Valued at a market cap of $48 billion, Celestica (TSX:CLS) is among the largest tech companies in Canada. In the last three years, CLS stock has returned more than 2,200% to shareholders, driven by the artificial intelligence-powered bull run.
While CLS stock has delivered game-changing returns for investors since 2023, let’s see if it can maintain its momentum over the next three years.
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The bull case for investing in Celestica stock
Celestica provides electronics manufacturing and supply chain solutions for technology companies worldwide.
The Toronto-based firm designs, builds, and assembles hardware components, offering services from product development through after-market support.
It serves cloud providers, aerospace, defence, healthcare, and communications sectors through two segments: Advanced Technology Solutions and Connectivity and Cloud Solutions.
Celestica has increased its revenue from US$5.6 billion in 2021 to US$9.7 billion in 2024, indicating an annual growth rate of almost 20%.
Q3 Results
Celestica delivered record third-quarter results and raised its full-year outlook as surging demand for AI data centre equipment drives exceptional growth.
- The Toronto-based electronics manufacturer posted revenue of US$3.2 billion, up 28% from last year and above guidance. Adjusted earnings per share rose 52% to US$1.58.
- The company now expects 2025 revenue of US$12.2 billion, up from a previous forecast of US$11.6 billion, representing 26% annual growth.
- Management raised its earnings outlook to US$5.90 per share from US$5.50, implying 52% growth for the year.
- Operating margins reached 7.6%, the highest quarterly level in company history.
CEO Rob Mionis said Celestica is navigating the most rapid period of change in its history, driven by massive AI infrastructure investments from hyperscale customers.
Its high-performance networking switch business, which includes products for companies such as Microsoft and Meta, is expected to generate roughly US$5 billion in revenue this year, an 80% increase. Revenue from hyperscalers now accounts for 44% of the company’s total sales.
Outlook
Looking ahead:
- Celestica provided a preliminary 2026 revenue outlook of US$16 billion, indicating 31% growth.
- The company expects earnings of US$8.20 per share, a 39% increase.
- Management expressed confidence extending into 2027 based on visibility into multiple new program ramps, including next-generation networking switches and custom AI compute platforms.
Celestica is making significant capacity investments to support growth. Celestica is expanding its Richardson, Texas, facility to support production of thousands of additional AI racks annually and finalizing plans for another large manufacturing site in the state. The firm is also adding capacity at its Thailand campus to accommodate production ramps planned through 2027 and 2028.
CFO Mandeep Chawla said capital expenditures will rise to between 2% and 2.5% of revenue next year from 1.5% currently, all funded by operational cash flow.
The company holds a strong market share in high-bandwidth Ethernet switching, accounting for 55% of spending on custom AI networking solutions. Celestica has won 10 programs for next-generation 1.6 terabit switches, with initial production ramps expected in late 2026.
Is CLS stock still undervalued?
Celestica is forecast to increase revenue from US$9.7 billion in 2024 to US$25.7 billion in 2028. In this period, adjusted earnings are forecast to expand from US$3.88 per share to US$14.14 per share.
If CLS stock is priced at 30 times forward earnings, it will trade around US$424 in early 2029, indicating an upside potential of 40% from current levels.
