CLS Stock: How Fragile is Celestica’s AI-Powered Expansion?

Will the artificial intelligence (AI) party continue into 2026? 

With AI hyperscaler companies such as Alphabet [GOOGL], Meta [META] and Microsoft [MSFT] expected to spend a record $527bn on AI over the course of the year, it may look like the party is only just getting started. 

Now, however, it’s not just the model makers and hyperscalers that are celebrating, but all of the firms involved in designing, manufacturing and powering the data center infrastructure at the heart of AI model training. From power providers to connectivity companies and memory chip manufacturers, this ecosystem of ‘picks and shovels’ firms is benefiting from an unprecedented wave of demand, and investors are taking notice. 

The case of Celestica [CLS] demonstrates both the advantages and pitfalls that technology manufacturers face in this golden age of AI investment. 

Founded in 1994, since 2018 the Toronto-based firm has pivoted from low-margin electronics manufacturing services (EMS) to higher-margin original design manufacturing, allowing it to capture a piece of the AI infrastructure pie and serve big name customers such as Alphabet’s Google, IBM [IBM] and Meta. 

The company operates in two segments: Advanced Technology Solutions, which serves defense, industrial and health technology clients; and Connectivity and Cloud Solutions, which focuses on equipment including servers and storage. 

With its impressive client base and diversified operations, Celestica could be one of the clear winners of the sudden windfall of AI infrastructure spending. However, the caprices of hyperscalers can change a stock’s prospects overnight. In the run-up to Celestica’s Q4 earnings on January 28, we examine the headwinds and tailwinds CLS is set to face in the coming months. 

Celestica’s Business Booms

“We are currently delivering the strongest financial performance in the company's history,” the Celestica CEO effused in the Q3 earnings call in October 2025. 

The firm recorded quarterly revenue of $3.19bn, above estimates and up 28% year-over-year due to an impressive 82% increase in communications end market revenues. It also saw its non-GAAP operating margin grow 80 basis points to 7.6%, a record figure enabled by Celestica’s strategic refocus on higher-margin segments. Adjusted EPS also beat estimates, rising 52% to $1.58. 

The likelihood of sustained demand has allowed the company to issue bullish guidance for the upcoming quarter. The company expects Q4 revenue of $3.325bn–3.575bn and adjusted EPS of $1.65–1.81. Revenue for the full year is expected to clock in at $12.2bn for 2025, with $5bn of that coming from sales of the company’s hardware platform solutions. 

It was Celestica’s 2026 forecast, however, that turned the most heads. Forecast revenue of $16bn would represent growth of 31% on already record 2025 figures, while non-GAAP adjusted EPS of $8.20 would mean 39% growth year-over-year.

Whether this can be pulled off, however, depends as much on Celestica’s clients as on its diverse portfolio offerings. 

On January 22, Taiwanese news outlet Digitimes reported that Google was looking to place assembly orders for its L10-L11 tensor processing unit (TPU) servers with Taiwanese manufacturers such as Inventec [2356:TW]. Shares of Celestica, which manufactures TPU servers for the tech giant, fell 8% on the news. 

Whether or not Google’s diversification of manufacturers will affect Celestica’s bottom line remains to be seen. The Canadian company is due to release its Q4 2025 financial results after market close on January 28. 

Pivot Drives Share Price Climb

CLS stock’s performance has benefitted considerably from the company’s strategic pivot to high-margin, data center-exposed business segments. 

It debuted on the NYSE back in 1998, at $9.28 per share, and following a peak in 2000, languished for decades at or below its IPO price.   

That all changed in late 2023, as the AI gold rush began in earnest. CLS surged above its previous all-time high, set nearly 24 years earlier, in late 2024, and has continued its uphill sprint since. 

As of January 26, CLS stock was trading at 308.25, representing growth of 153.31% in the past 12 months and 4.28% in the year to date.

Fundamentals: CLS vs FLEX vs JBL

The growth of AI infrastructure spending is set to benefit a range of companies, including many that cater to the connectivity and communications end markets that are underpinning Celestica’s impressive financials. To examine in detail the prospects of such ‘picks and shovels’ stocks — plus how competition might impact the investment case for Celestica — let’s take a look at two of its EMS peers: Flex [FLEX] and Jabil [JBL].

Singapore-based EMS provider Flex competes with Celestica for the same hyperscaler and enterprise clients, but boasts a larger global footprint. It also has exposure to the automotive, electric vehicles and robotics segments, and may benefit from its data center power infrastructure partnership with Nvidia [NVDA], announced in August 2025. 

In its Q2 2026 earnings report, it recorded revenue growth of 4% to $6.8bn, as well as an operating margin at above 6% for the fourth quarter in a row. EPS came in at $0.79, up 23% year-over-year. Management projected at least 35% data center revenue growth for the full year.  

Jabil, meanwhile, has doubled down on its US expansion, committing $500m over the next few years to expand its cloud and AI data center infrastructure product offerings. It serves a number of prominent clients, including Apple [AAPL], Amazon [AMZN] and Tesla [TSLA]. 

The company reported Q1 2026 earnings in December 2025, with management highlighting AI as “the primary driver of growth”. Net revenue came in at $8.3bn, with a core operating margin of 5.5% and GAAP diluted EPS of $1.35. Jabil is forecasting $32.4bn in revenue for the full year, with AI-related revenue accounting for some $12.1bn of that figure, up 35% year-over-year.  

Here are how the three stocks’ fundamentals compare: 

Source: Yahoo Finance

CLS Stock: The Investment Case

The Bull Case for Celestica

Celestica’s rosy Q3 earnings drew significant analyst attention, with BNP Paribas including it in its list of top AI picks for 2026: “data center investment appears durable with lead times supporting improved visibility through 2026 across the server, networking, and storage ecosystems,” analyst Karl Ackerman wrote in a note on January 21.

The firm highlighted Celestica’s exposure to potential AI infrastructure bottlenecks as an engine for growth. BNP Paribas expects the total addressable market for data center networking to grow to $120bn by 2028, driven by demand for AI servers. 

Citi increased its rating of CLS stock from ‘hold’ to ‘buy’ in the wake of Q3 earnings back in November, citing sustained hyperscaler capex. The firm set a $375 price target on the stock that, three months later, still represents an upside of 21.65% on the most recent close.  

The Bear Case for Celestica

It is clear that some companies will come out of the AI infrastructure boom richer than before, but it remains uncertain which companies will profit the most, especially in more crowded segments. Competitors with stronger ties to big tech names, including Flex and Jabil, could also gain the upper hand. As we’ve seen, ‘magnificent seven’ players like Apple continue to act as kingmakers through partnerships. 

Additionally, in order for CLS’ bullish forecasts to pan out, sustained AI spending is a must. If the ballooning costs of training large language models proves to be too much for investors, the fallout will likely ripple through the supply chain. Any changes in Celestica’s client base could also cause it to fall short of the high expectations it has set for itself.

Conclusion

EMS providers are sure to benefit from AI infrastructure spending throughout 2026, assuming the momentum around AI can continue. Celestica could well be one of the biggest winners, with its solid financials and diversified portfolio tapping into sustained demand. However, fierce competition or rejection by a prominent client could severely impact its prospects down the road.