North America and Asia to support upcoming ramps in high-performance networking and custom compute platforms. CFO Todd Ankenmann stated that the company is investing in working capital to support 2027 revenue targets, which will result in a net use of cash for that fiscal year.

Gavin Cato stated, "I think you are going to see pluggables remain in the 1.6 timeframe," referring to the transition of optical interconnect technologies.
Steven Dorwart noted that the Jalapeño architecture for OpenAI "has been validated through OpenAI's published tests to deliver higher inference throughput per watt than the comparison systems."
Mandeep Chawla stated that "in modern AI clusters, networking is the fundamental nervous system," with networking platforms being refreshed approximately every two years.
Steven Dorwart reported that the company is "well into the testing phase" of a functional 1.6T co-packaged optics networking solution using Broadcom silicon.
Mandeep Chawla stated that "third-party forecasts anticipate cumulative data center CapEx will reach more than $3 trillion by 2030," representing a multiyear investment cycle.

INDUSTRY GLOSSARY

800G/1.6T: High-bandwidth data transmission speeds for networking switches and transceivers.
JDM: Joint Design and Manufacturing, a collaborative model where a company co-develops products with its customers.
HPS: Hardware Platform Solutions, Celestica's proprietary design and intellectual property portfolio.
L11 Integration: The process of integrating servers, switches, and storage into fully functional, tested racks.
CPO: Co-packaged optics, an advanced technology that integrates optical engines directly onto the same package as the switch silicon.
SONiC: Software for Open Networking in the Cloud, an open-source network operating system used in hyperscale data centers.
ASIC: Application-Specific Integrated Circuit, a chip customized for a particular use, such as AI acceleration.
TPU: Tensor Processing Unit, a custom ASIC developed by Google to accelerate machine learning workloads.
XPU: A general term for AI accelerators or processing units, such as GPUs or custom ASICs.
SerDes: Serializer/Deserializer, a pair of functional blocks used in high-speed communications to compensate for limited input/output.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the Celestica Third Quarter 2026 Financial Results and 2026 Investor and Analyst Day Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Matthew Pallotta, Head of Investor Relations. Please go ahead.

Matthew Pallotta: Good morning, and thank you for joining us on Celestica's third quarter 2026 financial results and Investor and Analyst Day conference call. On the agenda for today's call, we'll begin with our third quarter financial results, followed by our 2026 Investor and Analyst Day. At the conclusion of the prepared remarks, we'll open up the lines for Q&A. On the call today, we have Rob Mionis, Chair of the Board and Chief Executive Officer, Todd Ankenmann, Chief Financial Officer, and joining for our Investor and Analyst Day portion, Mandeep Chawla, Group President of Global Markets, Steven Dorwart, President of our Connectivity and Cloud Solutions segment, and Todd Cooper, President of our Advanced Technology Solutions segment.

Please note that during the course of this call, we will make forward-looking statements, including statements relating to the future performance of Celestica, our business outlook, guidance for the fourth quarter of 2026, our 2026 and 2027 annual outlook, and anticipated trends in our industry and their anticipated impact on our business. These are based on management's current expectations, forecasts, and assumptions as of October 26, 2026. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations, and their potential impact on our results cannot be reliably predicted at this time.

For identification and discussion of the material assumptions, risks, and uncertainties, please refer to our public filings with the SEC and on SEDAR+, as well as the investor relations section on our website. We undertake no obligation to update these forward-looking statements unless expressly required to do so by law. In addition, during this call, we will refer to various non-GAAP financial measures. We've included in our earnings release, found in the investor relations section of our website, a discussion of those non-GAAP financial measures and a reconciliation to the most comparable GAAP measures.

Unless otherwise specified, all references to dollars on this call are to U.S. dollars, all per share information is based on diluted shares outstanding, and all references to comparative figures are a year-over-year comparison. With that, I will now turn the call over to Rob.

Rob Mionis: Thank you, Matt, and good morning, everyone, and thank you for joining us on today's call. We are excited to be able to share with you more about Celestica's role in advancing AI infrastructure. Today, we will discuss a number of important developments and the long-term outlook of our business. We are seeing unprecedented momentum positioning us for a strong end to 2026 and further acceleration into 2027. Before diving into the Investor and Analyst Day portion of our call, Todd will walk us through our third quarter results, provide our fourth quarter guidance, and share our updated 2026 outlook. Todd, over to you.

Todd Ankenmann: Thank you, Rob, and good morning. It is a pleasure to join you for my first call today in this capacity, and I look forward to engaging with you all. Now turning to our third quarter 2026 performance. Revenue in the third quarter was $5.83 billion, up 83% and above the high end of our guidance range. A strong demand and solid operational execution led to higher than expected revenue in both our CCS and ATS segments. Our non-GAAP operating margin was 8.5%, up 90 basis points, driven by higher margins in both our segments. This once again represented the highest quarterly non-GAAP operating margin in the company's history.

Our adjusted earnings per share was $3.30, exceeding the high end of our guidance range and an increase of $1.72 or 109%. Moving on to some additional metrics. Adjusted gross margin was 11.2%, down 50 basis points, largely due to mix in our CCS segment. Our adjusted effective tax rate for the quarter was 18%. Lastly, our strong earnings growth and disciplined working capital management resulted in adjusted ROIC of 64.7%, up approximately 27 percentage points compared to the prior year period. Before moving on to our segment performance, we would like to inform everybody that we renamed our CCS end markets to better reflect the program composition of our portfolio.

Effective Q3 and going forward, our communications end market is renamed Networking and our enterprise end market is renamed Compute and Storage. This update is a change in naming convention only, and the composition of the end markets remains unchanged and does not impact previously reported financial results. Revenue in our CCS segment in the third quarter was $4.9 billion, up 102%, driven by very strong growth in both our networking and compute and storage end markets. Our CCS segment accounted for 84% of total company revenue.

Our networking end market revenue was up 68%, higher than our outlook of approximately 60%, primarily driven by growth in 800G networking, complemented by early volumes on ramping 1.6T programs and solid demand in our 400G programs. Revenue in our compute and storage end market was up 242%, well above our outlook of approximately 190%, driven by ramping volumes in hyperscale and our AI compute, and complemented by stronger than expected demand in storage programs. In our HPS business, revenue was $2.3 billion in the third quarter, representing growth of 70%, driven by ramping 1.6T and 800G switch programs across multiple hyperscaler customers. Our HPS business accounted for 40% of total company revenue.

ATS revenue for the quarter was $957 million, up 23% and above our outlook of a mid-teens percentage increase. The strong growth was driven primarily by an acceleration in capital equipment and supported by higher demand in each of our other businesses. ATS segment accounted for 16% of total company revenue. Moving on to segment margins. CCS segment margin was 8.9% in the third quarter, an improvement of 60 basis points driven by strong operating leverage. Our ATS segment margin was 6.6%, up 110 basis points, driven by improved mix and operating leverage. In the third quarter, three customers each accounted for 10% or more of our total revenue, accounting for 35%, 17%, and 14%, respectively. Turning to working capital.

At the end of the third quarter, our inventory balance was $4.5 billion, a sequential increase of $1.1 billion and a year-over-year increase of $2.5 billion, as we support very strong demand with an accelerating growth outlook in 2027. Cash cycle days for the quarter were 42, representing a 23-day improvement over the prior year and a five-day improvement sequentially. Moving on to cash flows. We generated $128 million of free cash flow in the third quarter and $413 million year-to-date. Our capital expenditures were $274 million, or approximately 4.7% of revenue, compared to 1.2% of revenue in the prior year quarter.

Year-to-date, our capital expenditures are $767 million, or 5.3% of revenue, and we continue to anticipate spending approximately $1 billion in 2026. During the third quarter, we completed our previously announced public offering of approximately 11.1 million shares, with gross proceeds of $3.45 billion before underwriting discounts and offering expenses. At the end of the third quarter, our cash balance was approximately $4 billion, while our gross debt was $736 million, resulting in a net cash position of $3.2 billion. We had no outstanding draw on our revolver at the end of the quarter. Our gross debt to non-GAAP trailing 12-month adjusted EBITDA leverage ratio was 0.4 turns, an improvement of 0.1 turns sequentially and 0.4 turns versus prior year.

As of September 30th, 2026, we were in compliance with all our financial covenants under our credit agreement. Our cash balance, in combination with our revolver, provides us with approximately $5.7 billion of available liquidity, positioning us to support strong anticipated future growth. We did not repurchase any shares for cancellation during the third quarter under our current normal course issuer bid. Now moving on to our guidance for fourth quarter. Fourth quarter revenue is projected to be between $6.275 billion and $6.575 billion, representing growth of 76% at the midpoint. Adjusted earnings per share is anticipated to be between $3.37 and $3.57, representing an increase of $1.58 at the midpoint or 84% growth.

Our adjusted earnings per share assumes approximately 127 million diluted weighted average shares outstanding. Assuming the achievement of the midpoint of our revenue and adjusted EPS guidance ranges, our adjusted operating margin is expected to be 8.7%, which would represent an increase of 100 basis points. We anticipate our adjusted effective tax rate for the fourth quarter to be approximately 20%. Next, we will review our revenue outlook for each of our end markets. In our CCS segment, we expect revenue in our networking end market to grow approximately 65%, primarily driven by hyperscaler-led growth in 800G programs and the ramping of our 1.6T programs.

In our compute and storage end market, we expect growth of approximately 160%, driven by the continued strength in hyperscaler AI compute, as well as strong demand in storage. In our ATS segment, we anticipate revenue to be up in the low 20s percentage range, driven primarily by strong growth in our capital equipment business as well as new program ramps in our other businesses. Our solid fourth quarter guidance reflects our continued momentum to close out the year. This, combined with our strong year-to-date performance, supports our increased 2026 financial outlook. Our 2026 revenue outlook increases from $20.5 billion to $21 billion, representing growth of 69%.

We are also raising our adjusted EPS outlook to $11.55, up from $11.30, representing growth of 91%. Reflected in our outlook is a full-year adjusted operating margin of 8.4%, unchanged from our previous outlook. Finally, our free cash flow outlook for 2026 is $460 million, compared to our previous outlook of $600 million. The change in our free cash flow outlook expectation is primarily driven by targeted working capital investments to support the accelerating growth in 2027. With that, I will turn the call back over to Rob to begin the investor and analyst day portion of our presentation. Rob, over to you.

Rob Mionis: Thank you, Todd. At our investor day a year ago, we talked about Celestica being future-ready. Over the past year, that future has arrived rapidly as our growth trajectory has steepened dramatically. Today, Celestica stands at the forefront of driving technology advancements as we are actively helping build the world's leading platforms for advanced AI infrastructure. For the remainder of our call, members of our executive leadership team and I will discuss our operations, financials, strategy, and capabilities that position Celestica as a key contributor to the AI investment super cycle. Our strategy, technical capabilities, and market tailwinds coalesce around four distinct pillars that drive sustainable long-term shareholder value creation. First is differentiation.

Celestica acts as a critical launch partner on next generation platforms. Hyperscalers partner with us from early-stage R&D to co-design, commercialize, and scale their most complex AI networking and compute solutions. Second is growth. We hold industry-leading positions in AI data center technologies, benefiting from generational secular growth tailwinds. We strategically pursue technologies where we have a competitive advantage, anchored by our leadership position in Ethernet networking and full system design capabilities for next generation AI compute platforms. Third is visibility. Our multi-generational customer engagement and deep alignment with our hyperscaler and frontier AI lab customers enable us to pursue long-term capacity planning with high confidence. Fourth is our disciplined approach to investments.

We employ an investment framework to drive long-term earnings growth while filtering those decisions through our strategy and key financial hurdles on margins and return on capital. These four pillars create a powerful foundation for compounding shareholder value over the long term. Our business is fundamentally stronger today than at any time in Celestica's history, reflected by our accelerating financial performance, driven by a step function change in our scale, profitability, and earnings power. Over the three-year period to 2026, Celestica's revenue is expected to have delivered a 38% CAGR, more than doubling our top line.

At the same time, margin improvements are driving non-GAAP adjusted EPS to compound at an even faster 67% CAGR, representing a nearly five-fold increase over the same period. Our growth has been deliberate, strategic, and profitable. When leading technology companies choose Celestica for their most complex solutions, they do so because of our core competencies in leading-edge design, commercialization, and scaling. These capabilities directly address the critical challenges facing our customers. We manage the entire development to deployment life cycle for hyperscalers and frontier AI labs on next generation AI infrastructure, enabling cost optimization, accelerated time to market, and reliability of their global manufacturing solutions through seamless execution.

The integration of full stack design and scale manufacturing of highly complex platforms produces a powerful combination that is greater than the sum of its parts and enables a strong competitive moat that is challenging for our competitors to replicate. We will take a closer look at each of these foundational capabilities, which have helped position us as a preferred multi-generational partner for leading AI data center innovators. A central element of our differentiation is our design leadership. We believe our global team is amongst the best and most capable in the industry, with a depth of proven institutional knowledge developed over successive generations of technologies.

Our design-led approach enables customization for optimization through our joint design and manufacturing or JDM model. Increasingly, this has become a preferred approach to product development for our hyperscaler and frontier AI lab customers. By leveraging our system-level design capabilities, we collaborate directly with our customers to deliver customized solutions. These solutions enable superior price performance and an overall lower total cost of ownership, while also ensuring supply chain flexibility and vendor diversification. The commercialization phase acts as a vital bridge between design and mass production, enabling a seamless transition that is critical to the timing and quality of program delivery.

Separating design and manufacturing across different vendors can leave blind spots, where each can miss critical considerations that have the potential to lead to ramp delays, poor yields, and costly redesigns when moving from prototype to mass production. Celestica's vertically integrated model eliminates this friction. Through our design for manufacturability approach, our design and manufacturing engineering teams work side by side from initial development straight through commercialization. This allows us to identify and resolve critical production hurdles early on. We believe this is one of the more underappreciated strength of our model relative to competitors within our industry. It continues to be a crucial differentiator that unlocks both scale and speed to market for our customers.

Finally, operational excellence is deeply ingrained in Celestica's DNA. Scaling a highly complex product from proof of concept to mass production is a technical discipline in itself. It presents unique operational and engineering challenges, a critical area where we often see industry competitors struggle. Our customers rely on us to continuously innovate our manufacturing and testing processes to deliver their most complex solutions. Our stewardship culture sets us apart from other operators. We take the initiative to own the complete solution end-to-end and approach problem-solving as a true technology partner. We standardize these best practices through the Celestica operating system, ensuring strict adherence to standards of quality and reliability throughout our global network as programs scale.

To support the significant anticipated acceleration in demand driven by recent program awards, we have approved plans to significantly increase our global capacity over the next couple of years, adding to our growing network of over 40 sites in 16 countries. In North America, our U.S. presence is centered in Texas, where we are adding capacity across multiple sites to enable critical home country manufacturing for hyperscaler customers. The new capacity supports advanced L11 integration for scale deployment of liquid-cooled AI racks. To adjust power bottlenecks, we are adding hundreds of megawatts across our network, including at our U.S. sites. In Mexico, we continue to support demand for nearshoring by investing in upgrades at our campus in Monterrey.

In Asia, our data center customers are seeking additional capacity at our flagship Thailand campus to leverage our exceptional local capabilities and talent. We are making significant additions to support major production ramps through 2027 and 2028. We are also making targeted investments in Japan and Malaysia to support our networking programs that offer our customers greater geographic diversity across the Asia region. Our regionalized multi-node network strategy delivers a flexible, resilient supply chain that helps customers mitigate geopolitical and operational risk while scaling their deployments. Within our network, we are making targeted investments in new automation lines to ramp at-scale production. Today, this includes automating L6 through L10 processes for manufacturing the latest generation networking and compute trays.

We are also deploying new lines to automate L11 rack assembly. We believe this is a capability that is unique among competing OEMs and strengthens our value proposition for hyperscalers, particularly in higher-cost, labor-constrained markets. By automating highly repetitive tasks, such as cabling and fiber optic insertion, we are solving critical bottlenecks in high-sensitivity clean room environments. These applications also extend into several of our ATS end markets, with fully automated lines in operation at facilities in Mexico and Europe. We take a phased approach to these investments, verifying operational viability before scaling, which we believe deliver attractive payback periods, faster ramps, and repeatable high yields.

As we navigate this high-growth phase, we will continue finding new opportunities to drive scale without compromising the exacting quality and reliability our customers depend on. Our differentiated model allows us to serve a highly specialized role for our customers. Where the EMS model is restricted in its design capabilities and the OEM model leans toward more rigid architectures, Celestica combines critical elements of both these models. Through delivering an integrated end-to-end capability stack, beginning with collaborative early-stage co-design through to full-scale manufacturing and deployment, we operate as a true technology partner. Our ability to customize leading-edge AI infrastructure is supported by investments in HPS hardware roadmaps, a flexible software stack, and our commitment to open vendor ecosystems.

Furthermore, our operational rigor and end-to-end ownership of the solution ensures a seamless transition from prototype to manufacturing at scale. Ultimately, we believe this differentiated model continues to position Celestica as a preferred partner, closely aligning our development strategies and growth investments with our customers' multi-year roadmaps. With that, I will now turn the call over to Mandeep, Group President, Global Markets, to discuss our growth strategy. Mandeep, over to you.

Mandeep Chawla: Thank you, Rob, and good morning, everyone. Our demand environment today is defined by an unprecedented AI investment super cycle, bringing fundamental changes to both our business and our industry. One of these is our improved long-term demand visibility compared to historical norms. High demand for AI compute capacity has seen it become heavily constrained by power and hardware availability. Because of this, hyperscaler customers are undertaking longer-term commitments and engaging with providers like Celestica in multi-year planning cycles to secure the necessary components and manufacturing capacity. Our supply chain strategy manages overall technology availability rather than basic procurement, collaborating with ecosystem partners early to qualify components and build design flexibility.

Furthermore, our design-led HPS programs require customers to pursue early alignment on product development with us and our silicon ecosystem partners up to 24 months in advance of mass production. We expect these dynamics, particularly our visibility enabled by design-led timelines, to persist, allowing us to pursue our long-term growth investments with confidence. We view the AI infrastructure build-out as a durable, multi-year investment cycle, and we believe we are positioned well to capture this opportunity. Third-party forecasts anticipate cumulative data center CapEx will reach more than $3 trillion by 2030, representing nearly $2 trillion in incremental TAM growth from 2026. Constrained AI compute capacity due to surging demand for AI workloads serves as a strong signal for continued investment.

Forecasts anticipate total annual AI accelerator shipments will almost triple from 2026 to 2030, with every AI accelerator deployed driving investment in high-performance networking, making these core technologies that we support amongst the fastest-growing segments of the broader data center ecosystem. Importantly, nearly 70% of this capital investment is expected to be concentrated amongst the largest U.S. hyperscalers and leading frontier AI labs, who comprise the majority of our CCS customer base. These indicators align with the multi-year demand signals we are observing with both our current and prospective customers. As we touched on, our core competencies are uniquely suited to serve the distinct demanding requirements of AI infrastructure for hyperscalers and frontier AI labs.

These customers operate at the very cutting edge of compute and networking and share unique characteristics, which are defined by several core dynamics, which drive our commercial model and technical investments. The first is accelerated upgrade cycles, with new and more capable compute silicon now being introduced every 12-24 months, while networking platforms are being refreshed approximately every two years. The second is leading-edge performance and technical requirements, which necessitate the most advanced design engineering and technical capabilities to enable the latest systems. The third is customization, which requires us to enable bespoke solutions designed to support multiple variants of silicon, compute architectures and use cases, and tailored to their unique infrastructure specifications and AI workloads.

The fourth is scale, requiring optimized, highly reliable manufacturing processes and supply chain support for the largest deployers of infrastructure in the industry. Finally, to address these specific challenges, Celestica collaborates directly with hyperscaler and frontier AI lab engineering teams via our JDM model to target the most critical design and manufacturing challenges. Why has Celestica been able to expand from switch design into full rack scale and system-level solutions? In modern AI clusters, networking is the fundamental nervous system. Amongst core hardware technologies within AI data centers, high-speed networking design represents the most technically demanding engineering discipline. It requires multidisciplinary competencies in the areas of ultra-high-speed signal integrity, thermal management, optical connectivity, board design, software, and testing.

Having mastered those challenges at 800G and 1.6T, we believe we have the foundational technical capabilities to engineer adjacent domains required to design complete AI systems across compute, power delivery systems, liquid cooling, cabling, intra and inter-rack connectivity, software orchestration, and rack design. The boundary for design optimization is shifting from individual boards up to full racks and complete AI clusters, where considerations regarding networking, optics, power, and cooling are becoming increasingly interconnected. This dynamic creates a powerful competitive barrier. Moving up from server assembly and rack integration into designing high-speed networking presents significant engineering challenges. It requires the kind of deep institutional knowledge and proof points that we have spent years building.

However, moving from high-speed networking into converged system design is a shift that plays directly to the breadth of Celestica's core engineering capabilities and strengths, unlocking a growing set of opportunities where we see massive potential in the coming years. The value we deliver to leading AI platforms is directly reflected in our engagements with hyperscaler customers, which continue to accelerate. We have earned this position by executing relentlessly across the critical success factors of speed to market, customization for optimization, and scale, allowing us to build strong multi-generational relationships with these customers. From 2023 through 2026, we expect Celestica's hyperscaler revenue to grow by approximately 5x, expanding at a 71% CAGR.

We are positioned to remain a critical provider to the industry's leading players as we are expanding our engagements to support additional hyperscaler and frontier AI lab customers in 2027. Our market position is reinforced by this diversified customer portfolio consisting of a number of the leading hyperscaler and frontier AI labs in the industry. This is supported by our deep relationships with an ecosystem of the leading designers of high-performance compute and networking chips. We collaborate closely with silicon providers to align early on product roadmaps supporting the next generation of chips in development.

This enables us to begin our work on designing market-ready solutions well ahead of wider commercial availability and collaborate on supply chain planning, supporting speed to market, and availability for our mutual customers. Our breadth of critical relationships and collaborations have immense benefits that continue to pay dividends, solidifying our role as a critical technology solution partner within the global AI data center ecosystem. With that, I'll now hand the call over to Steve to discuss our CCS segment.

Steven Dorwart: Thank you, Mandeep, and good morning, everyone. Our Connectivity & Cloud Solutions segment continues to see unprecedented momentum from the AI infrastructure investment super cycle. We are actively designing, industrializing, and manufacturing the world's most advanced AI infrastructure for leading hyperscalers and frontier AI model labs. The trajectory of our financial performance reflects the tremendous scale of revenue growth we are driving with CCS revenue expected to reach $17.4 billion in 2026, which roughly quadruples our business in just three years. Our proprietary design capabilities delivered via our HPS offering continues to be an important driving force in our success and now accounts for roughly half of our CCS revenues.

As we look ahead to 2027, we believe our expanding program wins and technology leadership position CCS to accelerate our growth trajectory. Our team is incredibly excited and energized by the pipeline of opportunities in front of us, which we believe has the potential to sustain our positive momentum in the years to come. Our HPS offering continues to see incredibly strong engagement from our customer base, helping bring leading-edge Ethernet networking and system-level solutions to market. To maintain our technology leadership, we have grown annual R&D spend by more than three-fold since 2023 and expect to invest over $300 million in 2027.

The scale of our investment enables us to support a rapidly growing breadth of technical capabilities, proof of concepts, and product roadmaps. We are seeing strong productivity from these investments, which translate directly into revenue opportunities, enabling us to engage earlier in product cycles, support more platforms, and convert proof of concepts into multi-year programs. We continue to support a broad portfolio of unique programs in active production and at various stages of development. Our team of over 1,600 HPS engineers across nine global design centers today is expected to grow to over 2,000 engineers by next year.

While HPS built its reputation in high-performance Ethernet networking, we have successfully expanded the scope of our projects into custom ASIC compute and rack scale systems, which opens up opportunities for greater design-led engagement in the market. Our R&D strategy consists of a structured four-step innovation life cycle. We first explore the development of new proof of concepts and capabilities to support emerging technologies alongside our key partners well before the formal RFPs, building expertise on frontier silicon ahead of industry adoption curves. Next, we evaluate the commercial viability, including potential scale of market adoption through rigorous screening to identify the candidates meriting further investment.

Third, we industrialize the design by pairing early R&D directly with factory floor process engineering, eliminating handoff friction and de-risking the transition from NPI to mass production. Finally, we commercialize complete HPS solutions like our DS6000 series switches, which serve as market-ready proof points of our IP and expertise and can be leveraged as reference designs for customized JDM variants. We developed this disciplined innovation formula to de-risk development schedules, support high first-pass manufacturing yields, and dramatically shorten time to market. Modern AI data centers are undergoing fundamental structural changes that are driving our technical investments today.

First, advances in technology and greater infrastructure scale are lowering the technical and economic barriers to hyperscalers designing a proliferation of new high-performance custom ASIC chips. This leads to the second, as each new custom chip requires a bespoke rack scale compute architecture, and in many cases, a customized networking fabric to support. As the level of customization increases, foundational aspects of the system must be tailored for the specific silicon and performance requirements, requiring a bottoms-up approach to designing each new architecture. Third, compressed upgrade cycles necessitate that all of this is done faster and more frequently.

With silicon upgrade cycles contracting to 12-24 months, hyperscalers and chip designers are often developing multiple generations concurrently at various stages, making a well-executed development phase and faster time to market more critical than ever. These developments are resulting in a growing number of unique product roadmaps and architectures, increasing technical demands on design engineering resources both by customers and design partners like Celestica. To keep pace, our strategy focuses on enabling core technologies and manufacturing capabilities that serve as foundational building blocks for leading-edge systems with broad applicability, allowing us to support a wider range of customized solutions and customers simultaneously. With rising complexity and demand for customized solutions, we believe the value of Celestica's model continues to increase.

Our engineers are working on solving today's foundational technical challenges to enable the next generation of leading-edge AI systems. First, as we've touched on already, is the shift towards engineering full rack scale and system-level solutions. We see it becoming more challenging, and in some cases impractical, to approach the design of networking and compute components independently from the entire rack or system, leading to a deeper scope of engagement. We are witnessing this in networking fabrics, where we are seeing an increasing use of disaggregated dedicated networking racks as well as compute architectures. Next is increasing integration of optical components into the rack design, the networking trays with approaches such as co-packaged optics, and eventually into compute trays.

We will touch more on this later. The move towards integrated optics is also related to the challenges associated with signal integrity. As we move towards 400 gig SerDes, this tightens electrical loss budgets and restricts copper distances, requiring simultaneous optimization across the entire physical path, driving the need for advances in PCB laminates, surface mount packaging, and direct attached copper. With our deep institutional knowledge in this area, we continue to invest in specialized engineering talent, simulation, and lab capabilities to develop and validate next-generation designs. Finally, the areas of power density and thermal management are tightly coupled as rack designs approach 500 kW or more.

Here, Celestica is actively engineering solutions to accommodate the transition to 800-volt DC power distribution architectures. Future systems will leverage the use of advanced liquid cooling for components beyond GPUs and switch silicon to include optics and memory. We are actively evaluating next-gen technologies, including two-phase liquid cooling and advanced thermal interface materials. By solving these challenges at the system level, we help customers bring high-performance platforms to market faster and effectively scale increasingly complex AI infrastructure. Now diving into our end markets, beginning with our networking portfolio, anchored by our market-leading Ethernet networking business. In 2026, networking revenue is expected to reach $11.8 billion, up 66%.

Our momentum this year is being driven by ramping 800G switch deployments along with the beginning of mass production in our earliest 1.6T programs. Looking into 2027, we expect 800G to continue its very strong growth trajectory and 1.6T volumes to accelerate substantially across a broadening base of customers and programs, including a number of variants supporting scale-up. As a result, we anticipate that our 1.6T revenue will surpass 800G revenue next year. To address evolving network architectures, Celestica has continued to develop our flagship family of DS series switches for the 1.6T generation within our HPS portfolio. Last year, we introduced the DS6000 and DS6001, the air-cooled and liquid-cooled variants of our Broadcom Tomahawk 6 base switches.

This year, we have added two new variants. Earlier this year, we announced the DS6010, a scale-up switch purpose-built and co-engineered for AMD's Helios Rack Scale architecture utilizing UALink over Ethernet, which we will dive into further in a moment. Earlier this month at the OCP Global Summit, we introduced the DS6005, our first co-packaged optics design built on Broadcom's Tomahawk 6 Davisson chip, integrating high-density silicon photonics engines, liquid cooling, and field-replaceable external laser modules in a 1.5OU form factor, delivering maximum power efficiency for dense clusters. All DS6000 series platforms are supported by Celestica's enterprise-grade SONiC software stack, providing open, flexible network telemetry and fabric orchestration. We are seeing expanding investments across every tier of AI networks.

Celestica has Ethernet networking solutions for use in all of the different domains within the data center. However, within our portfolio, we primarily support designs at the leading-edge bandwidth deployed in back-end networks for scale-out and a fast-growing portfolio within scale up, supporting low latency XPU to XPU connectivity. Back-end fabrics comprise the majority of the AI-driven demand. They link tens of thousands of AI accelerators demanding maximum bandwidth, ultra-low packet latency, and operate on shorter two-year refresh cycles with the majority of spend dominated by hyperscalers. Front-end networks have lower bandwidth and less stringent latency requirements relative to back end, though this domain is still an important part of hyperscale data centers as well.

We have seen the evolution of the various technologies in networking shape our strategy and the different roadmaps we are supporting. Historically, Ethernet and AI back-end networks supported primarily scale-out and emerging scale- across fabrics and relied on traditional copper interconnects and pluggable optical transceivers. As the industry transitions into the 1.6T generation, networking requirements shift dramatically. Historically, scale-up fabrics linking accelerators inside a node relied on proprietary closed architectures. One of the more consequential shifts currently underway is the introduction of Ethernet for scale-up networking, which has already meaningfully expanded our addressable content within the network. Furthermore, at these higher bandwidths, traditional copper and pluggable optics begin reaching physical boundaries in power consumption, port density, and signal integrity.

As a result, we are seeing the introduction of new interconnect technologies, including embedding of optics into the switch with co-packaged optics and near package optics, as well as new standards supporting form factors like XPO. Ultimately, we see pluggable and integrated optics solutions coexisting over the long term with each employed for appropriate use cases. We are supporting a growing number of networking roadmaps, which diversifies our broader product portfolio, including within each of our hyperscale customers, and enhances our value as a trusted technology partner that can help accelerate the path from design to deployment. Independent forecasts validate the significant market expansion underway in Ethernet data center networking. The TAM is projected to reach $173 billion by 2030.

Within that, the high bandwidth segments defined as 800G and higher, which comprise the majority of Celestica's current portfolio and pipeline, are forecasted to account for over 90%, a sevenfold increase. Looking at the markets by layers of the networking fabric, back-end AI networking is the fastest-growing, expected to account for over 80% of total market spending by 2030, indexing us with the largest and highest growth segments of the market. As noted earlier, the adoption of Ethernet for scale-up networking is driving a significant new market opportunity.

Scale-up Ethernet spending is projected to grow from negligible volumes in 2026 during the early stages of the 1.6T ramps to $55 billion by 2030, when it is expected to represent 40% of back-end Ethernet switch spending and about 1/3 of the total data center Ethernet market. From an architecture perspective, scale-up fabrics exhibit dramatically higher port attach rates and bandwidth requirements orders of magnitude higher, up to 10x and 100x that of scale-out networks and front-end networks, respectively. Scale-up fabrics also require ultra-low latency, custom chassis designs, and can effectively leverage open source networking operating systems like SONiC.

The requirements of these designs play directly to our strengths in system-level engineering on XPU architectures and our JDM model supporting customization, positioning Celestica for market leadership in scale-up Ethernet. One of the latest projects that serves as a valuable showcase of our networking design prowess is our collaboration with AMD on the DS6010 switch, which enables the scale-up fabric for AMD's Helios architecture, supporting high-speed, ultra-low latency connectivity of 72 AMD Instinct MI455X GPUs within a single rack. Alongside AMD's innovative architecture design team, our proven track record designing leading-edge switches made Celestica a uniquely qualified collaboration partner for this project.

The DS6010 represents a milestone in engineering and design leadership as the industry's first 204.8 Tb switch, powered by two Broadcom Tomahawk 6 chips in a single 1OU chassis, making it one of the most technically advanced solutions we've ever built. The open rack wide-compatible design is connected via a high-density cabled backplane, utilizes direct-to-chip liquid cooling and supports full SONiC integration. Our specialized manufacturing capabilities support the complex assembly and rigorous validation testing required for this high-performance design. Through this collaboration, we are enabling speed to market for the industry's leading hyperscalers and frontier AI labs deploying Helios. We expect to begin ramping by the end of the year.

As we've discussed, at bandwidths reaching 1.6T and eventually migrating to 3.2T utilizing 400 gig SerDes, traditional copper trace connectivity and standard pluggable transceivers face steep physical limits in signal integrity, as well as power and thermal efficiency and form factor density. Emerging approaches such as XPO are addressing some of these challenges with a new pluggable form factor. Integrated optics designs such as CPO and NPO are approaches to board design and connectivity that involve migrating the optical engines closer to the switch silicon, a departure from traditional pluggables where the optical components are contained within a transceiver that's connected to the front panel.

We believe we are in the very early stages of the industry's deployment of integrated optics architectures, and that these solutions will progressively see increasing traction in the coming years. We are investing in product roadmaps to support each of these various approaches to integrated optics and next generation pluggables in order to enable customer flexibility across different architectures. Optical standardization efforts like the Optical Compute Interconnect Consortium will give hyperscalers vendor interoperability while elevating design partners like Celestica as a critical system orchestrator. However, the move towards integrated optics is not without its challenges. Beyond design, the reliable, scalable manufacturing for integrated optics presents new hurdles that are different from traditional copper-connected switches.

Celestica has strategically invested in developing our capabilities and processes, including expanded state-of-the-art clean room space, robotic assembly and inspection systems, advanced optical fiber insertion where some micron tolerances are required, and multi-stage engineering validation testing protocols to support the high-volume manufacturing of these technologies. With the investments we are making and one of the industry's early proof points with the DS6005, we believe that we are at the forefront in building our capabilities towards commercializing integrated optics at scale with reliable commercial yields. As previously announced, these capabilities have earned us an award with a hyperscaler customer to co-design and manufacture a 1.6T rack scale co-package optics networking solution, with production scheduled to ramp in late 2027.

As we progress through the development process to be ready for 2027 availability, we believe we are one of the first teams in the world to have successfully brought up a functional CPO platform with Broadcom's Tomahawk 6 Davisson silicon, and we are well into the testing phase. We are currently in discussion with other customers exploring proof of concepts and potential future designs. We believe that interest in these solutions will broaden across our customer base as networking technologies evolve in the coming years. This program award serves as a powerful validation of our early R&D investment and capabilities, and positions Celestica as an early mover in commercializing Ethernet switches with integrated optics at hyperscale volumes.

Celestica's technical capabilities and execution are reflected in our leading market share across our core customer base of hyperscalers and frontier AI labs, where we are seeing an inflection in our growth even relative to our peers. Because we enable our customers' leading-edge deployments, we maintain the largest share of the highest bandwidth segments in data center Ethernet networking. Independent research outlets recognize Celestica as the world's number one provider in 800G and higher, accounting for 31% of revenue and 44% of total port shipments.

Furthermore, in custom solutions, Celestica holds an even more dominant position with a 58% share of total custom Ethernet switch revenue, more than double our nearest competitor, positioning us to capture significant growth as hyperscalers increasingly evaluate bespoke solutions enabled by our HPS offering. Turning now to our compute and storage end market. For 2026, revenue is projected to reach $5.6 billion, up an impressive 170%, driven by major ramps in our AI compute business and complemented by solid demand in storage. We continue to anticipate exceptional growth in custom ASIC compute programs in 2027, driven by our multi-generational relationship with Google in support of their TPU platform and our production ramp with OpenAI's Jalapeño platform.

We expect compute and storage to account for a growing share of CCS revenues in 2027 as these program ramps accelerate. The trend of customization for optimization is driving incredible growth in the deployment of new custom ASICs. The custom accelerator market is projected to exceed $430 billion by 2030, grow1th of more than 7x, and more than double the growth rate of merchant GPUs. Custom ASICs are expected to account for over 1/3 of the AI accelerator market. These forecasts have accelerated considerably during the past year, reflecting why custom ASIC compute represents such a powerful multi-year tailwind for Celestica and validates our strategic focus on this opportunity.

Our hyperscaler and Frontier AI lab customer base are leading this shift. As exemplified by the leading platforms in the marketplace today, the fixed costs of a successful custom accelerator program are surpassed by the benefits of lower cost per chip and superior performance per watt due to customization for workload specificity. As an industry leader in system-level co-design and manufacturing, Celestica is positioned as one of the premier infrastructure partners in this segment of the market. Celestica's role in supporting the launch of OpenAI's Jalapeño architecture is another important proof point reflecting the evolution of our system-level design capabilities.

This program represents the culmination of more than two years of development with our HPS team, standing as our most comprehensive and complex project to date. The inference-optimized system leverages the first generation of OpenAI's custom ASIC platform, Jalapeño, which was co-developed with Broadcom. It has been validated through OpenAI's published tests to deliver higher inference throughput per watt than the comparison systems across three tested open models. Celestica is helping bring this breakthrough architecture to life, supporting end-to-end delivery from co-design and engineering, software and testing, straight through volume production. Each unit in the dual rack system hosts 128 Jalapeño accelerators utilizing a cabled back plane.

Because of the incredible density, it is designed to accommodate extreme mechanical loads and advanced liquid cooling infrastructure. The system is supported by an Ethernet scale-up fabric, leveraging 1.6T switches with Broadcom's Tomahawk 6 silicon, enabling multi-rack, multi-level connectivity in the scale-up domain for up to 2,048 accelerators, and runs on a customized version of the SONiC operating system, co-developed with Celestica. It is expected to begin ramping production in 2027. Through our multi-generational relationship, Celestica and OpenAI are engaged in the development of future generations of their platform as we look to continue to build on our successful collaboration together. With that, I'll turn the presentation over to Todd Cooper to review our Advanced Technology Solutions segment.

Todd Cooper: Thank you, Steve, and good morning, everyone. Two years ago, we undertook steps to strategically reshape our ATS portfolio, prioritizing higher-margin programs and durable growth with Tier one customers. In 2026, we've seen the benefit of those as we expect a return to double-digit growth for the year with our ATS segment expected to deliver revenue of $3.6 billion, up 13%, and for segment margins to be up 110 basis points to a record 6.4%. We drive distinctive value in an environment characterized by increasing complexity, regionalization, and a greater need for engineering support, as well as resilience in supply chain management, allowing us to drive faster time to market in a cost-effective manner for our customers.

We believe this core value proposition underpins our strategic customer relationships and positions ATS for continued, sustainable, and profitable growth. Looking ahead to 2027, demand tailwinds and new program wins across our portfolio are expected to sustain our momentum and propel ATS to another year of double-digit growth. In capital equipment, strong AI-driven demand is necessitating foundries to make investments in new fab capacity, with market forecasts calling for wafer fab equipment spend to grow by more than 40% next year and continue that strong growth in 2028. Our strong relationships with the leading wafer fab equipment OEMs and our differentiated capabilities position us for robust growth.

In industrial, we expect solid growth on improving market trends, complemented by ramping business in energy generation, storage and metering, along with our traditionally strong test and measurement and telematics markets. Further, early pursuits in data center power infrastructure are also showing promise, supported by our investments in specialized engineering teams to enable solutions for this market. Both aerospace and defense and the health tech sectors are expected to see solid base business demand with growth driven by new program ramps, in particular with increased defense demand across the U.S. and Europe, as well as in advanced surgical robotics and diabetes care.

We believe our strong position, market tailwinds, and targeted commercial strategy will enable us to deliver another year of solid growth in 2027. Our commercial strategy is tied hand in hand with our engineering-led investments, aimed to unlock greater value add for our customers and deeper long-term engagements. With our growing engineering services team of nearly 400 engineers, we are continuously investing in specialized technical talent with dedicated capabilities across key sub-markets. By engaging with customers early in their product life cycles, we provide high-value design support, rapid prototyping, and automated testing.

ATS engineering services revenue is growing at more than 30% CAGR since 2023, with new wins seeing an attach rate of 50%, validating the opportunity and our engineering value proposition. We expect higher engineering-led mix, combined with improving operating leverage, will continue to expand our segment margins. We remain disciplined in managing our commercial portfolio, balancing our exposure across proven tier one anchor customers with newer accounts that show the potential for high growth in emerging technologies. We believe this strategy has built a strong foundation that positions ATS for sustained high-quality growth over the long term. I'll now turn the call over to Todd Ankenmann to discuss our financial outlook.

Todd Ankenmann: Thank you, Todd. Turning to our outlook for 2027, we see another year of accelerating revenue growth driven by unprecedented customer demand. We anticipate revenue of $40 billion, representing a 90% increase compared to our 2026 outlook, while non-GAAP operating margin is expected to be 9% for the full year, an expansion of 60 basis points. Underlying our revenue assumption is approximately 110% growth in CCS revenue, driven by rapidly growing demand in both networking and compute and storage, while ATS is expected to grow approximately 10%. As we expect to be ramping multiple large-scale new programs throughout the year, we anticipate sustained sequential growth, leading to meaningfully higher revenue in the second half versus the first half of 2027.

We anticipate non-GAAP adjusted EPS of $21.50, up 86%. Our outlook assumes approximately 127 million diluted weighted average shares outstanding for the year. Capital expenditures are expected to be in the range of $1.5 billion-$2 billion, which directly supports the programs we have won to date. Our outlook assumes an adjusted effective tax rate of approximately 21%. Our financial outlook factors in our best assessment of dynamics, including the impact of supply constraints and timing of capacity ramps against a backdrop of higher customer demand. I want to spend a moment diving deeper on the dynamics underpinning our 2027 revenue outlook and our view of the longer-term multi-year growth trajectory.

As we've discussed today, constrained supply and long design collaboration cycles have lengthened demand visibility. These multi-year customer commitments give us strong conviction in our growth investments and the sustainability of the demand we are witnessing today. In fact, our 2028 customer demand forecast, based solely on awarded programs, are meaningfully higher than our 2027 revenue outlook. When we look across our core product pillars, the anticipated growth drivers are robust and mutually reinforcing. In networking, we expect the already strong momentum we are experiencing to accelerate during the transition to 1.6T bandwidths, which we're in the very early stages of today.

We expect these ramps to be significantly larger and faster than the 800G upgrade cycle of the past two years, as we anticipate benefiting from multiple incremental drivers of demand, including Ethernet use in scale-up and new customers and ecosystems in our portfolio. Importantly, recent networking upgrade cycles have shown to be additive to demand, and we expect 800G deployments to continue to grow alongside initial 1.6T rollouts next year. In AI compute, multi-generational program ramps across our existing and new hyperscaler and frontier AI lab customers continue to grow and scale and are pointing to meaningfully higher volumes in 2027 and 2028.

Finally, beyond our committed ramps, we have a significant funnel of pursuits, including a number of potential large-scale engagements with existing and new customers. With our confidence in the sustainability of the demand we are seeing, we are thoughtfully yet proactively positioning the company to capture these opportunities. The achievement of our $40 billion revenue outlook for 2027 would represent more than fivefold growth in just four years. Establishing this greater scale continues to enable structurally higher and more resilient operating margins. We expect our non-GAAP operating margin to expand to 9% in 2027, benefiting from design-led wins, cost discipline, and scale. We continue to commit higher levels of CapEx to support the expansion of our manufacturing network.

Our plans for $1.5 billion-$2 billion in CapEx next year are intended to enable the scale necessary to support our multi-year growth plans. Additionally, with our 2027 outlook calling for nearly $20 billion of incremental revenue, we are investing meaningfully in working capital to support these large-scale ramps. The combination of these investments will result in a net use of cash in 2027. Over the past several years, we have managed to generate consistent and growing non-GAAP free cash flow, even as we have supported significant growth in revenue. Next year, however, the level of net cash usage will be a function of the sheer magnitude and velocity of our revenue ramp.

Our balance sheet is conservatively financed and well-funded with $4 billion of cash on hand, low leverage, and an additional $1.75 billion in available liquidity. We believe we are sufficiently capitalized at this time. When assessing potential investments, adjusted ROIC remains an important benchmark for capital efficiency and disciplined execution. Our adjusted ROIC has more than doubled in less than three years and has accelerated meaningfully in 2026 to 57% year-to-date, reflecting the incredible growth and margin improvements in our business and our strong track record of capital stewardship. The scale, efficiency, and profitability profile of our business enable us to generate consistently and structurally higher returns on capital than at any time in our company's history.

We continue to employ our same prudent approach to capital deployment. We believe the investments we are underwriting in 2026 and in 2027 support short payback periods and fast revenue conversion and profit generation as we phase our investments to align with customer deployment schedules. As such, we expect to continue generating adjusted ROIC well above historical levels. Our financial growth framework is aimed towards driving long-term compounding of our adjusted EPS in a disciplined and sustainable manner. To achieve this, we evaluate every commercial opportunity through strict strategic filters. We select programs that align with our core competencies in design and manufacturing differentiation while supporting customers where we see the opportunity for long-term multi-generational engagements.

We aim to drive sustainable adjusted operating margin expansion while also managing our mix at a portfolio level. And we assess investments based on adjusted ROIC hurdles and payback periods across multiple scenarios. This approach allows for risk mitigation while prioritizing our allocation of capital to the most strategically aligned projects with strong anticipated returns. As a management team, we pride ourselves on being trusted, thoughtful, and responsible stewards of capital. Our financial health is foundational to our capital allocation plans as we aim to support our multi-year growth trajectory while preserving financing and investment optionality. We are committed to maintaining a healthy and flexible balance sheet managed with investment-grade discipline.

Organic growth remains our top area of investment as we grow our engineering commercial resources alongside major investments in our asset base to support higher levels of working capital and CapEx to grow our global manufacturing network. In this hyper-growth environment we find ourselves in, we believe these are high return investments and the best use of our capital. We also look to leverage strategic M&A opportunistically to accelerate key capabilities and to grow our presence in existing or adjacent markets. Finally, we remain opportunistic in our approach towards returning capital to shareholders through the intended renewal of our NCIB program. With that, I'd like to pass it over to Rob for his closing remarks.

Rob Mionis: Thank you, Todd and team. As we close out our prepared remarks, we want to revisit the pillars that are the foundation of our current success and that we continue to build upon for the future. Celestica finds itself at the threshold of a truly remarkable opportunity and what I believe is the most exciting period for our company and our entire industry during my tenure as CEO. Our conviction is supported by our industry-leading positions in some of the fastest-growing segments of the AI data center build-out, and a multi-year demand outlook with structurally improved visibility with our leading hyperscale and frontier AI lab customers.

Our differentiated capabilities and technology leadership position us as a critical multi-generational partner, and our disciplined investment strategy has yielded us a proven track record of value creation. We hope today's discussion has provided you with a deeper understanding of our differentiated capabilities and our deliberate strategic positioning to capitalize on the unprecedented growth we see ahead. In closing, I want to extend our appreciation to our more than 34,000 global employees for their incredible efforts that make this all possible, and to our valued shareholders for your continued trust. Thank you all for joining us today.

We will now start the Q&A portion of our call, where we will also be joined by Gavin Cato, Senior Vice President, CCS Engineering. I will now turn the call back over to the operator to open the line for your questions.

Operator: Thank you. We will now begin the question and answer session. We ask that you please limit yourself to one question and rejoin the queue if you have a follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from David Vogt with UBS. David, your line is open. Please go ahead.

David Vogt: Great. Hey, guys, can you hear me? Just want to double-check.

Todd Ankenmann: We can hear you fine, David. Thank you. Sorry about that.

David Vogt: Hey. Hey, guys. All good. I was just asking, obviously you gave a lot of color, a lot of detail. We are going to get more at the investor event later today. Can you kind of speak to the demand drivers versus supply chain?

How you are thinking about how we should sort of think about whether it is silicon, optic supply, substrate supply, bureau manufacturing capacity supply in terms of how do we reconcile kind of the $40 billion number versus kind of the supply chain dynamics that are in the marketplace and how confident do you feel in terms of your ability to navigate a lot of the sort of challenges and hurdles that are out there in the marketplace today? I will turn it over since you guys got cut off.

Todd Ankenmann: Yeah. Thanks, David. It is Todd here. Our $40 billion guide took into consideration the risks around the ramps, the component availability, and the operational execution, David. At 90% year-to-year growth, we feel high confidence that number is supported. There are obviously opportunities to exceed that number due to those same factors. When you look at the fundamental drivers with the 800G, 1.6T, and solid resilient 400G on the networking side, there is a lot of demand upside. On the compute and storage, with the strong growth in the hyperscaler compute and Frontier, we feel pretty strongly on the $40 billion. It is second-half weighted when you look at how it is going to come to fruition.

Steve, do you want to add anything?

Steven Dorwart: Yeah. I just think that we have some comfort in what we see from the demand signals from our customers. We have the capacity in place to support the numbers that we have projected here and have more capacity to service upsides if they become available and the constraints start to break up. I think overall, good, very robust demand signals coming in, and the constraints are likely to be more in the areas of land and power and maybe some geopolitical forces and things like that would detract from that number. There is plenty of upside opportunity as well.

David Vogt: Great. All right. Thanks, guys. I will turn it back since we got cut off.

Operator: Your next question comes from the line of Kevin Krishnaratne with Scotiabank. Kevin, your line is open. Please go ahead.

Kevin Krishnaratne: Hey there. Are you able to hear me?

Todd Ankenmann: We can, Kevin. Go ahead.

Kevin Krishnaratne: Hey. Good morning. Thanks again. Interesting to hear the thoughts on the R&D spend picking up your 1,600 engineers moving to 2,000. I am wondering, three parts to the question. Where are you in the plan right now? How do you see that building over the coming quarters? Number two, can you talk about talent and where talent is coming from? Then more importantly, third, where is this going? Is this for programs into 2028 and beyond? You also talked about moving into other areas of the system, so I am just curious to unpack sort of the philosophy on your R&D investments. Thanks.

Gavin Cato: Hey. Sure. Hey, Kevin. It's Gavin Cato with the engineering side. I guess a few things. In terms of engineering, we continue to build. We've been adding, in general, about 500, 600 engineers a year. That's ramping a little bit more recently. We are getting them across the global sites. We have nine different locations, and so we're pulling them from the different sites. Primarily Austin and Taiwan have been ramping up significantly recently, as well as Silicon Valley. We are significantly building the U.S. presence right now in the talent plan. In terms of programs, we are engaged across the 27 programs, 2027 programs. We're wrapping them up. Most of those are in test phases at this point.

We are engaged actively and pretty heavily now in programs that are moving to 2028 and moving forward. It is a forward-leaning investment, and we're scaling that investment. At this point, we probably have 60-70 programs that we're actively engaged in. I think, did that hit all your points, Kevin?

Kevin Krishnaratne: Oh, yeah. Can you talk about other areas of the system, maybe elaborate on, yeah.

Gavin Cato: Yeah, sure. From a system level, networking is core. We continue to expand into the compute space, so we are seeing additional compute racks coming in, so that rack engagement, rack level work, is a primary focus for us. We do see opportunities to look at both memory and storage in terms of opportunities that they provide as rack architectures change. And we are seeing advancements in optical CPO, the work essentially in all the technology functions that underlie. So you're seeing some diversification in the capabilities in the rack themselves, and so we're covering that ground.

Kevin Krishnaratne: Great. Thanks a lot. I'll pass the line. Thank you.

Gavin Cato: Absolutely.

Operator: Your next question comes from the line of Joseph Cardoso with JPMorgan. Joseph, your line is open. Please go ahead.

Joseph Cardoso: Hey, thanks for the question, and good morning here. Guys, maybe I wanted to change or shift the conversation into the cash commentary that you guys had put out there. First and foremost, any way that you guys can put a range around 2027 net cash use and how you're thinking about cash cycle days that compose it? Then maybe more medium-term, what needs to happen for free cash flow conversion to turn positive again? Then are we on a path towards potentially that towards exiting 2027, or does this level of demand environment kind of keep that bogey in flux? So appreciate any kind of color you can provide here. Thank you.

Todd Ankenmann: Yeah. Thanks, Joseph. It's Todd here. Yeah. We reset 2026, the free cash flow forecast based on the increased demand outlook in 2026, going up $500 million-$21 billion. When you look at our 2027 view of the $40 billion and looking at the free cash flow there, it is going to be a year of investment to support that incremental $20 billion of revenue. As you're aware, we did raise $3.5 billion of equity in August, and we feel this should be sufficient to cover our needs. We have more than enough capital to execute to our current outlook with $4 billion of cash and additional liquidity available.

When you look at 2028 and beyond, we feel comfortable based on our current view that we're confident we'll be able to target to return to positive cash flow in 2028, Joseph.

Joseph Cardoso: Thank you. Appreciate the color.

Todd Ankenmann: Thanks for the question.

Operator: Your next question is from Karl Ackerman with BNP Paribas. Karl, your line is open. Please go ahead.

Karl Ackerman: Yes, thank you. You spoke about the rising complexity of next-generation switch designs, including the transition to liquid cooling and integrated optics on the board in switch silicon. How much of an influence on your improved margin outlook is coming from the rising complexity of these next-generation switch designs? Are you also able to improve margins on your server business as complexities rise there also, as well as your ability to support L11 capabilities that offer this full rack scale system approach?

Steven Dorwart: Thanks, Karl. This is Steve. Yeah. As we think about the different products that we are supporting for our customers and the things that are most attractive to us, we have the ability to be somewhat selective in terms of the things that we invest in and the things that we want to offer to our customers. Margin is certainly a factor that we consider, the products and the deal structures that will enable the best margins for us. We have. Sorry. You want to—

Todd Ankenmann: Yeah, I'll jump in. I'll add to that, Steve. When you think of it, looking at our gross margins exiting 2026, we feel pretty strongly that our margins will continue in 2027 in the low 11s. It will be dependent on mix between networking and compute. We still see networking being accretive from a margin perspective. When you look at that's leading to the continued, based on the additional revenue volume, the operating leverage that we're getting on our op margin and then the ability to expand to 9% in 2027.

Karl Ackerman: Thank you.

Operator: Your next question comes from Mehdi Hosseini with Susquehanna International Group. Mehdi, your line is open. Please go ahead.

Mehdi Hosseini: Yes. Thanks for taking my question. You did mention that 1.6T revenue should exceed 800G. Should I assume that majority of the transceivers are still going to be pluggable or a mix of linear pluggable and traditional pluggables?

Gavin Cato: No, this is Gavin. Good question, Mehdi. I think what we are going to do in 1.6T is certainly see a lot of the pluggable remain. I think you will see some efforts to prove out CPO capabilities or to prove out and look at NPO type capabilities. But I think you are going to see pluggables remain in the 1.6 timeframe. That is just the nature of the business. I think as you start to see 3.2T and 400 gig SerDes, I think that is where you are going to see CPO play more prominently.

Mehdi Hosseini: Great. I actually have one quick follow-up. I know we are supposed to ask one question, but given all the disruption. I see the compute and the storage growing relatively faster than networking in 2027. Is that specific to these ASIC projects that you have, or is that a combination of networking, more of a back-end loaded waiting for more pluggable come to the market? How should I think about the difference in the growth between networking and compute?

Steven Dorwart: Hi, this is Steve, Mehdi. I think that what we are seeing is what we are focusing on. We have done a lot of things to diversify the revenue streams that we receive from our customers and where we participate. And we have had this strong industry-leading position in networking, and now we are expanding and taking some of the core competencies and the capabilities that we have and that we have developed to be so successful in networking and taking it into the AI compute space.

And so we see a lot of growth just as a factor of the markets that we are addressing, the opportunities that we are addressing, and where our customers are focused in terms of custom solutions around the switching or the compute ASICs.

Mehdi Hosseini: Thank you.

Todd Ankenmann: Yeah, it's Todd here. I think the two key drivers in compute, looking at the TPU platform opportunity and then our OpenAI opportunity that we've announced before will ramp in 2027, but it will be second half weighted.

Operator: A reminder, we ask that you please limit yourself to one question and rejoin the queue if you have a follow-up. Your next question comes from the line of John Shao with TD Cowen. John, your line is open. Please go ahead.

John Shao: Good morning, guys. Thanks for taking my question. I heard that the OpenAI program is going to be H2 ramp-up. How about other new programs that's pretty much networking content heavy? Given some of these programs can be pretty material in terms of moving the needle, do you think the key metrics such as growth, gross margin is going to be different in H1 versus H2?

Todd Ankenmann: Yeah, John. No, I don't think there'll be different gross margin dynamics in 2027 between the two halves. It is dependent ultimately on the mix in the individual quarters, but we feel overall we'll have strong margins in 2027 at 11%.

John Shao: Thank you.

Operator: Our next question comes from the line of Daniel Zhu with Bernstein. Daniel, your line is open. Please go ahead.

Daniel Zhu: Yeah. Congrats on a great set of results. The inference scale-up design that you worked on for OpenAI Jalapeño focuses on expanding the scale of domains beyond a similar single rack. We are now seeing new designs from Broadcom and Nvidia that operate on similar design principles. Is there anything you can share about how the work you have done on Jalapeño has been received in terms of trying to win new programs with other potential customers that are trying to solve similar problems that OpenAI is?

Steven Dorwart: Yeah. This is Steve. I think that the work that we have done with OpenAI and the Jalapeño program is really serving as a strong proof point of our capabilities. It's certainly led to other opportunities. Just the way the ecosystem that OpenAI is engaged with is constructed, we will find a number of other opportunities to engage with other companies using this technology. Certainly, as I said, it's a proof point that we can demonstrate this strong capability that is attractive to other companies as well. So we have a strong funnel of opportunities. We are being somewhat selective about where we engage. But I think from a capability standpoint, certainly is an important program for us.

Gavin Cato: Yeah. I think one of the things that we see is the processes and the techniques that we've used to really look at the rack and delivering a full rack solution for OpenAI. That translates whether you're looking at full network racks or you're looking expansion of compute across multiple racks. That end-to-end solution is something that from the standpoint of our design capabilities or testing or validation, and the way we translate that into a manufacturing capability, is certainly differentiated at this point in time. It is helping us in those engagements.

Daniel Zhu: Got it. Thank you.

Operator: Your next question comes from the line of Michael Ng with Goldman Sachs. Michael, your line is open. Please go ahead.

Michael Ng: Hi. Good morning. Thanks for the question. I just wanted to ask about your CapEx outlook for 2027. Just given the strong pipeline that you have for 2028 and the very good ROICs that you're seeing on capital deployed today, how do you balance investing additional capital with the ROICs and making sure that you have enough capacity to capitalize on all the demand opportunity that you have? Thank you.

Todd Ankenmann: Yeah, Michael, we are always looking at our capacity requirements, but when you look at the CapEx forecast for 2027 of $1.5 billion-$2 billion, those approved investments are for awarded programs and already won and support the capacity needs for 2027 and 2028. We do have a strong process of looking at multiple different scenarios and outcomes around each of the investments. All of them do have strong ROIs and paybacks and support our ROICs continuing to be above our historical levels. We will reevaluate with new wins and new things as they come in, the needs of the capacity on a continuous basis, but we have a robust process as a leadership team to do that.

Michael Ng: Thank you, Todd.

Operator: Your next question comes from the line of Ruben Roy with Stifel. Ruben, your line is open. Please go ahead.

Ruben Roy: Yeah, great. Thank you. Rob or Todd, it is great to see the execution and the commentary, not just on 2027 guidance, but the stronger outlook extending into 2028. I am wondering if you could comment on how you are viewing that 2028 dynamic relative to follow-on generations. You talked about what is going on with Google and multiple generations at OpenAI. Is that driving sort of the confidence into 2028, or is there a portion of unawarded opportunities that you are considering? Just trying to understand how you are thinking about the longer-term dynamic there on extended visibility. Thank you.

Mandeep Chawla: Hey, Ruben, it's Mandeep. Nice to talk to you. We're very confident right now in 2028. The demand visibility is getting longer and longer. We know that material lead times were what was originally driving that. But with the capacity build-out plans that are needed to build data centers, it's extending even beyond that. We're having conversations right now with customers about programs that are going into 2029, and in some cases, even 2030. We're being awarded programs right now where the silicon has not yet been developed, but programs are expected to begin in 2028. It's just leading to very integrated conversations with our customers. The design cycles are very intertwined. Our R&D teams are working together.

It gives us a lot of confidence. To the points that have been raised by Todd earlier, the view that we have right now on capacity is for programs that have already been won. But the funnel of opportunities that we are continuing to engage with our customers on provide a meaningful level of upside opportunity, and that's what we're focused on. So we're focused on execution, but we're also focused on driving some additional opportunities which we think could really have a meaningful impact in 2028 and 2029.

Ruben Roy: Great detail. Thanks, Mandeep.

Mandeep Chawla: Thanks, Ruben.

Operator: Your next question comes from the line of Thanos Moschopoulos with BMO Capital Markets. Thanos, your line is open. Please go ahead.

Thanos Moschopoulos: Hi. Good morning. On scale-up in 2027, will that primarily be Helios and Jalapeño, or are there other programs expected to ramp as well? Heading into 2028, what will be the dynamic scale-up? Thank you.

Steven Dorwart: Yeah, this is Steve. I think, as you've described, that's where the predominant revenue will come from, are those programs that are wins for us. I think it represents an increasingly interesting space for us, an opportunity for us to expand into providing a broader range of solutions to our customers. Scale-up is something that's very attractive to us in participating in a bigger way. We have a number of opportunities that we're considering in the funnel, but you've mentioned the ones that we've named specifically. We're encouraged by what we see in this space.

Mandeep Chawla: Yes, I know. We have announced that we won 10, won 1.6T programs. When you look at those, four of them are scale up and six of them are scale out. I think when you look at those growing through 2027, that's going to be one of the growth drivers going into the networking space.

Thanos Moschopoulos: Thank you.

Operator: Your next question comes from the line of George Notter with Wolfe Research. George, your line is open. Please go ahead.

Taran Katta: Hey, guys. This is Taran on for George. Can you guys just talk a little bit about your significant funnel of pursuits, specifically the nature of the new large-scale engagements you guys are pursuing?

Steven Dorwart: Hi, this is Steve. Yeah, I think, as it relates to the AI compute space, hyperscale market in general and the emerging opportunities that we see with next generation adopters of these kinds of technologies and these models, I think there's a lot of opportunity available to us. It's more a matter of being selective about where we engage and being very deliberate about where we can actually bring differentiated value to these customers. We think about growing our business and diversifying across several dimensions. We've done a good job of adding customers, expanding our offerings, both in terms of products and value-added services, and participating with higher levels of completion on the products that we do for our customers.

So we've diversified in several ways, but I think that we also want to be careful about where we expand and what it means to our business. Certainly, we want to continue to execute as strongly as we have for the current base of customers that we are supporting today and looking to selectively add customers that may help us diversify our portfolio going forward. I think when we look at the funnel, we have got a strong demand from our current customers, and I would say it is at a historic high level.

But it is largely coming from our base customers, our core customers, and them recognizing the value that we can bring and directing more of their requirements to us. I think from a new customer perspective, it is a situation of, it is not always good to have all your eggs in one basket, but if you have got a very strong basket and you watch it closely, I think it is an acceptable place to be, and that is largely how I see it.

Taran Katta: Thank you.

Operator: Your next question comes from the line of Steven Fox with Fox Advisors LLC. Steven, your line is open. Please go ahead.

Steven Fox: Hey, good morning. I was curious if you could dig in a little bit more into the manufacturing advantages you talked about going forward and how they maybe, as you ramp them, hurt the gross margins and eventually help the gross margins. Thanks.

Mandeep Chawla: Yeah. Hey, Steven, it's Mandeep here. I would say two things. The first one is actually reiterating that the CapEx that we're putting in place by the end of 2026 will really enable the revenue in 2027. What you're seeing is very targeted investments in specific areas. We're growing significantly in our campus in Thailand, where we have very robust capabilities that go back frankly, decades. We're investing in Malaysia, we're investing in Japan, and we're investing substantially in Texas as well. What this is really doing is supporting our customers from a regionalization perspective, and really giving them that global end-to-end solution.

As a result of having these focused investments, we're driving a very high level of productivity and our operating leverage is continuing to help us, and we're seeing that scaling benefit, and we're being very thoughtful and disciplined on driving cost leverage and very good productivity in our sites. To your point on the margin profile, so area that we're focused on is really to have not only expanded or increased levels of square footage, but increased levels of power availability. We are increasing our overall power offering substantially as we go between 2025 into 2026 and 2027, and even for plans that we've already made for 2028.

Because of those investments that we're making in both square footage and power, it's allowing us to capture program wins that many of our competitors have not been able to secure. Those are leading to HPS type of engagements, where we're able to then bring engineering to the table, and that's ultimately leading to strong pricing and good margins as well. There's a lot of different factors that we put into place when we're pursuing the wins that Steve talked about. We don't pursue every opportunity that's in front of us. We're quite targeted to try and get the ones that we believe are the best for our portfolio.

Steven Fox: Great. Thank you.

Operator: Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Ruplu, your line is open. Please go ahead.

Ruplu Bhattacharya: Hi. Thanks for taking my question, and congrats to Mandeep and Todd for their new roles. My question is, how should investors reconcile the recent $3.5 billion equity raise that you did with the now proposed NCIB covering up to 2.5% of the float? Is the repurchase primarily intended to offset stock-based comp, or could this be meaningful capital return? And maybe you can weave in how much revenue can your existing footprint support, and do you have any flexibility for acquisitions? Thank you.

Todd Ankenmann: Yeah. Thanks, Ruplu. It's Todd here. Look, we renewed our NCIB program to purchase up to 2.5%. We'll be opportunistic on the timing. The priority and focus of our capital is on the organic growth to support the $20 billion growth we see into 2027 and the substantial growth we see beyond that into 2028. So that will be the focus of where we're going to do that. It is a Canadian requirement to renew the program on an annual basis, so that's one of the things we had to pursue and renew the NCIB program, Ruplu.

Mandeep Chawla: On M&A, Ruplu, we do remain. On M&A, you asked, we do have an active funnel, and we've been very targeted in that, largely capability-driven at this stage of the game. And we do have the capability to do both.

Ruplu Bhattacharya: Thanks, Todd. Part of my question was how much revenue can the current infrastructure support? Any guidance on that? Thank you.

Todd Ankenmann: Yeah. We won't give a revenue figure specifically tied to capacity because it's unique to the mix of the production and the individual customer programs, Ruplu. But we feel we've got the capacity needed with the investments in 2027 to support our requirement for 2027 and 2028.

Ruplu Bhattacharya: Thank you.

Operator: Your next question comes from the line of Todd Coupland with CIBC. Todd, your line is open. Please go ahead.

Todd Coupland: Oh, great. Thanks, and good morning, everyone. Hopefully this question wasn't asked before I got back on. I was curious, with the labs starting to ramp more materially in 2027 and 2028, how would you characterize their ability to make the spend that you're building into their forecast? In other words, do they have the financing in place now, or is that required? Just frame that up for us for 2027 and 2028. Thanks a lot.

Todd Ankenmann: Yeah. We're always looking at our customers are well-funded, Todd. We see no financial distress across our portfolio. We engage regularly on their funding and liquidity, and we see no concerns that they have low liquidity to support the outlooks. We do look at their third-party funding support or contractual backstops when necessary. But at this point, we feel our customers are well-funded and have liquidity to support the business as we see it.

Mandeep Chawla: One thing I'll just add to that, Todd, is as you know, because of the lead times of materials, we're having conversations with our customers on what their demand outlook is three, four, five quarters out in a very detailed way, and then we're bringing that inventory in. When we're bringing that inventory in, it's assessed on the credit that they have in the moment. We do have very open conversations. We have no concerns with some of the largest companies in the world. We do know that other customers are growing very rapidly from a smaller base. We've closely tied out with them on what their credit is, and we don't have any concerns at this time.

Operator: Your next question comes from the line of Robert Young with Canaccord Genuity. Robert, your line is open. Please go ahead.

Robert Young: Hi. Good morning. Over the last few quarters, you've noted several times that you're carrying very high levels of utilization in the factory. You never really given historical quantitative numbers around that. But given this enormous amount of revenue that you're adding in 2027, and the capacity expansion, how confident are you that you can keep the utilization that high, and how important is that to maintain the operating margins and getting to that 9% number? Maybe give us just some historical context around how you've been able to manage these adds to capacity and keep utilization high, whether that's important. Thanks.

Mandeep Chawla: Yeah. Hey, Rob, it's Mandeep here. Look, high utilization isn't by accident. We're deliberate in when we try and drive it, and we've been able to do that successfully now for many, many years. When we're adding on capacity, we want to make sure that the right space is being used and it's being used to the highest returns. So back to a point that Steve was making earlier, we do compare different opportunities in our funnel knowing that we can't bring on everything into our factories, and we want to make sure that we get the best yield for it. We are running at a high level of utilization, specifically in the factories that I mentioned.

When we're adding on capacity, it's because they run out of space. But we don't want to add on just more space and then go and fill it. It's tied to a business case, and so we want to know that we can fill that capacity in a relatively short period of time. In Asia, we're able to get new capacity online, sometimes in as little as 12 months. Takes a little bit longer in the U.S., but at the same time, the roadmaps that we have with our customers match up to it. But we do expect high utilization in 2027, and we are working towards high utilization in 2028 as well.

Operator: Your final question comes from the line of Paul Treiber with RBC Capital Markets. Paul, your line is open. Please go ahead.

Paul Treiber: Oh, thanks. Thanks for taking the question. Just a follow-up to one of Mandeep's previous comments just in regards to competition, in regards to power availability and manufacturing capability, which have been helping drive wins. Steve, is supply availability becoming more important than design in engineering capabilities for next generation wins, or is it fairly balanced between those two? Can you comment on the competitive ecosystem overall, particularly for full rack solutions, just giving increasing complexity and scale. Are you seeing fewer competitors that can pursue these programs?

Steven Dorwart: Yeah, this is Steve. Some important questions you've raised there and something that we're always being very mindful of is just what is it that will drive the outcomes that we're looking for from our customers. Certainly the design piece and the ability to support leading-edge technologies, making the investments as we've outlined in R&D and building these strong ecosystem partnerships with key technology providers is really critical to our ongoing success, we feel. So this is a priority. We also look at what capacity that we can make available in the time frames required.

We're fortunate, I would say, in that we're not in a situation of having to compete for share on a regular cadence or a regular basis, much like you would expect in a more common or commoditized product space. We are dealing with more complex, more bespoke kinds of solutions for our customers. And with that, there's a fair amount of co-investment. And with that, the customers and ourselves are aligned on maximizing the utilization and getting the maximum output from those investments. So I think in that regard, that's the second thing. And I believe you may have had a third part to that question.

Paul Treiber: Yes, just the overall competitive ecosystem and the increasing complexity in scale. Are you seeing fewer competitors?

Steven Dorwart: Yeah. Certainly, where we believe we've had a lot of success in this space, it's going to invite competition. We do have additional competitors. But as I mentioned, we're kind of in a space where our share is derived by a number of factors, and it's something that we usually are negotiating with our customers on a regular basis. As I said, they have a mutual interest in getting the maximum return on the investments they've made with us. But also where our products are in the life cycle is also a factor.

For example, a customer may choose to move an older product away from us to ensure that we can have focus and capacity available for next generation or new products. I think from a competitive standpoint, I think we're in a very strong space.

Mandeep Chawla: I'll just add one thing, Paul, to your point on the competitive landscape and to the remarks that we made when the prepared remarks. We really are focused on building competitive moats in the areas that we're focused on. On the networking side, the complexity of the products are continuing to grow as you go to every subsequent generation. There are fewer competitors today that we are going up against on the 1.6 and on the 800G programs than there were on earlier generations. We think that as the industry moves towards things like 3.2 and as scale-up becomes more broad-based, we think that our offering is going to be very, very well received because of many years of investment.

On the enterprise side and on the compute side, as Gavin talked about, the solutions that we have with OpenAI are really a good proof point of where a lot of the industry is going, and that's the integrated rack. Being able to be vertically integrated and having proficiency in both compute and networking, being able to put it all together and then liquid cool that rack, and then in addition to that, being able to bring services to it, is difficult. As we continue to have proof points there, we do believe that not all competitors will stay for the journey.

There certainly are competitors, but we do think that we're building more and more proof points, which are being well received by our customers.

Operator: We have reached the end of our Q&A session. I will now turn the call back to Rob Mionis, CEO, for closing remarks.

Rob Mionis: Thank you all for joining us. Obviously, the folks hosting the call were not using Celestica-designed networking or compute hardware. We look forward to seeing most of you, if not all of you, this afternoon. If we did not get to your questions, we will certainly try to get to them this afternoon. Thanks for your continued support. Have a great day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Should you buy stock in Celestica right now?

Before you buy stock in Celestica, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Celestica wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $344,608!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,327,222!*

Now, it’s worth noting Stock Advisor’s total average return is 904% — a market-crushing outperformance compared to 211% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

See the 10 stocks »

*Stock Advisor returns as of October 27, 2026.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has positions in and recommends Celestica. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.

Popular Articles

Popular Articles

Popular Articles

Popular Articles

Popular Articles

Popular Articles

Popular Articles

Popular Articles

Popular Analysis

Popular Analysis

Popular Analysis

Popular Analysis

Popular Analysis

Popular Analysis

Top Blog Posts

Top Blog Posts

Top Blog Posts

Top Blog Posts

Top Blog Posts

Top Blog Posts

Top Blog Posts

Top Blog Posts

Beginners

Celestica (CLS) Q3 2026 Earnings Call Transcript

DATE

CALL PARTICIPANTS

TAKEAWAYS

RISKS

SUMMARY

INDUSTRY GLOSSARY

Full Conference Call Transcript

Should you buy stock in Celestica right now?

Recommended Articles