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Can CLS' ATS Segment Sustain Margin Growth Despite Revenue Headwinds?
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Key Takeaways
Celestica's ATS revenues were $806M in Q1 2026, while operating income rose 18% year over year.
Aerospace & Defense optimization and capital equipment softness weighed on ATS sales growth.
HealthTech strength and improving industrial demand supported ATS' margin expansion to 6%.
Celestica, Inc. (CLS - Free Report) generated revenues of $806 million from the Advanced Technology Solutions (ATS) in the first quarter of 2026 compared to $807.2 million in the year-ago quarter. Despite relatively flat revenue year over year. ATS segment operating income rose 18% year over year, with the operating margin rising to 6% from 5% in the year-ago quarter. The margin improvement suggests more efficient execution and better profitability across the segment’s diversified end markets.
The ongoing portfolio optimization in the Aerospace & Defense vertical is hindering revenue growth. The company is increasingly focusing on high-margin opportunities to capitalize on long-term gains at the expense of revenue growth in the near term. Demand softness in the Capital equipment vertical also impacted the net sales in this segment. However, despite weakness in the first quarter, management expects the capital equipment business to return to a growth path in the second quarter.
Strength in the HealthTech business is offsetting the weakness in other ATS businesses. Industrial business demand is also improving compared to prior quarters. Industrial program ramps are expected in the second quarter. Such trends are encouraging for Celestica as it diversifies its revenue stream beyond the fast-growing AI data center domain.
How Are Competitors Faring?
Celestica’s ATS segment faces competition from the Plexus Corp. (PLXS - Free Report) and Sanmina Corporation (SANM - Free Report) in the electronics manufacturing services industry. Plexus reported 23.2% year over year revenue growth in the aerospace defense domain, while revenues in the healthcare business grew 15% year over year. Strong Industrial funnel growth was supported by opportunities in data center, automation, and robotics and energy verticals. Plexus’ Industrial sector’s revenues were up 20.7% year over year.
In the second quarter of 2026, Sanmina’s revenues from the industrial and energy, medical, defense and aerospace,automotive and transportation end markets remained relatively flat year over year. However, strength in Sanmina’s communications, cloud and AI data center market is offsetting this decline.
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Can CLS' ATS Segment Sustain Margin Growth Despite Revenue Headwinds?
Key Takeaways
Celestica, Inc. (CLS - Free Report) generated revenues of $806 million from the Advanced Technology Solutions (ATS) in the first quarter of 2026 compared to $807.2 million in the year-ago quarter. Despite relatively flat revenue year over year. ATS segment operating income rose 18% year over year, with the operating margin rising to 6% from 5% in the year-ago quarter. The margin improvement suggests more efficient execution and better profitability across the segment’s diversified end markets.
The ongoing portfolio optimization in the Aerospace & Defense vertical is hindering revenue growth. The company is increasingly focusing on high-margin opportunities to capitalize on long-term gains at the expense of revenue growth in the near term. Demand softness in the Capital equipment vertical also impacted the net sales in this segment. However, despite weakness in the first quarter, management expects the capital equipment business to return to a growth path in the second quarter.
Strength in the HealthTech business is offsetting the weakness in other ATS businesses. Industrial business demand is also improving compared to prior quarters. Industrial program ramps are expected in the second quarter. Such trends are encouraging for Celestica as it diversifies its revenue stream beyond the fast-growing AI data center domain.
How Are Competitors Faring?
Celestica’s ATS segment faces competition from the Plexus Corp. (PLXS - Free Report) and Sanmina Corporation (SANM - Free Report) in the electronics manufacturing services industry. Plexus reported 23.2% year over year revenue growth in the aerospace defense domain, while revenues in the healthcare business grew 15% year over year. Strong Industrial funnel growth was supported by opportunities in data center, automation, and robotics and energy verticals. Plexus’ Industrial sector’s revenues were up 20.7% year over year.
In the second quarter of 2026, Sanmina’s revenues from the industrial and energy, medical, defense and aerospace,automotive and transportation end markets remained relatively flat year over year. However, strength in Sanmina’s communications, cloud and AI data center market is offsetting this decline.
Celestica's Price Performance, Valuation & Estimates
Celestica’s shares have soared 173.3% over the past year compared with the industry’s growth of 123.4%.
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From a valuation standpoint, Celestica trades at a forward price-to-earnings ratio of 30.38, higher than the industry average of 27.26.
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Earnings estimates for 2026 have increased 13.65% to $10.16 over the past 60 days, while the same for 2027 have also increased 14.24% 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.