Celestica, Inc. CLS shares have gained 20.1% in the past six months compared with the Electronics - Manufacturing Services industry’s growth of 26.7%. The stock has outperformed the Zacks Computer & Technology sector and the S&P 500 during the same time frame.
Image Source: Zacks Investment Research
The company has underperformed its peers like Jabil, Inc. JBL and Sanmina Corporation SANM. Shares of Jabil have jumped 33.4%, and shares of Sanmina have risen 27.3%.
Celestica Gains From Solid AI Traction, Hyperscaler Spending
Celestica is benefiting from robust demand for next-generation Ethernet switches from hyperscalers. The company continues to see strong adoption of 800G networking solutions. It is also preparing for the commercial ramp of 1.6-terabit switch programs in the latter half of 2026. Demand for legacy 400G products has remained resilient in recent quarters.
Growing investments in AI infrastructure are driving expansion of Celestica's AI compute business. Management expects this momentum to continue throughout the remainder of 2026 and into 2027, positioning AI compute as one of the company's fastest-growing businesses. These factors are driving growth in Celestica’s Connectivity & Cloud Solutions segment.
Conditions are also improving in the semiconductor manufacturing industry. This presents a solid growth opportunity for Celestica’s Advanced Technology Solutions segment. Stronger demand for wafer fabrication equipment combined with momentum in industrial, healthcare and aerospace markets is expected to drive higher ATS revenues.
In addition to strong revenue growth, Celestica expects profitability to improve as well. A richer mix of engineering-intensive programs, particularly within its High-Performance Solutions portfolio, supports operating margin expansion.
Celestica continues to invest aggressively in manufacturing capacity to meet rising customer demand. The company is expanding facilities across North America and Asia, including Thailand, Japan and the United States. Focus on diversifying operations and boosting supply chain reliability gives it a competitive edge against other players such as Jabil and Sanmina.
Strategic Collaboration With Industry Leaders is a Tailwind
Advanced Micro Devices AMD is expanding its AI infrastructure portfolio with the upcoming Helios platform to strengthen its position in the hyperscale AI market. Celestica is a key manufacturing and design partner in this initiative. Celestica is providing a scale-up networking switch that serves as the backbone of AMD’s Helios rack architecture.
Celestica’s partnership with OpenAI provides an important long-term growth opportunity. 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. The partnership strengthens Celestica's presence in the rapidly expanding AI infrastructure market.
Estimate Revision Trend
Earnings estimates for Celestica for 2026 and 2027 have increased over the past 60 days.
Image Source: Zacks Investment Research
Key Valuation Metric of CLS
From a valuation standpoint, CLS is currently trading at a premium compared to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 22.62 forward 12-month earnings, higher than 20.71 for the industry.
Image Source: Zacks Investment Research
End Note
The growing proliferation of AI-based applications and generative AI tools across industries presents a solid growth opportunity for Celestica. Growing collaboration with major technology giants like AMD, OpenAI and Broadcom is propelling innovation. Investment in expanding manufacturing capacity to support growing AI infrastructure-related demand will likely reap long-term benefits. Upward estimate revision shows growing investors’ confidence regarding the stock’s growth potential. Owing to these factors, with a Zacks Rank #1 (Strong Buy), Celestica appears to be a strong investment option at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Celestica, Inc. (CLS): Free Stock Analysis Report
Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report
Jabil, Inc. (JBL): Free Stock Analysis Report
Sanmina Corporation (SANM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).