Celestica (TSX: CLS) provides data centre infrastructure and advanced technology solutions, positioning it to benefit from the rapid expansion of AI (artificial intelligence) and cloud computing. The company has delivered exceptional shareholder returns over the past three years, with the stock surging more than 1,430%, representing an annualized return of approximately 148.3%. Strong financial performance, robust demand for its technology solutions, and growing exposure to the AI infrastructure market have driven this impressive rally.
Despite its remarkable gains, Celestica continues to demonstrate strong underlying momentum. In July, the company delivered an impressive second-quarter performance, surpassing both its guidance and analysts’ expectations. Management also raised its full-year outlook, reinforcing confidence in its growth trajectory. Against this backdrop, let’s examine Celestica’s second-quarter results, growth prospects, and valuation to determine whether the stock still offers an attractive entry point following its exceptional three-year run.
Let’s start with its second-quarter performance.
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Celestica’s second-quarter performance
Celestica delivered a strong second-quarter performance, with revenue surging 62.4% year over year to $4.7 billion. Its Connectivity & Cloud Solutions (CCS) segment, which includes Hardware Platform Solutions, drove growth, with revenue jumping 84% to $3.8 billion. Meanwhile, revenue from the Advanced Technology Solutions (ATS) segment increased 8% to $0.89 billion.
The company also made meaningful progress on profitability. Although adjusted selling, general, and administrative (SG&A) expenses rose $16.3 million to $104.1 million, adjusted SG&A as a percentage of revenue fell to 2.2% from 3%, reflecting improved operating leverage. Consequently, adjusted operating margin expanded to 8.2% from 7.4% in the year-ago quarter. Celestica reported net income of $368.8 million, or $3.17 per share, while adjusted EPS, excluding special items, surged 82.7% year over year to $2.54.
Strong operating performance also translated into robust cash generation. Celestica generated $410.9 million in cash during the quarter, increasing cash and cash equivalents to $535.7 million at quarter-end. With accelerating revenue growth, expanding margins, and strong cash generation, the company appears well positioned to capitalize on the growing demand for AI and cloud infrastructure. Let’s now examine its growth prospects.
Celestica’s growth prospects
The rapid adoption of AI among enterprises, governments, and consumers is prompting hyperscalers to accelerate investments in AI-ready data centres, creating a significant long-term growth opportunity for Celestica. The company is responding by developing innovative solutions, expanding its production capabilities, and broadening its customer base to strengthen its competitive position. It also raised about $3.5 billion through a secondary share offering last month, providing additional capital to support working capital needs and expand manufacturing capacity.
Following its strong second-quarter performance, Celestica raised its 2026 guidance, further highlighting the strength of its growth trajectory. Management now expects revenue to reach approximately $20.5 billion, up from its previous forecast of $19 billion and representing 65% growth from the prior year. Adjusted EPS could increase 87% to $11.30, while the adjusted operating margin could expand from 7.5% to 8.4%. The company also expects to generate about $600 million in free cash flow this year.
Looking ahead, management expects growth to accelerate further in 2027, supported by robust customer demand and an expanding pipeline of new program wins. With strong exposure to AI infrastructure, expanding production capacity, and improving profitability, Celestica appears well positioned to sustain its impressive growth trajectory.
Investors’ takeaway
Despite Celestica’s exceptional performance over the past three years and its roughly 34% gain so far this year, the stock still trades at a relatively reasonable valuation. Its next-12-month price-to-sales and price-to-earnings multiples currently stand at 1.6 and 25.9, respectively. Given its strong financial performance, robust exposure to the rapidly expanding AI infrastructure market, healthy growth prospects, and reasonable valuation, I believe Celestica remains an attractive buy for long-term investors.
