Earnings estimates for Celestica Inc. CLS for fiscal 2026 and fiscal 2027 have moved up 11.42% to $11.32 and 30.21% to $19.01, respectively, over the past 60 days. The positive estimate revision depicts bullish sentiments about the stock’s growth potential.
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CLS Gains from AI Infrastructure Demand, Portfolio Strength
The proliferation of AI-based applications is expanding demand for Celestica's data communications and information processing infrastructure. In the second quarter of 2026, Enterprise revenues rose 167%, driven by the accelerated ramp of a hyperscaler AI/ML compute program, while 800G switching continued to scale. The company expects mass production of 1.6T programs with two hyperscalers to begin in the third quarter of 2026, with 10 active programs expected to ramp through 2027.
The company will manufacture advanced AI racks developed in collaboration with Broadcom to support OpenAI's custom accelerator roadmap. Initial deliveries are expected later in 2026, with mass production scheduled for 2027.
AMD is broadening its AI infrastructure offerings with the planned Helios platform. Celestica is playing an important role as a design and manufacturing partner for the platform.
Celestica’s comprehensive portfolio spanning communications, cloud, aerospace and defense, industrial and healthcare markets strengthens its business model by making it less vulnerable to downturn in any single market. Its strong focus on product diversification and high-value markets is supported by R&D, engineering and advanced manufacturing capabilities. This allows the company to maintain its competitive edge in a highly competitive electronics manufacturing services industry where it faces competition from major players such as Jabil, Inc. JBL, Sanmina Corporation SANM and Flex.
Healthy Cash Flow and Strong Balance Sheet are Positives
Cash provided by operating activities increased to $410.9 million from $152.4 million in the year-ago quarter, supported by stronger earnings despite higher working capital requirements tied to rapid growth. Free cash flow was $147.1 million, up 22.7% year over year.
As of the second quarter of 2026, Celestica’s current ratio stands at 1.23. A current ratio more than 1 implies that the company is well positioned to pay off its short-term debt obligations.
Price Performance
Celestica shares have declined 1% in the past year against the Electronics - Manufacturing Services industry’s growth of 20.3%. The stock has underperformed the Zacks Computer & Technology sector and the S&P 500 during the same time frame.
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The company has underperformed its peers like Jabil and Sanmina. Shares of Jabil have jumped 31.2%, and shares of Sanmina have risen 24.9%.
Key Valuation Metric of CLS
From a valuation standpoint, CLS is currently trading at a discount compared to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 17.75 forward 12-month earnings, lower than 18.08 for the industry.
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End Note
CLS is witnessing solid momentum across several end markets backed by its robust portfolio. Growing investments in AI infrastructure are driving expansion of Celestica's AI compute business. CLS expects AI-related demand to remain a significant contributor to growth in the coming quarter. The company’s strong liquidity better positions it to navigate economic downturns and capitalize on emerging growth opportunities. Celestica’s expanding client base and growing collaboration with tech giants such as Broadcom, AMD and OpenAI bring a multi-billion-dollar revenue-generating opportunity in the next several years. Hence, with a Zacks Rank #1 (Strong Buy), Celestica appears to be a good investment option at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).