Celestica (CLS) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue reached $2.65 billion, up 20% year-over-year, surpassing the high end of guidance, with adjusted EPS of $1.20, a 45% increase, and record adjusted operating margin of 7.1%.

• CCS segment led growth, driven by hyperscaler and HPS networking demand, while ATS also outperformed.

• Net earnings were $86.2 million, down 6% year-over-year, mainly due to higher SG&A and tax expense despite higher gross profit.

• Macro environment remains dynamic due to trade policy, but recent U.S. exemptions for key IT hardware provide near-term clarity.

• Repurchased 0.6 million shares for $75 million in Q1 2025.

Financial highlights

• Adjusted gross margin was 11.0%, up 110 basis points year-over-year; gross margin improved to 10.3%.

• Adjusted operating margin reached 7.1%, up 120 basis points; adjusted operating earnings rose 44% to $187.8 million.

• Adjusted ROIC was 31.5%, up from 23.8% in Q1 2024.

• Free cash flow for Q1 was $93.6 million, up from $67.7 million.

• SG&A expenses rose 74% to $112.5 million, mainly due to unfavorable TRS fair value adjustments and higher compensation.

Outlook and guidance

• FY 2025 revenue outlook raised to $10.85 billion (12% growth); adjusted EPS outlook raised to $5.00.

• Q2 2025 revenue guidance: $2.575–$2.725 billion; adjusted EPS: $1.17–$1.27; adjusted operating margin expected at 7.2%.

• Free cash flow outlook for 2025 remains $350 million.

• Management expects capital spending for 2025 to be 1.5%–2.0% of revenue, funded by cash and credit facilities.

• Communications revenue expected to increase high-fifties percent year-over-year in Q2 2025; Enterprise to decrease low-forties percent.