Assessing Celestica’s AI-Driven Growth: Is CLS Stock at Risk?
As the AI sector continues to expand, the focus turns to firms like Celestica Inc. (CLS) and their potential risks and rewards in an increasingly competitive market. With significant investments in AI infrastructure expected from major tech players, Celestica’s strategic pivots and financial performance are under scrutiny.
AI Spending Surge and Its Impact
Leading companies in artificial intelligence, including Alphabet, Meta, and Microsoft, plan to invest approximately $527 billion in AI technologies in 2025. This surge creates opportunities for companies involved in the supportive infrastructure underlying AI model training.
Celestica’s Strategic Shift
Founded in 1994 and based in Toronto, Celestica transitioned from low-margin manufacturing to higher-margin original design services in 2018. This shift allowed the company to engage with major clients like Alphabet, IBM, and Meta. Celestica operates through two segments:
- Advanced Technology Solutions – serves clients in defense, industrial, and health tech.
- Connectivity and Cloud Solutions – focused on servers and storage equipment.
Recent Financial Performance
In its Q3 earnings call in October 2025, Celestica announced record revenue of $3.19 billion, representing a 28% year-over-year increase. This growth was driven by an 82% rise in communications market revenue. The company’s non-GAAP operating margin also improved, reaching 7.6%.
Celesetica’s adjusted earnings per share (EPS) increased by 52%, reaching $1.58. The firm anticipates Q4 2025 revenue between $3.325 billion and $3.575 billion.
Future Projections
For 2026, Celestica projects revenue of $16 billion, a growth rate of 31% over 2025. The anticipated non-GAAP adjusted EPS for 2026 is $8.20, up 39% year-over-year. However, these forecasts depend largely on continual demand from their customer base.
Market Competition and Challenges
Recent reports indicate that Google may diversify its supply chain for cloud technology, potentially impacting Celestica’s orders. Shares of Celestica experienced an 8% decline following this news.
Stock Performance Insights
Celestica’s stock performance has benefited from its pivot to data center-focused segments. Initially trading at $9.28 per share in 1998, the stock reached a record high in late 2024, trading at $308.25 as of January 26, demonstrating an impressive growth of 153.31% over the past year.
Comparative Market Analysis
When compared to its peers in the electronics manufacturing services (EMS) sector, Celestica, Flex, and Jabil show varying growth trajectories:
| Company | Market Cap | P/S Ratio | Estimated Sales Growth (Current FY) | Estimated Sales Growth (Next FY) |
|---|---|---|---|---|
| Celestica (CLS) | $35.47bn | 3.18 | 26.72% | 34.32% |
| Flex (FLEX) | $23.57bn | 0.93 | 5.08% | 6.64% |
| Jabil (JBL) | $25.53bn | 0.85 | 8.95% | 7.43% |
Investment Outlook
Analysts view Celestica favorably due to its strong performance and market positioning. BNP Paribas has identified it as a top AI investment, expecting significant growth in the data center market. However, competition from firms like Flex and Jabil poses risks.
Concluding Thoughts
Celestica stands to benefit from the booming demand for AI infrastructure. Yet, its success is contingent upon not just internal strategies but also external market dynamics. Decisions by major clients and competition will determine whether CLS can maintain its upward trajectory.
