# Celestica (CLS) Investment Analysis: Growth, Risks, Scenarios, and Management Review

> This investment thesis evaluates Celestica, Inc. (NYSE: CLS), a key player in power electronics and connectors within the electrical sector. The analysis examines Celestica’s business model, management quality, future growth opportunities, and potential risk-reward outcomes across multiple scenarios, offering a focused view of what could drive or challenge the stock’s long-term performance.

**Companies**: Celestica, Inc. Common Stock
**Sectors**: Electrical Equipment
**Published**: 2026-08-24
**Last Updated**: 2026-08-24
**Source**: https://thesisloop.ai/thesis/celestica-cls-investment-analysis-growth-risks-scenarios-and-management-review-d73ccbf6-ab69-444a-83ac-b11ca95abe4b

## Score Overview

| Company | Management | Business Model | Future Growth | Risk |
|---------|-----------|---------------|--------------|------|
| Celestica, Inc. Common Stock | 70/100 | 63/100 | 60/100 | 77/100 |

## Celestica, Inc. Common Stock (NYSE:CLS)

**Sector**: Electrical Equipment | **Industry**: Power Electronics & Connectors

### Management Credibility

- Management expects to continue repatriating funds from foreign subsidiaries, with potential additional tax liabilities accounted for in the financial statements. (+1 more commitment) (NEUTRAL)
  > We have repatriated and expect to continue repatriating funds from our foreign subsidiaries. Repatriation of certain foreign funds could result in additional tax liabilities under current tax laws. We have recorded tax liabilities in our consolidated financial statements for the anticipated repatria
- **[CATALYST] Power Electronics And Connectors Earnings and Guidance Reset** (POSITIVE, REVISED): The prior 1.5%-2.0% range was narrowed to approximately 1.5% of revenue, at the lower end of the previous range. YTD capex was $106.5 million, or approximately 1.22% of YTD revenue. (1 revised across 1 tracked commitment)
  > We currently estimate that capital spending for 2025 will be approximately 1.5% of revenue (at the lower end of our previous estimate of 1.5% to 2.0% of revenue).
- **[CATALYST] Power Electronics And Connectors Product or Capex Inflection** (POSITIVE, MET): The 2025 commitment was previously due and the current filing provides comparative 2025 data. 2025 capex was approximately $185.3 million, or about 1.4% of 2025 revenue of approximately $12.9 billion, which is within the stated range using the company's approximate figures and rounding. (1 met across 1 tracked commitment)
  > We currently estimate that capital spending for 2025 will be approximately 1.5% to 2.0% of revenue, and expect to fund these expenditures from cash on hand and through the financing arrangements described below under "Capital Resources."
- **[METRIC] Power Electronics And Connectors Balance Sheet Resilience** (POSITIVE, MET): Finance costs were funded while the company maintained positive operating cash generation and cash on hand. YTD operating cash flow was $408.9 million, and cash at September 30 was $305.9 million. (4 met across 4 tracked commitments)
  > Annual interest expense and fees under the Credit Facility, including the impact of our interest rate swap agreements, based on amounts and swap agreements outstanding at June 30, 2026 are approximately $46 million. We expect to fund our finance costs with cash on hand.
- **[PRINCIPLE] Power Electronics And Connectors Capital Allocation** (NEUTRAL, IN_PROGRESS): The company recorded $18.9 million of restructuring charges YTD and held a $4.4 million restructuring provision at September 30, which management stated it intends to fund with cash on hand. Actual settlement of the remaining provision was not yet reported. (2 in progress across 2 tracked commitments)
  > We intend to file a notice of intention with the Toronto Stock Exchange (TSX) to commence a new NCIB in Q4 2025, after our current NCIB expires on October 31, 2025. If this notice is accepted by the TSX, we expect to be permitted to repurchase for cancellation, at our discretion during the twelve (1
- **[PRINCIPLE] Power Electronics And Connectors Revenue Quality** (NEUTRAL): Management plans to continue diversifying its customer base and developing new capabilities, subject to market and execution conditions.
  > Our material assumptions include: growth in manufacturing outsourcing from customers in diversified markets; our ability to retain programs and customers, including no unexpected customer or program transfers, losses or disengagements; no unforeseen adverse changes in our mix of businesses; no undue
- **[TREND] Power Electronics And Connectors Demand Cycle** (NEUTRAL): Continue pursuing growth in data-center networking, AI/ML compute, cloud and hyperscaler programs, including scaling operations and capacity to meet anticipated customer demand.
  > This demand growth has required our business to place a greater focus on various operational factors, including the management of our manufacturing capacity, human capital dedicated to these programs, supply chain, capital investments, and working capital requirements.
- **[TREND] Power Electronics And Connectors Supply Chain Reconfiguration** (NEUTRAL): Management intends to continue hedging foreign-currency exposure from operating costs and future cash flows, generally for periods of up to twelve months.
  > We enter into foreign currency forward contracts to hedge our cash flow exposures and swaps to hedge our exposures of monetary assets and monetary liabilities (economic hedges), generally for periods of up to 12 months, to lock in the exchange rates for future foreign currency transactions, which is

### Business Model

- Celestica designs, manufactures, tests, and manages supply chains for technology products made for cloud, communications, data-center, aerospace, defense, industrial, and health-care customers, generating Q2 2026 revenue of $4.70 billion. (NEUTRAL)
  > Celestica is a technology leader with deep expertise in design, engineering, manufacturing, supply chain and platform solutions. Celestica enables critical data center infrastructure for AI, cloud and hybrid cloud, and advances technologies in high-growth markets. ... We operate a network of sites a
- **[CATALYST] Power Electronics And Connectors Product or Capex Inflection** (POSITIVE, Change: EXPANDING): Hardware Platform Solutions shifted from an important contributor to the central growth driver. It represented 30% of Q3 FY24 revenue and 44% of Q3 FY25 revenue, with revenue rising 79% to approximately $1.4 billion. Year-to-date share also increased from 28% to 42%. This reflects accelerating hyperscaler networking-switch volumes and indicates a stronger concentration in AI and data-center infrastructure. (5 expanding across 1 engine)
  > Enterprise end market revenue increased $724.0 million (167%) in Q2 2026 compared to Q2 2025, driven by the continued ramp-up of an AI/ML compute program with a hyperscaler customer and increased demand in our storage programs.
- **[METRIC] Power Electronics And Connectors Balance Sheet Resilience** (POSITIVE, Change: SHIFTED): Financial capacity improved year over year, with cash increasing 41% and operating cash flow increasing 39%. However, the company is moving into a much more capital-intensive expansion phase: FY25 capex was $201.2 million, while planned FY26 capex is approximately $1 billion. Debt remained broadly stable, so the balance-sheet moat improved in liquidity but became more exposed to execution and funding needs. (1 shifted)
  > Based on our current cash flow budgets and forecasts of our short-term and long-term liquidity needs, we continue to believe that our current and projected sources of liquidity will be sufficient to fund our anticipated liquidity needs for the next twelve months and beyond. Specifically, we believe 
- **[METRIC] Power Electronics And Connectors Free Cash Flow** (NEUTRAL, Change: SHIFTED): Balance-sheet capacity remained supportive but became more working-capital intensive. Operating cash flow improved 24% year to date, and free cash flow rose 44%, while term-loan borrowings declined modestly. However, cash fell from $423.3 million at year-end 2024 to $305.9 million at September 30, 2025, and accounts receivable and inventories increased materially to fund CCS growth. The later Q2 FY26 baseline shows stronger liquidity, so the balance-sheet moat subsequently improved. (2 expanding, 1 shifted)
  > Our non-GAAP free cash flow of $302.4 million for YTD 2025 increased $92.3 million compared to YTD 2024 ... At September 30, 2025, we had cash and cash equivalents of $305.9 million.
- **[METRIC] Power Electronics And Connectors Margin Profile** (POSITIVE, Change: EXPANDING): ATS was broadly stable to modestly expanding in absolute revenue, but it lost strategic weight in the company. Q3 FY25 revenue declined 4% year over year because Celestica discontinued a margin-dilutive aerospace and defense program; year-to-date revenue still rose 2%. Its share fell from 33% in Q3 FY24 to 24% in Q3 FY25, while margin improved from 4.9% to 5.5%. The later Q2 FY26 baseline shows recovery to 19% share, 8% year-over-year growth, and a 6.3% margin. (2 shifted, 2 expanding across 1 engine)
  > ATS segment revenue for Q2 2026 increased $69.2 million (8%) compared to Q2 2025, driven by revenue increases in each of our ATS businesses.
- **[METRIC] Power Electronics And Connectors Revenue Growth** (POSITIVE, Change: EXPANDING): Communications was the strongest growth engine. Its share of revenue rose from 42% in Q3 FY24 to 61% in Q3 FY25, while revenue increased 82%, driven by data-center networking demand and switch-program ramps. The later Q2 FY26 baseline reports a 56% share, so the latest baseline remains materially above Q3 FY24 but below the Q3 FY25 peak. (5 expanding across 1 engine)
  > Communications end market revenue increased $1,012.0 million (62%) in Q2 2026 compared to Q2 2025, driven by data center networking demand, including the continued growth of our switch programs.
- **[PRINCIPLE] Power Electronics And Connectors Competitive Moat** (POSITIVE, Change: EXPANDING): The scale moat appears to be strengthening operationally. Celestica expanded manufacturing capacity and capabilities in Thailand, Malaysia, and Richardson, Texas to support AI and machine-learning programs. Capital expenditures remained substantial at $106.5 million year to date, with most spending directed to CCS, while inventory turns improved from 4.9x in Q3 FY24 to 5.6x in Q3 FY25. This supports the ability to absorb large hyperscaler ramps, although customer concentration also increased. (2 expanding, 1 stable)
  > We offer a comprehensive range of products and services that cover the entire technology product lifecycle, including hardware design and development, new product introduction, engineering services, supply chain management and logistics, electronics manufacturing and assembly, complex mechanical ass
- **[PRINCIPLE] Power Electronics And Connectors Revenue Quality** (NEGATIVE, Change: CONTRACTING): Switching-cost support strengthened as Celestica became more embedded in large customer programs. Three CCS customers each exceeded 10% of revenue in Q3 FY25, compared with two in Q3 FY24, and the top 10 customers rose from 74% to 80% of revenue. This indicates deeper customer integration and larger program dependence, but also increases concentration risk; the moat expanded while revenue quality became less diversified. (2 expanding, 1 contracting)
  > We depend on a small number of customers for a substantial portion of our revenue. In the aggregate, our top 10 customers represented 80% of total revenue for Q3 2025 ... (Q3 2024 — 74%). Three customers ... individually represented 10% or more of total revenue in Q3 2025.
- **[TREND] Power Electronics And Connectors Demand Cycle** (POSITIVE, Change: EXPANDING): CCS became substantially more important to Celestica's business. Its revenue share increased from 67% in FY24 to 74% in FY25, and segment revenue grew 42%. The latest quarter reinforced the shift: Q4 FY25 CCS revenue increased 64% year over year and 19% sequentially, driven by networking switches and AI/ML compute. (3 expanding)
  > CCS segment revenue for 2025 increased 42% to $9.19 billion compared to $6.49 billion in 2024. ... CCS segment revenue increased $1,119.9 million (64%) in Q4 2025 compared to Q4 2024.
- **[TREND] Power Electronics And Connectors Digital and Automation Shift** (POSITIVE, Change: EXPANDING): HPS shifted from a smaller design-and-manufacturing offering into a major revenue engine. Revenue increased 81% in FY25 to approximately $5.0 billion, and its share of total revenue rose from 29% to 41%. Q4 FY25 HPS revenue was approximately $1.4 billion, up 72% year over year. This is a favorable shift toward a higher-margin, design-led business, although it also requires greater R&D and capital investment. (3 expanding)
  > Higher R&D expenses in Q2 2026 and 1H 2026 were to support the growth of our HPS business.
- **[TREND] Power Electronics And Connectors Market Structure** (NEGATIVE, Change: CONTRACTING): CCS became increasingly dominant. Its share of total revenue rose from 67% in Q3 FY24 to 76% in Q3 FY25, and year-to-date share rose from 67% to 72%. Revenue increased 43% in Q3 and 33% year to date. The later Q2 FY26 baseline continues to show CCS dominance, with Communications and Enterprise together representing 81% of revenue. (1 expanding, 1 contracting)
  > CCS segment revenue increased $727.6 million (43%) in Q3 2025 compared to Q3 2024 ... CCS revenue (% of total revenue) 76% [Q3 2025] versus 67% [Q3 2024].

### Future Growth

- **[CATALYST] Power Electronics And Connectors Earnings and Guidance Reset** (POSITIVE, Trend: ACCELERATING): Q1 FY25 revenue was $2.6486 billion, above the guidance range of $2.475 billion to $2.625 billion by $23.6 million, or approximately 0.9% above the high end. Management attributed the outperformance to higher-than-expected customer demand and execution. This is the first available quantified guidance-surprise datapoint in the supplied history, so it is best treated as a new positive signal rather than a multi-quarter trend. (3 new trend, 2 accelerating across 5 signals)
  > For Q2 2026, our revenue exceeded the high end of our guidance range due to higher than anticipated customer demand and strong operational execution.
- **[CATALYST] Power Electronics And Connectors Product or Capex Inflection** (POSITIVE, Trend: ACCELERATING): Q1 FY25 capital spending was $36.7 million, or about 1.4% of quarterly revenue, focused largely on CCS capacity, Thailand expansion, and new customer programs. Management guided to 2025 capex of 1.5% to 2.0% of revenue. The supplied Q2 FY26 signal indicates a major step-up: $493.3 million in first-half spending and approximately $1 billion expected for full-year 2026. This is a substantial acceleration in investment to support the CCS and AI/data-center growth cycle. (1 accelerating, 2 steady, 2 new trend across 5 signals, 1 leading indicator)
  > Enterprise end market revenue increased $724.0 million (167%) in Q2 2026 compared to Q2 2025 and increased $1,140.7 million (135%) in 1H 2026 compared to 1H 2025, driven by the continued ramp-up of an AI/ML compute program with a hyperscaler customer and increased demand in our storage programs.
- **[METRIC] Power Electronics And Connectors Balance Sheet Resilience** (POSITIVE, Trend: NEW_TREND): Available revolving capacity declined from $738.9 million at Q4 FY24 to $588.9 million at Q1 FY25 because Celestica had drawn $150 million. The supplied Q2 FY26 signal shows approximately $1,739.6 million available against a $1.75 billion facility after the April 2026 amendment. Although available capacity fell in Q1 FY25, the later facility expansion represents a substantial increase in financial flexibility for working capital and growth investment. (1 accelerating, 1 steady, 2 new trend across 4 signals, 1 leading indicator)
  > As previously announced in April 2026, we amended our credit agreement (April 2026 Amendment) to: (1) increase the commitments under the revolving credit facility (Revolver) from $750.0 million to $1,750.0 million; (2) refinance our then-existing term A loan facility ...; and (3) extend the maturity
- **[METRIC] Power Electronics And Connectors Margin Profile** (POSITIVE, Trend: ACCELERATING): CCS segment margin improved from 6.8% in Q1 FY24 to 8.0% in Q1 FY25 and 7.9% in Q4 FY24, while ATS margin improved from 4.2% to 5.0% and 4.6% sequentially. The supplied Q2 FY26 data shows additional improvement to 8.7% for CCS and 6.3% for ATS. The latest quarter continues the margin expansion, supported by higher networking-product mix and operating leverage. (1 accelerating, 4 steady across 5 signals)
  > CCS segment margin increased to 8.7% in Q2 2026 from 8.3% in Q2 2025 ... driven by operating leverage. ATS segment margin increased to 6.3% in Q2 2026 from 5.3% in Q2 2025, primarily due to improved product mix and operating leverage.
- **[METRIC] Power Electronics And Connectors Revenue Growth** (POSITIVE, Trend: ACCELERATING): Q1 FY25 Communications revenue was $1,427.7 million, up 87% year over year and 21% sequentially from Q4 FY24's approximately $1,180.0 million (calculated from the reported $247.7 million sequential increase). The latest quarter shows faster growth than the previously supplied Q2 FY26 signal of +62% year over year and +10% sequentially, indicating a strong but volatile networking demand cycle. (5 accelerating across 5 signals)
  > Communications end market revenue increased $1,012.0 million (62%) in Q2 2026 compared to Q2 2025 and increased $1,994.9 million (65%) in 1H 2026 compared to 1H 2025, driven by data center networking demand, including the continued growth of our switch programs.
- **[PRINCIPLE] Power Electronics And Connectors Revenue Quality** (NEUTRAL, Trend: STEADY): HPS revenue nearly doubled year over year in Q1 FY25 to approximately $1.0 billion and represented 39% of company revenue, up from 23% in Q1 FY24. The supplied Q2 FY26 data shows HPS at approximately $1.9 billion, or 41% of revenue, with growth slowing to +58% year over year. The business remains a major growth engine, but its reported growth rate has moderated from 99% to 58%. (1 decelerating, 1 reversing, 1 steady across 3 signals)
  > However, the long‑term trajectory of AI adoption and related data center deployment is uncertain ... constraints on specialized components and data center capacity; and the availability, timing, reliability and price of critical utilities. Adverse developments in any of these areas could cause our c
- **[TREND] Power Electronics And Connectors Demand Cycle** (POSITIVE, Trend: ACCELERATING): Enterprise revenue fell 39% year over year and 26% sequentially in Q1 FY25 to $413.7 million because a hyperscaler AI/ML computing program was transitioning technologies. By Q2 FY26, the supplied signal had reversed to +167% year over year and +39% sequentially at $1,157.1 million. This is a clear negative-to-positive inflection, although the comparison benefits from the prior transition period. (5 accelerating across 5 signals)
  > HPS revenue for Q2 2026 increased 58% to approximately $1.9 billion compared to Q2 2025, and accounted for 41% of our total Q2 2026 revenue (Q2 2025 — 43% of our total Q2 2025 revenue). Increases in HPS revenue was driven by strong demand for our networking switch programs with hyperscaler customers
- **[TREND] Power Electronics And Connectors Supply Chain Reconfiguration** (NEUTRAL): Growth is creating a heavy working-capital requirement: inventory rose to $3.40 billion, up from $2.19 billion at year-end, and first-half inventory absorbed $1.21 billion of cash. Customer deposits of $481.4 million partly protect against obsolete inventory, but the scale of the buildup is a constraint to monitor. — Inventory and working-capital burden: +55% inventory versus December 31, 2025; days in inventory rose to 67 from 61 in Q1
  > Increase in inventory balances in 1H 2026, primarily reflected our business growth (mostly in our CCS segment).

### Risk Assessment

- **[CATALYST] Power Electronics And Connectors Product or Capex Inflection** (NEGATIVE, Risk: HIGH): Execution risk was elevated in Q3 2025 as management continued expanding Thailand, Malaysia, and Richardson, Texas facilities for AI/ML programs. YTD capital spending was $106.5 million, primarily for manufacturing capabilities and new customer programs, while CCS accounted for most spending. The later baseline shows a much larger 2026 buildout and rates this risk HIGH, indicating that the investment exposure intensified from the earlier period. (4 intensifying, 1 high-severity)
  > Our capital expenditures for 1H 2026 were $493.3 million (1H 2025 — $69.2 million). Our capital expenditures for 1H 2026 were primarily to support revenue growth in our CCS business and enhance our manufacturing capabilities in various geographies (including at our Thailand and U.S. facilities).
- **[METRIC] Power Electronics And Connectors Balance Sheet Resilience** (NEUTRAL, Risk: MODERATE): Debt is manageable today, but the company must service variable-rate loans while funding a large capex program. Higher interest rates would raise costs and could restrict investment, buybacks, or acquisitions. [BALANCE_SHEET] (+2 more risks)
  > A one-percentage point increase in relevant interest rates would increase interest expense, based on outstanding borrowings under the Credit Facility at June 30, 2026, by $3.9 million annually, including the impact of our interest rate swap agreements, and by $7.4 million annually, without accountin
- **[METRIC] Power Electronics And Connectors Free Cash Flow** (NEGATIVE, Risk: HIGH): Balance-sheet exposure increased during Q3 2025. Accounts receivable rose to $2.44 billion from $2.07 billion, and inventory rose to $2.05 billion from $1.76 billion at year-end 2024. YTD cash use included $370.3 million for receivables and $286.1 million for inventory. Inventory write-downs also increased to $49.6 million from $33.3 million in the prior-year period. Although cash-cycle days improved to 65 from 66 in Q3 2024, the absolute amounts tied up in working capital increased substantially. The June 2026 baseline reports a still larger exposure and rates the risk HIGH, so the overall trajectory is intensifying. (4 intensifying, 1 high-severity)
  > Accounts receivable (170.8) ... Inventories (728.8) ... Accounts payable, accrued and other current liabilities, provisions and income taxes payable 1,025.3
- **[METRIC] Power Electronics And Connectors Margin Profile** (NEGATIVE, Risk: HIGH): The risk was significant in Q3 2025 because the total return swap generated a $113.3 million operating gain in the quarter and a $191.6 million gain year to date. The gain was non-cash and linked to Celestica's share price; a future share-price decline could reverse it. The filing states that a $1 decline in the share price would reduce the swap's value by approximately $1.3 million. The June 2026 baseline shows the same risk remained HIGH, with an even larger quarterly gain, so the risk intensified over time. (4 intensifying, 1 high-severity)
  > GAAP EPS for Q2 2026 also included $0.90 per share (pre-tax) positive impact attributable to TRS FVAs.
- **[METRIC] Power Electronics And Connectors Revenue Growth** (NEGATIVE): The risk intensified during Q1 2026. CCS revenue increased 76% year over year and rose to 80% of total revenue from 70%. Communications revenue increased 69%, while Enterprise revenue increased 101%, largely because of networking switch ramps and an AI/ML compute program with one hyperscaler. ATS revenue was essentially flat year over year at $806.0 million versus $807.2 million. The Q2 baseline shows CCS still at 81% of revenue and Enterprise growth accelerating to 167% year over year, confirming continued concentration in a narrow set of growth programs. (1 intensifying)
  > CCS segment revenue increased $1,399.6 million (76%) in Q1 2026 compared to Q1 2025... driven by data center networking demand... Enterprise end market revenue increased $416.7 million (101%)... driven by the ramp-up of an AI/ML compute program with one of our hyperscaler customers.
- **[PRINCIPLE] Power Electronics And Connectors Regulatory Position** (NEUTRAL): The risk was concrete and already affecting operations in Q3 2025. Management stated that U.S. export controls had adversely affected the Capital Equipment business and CCS, while tariffs increased costs for U.S. customers using non-U.S. sites and components. The company could not quantify the future impact and acknowledged that customer recovery of tariffs was not guaranteed. The June 2026 baseline continues to rate this risk HIGH; no evidence of resolution is provided, so the risk is stable at a high level. (1 stable)
  > The U.S. government has imposed and may continue to impose additional export controls... These actions have adversely impacted and continue to adversely impact our Capital Equipment business and our CCS segment.
- **[PRINCIPLE] Power Electronics And Connectors Revenue Quality** (NEGATIVE, Risk: HIGH): Customer concentration was already high in Q3 2025 and worsened relative to the 2024 comparison: the top 10 customers rose from 74% to 80% of quarterly revenue, while three customers represented 30%, 15%, and 14% of revenue. All individually significant customers were in CCS, increasing exposure to a small number of data-center programs. The later June 2026 baseline remains HIGH, so the risk is best viewed as intensifying from the earlier period to the latest assessment. (5 intensifying, 2 high-severity)
  > We depend on a small number of customers for a substantial portion of our revenue. In the aggregate, our top 10 customers represented 83% of total revenue for Q2 2026 and 1H 2026 (Q2 2025 and 1H 2025 — 78%). Three customers (all in our CCS segment) individually represented 10% or more of total reven
- **[PRINCIPLE] Power Electronics And Connectors Unit Economics** (NEGATIVE): The concentration worsened. Communications revenue increased 81% in 2025 and represented 57% of total revenue, while Enterprise revenue fell 19% because of a technology transition in one hyperscaler AI/ML program. CCS margin improved from 6.2% in 2023 to 7.4% in 2024 and 8.2% in 2025, so the risk had not yet harmed margins, but the revenue mix became substantially more dependent on one fast-growing end market. The Jun. 2026 baseline confirms the exposure remained high. (2 intensifying)
  > Communications end market revenue for 2025 increased $3,179.7 million (81%) compared to 2024 ... Enterprise end market revenue for 2025 decreased $481.7 million (19%) compared to 2024, driven by the technology transition in an AI/ML compute program with one of our hyperscaler customers.
- **[TREND] Power Electronics And Connectors Demand Cycle** (NEGATIVE, Risk: HIGH): Exposure materially increased during Q3 2025. HPS revenue rose 79% year over year to approximately $1.4 billion, equal to 44% of total revenue versus 30% in Q3 2024. Communications revenue increased 82%, driven by networking demand and switch-program ramps. This creates greater downside if hyperscaler capital spending, AI deployment, or data-center construction slows. The June 2026 baseline still rates this risk HIGH; therefore the earlier-to-later trajectory is intensifying. (4 intensifying, 1 high-severity)
  > Recent investments in AI infrastructure by hyperscalers and other data center customers have increased demand for certain products in our CCS segment, including our Hardware Platform Solutions (HPS) business. However, the long‑term trajectory of AI adoption and related data center deployment is unce
- **[TREND] Power Electronics And Connectors Market Structure** (NEUTRAL, Risk: MODERATE): The business competes with large electronics manufacturers and design manufacturers that can offer similar end-to-end services. Price competition, customer transfers, or faster technology changes could reduce market share and margins. [COMPETITIVE]
  > Celestica operates in the contract design and manufacturing industry and competes with a variety of providers from electronics manufacturing services (EMS) companies to original design manufacturers (ODMs).
- **[TREND] Power Electronics And Connectors Policy and Regulation** (NEGATIVE, Risk: HIGH): The risk was already material and remained high. Management specifically stated that U.S. export controls had adversely affected the Capital Equipment business and CCS, while tariff and trade-policy effects could not yet be quantified and could be material. The company assumed no material change in tariffs or trade restrictions in its outlook, so the forecast remained vulnerable to policy changes. No evidence in this filing supports an easing classification. (3 stable, 1 high-severity)
  > Governmental actions related to international trade agreements have increased (and could further increase) the cost to our U.S. customers who use our non-U.S. manufacturing sites and components, and vice versa, which may materially and adversely impact demand for our services, our results of operati
- **[TREND] Power Electronics And Connectors Supply Chain Reconfiguration** (NEGATIVE, Risk: HIGH): The filing identifies continuing exposure to component availability, supplier quality, transportation costs, labor, energy, and geopolitical disruptions. Cost inflation had been mostly offset through customer pricing, but management warned that this may not continue and that customers could reduce business if prices rise. Inventory write-downs increased year over year, providing evidence of ongoing cost and product-risk pressure. The June 2026 baseline still rates this risk HIGH, so it remains high and broadly stable rather than resolved. (4 stable, 2 high-severity)
  > Any increase in our costs that we are unable to recover would negatively impact our margins and operating results.

### Scenario Analysis

- The primary first-order effects are Celestica's exposure to corporate investment and floating-rate financing: lower rates can support hyperscaler capex and reduce interest expense, while higher rates can delay infrastructure programs and raise costs on its unhedged debt and SOFR-linked total-return swap. The second-order consequence is amplified operating leverage: CCS generated 81% of first-half revenue, HPS was approximately 41% of revenue, and the company is spending about $1 billion on capacity while also financing sharply higher inventory and receivables. If rates remain supportive, those investments can improve growth and returns; if customer programs slow, underutilized factories, weaker cash conversion and higher credit losses could follow. The third-order effect is a valuation and sector-rotation response, with Celestica likely to re-rate upward as a long-duration AI infrastructure enabler when yields fall, but to derate disproportionately when Treasury yields rise or investors question hyperscaler capex. (POSITIVE)
  > A/R is recorded net of allowance of $39.5 at June 30, 2026 (December 31, 2025 — $30.5).
- Hyperscaler spending on networking, servers, storage, and AI compute is directly increasing Celestica's Communications and Enterprise revenue, with CCS now representing roughly 81% of sales and both segments growing rapidly. The resulting scale is improving CCS profitability and factory utilization, while giving Celestica greater relevance as a manufacturing and systems-integration partner for complex AI hardware programs. However, converting demand into cash requires large inventories, customer financing, and approximately $1 billion of capital spending, while shortages and utility constraints can delay production. In the third order, Celestica benefits from investor preference for companies monetizing AI capex, but its low-margin, concentrated contract-manufacturing model means it is less defensible than chip designers, cloud platforms, or software monopolies. (POSITIVE)
  > Recent investments in AI infrastructure by hyperscalers and other data center customers have increased demand for certain products in our CCS segment, including our Hardware Platform Solutions (HPS) business. However, the long‑term trajectory of AI adoption and related data center deployment is unce

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