Celestica ((TSE:CLS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Celestica’s recent earnings call painted a picture of robust performance, underscored by record-breaking revenue and impressive growth metrics, particularly within the CCS segment. The company expressed optimism for future quarters, buoyed by strategic investments in R&D and capacity expansion. Despite some challenges in the ATS segment and a downturn in the enterprise market, the positive elements of the report significantly overshadowed these concerns, indicating a strong overall sentiment.
Record-Breaking Revenue and Growth
Celestica reported a remarkable revenue of $3.19 billion, marking a 28% increase that surpassed the high end of their guidance range. This growth was primarily driven by strong demand in the communications end market. The adjusted earnings per share for the quarter rose to $1.58, reflecting a substantial increase of 52%.
Strong Performance in CCS Segment
The CCS segment was a standout performer, with revenue soaring to $2.41 billion, a 43% increase. This was fueled by an 82% surge in communications end market revenues, significantly exceeding the guidance of low 60s percentage growth.
Improvement in Non-GAAP Operating Margin
Celestica achieved its highest quarterly non-GAAP operating margin in history at 7.6%, an improvement of 80 basis points. This milestone underscores the company’s operational efficiency and robust financial health.
Investment in R&D and Capacity Expansion
The company has significantly ramped up its R&D spending, with a more than 50% increase this year and plans for a further 50% rise by 2026. Additionally, Celestica is expanding its capacity in Texas and Asia to meet rising demand and support program ramps.
Decline in ATS Segment Revenue
The ATS segment experienced a 4% decline in revenue, totaling $781 million. This decrease was attributed to portfolio reshaping within the A&D business, highlighting a strategic shift in focus.
Challenges in Enterprise End Market
Revenue in the enterprise end market fell by 24%, aligning with guidance due to a technology transition in an AI/ML compute program. This reflects ongoing adjustments in response to market dynamics.
Inventory Increase
Celestica’s inventory balance increased by $226 million year-over-year, ending at $2.05 billion. This rise in inventory is indicative of the company’s preparation for future demand and program expansions.
Positive Guidance for Q4 and 2025 Outlook
Looking ahead, Celestica provided optimistic guidance for the fourth quarter of 2025, with projected revenue between $3.325 billion and $3.575 billion, representing a 36% growth at the midpoint. The company also raised its full-year 2025 revenue outlook to $12.2 billion, reflecting a 26% growth, and adjusted EPS projection to $5.90, indicating a 52% increase.
In conclusion, Celestica’s earnings call conveyed a strong positive sentiment, driven by record-breaking revenue and growth, particularly in the CCS segment. While challenges in the ATS segment and enterprise market were noted, the company’s strategic investments and optimistic guidance for future quarters highlight a promising outlook.