Celestica (TSX:CLS), a fast-growing Canadian expertise {hardware} manufacturing and provide chain companies accomplice to a budding synthetic intelligence (AI) ecosystem, has ballooned from a modest $1.6 billion market cap in late 2022 right into a $40 billion behemoth as of September 2025. However after a monumental 2,660% run in three brief years, might there be extra to Celestica’s development story?

Let’s dive into the numbers, the markets, and the technique to see simply how a lot development potential Celestica inventory actually has over the subsequent three years.

Celestica’s monetary firepower and stellar execution

Celestica’s current monetary efficiency is nothing in need of spectacular. In the course of the second quarter of 2025, income hit a file $2.9 billion, hovering 21% year-over-year and soundly beating steerage. Extra importantly, profitability is exploding with adjusted earnings per share (EPS) surging 54% to $1.39. Progress has come from high-margin data-center-related enterprise strains. The corporate’s adjusted working margin expanded by 110 foundation factors to 7.4%. Celestica’s spectacular income development is accompanied by stronger revenue margins, a gorgeous mixture buyers like to see.

Administration raised its full-year 2025 income steerage from $10.9 billion to $11.6 billion, implying 20% sequential development from 2024.

Using an unstoppable AI wave

Celestica’s development story is premised on its pivotal position as a {hardware} enabler for the unreal intelligence revolution. The corporate operates by way of two segments: Superior Expertise Options (ATS) and Connectivity & Cloud Options (CCS). Its CCS section, which made up 72% of second-quarter income, is the clear development star. Inside CCS, the communications enterprise (networking switches and information centre interconnects) exploded by 75% year-over-year.

Why is that this occurring? The world’s tech giants are in an arms race to construct AI infrastructure, and Celestica is among the many key arms sellers, alongside Nvidia. The corporate has not too long ago scored high-profile program wins with AI leaders like OpenAI and Meta Platforms. It’s concerned in cutting-edge tasks like Meta’s 1.6T switching expertise and constructing full AI rack programs for OpenAI. Meta might invest US$600 billion in U.S. information centres by way of 2028.

Celestica might take pleasure in extra enterprise nonetheless. The “Large 4” AI market gamers (Amazon.com, Alphabet, Microsoft, and Meta) proceed to spend a whole bunch of billions on capital expenditures in 2025 alone, with the overwhelming majority directed at AI infrastructure. Funding financial institution UBS forecasts international AI spending will hit US$480 billion in 2026. Celestica, with its deep partnerships and experience in high-performance switching and server platforms, is completely positioned to seize a major slice of this monumental spend.

Bay Road analysts forecast an 18.8% compound annual development price (CAGR) for Celestica’s income over the subsequent two years, with earnings per share development charges exceeding 30% yearly.

Past AI: Celestica’s diversification and strategic shrewdness

Whereas AI will get most headlines, Celestica’s enterprise strains are diversified. Its ATS section (28% of income) – which serves aerospace and defence, healthtech, and industrial markets – additionally noticed a wholesome 7% income enhance and stronger margins. Latest geopolitical tensions are triggering elevated defence spending globally, offering one other potential development vector.

Administration can also be shrewdly navigating dangers. It acknowledges a key vulnerability: buyer focus. Celestica’s prime 10 prospects represented 73% of 2024 income. Nonetheless, the corporate is actively working to diversify its buyer combine and product portfolio, specializing in higher-margin, value-added companies like design, growth, and after-market help inside its {Hardware} Platform Options (HPS) enterprise.

Dangers and the valuation query

Celestica’s excessive buyer focus is an actual problem, particularly within the extremely aggressive electronics manufacturing companies (EMS) trade. A slowdown in AI infrastructure spending by hyperscalers, although not anticipated quickly, would damage.

Then there’s the valuation angle. With a ahead price-to-earnings (P/E) a number of of 40, Celestica inventory is much from low cost. The market is pricing in quite a lot of future development. This makes it delicate to any earnings missteps or shifts in market sentiment.

The Silly backside line

So, simply how a lot development potential does Celestica inventory nonetheless have? Important. The corporate has remodeled itself from a low-margin contract producer right into a crucial, high-value accomplice in essentially the most transformative expertise pattern of our era. Its monetary future appears sturdy. Progress is accelerating, margins have expanded, and it’s driving a long-term, multi-billion-dollar wave of AI infrastructure spending.

Whereas its valuation calls for respect and the dangers of buyer focus are actual, Celestica’s strategic positioning, execution excellence, and publicity to secular development developments recommend double-digit development charges could also be sustained by way of 2028.

Buyers with the next danger tolerance and a long-term horizon could construct positions in Celestica inventory whereas watching execution quarter-to-quarter to make sure it continues to satisfy the lofty expectations its present value instructions.