Celestica (TSX:CLS), a fast-growing Canadian know-how {hardware} manufacturing and provide chain providers companion to a budding synthetic intelligence (AI) ecosystem, has ballooned from a modest $1.6 billion market cap in late 2022 right into a $40 billion behemoth as of September 2025. However after a monumental 2,660% run in three brief years, may there be extra to Celestica’s progress story?
Let’s dive into the numbers, the markets, and the technique to see simply how a lot progress potential Celestica inventory really has over the subsequent three years.
Celestica’s monetary firepower and stellar execution
Celestica’s current monetary efficiency is nothing in need of spectacular. In the course of the second quarter of 2025, income hit a document $2.9 billion, hovering 21% year-over-year and soundly beating steerage. Extra importantly, profitability is exploding with adjusted earnings per share (EPS) surging 54% to $1.39. Progress has come from high-margin data-center-related enterprise strains. The corporate’s adjusted working margin expanded by 110 foundation factors to 7.4%. Celestica’s spectacular income progress is accompanied by stronger revenue margins, a ravishing mixture traders like to see.
Administration raised its full-year 2025 income steerage from $10.9 billion to $11.6 billion, implying 20% sequential progress from 2024.
Driving an unstoppable AI wave
Celestica’s progress story is premised on its pivotal position as a {hardware} enabler for the factitious intelligence revolution. The corporate operates by means of two segments: Superior Know-how Options (ATS) and Connectivity & Cloud Options (CCS). Its CCS phase, which made up 72% of second-quarter income, is the clear progress star. Inside CCS, the communications enterprise (networking switches and information centre interconnects) exploded by 75% year-over-year.
Why is that this taking place? The world’s tech giants are in an arms race to construct AI infrastructure, and Celestica is among the many key arms sellers, alongside Nvidia. The corporate has not too long ago scored high-profile program wins with AI leaders like OpenAI and Meta Platforms. It’s concerned in cutting-edge initiatives like Meta’s 1.6T switching know-how and constructing full AI rack programs for OpenAI. Meta may invest US$600 billion in U.S. information centres by means of 2028.
Celestica may take pleasure in extra enterprise nonetheless. The “Large 4” AI market gamers (Amazon.com, Alphabet, Microsoft, and Meta) proceed to spend lots of of billions on capital expenditures in 2025 alone, with the overwhelming majority directed at AI infrastructure. Funding financial institution UBS forecasts international AI spending will hit US$480 billion in 2026. Celestica, with its deep partnerships and experience in high-performance switching and server platforms, is completely positioned to seize a major slice of this monumental spend.
Bay Road analysts forecast an 18.8% compound annual progress price (CAGR) for Celestica’s income over the subsequent two years, with earnings per share progress charges exceeding 30% yearly.
Past AI: Celestica’s diversification and strategic shrewdness
Whereas AI will get most headlines, Celestica’s enterprise strains are diversified. Its ATS phase (28% of income) – which serves aerospace and defence, healthtech, and industrial markets – additionally noticed a wholesome 7% income enhance and stronger margins. Latest geopolitical tensions are triggering elevated defence spending globally, offering one other potential progress vector.
Administration can be shrewdly navigating dangers. It acknowledges a key vulnerability: buyer focus. Celestica’s prime 10 prospects represented 73% of 2024 income. Nonetheless, the corporate is actively working to diversify its buyer combine and product portfolio, specializing in higher-margin, value-added providers like design, growth, and after-market assist inside its {Hardware} Platform Options (HPS) enterprise.
Dangers and the valuation query
Celestica’s excessive buyer focus is an actual subject, particularly within the extremely aggressive electronics manufacturing providers (EMS) trade. A slowdown in AI infrastructure spending by hyperscalers, although not anticipated quickly, would harm.
Then there’s the valuation angle. With a ahead price-to-earnings (P/E) a number of of 40, Celestica inventory is way from low cost. The market is pricing in a number of future progress. This makes it delicate to any earnings missteps or shifts in market sentiment.
The Silly backside line
So, simply how a lot progress potential does Celestica inventory nonetheless have? Important. The corporate has reworked itself from a low-margin contract producer right into a crucial, high-value companion in probably the most transformative know-how pattern of our technology. Its monetary future seems to be sturdy. Progress is accelerating, margins have expanded, and it’s driving a long-term, multi-billion-dollar wave of AI infrastructure spending.
Whereas its valuation calls for respect and the dangers of buyer focus are actual, Celestica’s strategic positioning, execution excellence, and publicity to secular progress traits recommend double-digit progress charges could also be sustained by means of 2028.
Traders with a better threat tolerance and a long-term horizon might construct positions in Celestica inventory whereas watching execution quarter-to-quarter to make sure it continues to fulfill the lofty expectations its present worth instructions.
