Celestica (TSX: CLS) operates through two core business segments: Connectivity and Cloud Solutions (CCS) and Advanced Technology Solutions (ATS). The CCS segment focuses primarily on infrastructure supporting artificial intelligence (AI), machine learning, and data centres. Meanwhile, ATS delivers complex electronics and subsystem solutions to customers in aerospace and defence, industrial, healthtech, and capital equipment markets.
Supported by strong quarterly performances, healthy 2026 guidance, and meaningful exposure to the fast-growing AI market, Celestica’s stock has delivered returns of more than 218% this year. Building on this momentum, a closer look at the company’s recently reported third-quarter results and long-term growth prospects can help assess whether this upward trend in its share price is sustainable into 2026.
Source: Getty Images
Celestica’s third-quarter performance
In the third quarter, Celestica reported revenue of $3.2 billion, representing a 27.8% year-over-year increase and exceeding its internal guidance. Driven by a 79% surge in Hardware Platform Solutions, the company’s CCS segment generated revenue of $2.4 billion, up 43% from the prior-year period. In contrast, revenue from the ATS segment declined 4% year over year to $0.78 billion.
Beyond strong top-line growth and expanding adjusted gross margins, a decline in selling, general, and administrative expenses as a percentage of revenue supported operating leverage. As a result, adjusted operating income rose 43.5% to $242.2 million, while adjusted operating margin expanded by 80 basis points to 7.6%. Adjusted net income reached $183.1 million, translating into adjusted earnings per share (EPS) of $1.58, a 51.9% increase compared with the same quarter last year.
Celestica also generated $126.2 million in operating cash flow during the quarter, while free cash flow totalled $88.9 million. The company ended the period with $305.9 million in cash and cash equivalents and total liquidity of $1.1 billion, leaving it well positioned to fund its growth initiatives.
Celestica’s growth prospects
Enterprises are moving beyond pilot AI initiatives and increasingly embedding artificial intelligence into their core strategies and day-to-day operations. At the same time, individuals are adopting AI-powered tools to enhance productivity and convenience. Together, these trends have prompted hyperscalers to accelerate investments in AI-ready data centres, driving stronger demand for Celestica’s products and services. In parallel, Celestica continues to broaden its product portfolio through the launch of innovative offerings, including advanced networking switches and storage solutions, further strengthening its competitive position.
Building on its strong third-quarter performance, management has raised its 2025 guidance and provided an optimistic outlook for 2026. For 2025, Celestica increased its revenue forecast from $11.6 billion to $12.2 billion, representing a 26.4% year-over-year increase. The company also expects adjusted earnings per share of $5.90, up 52.1% from the prior year, while free cash flow is projected to rise from $305.9 million to $425 million.
Looking ahead to 2026, management anticipates revenue and adjusted EPS growth of 31.1% and 39%, respectively, with free cash flow expected to increase further to $500 million. Taken together, these forecasts highlight Celestica’s strong growth trajectory and healthy long-term prospects.
Investors’ takeaway
Celestica has delivered an exceptional return of approximately 2,750% over the past three years. On the back of this strong performance, the company’s valuation has expanded, with its next-12-month (NTM) price-to-sales and price-to-earnings multiples standing at 2.4 and 39.5, respectively. While these valuation levels may appear elevated, they are supported by Celestica’s robust operating performance and strong growth outlook. Accordingly, I believe the stock’s upward momentum is likely to continue into 2026, making it an excellent buy right now.
