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CLS Benefits From Strong Cash Flow Growth: More Upside Ahead?
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Key Takeaways
Celestica generated $356.3M in operating cash flow, up from $130.3M a year ago.
CLS offset higher receivables and inventory with a $1.07B rise in payables and better cash cycle days.
Celestica's CCS revenue jumped 76% as AI/ML ramps, hyperscaler demand and 800G networking drove growth.
Celestica, Inc. (CLS - Free Report) generated $356.3 million in cash from operating activities, up from $130.3 million a year ago. There are multiple factors driving the cash flow.
Disciplined working capital management is a major driver. In the first quarter of 2026, accounts receivable increased by $529.3 million and inventory rose by $484.9 million due to higher revenue volumes and growing demand, particularly in its Connectivity & Cloud Solutions (CCS) segment. This is bad for short-term cash flow because the company has booked sales but hasn't collected the cash yet.
However, these increases were more than offset by a $1.07 billion rise in accounts payable and accrued liabilities, resulting in favorable working capital changes of $87 million. This implies Celestica doesn't have to pay suppliers immediately, hence the company has the cash. Cash cycle days improved to 55 days, versus 69 days a year ago. A cash cycle indicates the average time it takes to convert inventory goods into cash through sales.
CLS generated revenues of $3.24 billion from the Connectivity & Cloud Solutions segment in the first quarter of 2026, up 76% year over year. Next-generation AI/ML compute program ramps, hyperscaler deployments, demand for 800G networking switches and storage platform growth are propelling revenues. Celestica’s strong revenue growth, combined with a stable cash cycle, indicates that cash is not held up unduly in excess inventory.
Free cash flow was $137.9 million in the first quarter compared with $93.6 million in the prior-year quarter. It is to be noted that aggressive investment in manufacturing capacity to support AI-related revenues remains a drag on free cash flow.
How Are Competitors Faring?
The company faces competition from Jabil, Inc. (JBL - Free Report) and Sanmina Corporation (SANM - Free Report) in the Electronics Manufacturing Services industry. In the second quarter of fiscal 2026, Sanmina generated $398.8 million of net cash from operating activities compared with $156.9 million in the previous year’s quarter. Free cash flow came in at $342 million, supported by solid earnings and balance-sheet execution, while net capital expenditures were $57 million, which management said was below its outlook primarily due to timing. Sanmina also continued repurchasing stock, buying back 1.1 million shares for $160 million during the quarter. Strong communications networks and cloud and AI infrastructure demand are driving growth.
In the second quarter of fiscal 2026, Jabil generated $411 million of net cash from operating activities compared to $334 million a year ago. AI data center infrastructure, healthcare and advanced warehouse and retail automation are major growth drivers for the company. Jabil is expected to generate more than $1.3 billion in adjusted free cash flow.
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CLS Benefits From Strong Cash Flow Growth: More Upside Ahead?
Key Takeaways
Celestica, Inc. (CLS - Free Report) generated $356.3 million in cash from operating activities, up from $130.3 million a year ago. There are multiple factors driving the cash flow.
Disciplined working capital management is a major driver. In the first quarter of 2026, accounts receivable increased by $529.3 million and inventory rose by $484.9 million due to higher revenue volumes and growing demand, particularly in its Connectivity & Cloud Solutions (CCS) segment. This is bad for short-term cash flow because the company has booked sales but hasn't collected the cash yet.
However, these increases were more than offset by a $1.07 billion rise in accounts payable and accrued liabilities, resulting in favorable working capital changes of $87 million. This implies Celestica doesn't have to pay suppliers immediately, hence the company has the cash. Cash cycle days improved to 55 days, versus 69 days a year ago. A cash cycle indicates the average time it takes to convert inventory goods into cash through sales.
CLS generated revenues of $3.24 billion from the Connectivity & Cloud Solutions segment in the first quarter of 2026, up 76% year over year. Next-generation AI/ML compute program ramps, hyperscaler deployments, demand for 800G networking switches and storage platform growth are propelling revenues. Celestica’s strong revenue growth, combined with a stable cash cycle, indicates that cash is not held up unduly in excess inventory.
Free cash flow was $137.9 million in the first quarter compared with $93.6 million in the prior-year quarter. It is to be noted that aggressive investment in manufacturing capacity to support AI-related revenues remains a drag on free cash flow.
How Are Competitors Faring?
The company faces competition from Jabil, Inc. (JBL - Free Report) and Sanmina Corporation (SANM - Free Report) in the Electronics Manufacturing Services industry. In the second quarter of fiscal 2026, Sanmina generated $398.8 million of net cash from operating activities compared with $156.9 million in the previous year’s quarter. Free cash flow came in at $342 million, supported by solid earnings and balance-sheet execution, while net capital expenditures were $57 million, which management said was below its outlook primarily due to timing. Sanmina also continued repurchasing stock, buying back 1.1 million shares for $160 million during the quarter. Strong communications networks and cloud and AI infrastructure demand are driving growth.
In the second quarter of fiscal 2026, Jabil generated $411 million of net cash from operating activities compared to $334 million a year ago. AI data center infrastructure, healthcare and advanced warehouse and retail automation are major growth drivers for the company. Jabil is expected to generate more than $1.3 billion in adjusted free cash flow.
Celestica's Price Performance, Valuation & Estimates
Celestica’s shares have soared 177.6% over the past year compared with the industry’s growth of 139.8%.
Image Source: Zacks Investment Research
From a valuation standpoint, Celestica trades at a forward price-to-earnings ratio of 29.92, higher than the industry average of 27.59.
Image Source: Zacks Investment Research
Earnings estimates for 2026 have increased 15.06% to $10.16 over the past 60 days, while the same for 2027 have also increased 15.78% to $14.6.
Image Source: Zacks Investment Research
Celestica currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.