Celestica Inc. saw its shares drop sharply on Tuesday, even as the Toronto-based electronics manufacturer raised its 2026 revenue and profit targets following a robust first quarter driven by artificial intelligence infrastructure demand. The stock fell about 15% to $357.45 in New York trading, after opening at $382.00.
Strong Q1 Results
First-quarter revenue surged to $4.05 billion, up 53% from $2.65 billion a year earlier. On a GAAP basis, earnings per share came in at $1.83. Adjusted EPS—excluding stock-based compensation, amortization, and restructuring charges—reached $2.16, well above the $1.20 posted in the prior-year period. CEO Rob Mionis described the company's 8.0% adjusted operating margin as a 'new milestone.'
Outlook Raised
The company boosted its 2026 revenue target to $19.0 billion, up from $17.0 billion. Full-year adjusted EPS guidance was raised to $10.15 from $8.75. For the second quarter, Celestica expects revenue between $4.15 billion and $4.45 billion, with adjusted EPS in the $2.14 to $2.34 range. Free cash flow guidance remains unchanged at $500 million.
Segment Performance
The Connectivity & Cloud Solutions (CCS) segment, which includes communications gear, enterprise servers, and storage, led growth with a 76% revenue surge to $3.24 billion. Hardware Platform Solutions followed, up 63% to around $1.7 billion. Advanced Technology Solutions, covering aerospace, defense, industrial, HealthTech, and capital equipment, remained essentially flat at $810 million, though margins improved.
Market Context
The decline underscores just how demanding expectations have become for AI infrastructure suppliers. Celestica is now viewed as a key player in the AI data-center buildout, but the stock's pullback suggests that much of the rapid growth may already be priced in. The company's cautious free cash flow outlook and potential need for additional capital for capex or acquisitions also weighed on sentiment.
Balance Sheet Moves
Celestica recently amended its credit agreement, expanding its revolving credit line to $1.75 billion from $750 million. It also converted an existing term loan into a new $250 million Term A facility, with both the revolver and Term A loan maturing in April 2031.
Industry Trends
The broader electronics manufacturing services sector is increasingly competing for AI-driven cloud, networking, and data-center projects. Rivals such as Flex, Sanmina, and Jabil are also pursuing expansion strategies. Jabil recently projected stronger-than-expected sales and earnings, fueled by AI demand from data centers.
Investor Takeaway
While Celestica's numbers reflect solid demand, the stock's reaction highlights the challenge of outpacing a market that has already priced in rapid growth. Execution remains key, especially as the company navigates capex needs and refinancing risks. The raised guidance is a positive signal, but investors are looking for sustained profitability and cash flow generation.
