The Celestica story

What drives the business

• Celestica's strategic shift is toward designing customized platforms for hyperscalers rather than only manufacturing customers' designs, with Hardware Platform Solutions typically earning higher margins than traditional electronics manufacturing but requiring dedicated research and development investment.
• Connectivity & Cloud Solutions, or CCS, supplies networking switches, optical systems, racks, servers and storage for cloud and AI infrastructure, and its revenue increased 42% to $9.19 billion in 2025.
• In the quarter to June 2026, CCS revenue grew 84% to $3.81 billion and segment margin rose to 8.7% from 8.3%, while its Hardware Platform Solutions business generated approximately $1.9 billion, up 58%.
• Advanced Technology Solutions serves aerospace and defense, industrial, HealthTech and capital equipment customers, with revenue increasing 8% to $0.89 billion and segment margin improving to 6.3% from 5.3% in the quarter to June 2026.
• In April 2026, Celestica amended its senior credit agreement with Bank of America as administrative agent, increasing revolving credit commitments from $750.0 million to $1,750.0 million.

What the price assumes

At $388.24, the reverse DCF implies that free cash flow after stock pay grows 30.6% a year for ten years, using a 10.3% discount rate.

Celestica delivered 96.6% annual growth on that measure over the last 3 fiscal years, while the TenQ check sets a 50.3% bar by slowing that record halfway toward 4%.

The implied growth clears that check, but a short historical record and a decade of assumed compounding cover very different spans.

Value CLS on your own assumptions

What could change the story

• The shift toward CCS increases concentration in major customers, making changes in hyperscaler deployment plans, component availability and production schedules more consequential as Celestica expands capacity.
• Margins remain below the TenQ sector benchmarks despite their improvement, with an operating margin of 8.8% against 10.7%, leaving less room to absorb execution costs than that benchmark.
• The near-term liquidity check fails at 1.23 against its 1.50 bar, while total debt of $810 million exceeds cash and short-term investments of $536 million.
• GAAP EPS of $3.17 in the quarter to June 2026 included a positive $0.90 per share pre-tax impact from the total return swap agreement, a noncash adjustment that does not reflect ongoing operating performance.
• Only 1 of 6 TenQ Value checks passes, with the 1.2% free cash flow yield below Celestica's historical 7.7%, so the favorable reverse DCF comparison does not extend across the other valuation checks.

What to watch next

• For the quarter to September 2026, management expects revenue between $5.25 billion and $5.55 billion, adjusted EPS between $2.88 and $3.08, and adjusted operating margin of 8.4% at the midpoint.
• Cash generation and spending on capacity will test the 2026 outlook for $20.5 billion in revenue and $600 million in free cash flow.
• New program launches, CCS margins and customer forecasts will help test management's expectation that 2027 revenue growth exceeds the 65% anticipated for 2026, with adjusted EPS growing faster than revenue.
• The August 2026 underwriting agreement makes financing terms and diluted share count important follow-up items, since the July 2026 outlook assumed no share repurchases or issuances for the remainder of 2026.

Sources

• Celestica's earnings release, filed with the SEC
• Its latest 10-Q or 10-K, for the risk factors
• The CLS stock report, for every figure and check