Celestica (CLS 1.87%), a global electronics manufacturing services provider with a focus on Advanced Technology Solutions and Connectivity & Cloud Solutions, reported earnings for Q2 2025 on July 28, 2025. The company delivered GAAP revenue of $2.89 billion, well above the $2.68 billion analyst consensus, and adjusted earnings per share (non-GAAP) of $1.39, exceeding the $1.24 expected by analysts. These results marked year-over-year growth of 21% for revenue and 54% for adjusted EPS (non-GAAP). Celestica also raised its full-year 2025 outlook for revenue, adjusted EPS (non-GAAP), adjusted operating margin (non-GAAP), and free cash flow (non-GAAP). The period was notable for strong performance in the Connectivity & Cloud Solutions segment, alongside growth in the Advanced Technology Solutions segment. Overall, the quarter reflected robust demand, margin gains, and solid cash flow, although customer concentration remains a key risk for future volatility.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| Revenue (GAAP) | $2.89 billion | $2.68 billion | $2.39 billion | 21 % |
| EPS (Non-GAAP) | $1.39 | $1.24 | $0.90 | 54 % |
| Operating Margin (GAAP) | 9.4 % | 5.6 % | 3.8 pp | |
| Adjusted Operating Margin (Non-GAAP) | 7.4 % | 6.3 % | 1.1 pp | |
| Free Cash Flow (Non-GAAP) | $119.9 million | $65.6 million | 82.8 % |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Strategic Focus
Celestica is a leader in the electronics manufacturing services industry. It helps original equipment manufacturers and cloud providers design, engineer, and manufacture technology products. The business operates in two segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS).
Recently, Celestica has focused on expanding its offerings for high-value programs, such as data center hardware and next-generation networking equipment. Key success factors include technological innovation, strong supply chain management, and a balanced segment portfolio. However, maintaining stability depends on diversifying the customer base and staying competitive in technology and service quality.
Quarter Highlights: Financial and Operational Developments
Revenue grew 21% compared to the same period last year. The company exceeded both its own guidance and Wall Street expectations, with actual GAAP revenue reaching $2.89 billion versus the $2.68 billion analyst consensus. Adjusted EPS (non-GAAP) came in at $1.39, far above the $1.24 estimate, rising 54% compared to Q2 2024. The adjusted operating margin (non-GAAP) hit a company record of 7.4%. Management attributed this outperformance mainly to higher demand in the Communications end market and strong execution across both business segments.
The Connectivity & Cloud Solutions (CCS) segment led the quarter, delivering revenue of $2.07 billion, up 28%. Within CCS, Hardware Platform Solutions (HPS) revenue reached approximately $1.2 billion, 82% higher than Q2 2024. This growth was driven by continued demand for data center hardware, particularly networking switches for artificial intelligence and machine learning applications. The CCS segment margin improved to 8.3%, up from 7.0% in the prior year period, driven by operating leverage and favorable product mix.
Advanced Technology Solutions (ATS) posted revenue of $820 million, up 7% from last year. ATS segment margin improved to 5.3%, compared to 4.6% in Q2 2024. Margin gains here were supported by management's exit from a low-margin aerospace and defense program, which helped improve overall profitability for the segment. Despite this, ATS growth remained moderate, and management described the segment as stable but less robust than CCS in terms of revenue acceleration, with ATS segment revenue increasing 7%.
The period also saw a meaningful increase in free cash flow, with $119.9 million (non-GAAP) generated, up 83% year-over-year. Net cash from operations (GAAP) was $152.4 million, and capital allocation included share repurchases totaling $40.0 million. While Celestica benefited from a $0.84 per share gain related to a total return swap (TRS), this was a non-cash, non-core gain and excluded from adjusted results. Restructuring and other charges were somewhat higher than anticipated but not material to ongoing operations. The balance sheet remained healthy, with total assets of $6.24 billion and cash on hand of $313.8 million.
Product Families and Technology Initiatives
Celestica's HPS product family consists mainly of data center hardware such as networking switches and integrated rack systems, which support the buildout of cloud and artificial intelligence infrastructure. In the current period, HPS saw continued adoption of 400G and 800G networking switches, both essential for high-speed data transmission in large data centers, and management noted that 800G would represent more than half of networking switch volumes for FY2025, while 400G is expected to maintain a long sales tail due to continued demand.
The company also secured new business for high-speed optical transceivers, key components that enable rapid data transfer over fiber optics in data centers. A major OEM awarded Celestica a new program to produce 800G optical transceivers, and the ramp for these products will begin in the second half of the year. Looking forward, Celestica is developing next-generation 1.6T switches for even greater capacity, keeping its technology roadmap on the leading edge. In its ATS segment, the company maintained its strategy of focusing on higher-margin capital equipment, industrial, and health tech programs, and exited a low-margin aerospace and defense program.
Customer concentration remains a central issue. The top ten customers accounted for 73% of revenue in 2024, with the two largest representing 28% and 11%, respectively. Management continues to monitor this dependency, especially as hyperscalers (large cloud providers) drive a rising share of business. The acquisition of NCS Global, a services company, is helping expand higher-margin offerings, complementing Celestica's capabilities in full product lifecycle support and after-market services.
New design wins in optical and rack systems, combined with the company's ability to transfer production across global facilities (notably to the U.S. and Mexico when needed), position Celestica to adapt to shifts in trade policy and customer demand.
Looking Ahead: Guidance and Key Watchpoints
Celestica raised its full-year 2025 guidance. New targets for FY2025 are revenue of $11.55 billion (up from $10.85 billion) and adjusted EPS (non-GAAP) of $5.50 (up from $5.00). Adjusted operating margin (non-GAAP) is now forecast at 7.4%, compared to the previous 7.2%. Management expects non-GAAP free cash flow of $400 million for FY2025, a $50 million increase over prior guidance. For Q3 2025, projected revenue ranges from $2.875 to $3.125 billion, with adjusted EPS (non-GAAP) between $1.37 and $1.53, and an adjusted operating margin (non-GAAP) of 7.4%.
Investors should closely monitor customer concentration in coming quarters, as the largest hyperscalers continue to drive much of the top-line and profit momentum. Any change in capital investment plans by cloud providers could materially affect Celestica’s performance. Stability in the ATS segment, continued innovation in networking products, and successful integration of higher-margin services will be important factors as Celestica aims to deliver on its elevated guidance.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
