Q1 2026 Celestica Inc Earnings Call

April 28, 2026

Speaker #1: Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand.

Speaker #1: To withdraw your question, press star 1 again. I will now hand the conference over to Matthew Pallotta, Head of Investor Relations. Matthew, please go ahead.

Speaker #2: Good morning, and thank you for joining us on CELESTICA's Q1 2026 financial results conference call. On the call today, we have Rob Mionis, President and Chief Executive Officer and Mandeep Chawla, Chief Financial Officer.

Speaker #2: Please note that during the course of this call, we will make forward-looking statements, including statements relating to the future performance of CELESTICA, our business outlook, guidance for the second quarter of 2026, our 2026 annual outlook, and anticipated trends in our industry and their anticipated impact on our business.

Speaker #2: These are based on management's current expectations forecasts and assumptions as of April 27th. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and their potential impact on our results cannot be reliably predicted at this time.

Speaker #2: For identification and discussion of the material assumptions, risks, and uncertainties, please refer to our public filings, with the SEC and on Cedar Plus, as well as the investor relations section on our website.

Speaker #2: We undertake no obligation to update these forward-looking statements unless expressly required to do so by law. In addition, during this call, we will refer to various non-GAAP financial measures.

Speaker #2: We have included in our earnings release found in the investor relations section of our website a discussion of those non-GAAP financial measures and a reconciliation to the most comparable GAAP measures.

Speaker #2: Unless otherwise specified, all references to dollars on this call are to US dollars, all per-share information is based on diluted shares outstanding, and all references to comparative figures are a year-over-year comparison.

Speaker #2: Let me now turn the call over to Rob.

Speaker #3: Thank you, Matt. And good morning, everyone, and thank you for joining us on today's call. We kicked off the year with solid results in the first quarter, as revenues surpassed $4 billion with adjusted operating margin of 8%, a new high for CELESTICA.

Speaker #3: This performance drove adjusted EPS of $2.16 for the quarter, which exceeded the high end of our guidance range. Our awarded backlog and the opportunity pipeline with both existing and new customers are the strongest they have ever been during my tenure as CEO.

Speaker #3: We continue to see exceptionally strong and accelerating demand from a hyperscaler customer base, complemented by a steadily strengthening outlook in our ATS segment. This momentum underpins our expectation for sustained growth in both revenue and adjusted EPS throughout 2026, while our outlook for 2027 has strengthened compared to just 90 days latest 2026 outlook in a moment, but first, I'll hand it over to Mandeep to walk through the Q1 details and our Q2 guidance.

Speaker #3: Mandeep, over to you.

Speaker #4: Thank you, Rob. And good morning, everyone. Revenue in the first quarter was $4.05 billion, up 53%, just above the midpoint of our guidance range driven by very strong demand in our CCS segment.

Speaker #4: Our non-GAAP operating margin was 8.0%, up 90 basis points, driven by solid margin improvement in both of our segments. Our adjusted earnings per share was $2.16 in the first quarter, exceeding the high end of our guidance range and an increase of 96 cents or 80%.

Speaker #4: Moving on to some additional metrics. Adjusted gross margin was 11.3%, up 30 basis points, driven by improved mix and strong productivity. Our adjusted effective tax rate for the quarter was 19%.

Mandeep Chawla: $5 billion, up 53%. Just above the midpoint of our guidance range, driven by very strong demand in our CCS segment. Our non-GAAP operating margin was 8.0%, up 90 basis points, driven by solid margin improvement in both of our segments. Our adjusted earnings per share was $2.16 in Q1, exceeding the high end of our guidance range and an increase of $0.96 or 80%. Moving on to some additional metrics. Adjusted gross margin was 11.3%, up 30 basis points, driven by improved mix and strong productivity. Our adjusted effective tax rate for the quarter was 19%. Finally, strong profitability and disciplined working capital management led to an adjusted ROIC of approximately 50%, up more than 18 percentage points versus the prior year. Moving on to our segment performance.

Speaker #1: Billion. Up 53%. Just above the midpoint of our guidance range driven by very strong demand in our CCS segment. Our non-gap operating margin was 8.0%, up 90 basis points, driven by solid margin improvement in both of our segments.

Speaker #4: And finally, strong profitability and disciplined working capital management led to an adjusted ROIC of approximately 50%, up more than 18 percentage points versus the prior year.

Speaker #1: Our adjusted earnings per share was $2.16 in the first quarter, exceeding the high end of our guidance range and an increase of 96 cents or 80%.

Speaker #4: Moving on to our segment performance. Revenue in our ATS segment for the quarter was $806 million. Flat year-over-year and higher than our guidance of a low single-digit percentage decline.

Speaker #1: Moving on to some additional metrics. Adjusted gross margin was 11.3%, up 30 basis points, driven by improved mix and strong productivity. Our adjusted effective tax rate for the quarter was 19%.

Speaker #4: The performance was driven by higher revenue in health tech, offset by tougher comps due to previously communicated portfolio reshaping in our A&D business, and softness in capital equipment.

Speaker #1: And finally, strong profitability and disciplined working capital management led to an adjusted ROIC of approximately 50%, up more than 18 percentage points versus the prior year.

Speaker #4: Our ATS segment accounted for 20% of total company revenue in the first quarter. Revenue in our CCS segment was $3.24 billion. Up 76%, driven by very strong growth in both our communications and enterprise and markets.

Speaker #1: Moving on to our segment performance. Revenue in our ATS segment for the quarter was $806 million. Flat year over year, and higher than our guidance of a low single-digit percentage decline.

Mandeep Chawla: Revenue in our ATS segment for the quarter was $806 million, flat year-over-year and higher than our guidance of a low single-digit percentage decline. The performance was driven by higher revenue in HealthTech, offset by tougher comps due to previously communicated portfolio reshaping in our A&D business and softness in capital equipment. Our ATS segment accounted for 20% of total company revenue in Q1. Revenue in our CCS segment was $3.24 billion, up 76%, driven by very strong growth in both our communications and enterprise end markets. The CCS segment accounted for 80% of total company revenue in Q1.

Speaker #4: The CCS segment accounted for 80% of total company revenue in the first quarter. Revenue in our communications and market increased by 69%, better than our outlook of low 60s percentage growth, primarily driven by strong demand and ramping programs for 800G networking switches across our largest hyperscaler customers.

Speaker #1: The performance was driven by higher revenue in health tech, offset by tougher comps due to previously communicated portfolio reshaping in our A&D business, and softness in capital equipment.

Speaker #1: Our ATS segment accounted for 20% of total company revenue in the first quarter. Revenue in our CCS segment was $3.24 billion, up 76%, driven by very strong growth in both our Communications and Enterprise and Markets.

Speaker #4: Our enterprise and market revenue was higher by 101%, driven by the planned ramping of a next-generation AI/ML compute program with a hyperscaler customer. This result was modestly lower than our outlook of 100 high teens percentage increase as the timing of the planned ramp was partially gated by select component constraints.

Speaker #1: The CCS segment accounted for 80% of total company revenue in the first quarter. Revenue in our communications and market increased by 69%, better than our outlook of low 60s percentage growth, primarily driven by strong demand and ramping programs for 800G networking switches across our largest hyperscaler customers.

Mandeep Chawla: Revenue in our communications end market increased by 69%, better than our outlook of low 60s percentage growth, primarily driven by strong demand and ramping programs for our 800G networking switches across our largest hyperscaler customers. Our enterprise end market revenue was higher by 101%, driven by the planned ramping of a next-generation AI/ML compute program with a hyperscaler customer. This result was modestly lower than our outlook of 100 high teens percentage increase, as the timing of the planned ramp was partially gated by select component constraints. Our HPS business generated revenue of $1.7 billion, representing growth of 63% and accounted for 42% of total company revenue. The growth was driven by ramping 800G switch programs with multiple hyperscaler customers. Moving on to segment margins.

Speaker #4: Our HPS business generated revenue of $1.7 billion. Representing growth of 63% and accounted for 42% of total company revenue. The growth was driven by ramping 800G switch programs with multiple hyperscaler customers.

Speaker #1: Our enterprise and market revenue was higher by 101%, driven by the planned ramping of a next-generation AI/ML compute program with a hyperscaler customer. This result was modestly lower than our outlook of 100 high teens percentage increase, as the timing of the planned ramp was partially gated by select component constraints.

Speaker #4: Moving on to segment margins. ATS segment margin was 6.0%, up 100 basis points, driven by improved mix and higher profitability as a result of our portfolio optimization activities.

Speaker #4: CCS segment margin in the first quarter was 8.6%, an improvement of 60 basis points, driven by strong mix and operating leverage from higher volumes.

Speaker #1: Our HPS business generated revenue of $1.7 billion. Representing growth of 63% and accounted for 42% of total company revenue. The growth was driven by ramping 800G switch programs with multiple hyperscaler customers.

Speaker #4: During the first quarter, we had three customers that each accounted for at least 10% of total revenue, representing 35%, 15%, and 15% of revenue, respectively.

Speaker #1: Moving on to segment margins. ATS segment margin was 6.0%, up 100 basis points, driven by improved mix and higher profitability as a result of our portfolio optimization activities.

Mandeep Chawla: ATS segment margin was 6.0%, up 100 basis points, driven by improved mix and higher profitability as a result of our portfolio optimization activities. CCS segment margin in Q1 was 8.6%, an improvement of 60 basis points driven by strong mix and operating leverage from higher volumes. During Q1, we had 3 customers that each accounted for at least 10% of total revenue, representing 35%, 15%, and 15% of revenue, respectively. Moving on to working capital. At the end of Q1, our inventory balance was $2.67 billion, a sequential increase of $485 million and higher by $885 million compared to the prior year as we support significant growth in our CCS segment.

Mandeep Chawla: ATS segment margin was 6.0%, up 100 basis points, driven by improved mix and higher profitability as a result of our portfolio optimization activities. CCS segment margin in Q1 was 8.6%, an improvement of 60 basis points driven by strong mix and operating leverage from higher volumes. During Q1, we had three customers that each accounted for at least 10% of total revenue, representing 35%, 15%, and 15% of revenue, respectively. Moving on to working capital. At the end of Q1, our inventory balance was $2.67 billion, a sequential increase of $485 million and higher by $885 million compared to the prior year as we support significant growth in our CCS segment.

Speaker #4: Moving on to working capital. At the end of the first quarter, our inventory balance was $2.67 billion. A sequential increase of $485 million and higher by $885 million compared to the prior year, as we support significant growth in our CCS segment.

Speaker #1: CCS segment margin in the first quarter was 8.6%, an improvement of 60 basis points, driven by strong mix and operating leverage from higher volumes.

Speaker #4: Cash cycle days during the first quarter were 55, representing an improvement of 14 days versus the prior year, and six days better sequentially. Turning to cash flows.

Speaker #1: During the first quarter, we had three customers that each accounted for at least 10% of total revenue, representing 35%, 15%, and 15% of revenue, respectively.

Speaker #4: We generated $138 million of free cash flow in the first quarter. Our capital expenditures were $230 million or 5.7% of revenue, an increase of 135 million sequentially, and 193 million versus the prior year.

Speaker #1: Moving on to working capital. At the end of the first quarter, our inventory balance was $2.67 billion. A sequential increase of 485 million dollars and higher by 885 million dollars compared to the prior year, as we support significant growth in our CCS segment.

Speaker #4: Consistent with our prior communication, our full year 2026 capital expenditure guidance remains unchanged at approximately $1 billion. To enable significant growth in our CCS segment.

Speaker #1: Cash cycle days during the first quarter were 55, representing an improvement of 14 days versus the prior year and 6 days better sequentially. Turning to cash flows.

Mandeep Chawla: Cash cycle days during the Q1 were 55, representing an improvement of 14 days versus the prior year and 6 days better sequentially. Turning to cash flows. We generated $138 million of free cash flow in the Q1. Our capital expenditures were $230 million or 5.7% of revenue, an increase of $135 million sequentially and $193 million versus the prior year. Consistent with our prior communication, our full year 2026 capital expenditure guidance remains unchanged at approximately $1 billion to enable significant growth in our CCS segment. This investment is supported by awarded programs and our increased level of visibility to a multi-year capacity alignment with our key customers.

Speaker #4: This investment is supported by awarded programs and our increased level of visibility to a multi-year capacity alignment with our key customers. At the end of the quarter, our cash balance was $378 million.

Speaker #1: We generated $138 million of free cash flow in the first quarter. Our capital expenditures were $230 million, or 5.7% of revenue. This is an increase of $135 million sequentially, and $193 million versus the prior year.

Speaker #4: While our gross debt was $719 million, resulting in a net debt position of $341 million. We had no draw outstanding on our revolver at the end of the quarter.

Speaker #1: Consistent with our prior communication, our full year 2026 capital expenditure guidance remains unchanged at approximately $1 billion. To enable significant growth in our CCS segment.

Speaker #4: Our gross debt to non-GAAP trailing 12-month adjusted EBITDA leverage ratio was 0.6 turns, an improvement of 0.1 turns sequentially, and 0.5 turns versus the prior year period.

Speaker #1: This investment is supported by awarded programs and our increased level of visibility to a multi-year capacity alignment with our key customers. At the end of the quarter, our cash balance was $378 million.

Speaker #4: As of March 31st, we were in compliance with all financial covenants under our credit agreement. Subsequent to the end of the quarter, we amended our credit facility increasing our revolver by $1 billion to $1.75 billion.

Mandeep Chawla: At the end of the quarter, our cash balance was $378 million, while our gross debt was $719 million, resulting in a net debt position of $341 million. We had no draw outstanding on our revolver at the end of the quarter. Our gross debt to non-GAAP trailing twelve-month adjusted EBITDA leverage ratio was 0.6 turns, an improvement of 0.1 turns sequentially and 0.5 turns versus the prior year period. As of 31 March, we were in compliance with all financial covenants under our credit agreement. Subsequent to the end of the quarter, we amended our credit facility, increasing our revolver by $1 billion to $1.75 billion.

Speaker #1: While our gross debt was $719 million. Resulting in a net debt position of $341 million. We had no draw outstanding on our revolver at the end of the quarter.

Speaker #4: In addition, we received more favorable terms regarding certain covenants and interest rates and the maturities of both the term loan A and revolver were extended to 2031.

Speaker #1: Our gross debt to non-gap trailing 12-month adjusted EBITDA leverage ratio was 0.6 turns. An improvement of 0.1 turns sequentially, and 0.5 turns versus the prior year period.

Speaker #4: The upsized revolver on the amended facility along with our cash balance provides us with more than $2 billion of available liquidity, which we believe is sufficient to meet our current operating needs.

Speaker #1: As of March 31st, we were in compliance with all financial covenants under our credit agreement. Subsequent to the end of the quarter, we amended our credit facility increasing our revolver by $1 billion to $1.75 billion.

Speaker #4: During the quarter, we repurchased approximately 73,000 shares for cancellation under our normal course issuer bid at a cost of $20 million. We continue to be opportunistic with respect to share repurchases.

Speaker #1: In addition, we received more favorable terms regarding certain covenants and interest rates and the maturities of both the term loan A and revolver were extended to 2031.

Mandeep Chawla: In addition, we received more favorable terms regarding certain covenants and interest rates, and the maturities of both the Term Loan A and revolver were extended to 2031. The upsized revolver on the amended facility, along with our cash balance, provides us with more than $2 billion of available liquidity, which we believe is sufficient to meet our current operating needs. During the quarter, we repurchased approximately 73,000 shares for cancellation under our normal course issuer bid at a cost of $20 million. We continue to be opportunistic with respect to share repurchases. Moving on to our guidance for Q2 2026. Q2 revenue is projected to be between $4.15 and $4.45 billion, representing growth of 49% at the midpoint.

Speaker #4: Now, moving on to our guidance for the second quarter of 2026. Second quarter revenue is projected to be between $4.15 billion and $4.45 billion.

Speaker #1: The upside revolver on the amended facility along with our cash balance provides us with more than $2 billion of available liquidity which we believe is sufficient to meet our current operating needs.

Speaker #4: Representing growth of 49% at the midpoint. Adjusted earnings per share are anticipated to be between $2.14 and $2.34, representing an increase of 85 cents at the midpoint or 61% growth compared to the prior year.

Speaker #1: During the quarter, we repurchased approximately 73,000 shares for cancellation under our normal course issuer bid at a cost of $20 million. We continue to be opportunistic with respect to share repurchases.

Speaker #4: Assuming the achievement of the midpoint of our revenue and adjusted EPS guidance ranges, our non-GAAP operating margin is expected to be 8.0%, which would represent an increase of 60 basis points.

Speaker #1: Now moving on to our guidance for the second quarter of 2026. Second quarter revenue is projected to be between $4.15 billion and $4.45 billion.

Speaker #4: We anticipate our adjusted effective tax rate for the second quarter to be approximately 21%. Finally, let's review our revenue outlook for each of our end markets.

Speaker #1: Representing growth of 49% at the midpoint. Adjusted earnings per share are anticipated to be between $2.14 and $2.34, representing an increase of $0.85 at the midpoint, or 61% growth compared to the prior year.

Mandeep Chawla: Adjusted earnings per share are anticipated to be between $2.14 and $2.34, representing an increase of $0.85 at the midpoint or 61% growth compared to the prior year. Assuming the achievement of the midpoint of our revenue and adjusted EPS guidance ranges, our non-GAAP operating margin is expected to be 8.0%, which would represent an increase of 60 basis points. We anticipate our adjusted effective tax rate for Q2 to be approximately 21%. Finally, let's review our revenue outlook for each of our end markets. In our ATS segment, we anticipate revenue to be up in the mid-single-digit percentage range, fueled by program ramps across our HealthTech and industrial businesses, alongside strengthening market demand, driving a return to growth in our capital equipment business.

Speaker #4: In our ATS segment, we anticipate revenue to be up in the mid-single-digit percentage range. Fueled by program ramps across our health tech and industrial businesses, alongside strengthening market demand, driving a return to growth in our capital equipment business.

Speaker #1: Assuming the achievement of the midpoint of our revenue and adjusted EPS guidance ranges, our non-gap operating margin is expected to be 8.0% which would represent an increase of 60 basis points.

Speaker #4: In our CCS segment, we expect revenue in our communications end market to grow by approximately 50%, driven by ongoing hyperscaler ramps in multiple 800G programs complemented by continued strength in 400G programs.

Speaker #1: We anticipate our adjusted effective tax rate for the second quarter to be approximately 21%. Finally, let's review our revenue outlook for each of our end markets.

Speaker #4: In our enterprise end market, we expect growth of approximately 130%, supported by the continued ramp in an AI/ML compute program with a hyperscaler customer as well as ramping volumes in storage.

Speaker #1: In our ATS segment, we anticipate revenue to be up in the mid-single-digit percentage range, fueled by program ramps across our health tech and industrial businesses, alongside strengthening market demand driving a return to growth in our capital equipment business.

Speaker #4: With that, I will now turn the call back over to Rob to provide an update on our 2026 annual financial outlook and additional color on the latest developments in our business.

Speaker #1: In our CCS segment, we expect revenue in our communications end market to grow by approximately 50% driven by ongoing hyperscaler ramps in multiple 800G programs complemented by continued strength in 400G programs.

Mandeep Chawla: In our CCS segment, we expect revenue in our communications end market to grow by approximately 50%, driven by ongoing hyperscaler ramps in multiple 800G programs, complemented by continued strength in 400G programs. In our enterprise end market, we expect growth of approximately 130%, supported by the continued ramp in an AI/ML compute program with a hyperscaler customer, as well as ramping volumes in storage. With that, I will now turn the call back over to Rob to provide an update on our 2026 annual financial outlook and additional color on the latest developments in our business.

Speaker #5: Thank you, Mandeep. Driven by the continued strengthening of our demand pipeline and enhanced visibility as we progress through the year, we are raising our full year 2026 annual financial outlook.

Speaker #1: In our enterprise end market, we expect growth of approximately 130% supported by the continued ramp in an AI/ML compute program with a hyperscaler customer as well as ramping volumes in storage.

Speaker #5: We are raising our revenue outlook from $17 billion to $19 billion representing very strong growth of 53%. This latest outlook reflects accelerating demand in the second half of 2026, fueled by production ramps for awarded programs.

Speaker #1: With that, I will now turn the call back over to Rob to provide an update on our 2026 annual financial outlook and additional color on the latest developments in our business.

Speaker #5: We are also raising our outlook for adjusted EPS from $8.75 to $10.15, which if achieved would represent growth of 68%. Included in our forecast is an adjusted operating margin outlook of 8.1%, higher than our previous outlook of 7.8%.

Speaker #2: Thank you, Mandeep. Driven by the continued strengthening of our demand pipeline and enhanced visibility as we progress through the year, we are raising our full year 2026 annual financial outlook.

Rob Mionis: Thank you, Mandeep. Driven by the continued strengthening of our demand pipeline and enhanced visibility as we progress through the year, we are raising our full year 2026 annual financial outlook. We are raising our revenue outlook from $17 billion to $19 billion, representing very strong growth of 53%. This latest outlook reflects accelerating demand in H2 2026, fueled by production ramps for awarded programs. We are also raising our outlook for adjusted EPS from $8.75 to $10.15, which, if achieved, would represent growth of 68%. Included in our forecast is an adjusted operating margin outlook of 8.1%, higher than our previous outlook of 7.8%.

Speaker #2: We are raising our revenue outlook from $17 billion to $19 billion representing very strong growth of 53%. This latest outlook reflects accelerating demand in the second half of 2026 fueled by production ramps for awarded programs.

Speaker #5: Finally, we are reaffirming our free cash flow outlook of $500 million, which fully incorporates our $1 billion in planned capital investments in 2026. This outlook represents our high confidence view for 2026.

Speaker #2: We are also raising our outlook for adjusted EPS from $8.75 to $10.15 which if achieved would represent growth of 68%. Included in our forecast is an adjusted operating margin outlook of 8.1% higher than our previous outlook of 7.8%.

Speaker #5: And while the supply environment remains highly dynamic, our outlook is informed by a measured assessment of component availability. Building on my earlier remarks, our longer-term customer demand outlook has continued to solidify over the past 90 days, bolstered by additional new program wins and enhanced forecast visibility.

Speaker #2: Finally, we are reaffirming our free cash flow outlook of $500 million, which fully incorporates our $1 billion in planned capital investments in 2026. This outlook represents our high-confidence view for 2026.

Rob Mionis: Finally, we are reaffirming our free cash flow outlook of $500 million, which fully incorporates our $1 billion in planned capital investments in 2026. This outlook represents our high confidence view for 2026. While the supply environment remains highly dynamic, our outlook is informed by a measured assessment of component availability. Building on my earlier remarks, our longer-term customer demand outlook has continued to solidify over the past 90 days, bolstered by additional new program wins and enhanced forecast visibility. We expect to grow revenue by over six and a half billion dollars in 2026 based on our latest outlook, now we expect to grow revenue significantly more than this in 2027. As the year progresses and our visibility continues to improve, we will continue to update our outlook. Now, moving on to our businesses and beginning with our CCS segment.

Speaker #5: We expect to grow revenue by over 6.5 billion in 2026 based on our latest outlook and now we expect to grow revenue significantly more than this in 2027.

Speaker #5: As the year progresses, and our visibility continues to improve, we will continue to update our outlook. Now, moving on to our businesses and beginning with our CCS segment.

Speaker #2: And while the supply environment remains highly dynamic, our outlook is informed by a measured assessment of component availability. Building on my earlier remarks, our longer-term customer demand outlook has continued to solidify over the past 90 days bolstered by additional new program wins and enhanced forecast visibility.

Speaker #5: Based on our latest 2026 annual outlook, we now anticipate approximately 70% revenue growth in our CCS segment. Even as demand across our customer base remains exceptionally strong, and continues to accelerate, the unprecedented growth throughout the data center ecosystem has created a tighter supplier environment, effectively pacing our growth.

Speaker #2: We expect to grow revenue by over six and a half billion dollars in 2026 based on our latest outlook and now we expect to grow revenue significantly more than this in 2027.

Speaker #2: As the year progresses, and our visibility continues to improve, we will continue to update our outlook. Now moving on to our businesses and beginning with our CCS segment.

Speaker #5: As we navigate extended lead times and supply chain constraints for certain advanced components, we view our overall demand as durable and cumulative. Underpinning a sustained growth runway as supply and capacity align through the second half of 2026 and into 2027.

Speaker #2: Based on our latest 2026 annual outlook, we now anticipate approximately 70% revenue growth in our CCS segment. Even as demand across our customer base remains exceptionally strong, and continues to accelerate, the unprecedented growth throughout the data center ecosystem has created a tighter supplier environment effectively pacing our growth.

Rob Mionis: Based on our latest 2026 annual outlook, we now anticipate approximately 70% revenue growth in our CCS segment. Even as demand across our customer base remains exceptionally strong and continues to accelerate, the unprecedented growth throughout the data center ecosystem has created a tighter supply environment, effectively pacing our growth. As we navigate extended lead times and supply chain constraints for certain advanced components, we view our overall demand as durable and cumulative, underpinning a sustained growth runway as supply and capacity align through H2 2026 and into 2027. Moving on to our end markets. In communications, accelerating volumes from the ramping of multiple 800G Ethernet switch programs are driving very strong and sustained growth.

Speaker #5: Moving on to our end markets. In communications, accelerating volumes from the ramping of multiple 800G Ethernet switch programs are driving very strong and sustained growth.

Speaker #5: In addition, we are expecting to begin mass production on 1.6T switch programs with two hyperscaler customers, which will contribute to additional growth in the second half of the year.

Speaker #2: As we navigate extended lead times and supply chain constraints for certain advanced components, we view our overall demand as durable and cumulative. Underpinning a sustained growth runway as supply and capacity align through the second half of 2026 and into 2027.

Speaker #5: During the quarter, we also secured two important new program wins. Further bolstering our networking demand pipeline into 2027 and 2028. First, we announced in March we are collaborating with AMD on the design and manufacturing of a scale-up networking switch.

Speaker #2: Moving on to our end markets. In communications, accelerating volumes from the ramping of multiple 800G Ethernet switch programs are driving very strong and sustained growth.

Speaker #5: For the Helios rack scale AI architecture. This collaboration leverages our leading-edge Ethernet networking expertise to support deployments of the Helios platform. Development is in progress, and we expect initial units to be available by year-end.

Speaker #2: In addition, we are expecting to begin mass production on 1.6T switch programs with two hyperscaler customers. Which will contribute to additional growth in the second half of the year.

Rob Mionis: In addition, we are expecting to begin mass production on 1.6T switch programs with two hyperscaler customers, which will contribute to additional growth in H2 of the year. During the quarter, we also secured two important new program wins, further bolstering our networking demand pipeline into 2027 and 2028. First, we announced in March we are collaborating with AMD on the design and manufacturing of a scale-up networking switch for the Helios Rack-Scale AI architecture. This collaboration leverages our leading-edge Ethernet networking expertise to support deployment of the Helios platform. Development is in progress, and we expect initial units to be available by year-end. Additionally, we have secured a landmark program award for the design and manufacturing of a 1.6T co-packaged optics Ethernet switch with a hyperscaler customer.

Speaker #2: During the quarter, we also secured two important new program wins further bolstering our networking demand pipeline into 2027 and 2028. First, we announced in March we are collaborating with AMD on the design and manufacturing of a scale-up networking switch.

Speaker #5: Additionally, we have secured a landmark program award for the design and manufacturing of a 1.6T co-package optics Ethernet switch with a hyperscaler customer. This win serves as a critical validation of our ability to execute complex next-generation networking designs at scale.

Speaker #2: For the Helios rack scale AI architecture. This collaboration leverages our leading-edge Ethernet networking expertise to support deployments of the Helios platform. Development is in progress and we expect initial units to be available by year-end.

Speaker #5: We expect mass production to commence in 2027. Within our enterprise end market, the growth outlook remains very strong into 2027. As anticipated, volumes for our next-generation AI/ML compute program with a hyperscaler customer continue to scale through 2026.

Speaker #2: Additionally, we have secured a landmark program award for the design and manufacturing of a 1.6T co-package optics Ethernet switch with a hyperscaler customer. This win serves as a critical validation of our ability to execute complex next-generation networking designs at scale.

Speaker #5: We continue to expect a strong momentum to sustain in 2027, supported by the launch of mass production for our digital-native rack scale program, as well as higher demand from our hyperscaler programs driven by ramps in next-generation platforms.

Rob Mionis: This win serves as a critical validation of our ability to execute complex next-generation networking designs at scale. We expect mass production to commence in 2027. Within our enterprise end market, the growth outlook remains very strong into 2027. As anticipated, volumes for our next generation AI/ML compute program with a hyperscaler customer continue to scale through 2026. We continue to expect a strong momentum to sustain in 2027, supported by the launch of mass production for our digital native rack scale program, as well as higher demand from our hyperscaler programs driven by ramps in next generation platforms. Moving on to our ATS segment. We are increasing our full year revenue outlook, which now calls for mid to high single-digit percentage growth.

Speaker #2: We expect mass production to commence in 2027. Within our enterprise end market, the growth outlook remains very strong into 2027. As anticipated, volumes for our next-generation AI/ML compute program with a hyperscaler customer continue to scale through 2026.

Speaker #5: Moving on to our ETS segment, we are increasing our full-year revenue outlook, which now calls for mid to high single-digits percentage growth. The strengthening growth outlook relative to prior quarters is bolstered by a re-acceleration of customer demand in our capital equipment business as the market forecasts for wafer fab equipment spending is strengthening in the second half of 2026 and into 2027.

Speaker #2: We continue to expect a strong momentum to sustain in 2027 supported by the launch of mass production for our digital-native rack scale program as well as higher demand from our hyperscaler programs driven by ramps in next-generation platforms.

Speaker #5: We also continue to expect solid growth in both our industrial and health tech businesses, supported by new program ramps. We are also very encouraged by the strengthening margin profile of our ETS segment portfolio.

Speaker #2: Moving on to our ATS segment, we are increasing our full-year revenue outlook which now calls for mid to high single-digits percentage growth. The strengthening growth outlook relative to prior quarters is bolstered by a re-acceleration of customer demand in our capital equipment business as the market forecasts a wave of fab equipment spending is strengthening in the second half of 2026 and into 2027.

Speaker #5: As we see the benefits of our strategic portfolio reshaping activities. We expect that these dynamics, along with improving operating leverage, will continue to lead to stronger segment margins as we progress throughout the year.

Rob Mionis: The strengthening growth outlook relative to prior quarters is bolstered by a re-acceleration of customer demand in our capital equipment business as the market forecast a wave of fab equipment spending is strengthening in the H2 2026 and into 2027. We also continue to expect solid growth in both our industrial and HealthTech businesses, supported by new program ramps. We are also very encouraged by the strengthening margin profile of our ATS segment portfolio as we see the benefits of our strategic portfolio reshaping activities. We expect that these dynamics, along with improving operating leverage, will continue to lead to stronger segment margins as we progress throughout the year. The fundamentals and visibility supporting our long-term demand outlook through 2026 and into next year are stronger than ever.

Speaker #5: The fundamentals and visibility supporting our long-term demand outlook through 2026 and into next year are stronger than ever. The intensifying need for leading-edge AI compute and networking infrastructure is driving an unprecedented level of customer demand.

Speaker #2: We also continue to expect solid growth in both our industrial and health tech businesses supported by new program wraps. We are also very encouraged by the strengthening margin profile of our ATS segment portfolio.

Speaker #5: Today, as we scale our global operations to meet this accelerating demand, our primary focus remains on execution. We are confident that we are incredibly well-positioned to execute and deliver on the growth opportunity in front of us.

Speaker #2: As we see the benefits of our strategic portfolio reshaping activities. We expect that these dynamics along with improving operating leverage will continue to lead to stronger segment margins as we progress throughout the year.

Speaker #2: The fundamentals and visibility supporting our long-term demand outlook through 2026 and into next year are stronger than ever. The intensifying need for leading-edge AI compute and networking infrastructure is driving an unprecedented level of customer demand.

Speaker #5: With that, I will now turn the call back over to the operator to begin with the Q&A.

Rob Mionis: The intensifying need for leading edge AI compute and networking infrastructure is driving an unprecedented level of customer demand. Today, as we scale our global operations to meet this accelerating demand, our primary focus remains on execution. We are confident that we are incredibly well positioned to execute and deliver on the growth opportunity in front of us. With that, I will now turn the call back over to the operator to begin with the Q&A.

Speaker #1: We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star one to raise your hand.

Speaker #2: Today, as we scale our global operations to meet this accelerating demand, our primary focus remains on execution. We are confident that we are incredibly well positioned to execute and deliver on the growth opportunity in front of us.

Speaker #1: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #1: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Samik Chatterjee with JP Morgan.

Speaker #2: With that, I will now turn the call back over to the operator to begin with the Q&A.

Speaker #1: We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star one to raise your hand.

Operator: Your first question comes from the line of Samik Chatterjee with J.P. Morgan. Your line is open. Please go ahead.

Speaker #1: Your line is open. Please go ahead.

Speaker #3: Thank you. Thanks for taking my questions. Hope you can hear me. Maybe for the first question, you did mention the next-generation programs that you have with your enterprise customer on AI/ML compute programs.

Speaker #1: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #1: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Samic Chatterjee with JP Morgan.

Speaker #3: And there's been a lot of discussion around share. So maybe if you can just dive in a bit into what you're seeing relative to your market share with your customer on that front, particularly on these next-generation programs.

Operator: Your first question comes from the line of Samik Chatterjee with J.P. Morgan. Your line is open. Please go ahead.

Speaker #3: And what level of visibility are they providing you, particularly as their demand sort of increases on that front? Are they looking for additional vendors or suppliers to help them with that ramp?

Speaker #1: Your line is open. Please go ahead.

Samik Chatterjee: Thank you. Thanks for taking my questions. Hope you can hear me. Maybe for the first question, you did mention the next generation programs that you have with your enterprise customer on AI/ML compute programs, and there's been a lot of discussion around share. Maybe if you can just dive in a bit into what you're seeing related to your market share with your customer on that front, particularly on these next generation programs, and what level of visibility are they providing you, particularly as their demand sort of increases on that front? Are they looking for additional vendors or suppliers to help them with that ramp? I have a follow-up. Thank you.

Speaker #3: And I have a follow-up. Thank you.

Speaker #4: Hi, Samik. Yes. Based on the long lead times that there is for silicon these days, the visibility that we have into next-generation programs is quite long.

Speaker #3: So maybe if you can just dive in a bit into what you're seeing relative to your market share with your customer on that front, particularly on these next-generation programs.

Speaker #4: And we are supporting that customer on all the future generation programs, ones in production now and several are in the pipeline to start ramping in subsequent periods.

Speaker #4: We haven't seen a significant change in market share shifts or things along those lines. And we continue to execute well. In the first quarter, by the way, not that you asked, we did have a little bit of a component issue relative to our AI/ML compute issue.

Speaker #3: And I have a follow-up. Thank you.

Speaker #4: Hi, Samic. Yes, based on the long lead times that there are for silicon these days, the visibility that we have into next-generation programs is quite long.

Rob Mionis: Hi, Samik. Yes, you know, based on the long lead times that there is for silicon these days, the visibility that we have into next generation programs is quite long, and we are supporting that customer on all the future generation programs. One's in production now, several are in the pipeline to start ramping in subsequent periods. We haven't seen a significant change in market share shifts or things along those lines. We continue to execute well. In Q1, by the way, not that you asked, we did have a little bit of a component issue relative to our AI/ML compute issue. It was, it wasn't a demand issue, it was actually a material supply issue.

Speaker #4: It wasn't a demand issue. It was actually a material supply issue. That has been resolved. And we'll be catching up in subsequent quarters and the program remains on track.

Speaker #4: And we are supporting that customer on all the future generation programs: ones in production now and several are in the pipeline to start ramping in subsequent periods.

Speaker #3: Got it. Got it. Interesting. And maybe for my follow-up, the announcement of the win around the CPU Ethernet switch, just trying to get a bit more visibility in terms of what it means in terms of your content relative to a maybe a typical 1.6T switch, what does the content for CELESTICA look like, and what would be the margin profile?

Speaker #3: And what are you seeing in terms of engagement beyond this one hyperscaler that you won in terms of CPU Ethernet switches? Thank you.

Speaker #4: It wasn't a demand issue. It was actually a materials supply issue that has been resolved and will be catching up in subsequent quarters and the program remains on track.

Rob Mionis: That has been resolved, and we'll be catching up in subsequent quarters, and the program remains on track.

Speaker #4: Yeah. Good question. So this is not just another switch award. We actually believe it's the first major production sale deployment of CoPackage optics used in Broadcom's Tomahawk Fix Davison module.

Speaker #3: Got it. Got it. Interesting. And maybe for my follow-up, the announcement of the win around the CPU Ethernet switch, just trying to get a bit more visibility in terms of what it means in terms of your content relative to a maybe a sort of a typical 1.6T switch, what does the content for CELESTICA look like and what would be the margin profile?

Samik Chatterjee: Got it. Got it. Interesting. Maybe for my follow-up, the announcement of the win around the CPO Ethernet switch, just trying to get a bit more visibility in terms of what it means in terms of your content related to, maybe a sort of a typical 1.6T switch. What does the content for Celestica look like, and where would be the margin profile? What are you seeing in terms of engagement beyond this one hyperscaler that you won in terms of CPO Ethernet switches? Thank you.

Speaker #4: And designing that directly into our system and winning this award validates our multi-year investment in developing this capability ahead of the market. We talked about that in the last call.

Speaker #4: The transition to 1.6 requires managing unprecedented thermal and signal integrity challenges. And the fact that we're able to do this further demonstrates that we've actually moved up the value chain and we are now a sophisticated co-design partner for the most advanced hyperscalers.

Speaker #3: And what are you seeing in terms of engagement beyond this one hyperscaler that you won in terms of CPU Ethernet switches? Thank you.

Speaker #4: Yeah, good question. So this is not just another switch award. We actually believe it's the first major production-scale deployment of Copackage optics using Broadcom's Tomahawk 6 Davison module.

Rob Mionis: Yeah, good question. This is not just another switch award. We actually believe it's the first major production scale deployment of co-packaged optics, using Broadcom's Tomahawk 6 Davisson module and designing that directly into our system. Winning this award validates our multi-year investment in developing this capability ahead of the market. We talked about that in the last call. The transition to 1.6T requires managing unprecedented thermal and signal integrity challenges. The fact that we're able to do this further demonstrates that we've actually moved up the value chain, and we are now a sophisticated co-design partner for the most advanced hyperscalers. It also sets us up well for the 3.2 adoption, where we think this will kick in.

Speaker #4: It also sets us up well for the 3.2 adoption where we think this will kick in. So we think at this stage of the game, we're a market leader in terms of margin profile.

Speaker #4: Because of the high value add, this will be on the higher end of what we typically do.

Speaker #4: And designing that directly into our system—and winning this award—validates our multi-year investment in developing this capability ahead of the market. We talked about that in the last call.

Speaker #3: And are you seeing more hyperscalers interested beyond this one hyperscaler that you won?

Speaker #4: The transition to 1.6 requires managing unprecedented thermal and signal integrity challenges. And the fact that we're able to do this further demonstrates that we've actually moved up the value chain, and we are now a sophisticated co-design partner for the most advanced hyperscalers.

Speaker #4: I think each of the hyperscalers will have their own adoption for CPL. Some are choosing to do CPX before CPL. But at the end of the day, we'll think the major adoption will be at the 3.2.t node.

Speaker #1: Thank you, Samik.

Speaker #4: It also sets us up well for the 3.2 adoption where we think this will kick in. So we think at this stage of the game, we're a market leader in terms of margin profile.

Speaker #2: Thank you for your questions. As a reminder, please limit yourself to one question. If you would like to ask a follow-up, please feel free to re-enter the queue.

Rob Mionis: We think at this stage of the game, we're a market leader in terms of margin profile, because of the high value add, this will be on the higher end of what we typically do.

Speaker #4: Because of the high value add, this will be on the higher end of what we typically do.

Speaker #2: Your next question comes from the line of Michael Ng with Goldman Sachs. Your line is open. Please go ahead.

Speaker #3: And then you're seeing more hyperscalers interested beyond this one hyperscaler that you won?

Samik Chatterjee: Are you seeing more hyperscalers interested beyond this one hyperscaler that you won?

Speaker #5: Hi. Good morning. Thank you for the question. You talked about the CCS revenue growth of 70% for 2026 and the 2027 outlook. Getting better relative to the last 90 days.

Speaker #4: I think each of the hyperscalers will have their own adoption for CPU. Some are choosing to do CPX before CPU. But at the end of the day, we'll think the major adoption will be at the 3.2.t node.

Rob Mionis: I think each of the hyperscalers will have their own adoption for CPO. Some are choosing to do CPX before CPO. At the end of the day, we'll think the major adoption will be at the 3.2 node.

Speaker #5: I was wondering if you could talk a little bit about your 2027 CCS revenue growth expectations relative to where you got it last time and any way to size or help think about the order of contributions from some of the key programs that you mentioned between Scale-Up, Helio, CPO, and Digital Native.

Speaker #1: Thank you, Samic.

Rob Mionis: Thank you. Samik.

Speaker #2: Thank you for your questions. As a reminder, please limit yourself to one question. If you would like to ask a follow-up, please feel free to re-enter the queue.

Operator: Thank you for your questions. As a reminder, please limit yourself to one question. If you would like to ask a follow-up, please feel free to re-enter the queue. Your next question comes from the line of Michael Ng with Goldman Sachs. Your line is open. Please go ahead.

Speaker #2: Your next question comes from the line of Michael Ng with Goldman Sachs. Your line is open. Please go ahead.

Speaker #5: Thank you.

Speaker #1: Yeah. Hi, Mike. It's Mandeep here. Yeah. Thanks for the question. Look, we're very pleased with the accelerated growth that we're seeing across the business.

Speaker #3: Hi, good morning. Thank you for the question. You talked about the CCS revenue growth of 70% for 2026 and the 2027 outlook getting better relative to the last 90 days.

Michael Ng: Hi. Good morning. Thank you for the question. You talked about the CCS revenue growth of 70% for 2026 and the 2027 outlook getting better relative to the last 90 days. I was wondering if you could talk a little bit about your 2027 CCS revenue growth expectations relative to where you guided us last time and any way to size or help think about the, you know, order of contributions from some of the key programs that you mentioned between, you know, scale-out Helios, CPO, and digital native. Thank you.

Speaker #1: And we have no indications right now that it's slowing down. When we're looking at that we shared, we're growing by about 6.5 billion this year.

Speaker #3: I was wondering if you could talk a little bit about your 2027 CCS revenue growth expectations relative to where you got it last time and any way to size or help think about the order of contributions from some of the key programs that you mentioned between Scale-Up, Helio, CPO, and Digital Native.

Speaker #1: And we think we're going to grow significantly more than that, which means the floor would be somewhere around 25.5. But we do see revenue higher than that.

Speaker #1: And that's on programs that we've won. As you know, we're seeing really great networking dynamics this year. 400G continues to be strong. 800G is accelerating materially.

Speaker #3: Thank you.

Speaker #1: And we're ramping we're seeing some contribution towards the back end of the year from 1.6T programs. When you start looking at 2027, 800G demand continues to be strong.

Speaker #1: Yeah. Hi, Mike. It's Mandeep here. Yeah, thanks for the question. Look, we're very pleased with the accelerated growth that we're seeing across the business.

Mandeep Chawla: Hi, Michael. It's Mandeep Chawla. Thanks for the question. Look, we're very pleased with the accelerated growth that we're seeing across the business, and we have no indications right now that it's slowing down. When we're looking at that we shared. We're growing by about $6.5 billion this year, and we think we're gonna grow significantly more than that, which means the floor would be somewhere around $25.5 billion. We do see revenue higher than that, and that's on programs that we've won. As you know, we're seeing really great networking dynamics this year. 400G continues to be strong. 800G is accelerating materially. We're seeing some contribution towards the back end of the year from the 1.6T program.

Speaker #1: And we have no indications right now that it's slowing down. When we're looking at that we shared, we're growing by about 6.5 billion this year.

Speaker #1: 1.6T is now ramping across the programs that we've already started, plus additional programs that will be coming online. And then we have the very large program, the rack scale system that we're doing for the Digital Native customer.

Speaker #1: And we think we're going to grow significantly more than that, which means the floor would be somewhere around 25.5. But we do see revenue higher than that.

Speaker #1: And then in addition to that, as Rob talked about on the AI/ML compute programs, we're continuing to see strong growth, including next-generation programs. And I could go on with other things as well.

Speaker #1: And that's on programs that we've won. As you know, we're seeing really great networking dynamics this year. 400G continues to be strong. 800G is accelerating materially.

Speaker #1: But with the programs that we've won with the material that we are in line to secure with the capacity that is coming online, we have strong confidence in 2027.

Speaker #1: And we're ramping we're seeing some contribution towards the back end of the year from the 1.6T programs. When you start looking at 2027, 800G demand continues to be strong.

Speaker #1: And we'll give more specificity around the number as we go through the year.

Mandeep Chawla: When you start looking at 2027, 800G demand continues to be strong. 1.6T is now ramping across the programs that we've already started, plus additional programs that will be coming online. Then we have the very large program, the Rack-Scale System, that we're doing for the digital native customer. Then in addition to that, as Rob talked about on the AI/ML compute programs, we're continuing to see strong growth, including next generation programs. I could go on, you know, with other things as well. But with the programs that we've won, with the material that we are in line to secure, with the capacity that is coming online, we have strong confidence in 2027. You know, we'll give more specificity around the number as we go through the year.

Speaker #2: Thank you for your question. Your next question comes from a line of Tim Long with Barclays. Your line is open. Please go ahead.

Speaker #3: Thank you. Yeah. It was something we could talk a little bit about, the HPS business off to a pretty good start. 1.7 billion in a quarter.

Speaker #3: I'm curious if you can talk about kind of the progression of the HPS business. I know that's been part of the CAPEX and increased investment is more HPS centers as well.

Speaker #1: But with the programs that we've won with the material that we are in line to secure with the capacity that is coming online, we have strong confidence in 2027.

Speaker #3: And particularly into next year, I think some of the I think all three of these large programs—the Digital Native, AMD, and CPO—should be HPS as well.

Speaker #1: And we'll give more specificity around the number as we go through the year.

Speaker #3: So if you could just give us a little color on how you see the glide path for that piece of business in the mix.

Speaker #2: Thank you for your question. Your next question comes from the line of Tim Long with Barclays. Your line is open. Please go ahead.

Operator: Thank you for your question. Your next question comes from the line of Tim Long with Barclays. Your line is open. Please go ahead.

Speaker #3: Thank you.

Speaker #1: Great. Hi, Tim. Look, the HPS business and specifically the design work that we're doing with our customers is really underpinning the majority of the growth that we're seeing or a significant portion of it.

Speaker #3: Thank you. Yeah, I was hoping we could talk a little bit about the HPS business off to a pretty good start. This is 1.7 billion in the quarter.

[Analyst]: Thank you. Yeah, I was hoping you could talk a little bit about the HPS business. You're off to a pretty good start at $7.7 billion in the quarter. I'm curious if you, if you can talk about kind of the progression of the HPS business. I know that's been part of the CapEx and increased investment in more ATS segment as well. Particularly into next year, I think all three of these large programs, the Digital Native, AMD, and CPO should be HPS as well. If you could just give us a little color on how you see the glide path for that piece of business in the mix. Thank you.

Tim Long: Thank you. Yeah, I was hoping you could talk a little bit about the HPS business. You're off to a pretty good start at $7.7 billion in the quarter. I'm curious if you, if you can talk about kind of the progression of the HPS business. I know that's been part of the CapEx and increased investment in more ATS segment as well. Particularly into next year, I think all three of these large programs, the Digital Native, AMD, and CPO should be HPS as well. If you could just give us a little color on how you see the glide path for that piece of business in the mix. Thank you.

Speaker #1: You've already mentioned a few of them. We're seeing very good traction on the switching side. The CPO program that Rob just talked about is an HPS program.

Speaker #3: I'm curious if you can talk about kind of the progression of the HPS business. I know that's been part of the CAPEX and increased investment is more HPS centers as well.

Speaker #1: The 1.6T programs are predominantly HPS as well as our 800G and 400G programs. And so we have a very strong competitive position when it comes to networking.

Speaker #3: And particularly into next year, I think some of the I think all three of these large programs: the Digital Native, AMD, and CPO should be HPS as well.

Speaker #1: As we grow this Digital Native program into next year, it really starts to extend ourselves into compute as well. And all of this is underpinned by investments that we're making.

Speaker #3: So if you could just give us a little color on how you see the glide path for that piece of business in the mix.

Speaker #3: Thank you.

Mandeep Chawla: Great. Hi, Tim. Look, the HPS business, and specifically the design work that we're doing with our customers is really underpinning the majority of the growth that we're seeing or a significant portion of it. You've already mentioned a few of them. We're seeing very good traction on the switching side. The CPO program that Rob just talked about is an HPS program. The 1.6T programs are predominantly HPS as well as our 800G and 400G programs. We have a very strong competitive position when it comes to networking. As we grow this digital native program into next year, it really starts to extend ourselves into compute as well. You know, all of this is underpinned by investments that we're making.

Speaker #1: You'll notice that our R&D spend is up materially. And it's where we want it to be. We have about 1,350 design engineers right now.

Speaker #1: That's much higher than we had this time last year. And by the time we end this year, we're going to have even more. And the benefit of that is that if they're working on not this year's programs, but they're really working on programs for next year and the year after.

Speaker #1: You've already mentioned a few of them. We're seeing very good traction on the switching side. The CPO program that Rob just talked about is an HPS program.

Speaker #1: The 1.6T programs are predominantly HPS as well as our 800G and 400G programs. And so we have a very strong competitive position when it comes to networking.

Speaker #1: And so because of the programs that we've been winning and the pipeline that we have, we're very comfortable making the investments that we are in R&D, which is specifically HPS.

Speaker #1: As we grow this Digital Native program into next year, it really starts to extend ourselves into compute as well. And all of this is underpinned by investments that we're making.

Speaker #2: Thank you for your question. Your next question comes from the line of Karl Ackerman with BNP Paribas. Your line is open. Please go ahead.

Speaker #1: You'll notice that our R&D spend is up materially. And it's where we want it to be. We have about 1,350 design engineers right now.

Mandeep Chawla: You'll notice that our R&D spend is up materially and it's where we want it to be. We have about 1,350 design engineers right now. That's much higher than we had, this time last year. By the time we end this year, we're gonna have even more. The benefit of that is that if they're working on not this year's programs, but they're really working on programs for next year and the year after. Because of the programs that we've been winning and the pipeline that we have, we're very comfortable making the investments that we are in R&D, which is specifically HPS.

Speaker #5: Yes. Thank you. Two questions for me, please. First, as you think about the drivers for upwardly revised outlook for 2026 and 2027, I was hoping you could bucket the relative growth drivers between some of the new switch programs versus the AI servers.

Speaker #5: And how that might influence your margin trajectory throughout the balance of '26 and '27.

Speaker #1: And so, because of the programs that we've been winning and the pipeline that we have, we're very comfortable making the investments that we are in R&D, which is specifically HPS.

Speaker #1: Karl, I'll get started and feel free to add on for anything that I may miss. Look, as we look into 2027, what we are seeing right now is very strong growth coming in particular from CCS.

Speaker #2: Thank you for your question. Your next question comes from the line of Carl Ackerman with BNP Paribas. Your line is open. Please go ahead.

Operator: Thank you for your question. Your next question comes from the line of Karl Ackerman with BNP Paribas. Your line is open. Please go ahead.

Speaker #1: Although ATS will also be growing, I'll just quickly touch on ATS because often we miss it on the call. It's very nice to see the performance that's underway right now in ATS, which is a return to growth and strong margins.

Speaker #3: Yes, thank you. Two questions for me, please. First, as you think about the drivers for upwardly revised outlook for 2026 and 2027, I was hoping you could bucket the relative growth drivers between some of the new switch programs versus the AI servers.

Karl Ackerman: Yes. Thank you. Two questions for me, please. First, as you think about the drivers for your upwardly revised outlook for 2026 and 2027, I was hoping you could bucket the relative growth drivers between some of the new switch programs versus the AI servers and how that might influence your marginal trajectory throughout the balance of 2026 and 2027.

Speaker #1: And that's really being underpinned by capital equipment. Capital equipment, we believe now, is entering into a very nice cycle where there is a very strong order book from our major customers.

Speaker #3: And how that might influence your margin trajectory throughout the balance of ’26 and ’27.

Speaker #1: And that will take us through this year and next year. So ATS will be contributing to the growth. But the growth is overwhelmingly being driven by CCS.

Mandeep Chawla: Karl, I'll get started, and Rob can feel free to add on for anything that I may miss. Look, as we look into 2027, what we are seeing right now is very strong growth coming in particular from CCS, although ATS will also be growing. I'll just quickly touch on ATS because often we miss it on the call. It's very nice to see the performance that's underway right now in ATS, which is a return to growth and strong margin. That's really being underpinned by capital equipment. Capital equipment, we believe now is entering into a very nice cycle where there is a very strong order book from our major customers, and that will take us through this year and next year.

Speaker #1: Carl, I'll get started and interrupt and feel free to add on for anything that I may miss. Look, as we look into 2027, what we are seeing right now is very strong growth coming in particular from CCS, although ATS will also be growing.

Speaker #1: And it is being driven by both communications and enterprise. We're not going to split the details yet. Again, more to come. But just to talk about the specifics a little bit more, on the enterprise side, we are growing a new storage program that we've just launched and is in ramp.

Speaker #1: I'll just quickly touch on ATS, because often we miss it on the call. It's very nice to see the performance that's underway right now in ATS, which is a return to growth and strong margin.

Speaker #1: We have the AI/ML compute program that is going strong through this year. And then the next generation program, two programs to be specific, are going to be ramping in '27.

Speaker #1: And that's really being underpinned by capital equipment. Capital equipment, we believe, is now entering into a very nice cycle, where there is a very strong order book from our major customers.

Speaker #1: And then on the networking side, as we talked about, we have a couple of 1.6T programs that are coming online towards the end of this year.

Speaker #1: And that will take us through this year and next year. So ATS will be contributing to the growth. But the growth is overwhelmingly being driven by CCS.

Speaker #1: And then we have a lot more that are coming online next year. And then we never want to lose sight of this Digital Native wind, which is a completely integrated rack system which has compute and networking in it, highly complex, not easy to do, at scale.

Mandeep Chawla: ATS will be contributing to the growth, but the growth is overwhelmingly being driven by CCS, and it is being driven by both communications and enterprise. We're not gonna split out the details yet. Again, more to come. Yeah, just to go talk about the specifics a little bit more. On the enterprise side, we are growing a new storage program that we've just launched and is in ramp. We have the AI/ML compute program that is going strong through this year, and then the next generation program, two programs to be specific, are gonna be ramping in 2027.

Speaker #1: And it is being driven by both communications and enterprise. We're not going to split the details yet. Again, more to come. But just to talk about the specifics a little bit more.

Speaker #1: And that will be entering production next year as well. And so those are really driving the growth across CCS.

Speaker #1: On the enterprise side, we are growing a new storage program that we've just launched and is in ramp. We have the AI/ML compute program that is going strong through this year.

Speaker #4: And I would just add, Karl, that in terms of 1.6, we have 10 active programs that will be ramping heavily. And 2027, on top of that 800G remains strong.

Speaker #1: And then the next generation program, two programs to be specific, are going to be ramping in '27. And then on the networking side, as we talked about, we have a couple of 1.6T programs that are coming online towards the end of this year.

Mandeep Chawla: On the networking side, as we talked about, we have a couple of 1.6T programs that are coming online towards the end of this year. We have a lot more that are coming online next year. You know, we never wanna lose sight of this digital native rack scale program, which is a completely integrated rack system which has compute and networking in it. Highly complex, not easy to do at scale. That will be entering production next year as well. Those are really driving the growth across CCS.

Speaker #4: And as Mandeep mentioned, we have the Digital Native. We have the Helios rack. So lots of new programs and also our AML compute program that has very strong end customer demand for those programs.

Speaker #1: And then we have a lot more that are coming online next year. And then we never want to lose sight of this Digital Native win, which is a completely integrated rack system, which has compute and networking in it, highly complex, not easy to do, at scale.

Speaker #4: So that will end up ramping very nicely into 2027 as well. So overall, a very strong demand environment in 2027.

Speaker #1: And that will be entering production next year as well. And so those are really driving the growth across CCS.

Speaker #2: Thank you for your question. As a reminder, if you would like to ask a follow-up question, please press *1 to raise your hand and re-enter the queue.

Speaker #4: And I would just add, Carl, that in terms of 1.6, we have 10 active programs that'll be ramping heavily. And 2027, on top of that 800G remains strong.

Rob Mionis: I would just add, Karl, that in terms of 1.6, we have 10 active programs that'll be ramping heavily in 2027. On top of that, 800G remains strong, and as Mandeep mentioned, we have the digital native, we have the Helios rack, so lots of new programs. Also our AI/ML compute program that has very strong end customer demand for those programs. That will end up ramping very nicely into 2027 as well. Overall, a very strong demand environment in 2027.

Speaker #2: Your next question comes from the line of Mehdi Hosseini with Saskahana Financial Group. Your line is open. Please go ahead.

Speaker #4: And as Mandeep mentioned, we have the Digital Native, we have the Helios rack, so lots of new programs, and also our AML compute program that has very strong end-customer demand for those programs.

Speaker #5: Yes. Thanks for taking my question. One follow-up on the Helios project. To what extent actually, can you size the opportunities associated with Helios over the next 18 months?

Speaker #4: So that will end up ramping very nicely into 2027 as well. So overall, a very strong demand environment in 2027.

Speaker #5: And to what extent some of those opportunities are now embedded into your calendar year '26 revenue target?

Speaker #2: Thank you for your question. As a reminder, if you would like to ask a follow-up question, please press star 1 to raise your hand and re-enter the queue.

Operator: Thank you for your question. As a reminder, if you would like to ask a follow-up question, please press star one to raise your hand and reenter the queue. Your next question comes from the line of Mehdi Hosseini with Susquehanna Financial Group. Your line is open. Please go ahead.

Speaker #4: Yeah. With respect to Helios, the program isn't development right now. And we'll be shipping samples this year. We view the overall market as a multi-billion dollar market.

Speaker #2: Your next question comes from the line of Mehdi Hosseini with Saskahana Financial Group. Your line is open. Please go ahead.

Speaker #5: Yes. Thanks for taking my question. One follow-up on the Helios project. To what extent actually, can you size the opportunities associated with Helios over the next 18 months?

Mehdi Hosseini: Yes, thanks for taking my question. Want to follow up on the Helios project. Actually, can you size the opportunities associated with Helios over the next 18 months? To what extent some of those opportunities are now embedded into your calendar year 2026 revenue target?

Speaker #4: And as we get into next year, I think revenue will probably be based more by Silicon availability than by end market demand. At this stage of the game, though, things are on track with the development.

Speaker #5: And to what extent are some of those opportunities now embedded into your calendar year ’26 revenue targets?

Speaker #4: And it has a lot of market interest.

Speaker #2: Thank you for your question. Your next question comes from the line of David Vogt with UBS. Your line is open. Please go ahead.

Speaker #4: Yeah. With respect to Helios, the program is in development right now. And we'll be shipping samples this year. We view the overall market as a multi-billion dollar market.

Rob Mionis: Yeah. With respect to Helios, the program is in development right now and we'll be shipping samples this year. We view the overall market as a multi-billion dollar market. As we get into next year, I think revenue will probably be based more by silicon availability than by end market demand. At this stage of the game, though, things are on track with the development, and it has a lot of market interest.

Speaker #5: Great. Thanks, guys. So I just maybe Mandeep, I have a question regarding the revenue ramp versus the trade-off on gross margin. So obviously, TPU sounds like it was capacity-constrained this quarter.

Speaker #5: And that's going to ramp stronger as we go into Q2 in the second half of this year. And it certainly sounds like strength in calendar '27.

Speaker #4: And as we get into next year, I think revenue will probably be based more by silicon availability than by end market demand. At this stage of the game, though, things are on track with the development.

Speaker #5: How should we think about the gross margin progression of the business, particularly with TPU ramping and also the what sounds like a really strong start to the D&C relationship, potentially in the second half of this year into next year?

Speaker #4: And it has a lot of market interest.

Speaker #2: Thank you for your question. Your next question comes from the line of David Vogt with UBS. Your line is open. Please go ahead.

Operator: Thank you for your question. Your next question comes from the line of David Vogt with UBS. Your line is open. Please go ahead.

Speaker #5: Thanks.

Speaker #3: Yeah. He did it. Look, we're pleased that we saw gross margin expansion in the quarter on a year-over-year basis. We think that the gross margin dynamics that we're seeing are going to play in a similar way there are going to be mixed impacts along the way.

Speaker #3: Great. Thanks, guys. So I just maybe Mandeep, I have a question regarding the revenue ramp versus the trade-off on gross margin. So obviously, TPU sounds like it was capacity-constrained this quarter.

David Vogt: Great. Thanks, guys. Maybe, Mandeep, I have a question regarding the revenue ramp versus the trade-off on gross margin. Obviously, TPU sounds like it was capacity constrained this quarter, and that's going to ramp stronger as we go into Q2 in H2 of this year, and it certainly sounds like strength in calendar 2027. How should we think about the gross margin progression of the business, particularly with TPU ramping and also the, what sounds like a really strong start to the D&H relationship potentially in H2 of this year into next year? Thanks.

Speaker #3: But we definitely are looking to maintain if not grow our gross margins as we go forward. Two things I'll talk about. The first one is that longer term, there are some headwinds on the gross margin side.

Speaker #3: And that's going to ramp stronger as we go into Q2 and the second half of this year. And it certainly sounds like strength in calendar '27.

Speaker #3: How should we think about the gross margin progression of the business, particularly with TPU ramping and also what sounds like a really strong start to the DNC relationship, potentially in the second half of this year into next year?

Speaker #3: And it really has nothing to do with pricing because we're not we have capacities at a premium. Our execution is a real differentiator. And so we have choice on where we apply our focus and so we're not giving up price in the marketplace.

Speaker #3: Thanks.

Speaker #3: But the reality is that there's some input costs that are going up materially. Whether it be memory or whether it be silicon. And so those are some headwinds that we're working through on the gross margin side.

Speaker #5: Yeah. He did it. Look, we're pleased that we saw this gross margin expansion in the quarter on a year-over-year basis. We think that the gross margin dynamics that we're seeing are going to play in a similar way there are going to be mixed impacts along the way.

Mandeep Chawla: Yeah. Hey, David. Look, we're pleased that we saw gross margin expansion in the quarter on a year-over-year basis. We think that the gross margin dynamics that we're seeing are gonna play out in a similar way. There are gonna be mixed impacts along the way. We definitely are looking to maintain, if not grow our gross margins as we go forward. Two things I'll talk about. The first one is that, you know, longer term, there are some headwinds on the gross margin side, and it really has nothing to do with pricing, because we have capacity is at a premium. Our execution is a real differentiator, and so we have choice on where we apply our focus. We're not giving up price in the marketplace.

Speaker #3: But more specifically, what I'll talk about is the operating profit. We're seeing very nice operating leverage right now in the company. And we think that there's more opportunity in front of us as well.

Speaker #5: But we definitely are looking to maintain if not grow our gross margins as we go forward. Two things I'll talk about. The first one is that longer-term, there are some headwinds on the gross margin side.

Speaker #3: We're pleased to be able to raise the full year to 8.1%. That's up from the 7.8 that we had just 90 days ago. It's a reflection of mix, but it's a reflection of operating leverage because we're being very disciplined on the operating expenditure side.

Speaker #5: And it really has nothing to do with pricing because we're not we have capacities at a premium. Our execution is a real differentiator. And so we have choice on where we apply our focus and so we're not giving up price in the marketplace.

Speaker #3: And although we are very pleased to make investments along the way to fund growth. And so as you look into 2027, there will continue to be an opportunity on, I would say, operating leverage and we are very focused on ultimately translating that into EPS growth.

Speaker #5: But the reality is that there's some input costs that are materially. Whether it be memory or whether it be silicon. And so those are some headwinds that we're working through on the gross margin side.

Mandeep Chawla: The reality is that there's some input costs that are going up, materially, whether it be memory or whether it be silicon. Those are some headwinds that we're working through on the gross margin side. More specifically, what I'll talk about is the operating profit. We're seeing very nice operating leverage right now in the company, and we think that there's more opportunity in front of us as well. You know, we're pleased to be able to raise the full year to 8.1%. That's up from the 7.8% that we had, just 90 days ago. It's a reflection of mix, but it's a reflection of operating leverage because we're being very disciplined on the operating expenditure side.

Speaker #3: We are a management team that is very focused on long-term sustainable growth in EPS. And so the leverage that is being pulled are driving that outcome.

Speaker #5: But more specifically, what I'll talk about is the operating profit. We're seeing very nice operating leverage right now in the company. And we think that there's more opportunity in front of us as well.

Speaker #2: Thank you for your question. Your next question comes from the line of George Nauder with Wolf Research. Your line is open. Please go ahead.

Speaker #5: We're pleased to be able to raise the full year to 8.1%. That's up from the 7.8% that we had just 90 days ago. It's a reflection of mix, but it's a reflection of operating leverage because we're being very disciplined on the operating expenditure side.

Speaker #4: Hi, guys. Thanks very much. I guess I wanted to come back to the CPO and the you announced here. Is that an existing customer for networking infrastructure or is that a brand new customer?

Mandeep Chawla: Although we are very pleased to make investments along the way, to fund growth. As you look into 2027, there will continue to be an opportunity on, I would say, operating leverage, and we are very focused on ultimately translating that to EPS growth. We are a management team that is very focused on long-term sustainable growth in EPS, and so the levers that are being pulled are driving that outcome.

Speaker #5: And although we are very pleased to make investments along the way to fund growth. And so as you look into 2027, there will continue to be an opportunity on, I would say, operating leverage and we are very focused on ultimately translating that into EPS growth.

Speaker #4: And then also, I'm wondering if it's an existing customer, is it likely that that cannibalizes an existing revenue run rate for you? And then anything you could say about the potential size of that deal would be great.

Speaker #5: We are a management team that is very focused on long-term, sustainable growth in EPS. And so the levers that are being pulled are driving that outcome.

Speaker #4: And then also, you said 2027 would be the ramp. Is it any more specifics there? Is it early '27? Is it late '27? Any help would be great.

Speaker #2: Thank you for your question. Your next question comes from the line of George Nauder with Wolf Research. Your line is open. Please go ahead.

Operator: Thank you for your question. Your next question comes from the line of George Wang with Wolfe Research. Your line is open. Please go ahead.

Speaker #4: Thanks a lot.

Speaker #6: Hi, George. Yes. It's an existing customer. We have multiple 1.6T awards with this customer and programs. That's why they felt comfortable in giving us this one as well.

Speaker #6: Hi, guys. Thanks very much. I guess I wanted to come back to the CPO and the you announced here is that an existing customer for networking infrastructure or is that a brand new customer?

George Wang: Hi, guys. Thanks very much. I guess I wanted to come back to the CPO win that you announced here. Is that an existing customer for networking infrastructure, or is that a brand-new customer? And then

Speaker #6: We don't feel it cannibalizes the current programs that current demand that we have on those programs is actually going up. And with respect to timing, this will be second half of 2027.

Speaker #6: And then also, I'm wondering if it's an existing customer, is it likely that that cannibalizes an existing revenue run rate for you? And then anything you could say about the potential size of that deal would be great.

George Wang: Also, I'm wondering if it's an existing customer, is it likely that that cannibalizes an existing revenue run rate for you? Anything you could say about the potential size of that deal would be great. You said 2027 would be the ramp. Is it any more, you know, specifics there? Is it early 2027? Is it late 2027? Any help would be great. Thanks a lot.

Speaker #2: Thank you for your question. Your next question comes from the line of John Shao with TD Cowen. Your line is open. Please go ahead.

Speaker #6: And then also, you said 2027 would be the ramp. Is it any more specifics there? Is it early '27? Is it late '27? Any help would be great.

Speaker #7: Good morning, guys. Thanks for taking my question. So regarding Google's new Butterfly architecture for TPU VA, could you maybe talk about implication to your business?

Speaker #6: Thanks a lot.

Speaker #4: Hi, George. Yes. It's an existing customer. We have multiple 1.6T awards with this customer and programs. That's why they felt comfortable in giving us this one as well.

Rob Mionis: Hi, George. Yes, it's an existing customer. We have multiple 1.6T awards with this customer and programs. That's why they felt comfortable in giving us this one as well. We don't feel it cannibalizes the current programs. The current demand that we have on those programs is actually going up. With respect to timing, this will be H2 2027.

Speaker #7: And do you see an ongoing trend towards more complex data center interconnect? And as a result, you're going to be there to benefit as ODM.

Speaker #4: We don't feel it cannibalizes the current programs that current demand that we have on those programs is actually going up. And with respect to timing, this will be second half of 2027.

Speaker #7: Thanks.

Speaker #4: Yeah. As the architecture becomes more critical and as our hyperscale customers continue to innovate, what's becoming more and more evident is that systems-level manufacturing, design is becoming more and more important for these customers.

Speaker #2: Thank you for your question. Your next question comes from the line of John Chow with TD Cowen. Your line is open. Please go ahead.

Operator: Thank you for your question. Your next question comes from the line of John Shao with TD Cowen. Your line is open. Please go ahead.

Speaker #4: Especially in liquid cooling, advanced rack scale infrastructure, thermal management. So these customers are looking for us to continue to innovate with them and design with them on multiple nodes, moving forward.

John Shao: Good morning, guys. Thanks for taking my question. Regarding Google's new Boardfly architecture for TPU 8, could you maybe talk about implications to your business? Do you see an ongoing trend towards more complex data center interconnect, and as a result, you're gonna be there to benefit as ODM? Thanks.

Speaker #5: Morning, guys. Thanks for taking my question. So regarding Google's new Butterfly architecture for TPU VA, could you maybe talk about implication to your business?

Speaker #5: And do you see an ongoing trend towards more complex data center interconnect? And as a result, you're going to be there to benefit as ODM?

Speaker #4: So we're pleased to be able to continue to support them as they continue to innovate and advance their architecture through all the versions that you mentioned.

Speaker #5: Thanks.

Speaker #4: Yeah. As the architecture becomes more critical, and as our hyperscaler customers continue to innovate, what's becoming more and more evident is that systems-level manufacturing and design is becoming more and more important for these customers.

Rob Mionis: Yeah. You know, as the architecture becomes more critical and as our hyperscaler customers continue to innovate, what's becoming more and more evident is that systems level of manufacturing design is becoming more and more important for these customers, especially in liquid cooling, advanced rack scale infrastructure, thermal management. These customers are looking for us to continue to innovate with them and design with them on multiple nodes, moving forward. We're pleased to be able to continue to support them as they continue to innovate and advance their architecture, you know, through all the versions that you mentioned.

Speaker #2: Thank you for your question. Your next question comes from the line of Ruben Roy with Stifler. Your line is open. Please go ahead.

Speaker #3: Yes. Thank you. Rob, I wanted to come back to the supply commentary you characterized the environment as highly dynamic. And it sounded like there was a specific issue around AI/ML in Q1.

Speaker #3: So I'm just wondering if you could maybe expand on how you're thinking about supply relative to the guidance and the demand dynamic as you think about both Q2 and the second half of the year.

Speaker #4: So we're pleased to be able to continue to support them as they continue to innovate and advance their architecture through all the versions that you mentioned.

Speaker #3: Are there caps on sort of what you're able to ship as a broader base than the AI/ML program that you talked about for Q1?

Speaker #2: Thank you for your question. Your next question comes from the line of Ruben Roy with Stifler. Your line is open. Please go ahead.

Operator: Thank you for your question. Your next question comes from the line of Ruben Roy with Stifel. Your line is open. Please go ahead.

Speaker #3: Any detail on that would be helpful. Thank you.

Speaker #6: Good question. Where our experiencing more component shortages now than 90 days ago, two main factors. One is the demand really continues to grow. And as a result, the suppliers are a little bit behind on adding capacity.

Speaker #6: Yes. Thank you. Rob, I wanted to come back to the supply commentary you characterized the environment as highly dynamic. And it sounded like there was a specific issue around AI/ML in Q1.

Ruben Roy: Yes, thank you. Rob, I wanted to come back to the supply commentary. You characterized the environment as highly dynamic, and it sounded like there was a specific issue around AI/ML in Q1. I'm just wondering if you could maybe expand on, you know, how you're thinking about supply relative to the guidance and the demand dynamic. You know, as you think about both Q2 and H2, are there caps on sort of what you're able to ship as a broader base than the AI/ML program that you talked about for Q1? Any detail on that would be helpful. Thank you.

Speaker #6: So I'm just wondering if you could maybe expand on how you're thinking about supply relative to the guidance and the demand dynamic as you think about both Q2 and the second half of the year.

Speaker #6: The good news is that all of our key suppliers are currently in the works of adding capacity. And we expect the situation to improve the constrained commodities right now on allocation are custom silicon and memory.

Speaker #6: Are there caps on sort of what you're able to ship as a broader base than the AI/ML program that you talked about for Q1?

Speaker #6: That's probably not news flash for you. We're seeing challenges in PCBs, 40-plus layer ones, power components, optical components. The positive news is that we have commitment from all our suppliers to secure the outlet that we just gave.

Speaker #6: Any doubt on that would be helpful. Thank you.

Speaker #4: Yeah. Good question. There are experiencing more component shortages now than 90 days ago. Two main factors. One is the demand really continues to grow.

Rob Mionis: Good question. We are experiencing more component shortages now than 90 days ago. Two main factors. One is the demand really continues to grow. As a result, the suppliers are a little bit behind on adding capacity. The good news is that all of our key suppliers are currently in the works of adding capacity, and we expect the situation to improve. The constrained commodities right now on allocation are custom silicon and memory. That's probably not newsflash for you. We are seeing challenges in PCBs, the 40-plus layer ones, power components, optical components. The positive news is that we have commitments from all our suppliers to secure the outlook that we just gave. We think the outlook that we just gave factors all these in.

Rob Mionis: Good question. We are experiencing more component shortages now than 90 days ago. Two main factors. One is the demand really continues to grow. As a result, the suppliers are a little bit behind on adding capacity. The good news is that all of our key suppliers are currently in the works of adding capacity, and we expect the situation to improve. The constrained commodities right now on allocation are custom silicon and memory. That's probably not newsflash for you. We are seeing challenges in PCBs, the 40+ layer ones, power components, optical components. The positive news is that we have commitments from all our suppliers to secure the outlook that we just gave. We think the outlook that we just gave factors all these in.

Speaker #6: So we think the outlook that we just gave factors all these in. We think it's prudent. We think it's conservative. And that's why we marked it as high confidence.

Speaker #4: And as a result, the suppliers are a little bit behind on adding capacity. The good news is that all of our key suppliers are currently in the works of adding capacity.

Speaker #6: We have capacity in 26 coming online ourselves also in 2027. So if things continue to improve in the back half of the year, we'll have the opportunity to get it out the door and also into next year.

Speaker #4: And we expect the situation to improve the constrained commodities right now on allocation are custom silicon and memory. That's probably not news flash for you.

Speaker #6: But we think we factored it all in. But it is more constrained now than it was 90 days ago. And the lead times are extending.

Speaker #4: We're seeing challenges in PCBs, the 40-plus layer ones, power components, optical components. The positive news is that we have commitment from all our suppliers to secure the outlet that we just gave.

Speaker #6: And one last positive thing is with the extended lead times, we are getting unprecedented visibility from our customers and item demand. So that's actually a very positive thing for us as we do long-term planning.

Speaker #4: So we think the outlook that we just gave factors all these in. We think it's prudent. We think it's conservative. And that's why we marked it as high confidence.

Rob Mionis: We think it's prudent, we think it's conservative, and that's why we marked it as high confidence. We have capacity in 2026 coming online ourselves, also in 2027. If things continue to improve in the back half of the year, we'll have the opportunity to get it out the door and also into next year. We think we've factored it all in, but it is more constrained now than it was 90 days ago, and the lead times are extending. One last positive thing is, with the extended lead times, we are getting unprecedented visibility from our customers end item demand. That's actually a very positive thing for us as we do long-term planning.

Speaker #2: Thank you for your question. Your next question comes from the line of Ruplu Bhattacharya, with Bank of America. Your line is open. Please go ahead.

Speaker #4: We have capacity in 26 coming online ourselves also in 2027. So if things continue to improve in the back half of the year, we'll have the opportunity to get it out the door and also into next year.

Speaker #7: Hi. Thanks for taking the question. Rob Mandeep, you're projecting strong growth for next year. I think you said significantly more than six and a half billion year over year in fiscal '27.

Speaker #4: But we think we've factored it all in. But it is more constrained now than it was 90 days ago. And the lead times are extending.

Speaker #7: How should we think about free cash flow in that context? Looks like you did not take up the free cash flow guide for fiscal '26.

Speaker #4: And one last positive thing is, with the extended lead times, we are getting unprecedented visibility from our customers and item demand. So that's actually a very positive thing for us as we do long-term planning.

Speaker #7: What are some of the puts and takes impacting free cash flow for fiscal '26 and '27? And how should we think about the working capital as you see this strong growth?

Speaker #7: And just another clarification, I think, Rob, the AMD opportunity is a scale-up opportunity whereas the one you announced in the press release that the switch is CPO switch is a scale-out opportunity.

Speaker #2: Thank you for your question. Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead.

Operator: Thank you for your question. Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead.

Speaker #7: Can you help us size how much of that six and a half billion-plus growth next year is from scale-up and scale-out? And which is a longer-term opportunity?

Speaker #5: Hi. Thanks for taking the question. Rob Mandeep, you're projecting strong growth for next year. I think you said significantly more than six and a half billion year over year in fiscal '27.

Ruplu Bhattacharya: Hi. Thanks for taking the question. Rob, Mandeep, you're projecting strong growth for next year. I think you said significantly more than $6.5 billion year over year in fiscal 2027. How should we think about free cash flow in that context? Looks like you did not take up the free cash flow guide for fiscal 2026. What are some of the puts and takes impacting free cash flow for fiscal 2026 and 2027? How should we think about the working capital as you see this strong growth? Just another clarification. I think, Rob, the AMD opportunity is a scale-up opportunity, whereas the one you announced in the press release that the switch, CPO switch is a scale-out opportunity.

Speaker #7: Thanks for taking the question.

Speaker #5: How should we think about free cash flow in that context? Looks like you did not take up the free cash flow guide for fiscal '26.

Speaker #8: Hey, Ruben. I love you because you find a way to find three questions in one.

Speaker #7: It's a side analyst.

Speaker #8: Yeah. That experience talking there. Funding final left. Rob, talk about some of the program specifics that you brought up. So look, we're very happy that we were able to raise the revenue outlook for 2026 by $2 billion.

Speaker #5: What are some of the puts and takes impacting free cash flow for fiscal '26 and '27? And how should we think about the working capital as you see this strong growth?

Speaker #5: And just another clarification. I think, Rob, the AMD opportunity is a scale-up opportunity, but the one you announced in the press release, that the switch—the CPO switch—is a scale-out opportunity.

Speaker #8: And yet maintain our free cash flow outlook of $500 million. And then just as a reminder, that's including funding a billion dollars of CapEx.

Speaker #5: Can you help us size how much of that six and a half billion-plus growth next year is from scale-up and scale-out? And which is a longer-term opportunity?

Ruplu Bhattacharya: Can you help us size how much of that six and a half billion plus growth next year is from scale up and scale out, and which is a longer term opportunity? Thanks for taking the question.

Ruplu Bhattacharya: Can you help us size how much of that $6.5 billion + growth next year is from scale up and scale out, and which is a longer term opportunity? Thanks for taking the question.

Speaker #8: The balance sheet is incredibly strong. But we are we believe we are very disciplined when it comes to capital allocation. We'll assess our needs as we go through 2020 as we get closer to 2027.

Speaker #5: Thanks for taking the question.

Rob Mionis: Hey, Ruplu, I love you because you find a way to find three questions in one.

Speaker #2: Hey, Ruplu. I love you because you find a way to find three questions in one.

Speaker #8: And as the forecast starts to solidify, but I'll say just a few things. Again, the balance sheet is very, very strong. We have ample capacity to target to use it as we need to.

Ruplu Bhattacharya: Yeah. That's what I say to analysts.

Rob Mionis: Yeah. That's what I say to analysts.

Speaker #5: Yeah.

Rob Mionis: Yeah. That is, that is experience talking there. I think I'm gonna let Rob talk about some of the program specifics that you brought up. Look, we're very happy that we were able to raise the revenue outlook for 2026 by $2 billion.

Mandeep Chawla: Yeah. That is, that is experience talking there. I think I'm gonna let Rob talk about some of the program specifics that you brought up. Look, we're very happy that we were able to raise the revenue outlook for 2026 by $2 billion.

Speaker #2: That is experience talking there. Funding final left. Rob, talk about some of the program specifics that you brought up. So look, we're very happy that we were able to raise the revenue outlook for 2026 by $2 billion.

Speaker #8: We're very comfortable investing to support customer growth. But one thing you'll know is that we will always remain very disciplined. And so we are a free cash flow-focused management team.

Speaker #2: And yet maintain our free cash flow outlook of $500 million. And then just as a reminder, that's including funding a billion dollars of CapEx.

Mandeep Chawla: Yet maintain our free cash flow outlook of $500 million. Just as a reminder, that's including funding $1 billion of CapEx. The balance sheet is incredibly strong. We believe we are very disciplined when it comes to capital allocation. We'll assess our needs as we go through, as we get closer to 2027 and as the forecast starts to solidify. I'll say just a few things. You know, again, the balance sheet is very strong. We have ample capacity, to, you know, target to use it as we need to. We're very comfortable investing to support customer growth. One thing you'll know is that we will always remain very disciplined. We are a free cash flow-focused management team.

Speaker #8: But at the same time, the growth is really unprecedented right now. And so if that requires additional funding, we have no hesitation to do that.

Speaker #2: The balance sheet is incredibly strong. But we are we believe we are very disciplined when it comes to capital allocation. We'll assess our needs as we go through 2020 as we get closer to 2027.

Speaker #6: And regarding scale-up versus scale-out, correct the CPO win is scale-out and the Helios factor is a scale-up opportunity. We are have been very strong on scale-out as you noted.

Speaker #2: And as the forecast starts to solidify, but I'll say just a few things. Again, the balance sheet is very, very strong. We have ample capacity to target to use it as we need to.

Speaker #6: So we view scale-up as a huge opportunity but frankly, we're supporting both very strongly in our system-level architectures.

Speaker #2: We're very comfortable investing to support customer growth. But one thing you'll know is that we will always remain very disciplined. And so we are a free cash flow-focused management team.

Speaker #2: Thank you for your question. Your next question comes from the line of Robert Young, with Canaccord Genuity. Your line is open. Please go ahead.

Speaker #2: But at the same time, the growth is really unprecedented right now. And so, if that requires additional funding, we have no hesitation to do that.

Mandeep Chawla: At the same time, the growth is really unprecedented right now. If that requires additional funding, we have no hesitation to do that.

Speaker #3: Hi. Thanks for taking the question. Back to the component constraints. I think if you look back to the supply constraints in the pandemic, Sleska took a lot of share because of its execution.

Speaker #4: And regarding scale-up versus scale-out, correct—the CPO win is scale-out and the Helios track is a scale-up opportunity. We have been very strong on scale-out, as you noted.

Rob Mionis: Regarding scale-up versus scale-out, correct, the CPO win is scale-out and the Helios rack is a scale-up opportunity. We have been very strong on scale-out, as you noted. We view scale-up as a huge opportunity. Frankly, we're supporting both very strongly in our system-level architectures.

Speaker #3: Its relationships and so I'm curious if you'd see the current issues as strengthening your hand competitively? And then I was wondering if you could talk about relative impact on compute and networking or if it's relatively a similar supply chain impact.

Speaker #4: So we view scale-up as a huge opportunity but frankly, we're supporting both very strongly in our system-level architectures.

Speaker #3: Thanks.

Speaker #2: Thank you for your question. Your next question comes from the line of Robert Young with Canaccord Genuity. Your line is open. Please go ahead.

Speaker #6: Yeah. One of our key strengths is execution. So once we get the parts and securing the parts, wherever it happens to be in the quarter, we're able to execute that at scale.

Operator: Thank you for your question. Your next question comes from the line of Robert Young with Canaccord Genuity. Your line is open. Please go ahead.

Speaker #5: Hi. Thanks for taking the question. Back to the component constraints. I think if you look back to the supply constraints in the pandemic, Saska took a lot of share because of its execution.

Robert Young: Hi. Thank you for taking the question. Back to the component constraints. I think if we look back to the supply constraints in the pandemic, Celestica took a lot of share because of its execution, its relationships. I'm curious if you'd see the current issues as strengthening your hand competitively. I was wondering if you could talk about relative impact on compute and networking, or if it's relatively a similar supply chain impact. Thanks.

Speaker #6: Very quickly. So in the land of very dynamic supply constraints, we do advanced planning very well. And typically, we gain share through that environment because we find that peers or competitors have a hard time executing through turbulent times.

Speaker #5: Its relationships. And so I'm curious if you'd see the current issues as strengthening your hand competitively? And then I was wondering if you could talk about relative impact on compute and networking or if it's relatively a similar supply chain impact.

Speaker #6: So that is an opportunity. We haven't necessarily seen that as of yet as a result of the supply chain constraints. But frankly, the constraints are just starting right the thick of things right now.

Speaker #5: Thanks.

Speaker #4: Yeah, one of our key strengths is execution. So once we get the parts—and securing the parts, wherever it happens to be in the quarter—we're able to execute that at scale.

Rob Mionis: Yeah. One of our key strengths is execution. Once we get the parts and securing the parts, you know, wherever it happens to be in the quarter, we're able to execute that at scale very quickly. In the land of very dynamic supply constraints, we do advanced planning very well, and typically we gain share to that environment because we find that peers or competitors have a hard time executing through turbulent times. That is an opportunity. We haven't necessarily seen that as of yet as a result of the supply chain constraints. Frankly, the constraints are just starting, we're right in the thick of things right now. I think it will get better or at least more dynamic as the year gets along.

Speaker #6: I think it will get better or at least more dynamic as the year gets long. And with respect to compute versus networking, so on the networking side, it's not very memory-centric.

Speaker #4: Very quickly. So in the land of very dynamic supply constraints, we do advanced planning very well. And typically, we gain share through that environment because we find that peers or competitors have a hard time executing through turbulent times.

Speaker #6: So there the constraints are really around PCBs or silicon. But we think we have a good handle on that. On compute, it's all about memory.

Speaker #6: But our customers have very strong presence with the main memory suppliers and we have secured at least in the near term what we think we need to do to support our customers.

Speaker #4: So that is an opportunity. We haven't necessarily seen that as of yet as a result of the supply chain constraints. But frankly, the constraints are just starting right the thick of things right now.

Speaker #2: Thank you for your question. Your next question comes from the line of Thanos Moschopoulos, with BMO Capital Markets. Your line is open. Please go ahead.

Speaker #4: I think it will get better, or at least more dynamic, as the year gets long. And with respect to compute versus networking—so, on the networking side, it's not very memory-centric.

Rob Mionis: With respect to compute versus networking, so on the networking side, it's not very memory-centric. There, the constraints are really around PCBs or silicon, but we think we have a good handle on that. On compute, it's all about memory, but our customers have very strong presence with the main memory suppliers, and we have secured, at least in the near term, what we think we need to do to support our customers.

Speaker #2: As a reminder, please remember to unmute your device. Please go ahead.

Speaker #4: So there the constraints are really around PCBs or silicon. But we think we have a good handle on that. On compute, it's all about memory.

Speaker #4: But our customers have very strong presence with the main memory suppliers and we have secured at least in the near term what we think we need to do to support our customers.

Speaker #7: It comes. Hey, Thanos.

Speaker #2: Please press star one to re-enter the queue. Your next question comes from the line of Paul Treiber, with RBC Capital Markets. Your line is open.

Speaker #2: Thank you for your question. Your next question comes from the line of Thanos Moscopoulos with BMO Capital Markets. Your line is open. Please go ahead.

Operator: Thank you for your question. Your next question comes from the line of Thanos Moschopoulos with BMO Capital Markets. Your line is open. Please go ahead.

Speaker #2: Please go ahead.

Speaker #9: Yeah. Good morning and thanks for taking the question. Just you mentioned unprecedented visibility, long-term visibility and then also you mentioned in the slide deck capacity alignment with customers.

Speaker #2: As a reminder, please remember to unmute your device. Please go ahead.

Speaker #9: Can you elaborate on both of those and specifically what's fundamentally changed to give you far better long-term visibility in the past? And is there anything contractual that gives you better visibility than you may have had in the past?

Speaker #5: Hey, Tom.

Mandeep Chawla: Hey, Tom.

Speaker #4: There you go, Thanos.

Rob Mionis: Hey, Thanos.

Speaker #5: Hey, Thanos.

Mandeep Chawla: Hey, Thanos.

Speaker #2: Please press star one to re-enter the queue. Your next question comes from the line of Paul Triber with RBC Capital Markets. Your line is open.

Operator: Your next question comes from the line of Paul Treiber with RBC Capital Markets. Your line is open. Please go ahead.

Speaker #9: Thank you.

Operator: Your next question comes from the line of Paul Treiber with RBC Capital Markets. Your line is open. Please go ahead.

Speaker #6: Yeah. I would say a quarter or so ago, our key customers, the main hyperscalers, had very, very strong demand loaded in the system just to try to figure out where the constraints would be.

Speaker #2: Please go ahead.

Speaker #5: Yeah. Good morning. And thanks for taking the question. Just you mentioned unprecedented visibility, long-term visibility and then also you mentioned in the slide deck capacity alignment with customers.

Paul Treiber: Yeah, good morning, and thanks for taking the question. Just you mentioned, you know, unprecedented visibility, long-term visibility, and then also you mentioned in the slide deck, capacity alignment with customers. Can you know, elaborate on both of those and specifically, you know, what's fundamentally changed to give you know, far better long-term visibility in the past? Is there anything contractual that, you know, gives you better visibility than you may have had in the past? Thank you.

Speaker #6: At this stage of the game, I think the entire supply chain knows where the constraints are and we've aligned our physical capacity with our supply chain capacity.

Speaker #5: Can you elaborate on both of those, and specifically, what's fundamentally changed to give you far better long-term visibility than in the past? And is there anything contractual that gives you better visibility than you may have had in the past?

Speaker #6: With our capital CapEx plans. And that's the current state that we're in. And because lead times are very long, specifically custom silicon lead times are so long, we've not just done this for 26 or 27.

Speaker #5: Thank you.

Speaker #6: We're actually dipping into 2028 and actually booking awards right now that ship into 2028. So the unprecedented visibility is really just making sure that we're aligning long-term material supply with long-term capacity agreements.

Speaker #4: Yeah. I would say a quarter or so ago, our key customers, the main hyperscalers, had very, very strong demand loaded in the system just to try to figure out where the constraints would be.

Rob Mionis: Yeah. I would say a quarter or so ago, our key customers, the main hyperscalers, had very, very strong demand. They loaded in the system just to try to figure out where the constraints would be. At this stage of the game, I think the entire supply chain knows where the constraints will be, and we've aligned our physical capacity with our supply chain capacity, with our capital, CapEx plans, and that's the current state that we're in. Because the lead times are very long, specifically custom silicon lead times are so long, we've not just done this for 2026 or 2027. We're actually dipping into 2028 and actually booking awards right now that ship into 2028. The unprecedented visibility is really just making sure that we're aligning long-term material supply with long-term capacity agreements.

Speaker #6: And a lot of the orders that we're placing supported by our customers are NCANR, so there are contractual terms protecting us through ups and downs.

Speaker #4: At this stage of the game, I think the entire supply chain knows where the constraints are be. And we've aligned our physical capacity with our supply chain capacity.

Speaker #6: So we feel very comfortable in a long-term growth trajectory at this stage of the game. It's all about execution and that's what we do very well.

Speaker #4: With our capital CapEx plans. And that's the current state that we're in. And because lead times are very long, specifically custom silicon lead times are so long, we've not just done this for 26 or 27.

Speaker #2: Thank you for your question. Your next question comes from the line of Todd Coupland, with CIBC. Your line is open. Please go ahead.

Speaker #4: We're actually dipping it to 2028 and actually booking awards right now that ship into 2028. So the unprecedented visibility is really just making sure that we're aligning long-term material supply with long-term capacity agreements.

Speaker #7: Oh, thanks. And good morning, everyone. So I wanted to ask about the switch ramps in the second half of the year. I'm wondering if they are coming in as expected or have some of them been pushed into 2027, which gives you the higher confidence in that year.

Speaker #4: And a lot of the orders that we're placing, supported by our customers, are NCANR, so there are contractual terms protecting us throughout ups and downs.

Rob Mionis: A lot of the orders that we're placing supported by our customers are NCNR, so there are contractual terms protecting us through ups and downs. We feel very comfortable in a long-term growth trajectory at this stage of the game. It's all about execution, and that's what we do very well.

Speaker #7: Can you just talk about the dynamics between 26 and 27? Thanks.

Speaker #4: So we feel very comfortable in a long-term growth trajectory at this stage of the game. It's all about execution and that's what we do very well.

Speaker #6: I would say the switch ramps that are coming in the back half of the year are going as planned. In the back half of the year, we have two customers ramping 1.60 and several more coming online in 2027.

Speaker #2: Thank you for your question. Your next question comes from the line of Todd Coopland with CIBC. Your line is open. Please go ahead.

Operator: Thank you for your question. Your next question comes from the line of Todd Coupland with CIBC. Your line is open. Please go ahead.

Speaker #6: We've secured the silicon that is required to complete the development processes. And we also have commitments to support the ramps. And 800G remains very strong throughout the year.

Speaker #5: Oh, thanks and good morning, everyone. So I wanted to ask about the switch ramps in the second half of the year. I'm wondering if they are coming in as expected or have some of them been pushed into 2027, which gives you the higher confidence in that year.

Todd Coupland: Oh, thanks and good morning, everyone. I wanted to ask about the switch ramps in H2 of the year. I'm wondering if they are coming in as expected or have some of them been pushed into 2027, which gives you the higher confidence in that year. Can you just talk about the dynamics between 2026 and 2027? Thanks.

Speaker #6: So I would say things are going as planned on the networking side.

Speaker #5: Can you just talk about the dynamics between 26 and 27? Thanks.

Speaker #2: Thank you for your question. Your next question comes from the line of Michael Ng, with Goldman Sachs. Your line is open. Please go ahead.

Speaker #4: I would say the switch ramps that are coming in the back half of the year are going as planned. In the back half of the year, we have two customers ramping 1.60 and several more coming online in 2027.

Rob Mionis: I would say the switch ramps that are coming in H2 are going as planned. In H2, we have two customers ramping 1.6T and several more coming online in 2027. We've secured the silicon that is required to complete the development processes and we also have commitments to support the ramps. 800G remains very strong throughout the year. I would say things are going as planned on the networking side.

Speaker #8: Hi. Thank you very much for the follow-up. I was just wondering if you could give us an updated thoughts on capital intensity and the outlook for CapEx beyond this year.

Speaker #4: We've secured the silicon that is required to complete the development processes, and we also have commitments to support the ramps. And 800G remains very strong throughout the year.

Speaker #8: Obviously, you've got a lot of new program awards and some new wins. Should we expect CapEx to ramp up beyond that $1 billion that you laid out for this year in 2027?

Speaker #4: So I would say things are going as planned on the networking side.

Speaker #8: How are you thinking about additional capacity that you need to put in to support these new wins? Thank you.

Speaker #2: Thank you for your question. Your next question comes from the line of Michael Ng with Goldman Sachs. Your line is open. Please go ahead.

Operator: Thank you for your question. Your next question comes from the line of Michael Ng with Goldman Sachs. Your line is open. Please go ahead.

Speaker #2: Yeah. Hey, Mike. It's Matthew here. So $1 billion of CapEx this year as you're aware, we will be doing that or more next year.

Michael Ng: Hi. Thank you very much for the follow-up. I was just wondering if you could give us some updated thoughts on capital intensity and the outlook for CapEx beyond this year. Obviously, you've got a lot of new program awards and, you know, some new wins. Should we expect, you know, CapEx to ramp up beyond that $1 billion that you laid out for this year, in 2027? You know, how are you thinking about additional capacity that you need to put in to support these new wins? Thank you.

Speaker #5: Hi. Thank you very much for the follow-up. I was just wondering if you could give us an updated thoughts on capital intensity and the outlook for CapEx beyond this year.

Speaker #2: And I think the way to think about it right now would be I'm just going to give you a rough number of $1 billion and a half as a placeholder for now.

Speaker #2: And we're very comfortable with that. The way that to build on the comments that Robert shared just recently, we're having very long-term conversations with our customers A, as it relates to supply because we need to get in line on their behalf and lead times have extended in some cases beyond a year for certain types of materials.

Speaker #5: Obviously, you've got a lot of new programming awards and some new wins. Should we expect CapEx to ramp up beyond that $1 billion that you laid out for this year in 2027?

Speaker #5: How are you thinking about additional capacity that you need to put in to support these new wins? Thank you.

Speaker #2: But then really around capacity. And the majority of our capacity investments right now are in Southeast Asia, Thailand specifically, and in the United States and I would say Texas, specifically.

Speaker #2: Yeah. Hey, Mike. It's Mandeep here. So $1 billion of CapEx this year as you're aware, we will be doing better or more next year.

Mandeep Chawla: Yeah. Hey, Michael, it's Mandeep here. $1 billion of CapEx this year, as you're aware. We will be doing that or more next year. I think the way to think about it right now would be, I'm just gonna give you a rough number of $1.5 billion as a placeholder for now. We're very comfortable with that. The way that to build on the comments that Rob Mionis shared just recently, we're having very long-term conversations with our customers, A, as it relates to supply because we need to get in line on their behalf. Lead times have extended, in some cases, beyond a year for certain types of materials. Really around capacity.

Speaker #2: And we have a number that are going to come online this year. We have some that are coming online next year. And then there's other ones that we're evaluating still.

Speaker #2: And I think the way to think about it right now would be, I'm just going to give you a rough number of $1.5 billion as a placeholder for now.

Speaker #2: But that's the support growth in 2028 and 2029. And so when we make our capacity decision, it's tied to a business case. It's tied to program level specifics.

Speaker #2: And we're very comfortable with that. To build on the comments that Robert shared just recently, we're having very long-term conversations with our customers, A, as it relates to supply because we need to get in line on their behalf, and lead times have extended, in some cases, beyond a year for certain types of materials.

Speaker #2: It's tied to programs that we are winning or we intend to win by the time we make that decision to go forward with the CapEx.

Speaker #2: And the business cases are strong ROIs, strong paybacks. And so when you when we continue to have business cases like that brought forward, we don't hesitate to invest.

Mandeep Chawla: The majority of our capacity investments right now are in Southeast Asia, Thailand specifically, and in the United States, and I would say Texas specifically. We have a number that are gonna come online this year. We have some that are coming online next year. There's other ones that we're evaluating still. That's to support growth in 2028 and 2029. When we make our capacity decision, it's tied to a business case, it's tied to program-level specifics, it's tied to programs that we are winning or we intend to win by the time we make that decision to go forward with the CapEx. If the business cases are strong ROIs, strong paybacks.

Speaker #2: And so right now, I would say we will see an elevated level of CapEx spend into 2027. We'll take it one year at a time.

Speaker #2: And we have a number that are going to come online this year. We have some that are coming online next year. And then there's other ones that we're evaluating still.

Speaker #2: Thank you for your question. As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of Thanos Moschopoulos, with BMO Capital Markets.

Speaker #2: But that's the support growth in 2028 and 2029. And so when we make our capacity decision, it's tied to a business case. It's tied to program level specifics.

Speaker #2: It's tied to programs that we are winning or we intend to win by the time we make that decision to go forward with the CapEx.

Speaker #2: Your line is open. Please go ahead.

Speaker #9: Hi. Good morning. Sorry about that earlier. With respect to your large digital native customer, is that still on track to ramp in early 2027, or has there been any change taking on the pattern for that?

Speaker #2: And the business cases are strong ROI, strong paybacks. And so, when you continue to have business cases like that brought forward, we don't hesitate to invest.

Mandeep Chawla: When you, when we continue to have business cases like that brought forward, we don't hesitate to invest. Right now I would say we will see an elevated level of CapEx spend into 2027. You know, we'll take it one year at a time.

Speaker #6: Hi, Thanos. Yes. That's still on track. We're shipping sample systems this year. And production should start in the first quarter, late in the first quarter, next year that is on track.

Speaker #2: And so right now, I would say we will see an elevated level of CapEx spend into 2027. We'll take it one year at a time.

Speaker #5: Thank you for your question. As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of Thanos Moscopoulos with BMO Capital Markets.

Operator: Thank you for your question. As a reminder, if you would like to ask a question, please press star one to raise your hand. Your next question comes from the line of Thanos Moschopoulos with BMO Capital Markets. Your line is open. Please go ahead.

Speaker #6: We've been having very close meetings with all the key suppliers there to make sure we've secured the material across the supply chain and things look very positive at this stage of the game.

Speaker #5: Your line is open. Please go ahead.

Speaker #9: Great. Thanks.

Speaker #6: Okay.

Speaker #6: Hi. Good morning. I'm sorry about that earlier. With respect to your large digital native customer, is that still on track to ramp in early 2027, or has there been any change in thinking on the timing for that?

Thanos Moschopoulos: Hi, good morning, and sorry about that earlier. With respect to your large digital native customer, is that still on track to ramp in early 2027, or has there been any change in thinking on the timing for that?

Speaker #2: Thank you for your question. There are no further questions at this time. I will now hand I will now turn the call back to Rob Mionis for closing remarks.

Speaker #4: Hi, Thanos. Yes, that's still on track. We're shipping sample systems this year, and production should start in the first quarter—late in the first quarter—next year.

Rob Mionis: Hi, Thanos. Yes, that's still on track. We're shipping sample systems this year, and production should start in Q1, late in Q1, next year. That is on track. We've been having very close meetings with all the key suppliers there to make sure we secure the material across the supply chain, and things look very positive at this stage of the game.

Speaker #6: Thank you all. Thank you for your support and for joining us this quarter. We have great momentum across our business, and we look forward to updating you on our progress next quarter.

Speaker #6: Have a great day.

Speaker #4: That is on track. We've been having very close meetings with all of the key suppliers there to make sure we've secured the material across the supply chain and things look very positive at this stage of the game.

Speaker #6: Great. Thanks.

Thanos Moschopoulos: Great. Thanks.

Speaker #4: Okay.

Rob Mionis: Okay.

Speaker #2: Thank you for your question. There are no further questions at this time. I will now turn the call back to Rob Mionis for closing remarks.

Operator: Thank you for your question. There are no further questions at this time. I will now turn the call back to Rob Mionis for closing remarks.

Rob Mionis: Thank you, all. Thank you for your support and for joining us this quarter. We have great momentum across our business, and we look forward to updating you on our progress next quarter. Have a great day.

Speaker #4: Thank you all. Thank you for your support and for joining us this quarter. We have great momentum across our business, and we look forward to updating you on our progress next quarter.

Speaker #4: Have a great day.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q1 2026 Celestica Inc Earnings Call

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