If you’ve watched Celestica (TSX: CLS) shares lately, you’ve probably felt a bit seasick, given that the Canadian tech stock has turned quite volatile in recent months.
Valued at a market cap of $50.6 billion, Celestica is among Canada’s largest companies and has returned a monstrous 3,660% in the last five years. However, the TSX tech stock is also down 33% from all-time highs, giving you a chance to buy the dip.
I’ve been tracking this Toronto-based company for a while, and the short answer is this: nothing about Celestica’s business has broken down. Most of the volatility comes from sky-high expectations meeting normal, choppy news flow, rather than from any operational trouble.
Many artificial intelligence (AI) stocks have been under pressure this year because of rising inflation rates, elevated AI capital expenditures, and a challenging macro environment. If inflation remains high, it could force central banks to hike interest rates too over the next 12 months.
This would increase interest costs for debt-heavy AI companies and compress earnings or cash flow growth. A narrowing earnings base would impact capital expenditures, which will then drive future cash flow lower.
Here’s what’s really driving the ride, and why the fundamentals still look strong.
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Is CLS stock a good buy right now?
Celestica builds hardware for AI data centres and cloud computing giants. It depends heavily on a small group of massive tech customers, often called hyperscalers, for its networking switches and AI compute hardware.
In the second quarter of 2026, three customers accounted for more than 63% of total sales. Customer concentration suggests that any shift in orders could impact top-line growth and drive valuations significantly lower.
However, CFO Mandeep Chawla said the company has enough capacity to meet demand through 2027, but that material availability remains the real limiting factor.
Strip away the daily price swings, and Celestica’s results look excellent. In the second quarter, revenue rose 62% year over year to US$4.7 billion, while adjusted earnings per share (EPS) rose 83% to US$2.54.
Company management raised its full-year 2026 outlook to US$2.05 billion in revenue with EPS of US$11.30.
CEO Rob Mionis stated: “Our customers, again, continue to want more than the supply chain could supply; that is, again, not perishable demand.”
Basically, Celestica is bullish on demand for AI networking and compute hardware that is outpacing supply in the back end of 2026.
What’s next for the TSX tech stock?
Looking ahead, management expects 2027 revenue growth to accelerate past this year’s already strong 65% pace, fueled by new programs tied to OpenAI and AMD.
Analysts tracking CLS stock forecast revenue to increase from US$12.39 billion in 2025 to US$59 billion in 2029. In this period, earnings per share is projected to expand from US$6.05 to US$32.7. If the TSX tech stock trades at 20 times earnings, it could more than double over the next three years.
For long-term investors who believe global AI data centre spending still has years of growth ahead, pullbacks like this one can be worth a closer look, especially heading into Celestica’s investor day in late October.
