Celestica (NYSE: CLS) has emerged
as one of the strongest growth stories in the global electronics manufacturing
and supply chain solutions industry. Once viewed as a low-margin contract
manufacturer, Celestica has successfully transformed its business toward
higher-value segments such as cloud infrastructure, aerospace & defense,
and industrial technology. The company’s Q4 2025 earnings confirmed that this
transformation is not only working, but accelerating. In this article we will
dive into Celestica recent earnings, stock performance & valuation, growth
potential, and the risks investor should consider.
About Celestica
Celestica founded in 1994 and
headquartered in Toronto, Canada, is a global provider of design,
manufacturing, and supply chain solutions for leading technology and industrial
companies. The company operates through Advanced Technology Solutions (ATS) and
Connectivity & Cloud Solutions (CCS), serving markets such as cloud data
centers, aerospace and defense, communications, industrial equipment, health
technology, and renewable energy. By focusing on higher-complexity engineering
and system integration, Celestica has improved margins and strengthened
long-term growth.
Celestica Financial
Performance
Celestica reported an outstanding
Q4 2025 financial performance, demonstrating strong momentum across revenue,
earnings, and cash flow. Revenue for the quarter reached $3.65 billion, up from
$2.54 billion in Q4 2024, representing a 43.57% year-over-year increase, while
EPS rose to $2.31 from $1.16, delivering an exceptional 99.94% growth. On a
trailing twelve-month basis, revenue increased to $12.39 billion compared to
$9.64 billion in Q4 2024, reflecting 28.46% growth, and EPS surged to $7.16
from $3.61, an increase of 98.34%. Free cash flow per share (TTM) improved to
$3.94, up from $2.55, marking 54.51% year-over-year growth. Profitability
metrics remained solid, with a Gross profit margin of 12.06%, Net profit margin
of 6.72%, and Free cash flow margin of 3.7%, while efficiency ratios showed a Return
on assets of 10.14% and an impressive Return on equity of 40.49%. The balance
sheet stayed healthy with a debt-to-equity ratio of 0.35.
Over the past five years,
Celestica has grown its revenue at a 21.8% CAGR, net income at 68.2%, and free
cash flow at 27.3%. Celestica has proven its ability to grow rapidly and
consistently in the past and is still projected to grow in the coming year.
Celestica Fiscal 2026
Financial Forecast
Looking ahead, analysts forecast
2026 revenue of $17.38 billion, representing a 40.28% increase from 2025
revenue of $12.39 billion, and Non-GAAP EPS of $8.98, up 48.39% from 2025 EPS
of $6.05. Wall Street analysts give a Buy rating on the stock, with an average
price target of $386.15, implying 35.44% upside, and a highest price target of
$450, offering potential upside of 57.84% from current levels.
CLS Stock Price Performance
and Valuation
At the time this article was written Celestica’s stock was trading at $285.11 per share. The stock has gained 135.8% over the past year, significantly outperforming the S&P 500’s 16.4% increase during the same period. Over the past five years, Celestica has delivered a remarkable 3,057.3% return, far exceeding the S&P 500’s 79.5% gain and one of the best stock in the past five years.
Despite this strong
rally, the valuation remains attractive relative to growth, with a Price to
sales P/S TTM ratio of 2.61 and a lower forward P/S of 1.86. The stock trades
at a Non-GAAP Price to earnings P/E TTM of 46.37 and a more reasonable forward
Non-GAAP P/E of 31.29. While the P/FCF TTM is 71.44.
Based on Fiscal.ai data, if we
look at valuations over the past five years, the forward P/S, forward P/E, and
P/FCF are all above average. While the stock may appear overvalued compared to
its historical levels, Celestica was significantly undervalued in the past,
trading at a single digit forward P/E despite rapid high double digit growth.
The multiple expansion over the past five years is therefore justified, and
Celestica’s stock now trades at a reasonable valuation. Given its strong
earnings momentum, robust revenue outlook, and improving cash generation, the
current valuation remains compelling for long term investors seeking
high-growth opportunities despite the stock’s substantial price increase.
Celestica Growth Potential
Celestica growth potential
remains solid driven by several factors.
- Exceptional Revenue Growth
from AI Infrastructure Demand
Celestica's Q4 2025 revenue reached $3.65 billion, representing a robust 44% year-over-year increase compared to $2.55 billion in Q4 2024. The full-year 2025 revenue totaled $12.39 billion, marking a 28% increase from $9.65 billion in 2024. This growth is primarily driven by extraordinary demand for artificial intelligence and data center infrastructure from major hyperscalers. The company's Connectivity & Cloud Solutions (CCS) segment, which includes high-performance systems (HPS) serving AI/ML compute programs, contributed $2.86 billion in Q4 revenue alone, up 64% year-over-year and accounting for 78% of total company revenue.
The CCS segment revenue surge reflects accelerating adoption of next-generation AI infrastructure globally, with particular strength in communications equipment for 800G switch ramps. This demonstrates that Celestica is ideally positioned to capture substantial market share as enterprises and technology companies continue massive capital spending on AI-driven data center infrastructure. - Ambitious 2026 Guidance and
Strategic Capital Investment Plans
Celestica raised its 2026 revenue guidance to $17.0 billion from $16.0 billion, implying 37% year-over-year growth from 2025’s $12.4 billion. The company also targets adjusted EPS of $8.75 for 2026, up 45% from $6.05 in 2025, signaling confidence in sustained earnings momentum. Capital expenditures are planned to rise sharply to $1 billion in 2026 from $201 million in 2025, underscoring major investments in expanded manufacturing capacity to meet long-term customer demand.
Management expects to fund this entire capex program from operating cash flow, highlighting strong free cash flow generation and balance sheet flexibility. With $458 million in free cash flow in 2025, up $152 million from 2024, Celestica can support growth projects while aligning with key customers on multi-year AI infrastructure capacity plans beyond 2027. - Strategic Geographic Expansion
and Advanced Manufacturing Capabilities
Celestica is expanding manufacturing capabilities in the United States to support next‑generation AI infrastructure, including systems built around Google’s Tensor Processing Units, with completion targeted by 2027. At the same time, it plans to add capacity in Southeast Asia to enhance geographic diversification and stay close to key customer demand hubs. Together, these projects reflect a clear commitment to becoming a comprehensive provider of complex data center hardware while reducing reliance on any single region.
The move into more domestic U.S. production also responds to customer priorities around reshoring, geopolitical risk, and supply chain resilience. These investments strengthen Celestica’s role as a strategic infrastructure partner for hyperscalers and major technology firms, deepening customer relationships and raising switching costs through a flexible, globally distributed manufacturing footprint.
Risks to Consider
While Celestica looks like a good
stock, we should be mindful of potential risks.
- Customer and revenue
concentration
Celestica remains highly reliant on a narrow set of large customers, particularly in the AI and cloud-infrastructure space. A material loss of, or even a slowdown in orders from, just one or two top clients could meaningfully depress revenue, gross margins, and operating leverage. This customer concentration heightens vulnerability to shifts in hyperscaler spending cycles, potentially triggering sharp declines in financial performance and stock valuation amid volatile market dynamics. - Dependence on continued AI
capex
A large portion of Celestica’s recent growth and future revenue guidance hinges on hyperscalers’ and AI-hardware makers’ capital-spending cycles. Should AI spending decelerate due to soaring training costs, heightened regulatory scrutiny, or macroeconomic pressures prompting budget cuts demand for Celestica’s contract manufacturing and supply chain services could fall short of expectations, eroding revenue projections and exposing the firm to cyclical downturns in tech infrastructure investment. - Supply‑chain and operational
complexity
Celestica operates complex, global manufacturing and supply-chain networks, exposing it to component shortages, logistics disruptions, and geopolitical trade risks. Significant production-line disruptions, yield issues, or challenges in managing inventory and lead times can erode margins and strain customer relationships. These vulnerabilities amplify operational fragility, particularly amid volatile semiconductor availability and escalating U.S.-China tensions, potentially derailing delivery timelines and profitability targets.
Conclusion
Celestica stands out as a high-quality growth company with a proven transformation toward higher-value, higher-margin businesses. Strong Q4 2025 results, rapid earnings and cash flow growth, solid profitability, and a healthy balance sheet highlight the company’s operational strength. Despite a significant stock price rally, valuation remains reasonable relative to future growth expectations. Supported by favorable industry trends and positive analyst outlooks, Celestica remains an attractive investment opportunity for long-term, growth-focused investors.
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