Celestica (TSX:CLS) has been on a formidable run. Over the previous 12 months, CLS inventory has surged greater than 433%, making it the highest performer on the S&P/TSX Composite Index. Furthermore, the inventory has grown at a compound annual progress charge (CAGR) of 195.8% within the final three years, delivering capital features of two,494.6%. This huge rally within the shares of this Canadian firm is tied to the synthetic intelligence (AI) growth.

Celestica is capitalizing on the AI growth

Notably, Celestica isn’t a pure AI firm, nevertheless it has positioned itself as a vital participant within the AI infrastructure area. The corporate makes a speciality of design, manufacturing, {hardware} platforms, and provide chain options, serving clients throughout a variety of industries. It operates by way of two primary divisions. The Superior Expertise Options (ATS) section caters to aerospace and defence, industrial, healthcare expertise, and capital gear. In the meantime, the Connectivity & Cloud Options (CCS) division is concentrated on communications and enterprise markets.

It’s the CCS section that has been powering Celestica’s progress. As hyperscale clients rush to increase their infrastructure for AI-driven workloads, demand for networking merchandise has skyrocketed, propelling Celestica’s top-line progress and share worth momentum.

Celestica’s latest monetary outcomes replicate the stable demand tendencies. Within the second quarter, Celestica reported income of US$2.9 billion, a 21% year-over-year improve. A lot of this progress stemmed from the CCS section, which accounted for 72% of whole income. Communications finish market income jumped 75%, because of sturdy demand within the firm’s {hardware} platform options (HPS) networking enterprise, alongside rising momentum in its optical packages. Earnings adopted go well with, with adjusted earnings per share (EPS) climbing 54% to US$1.39.

The place may Celestica be in 3 years?

A lot of the inventory’s future trajectory will depend upon the sustainability of AI-driven demand and the corporate’s means to capitalize on it. For its CCS section, administration is guiding for income within the communications market to develop at a brisk tempo, pushed by stable demand for networking switches. Robust momentum in each 400G and 800G packages, notably with hyperscaler clients, is more likely to assist this progress. These clients proceed to increase their knowledge centres, making a sturdy tailwind for Celestica.

The enterprise market additionally holds promise. Within the third quarter, Celestica will start ramping volumes for a next-generation AI/ML compute program with a big hyperscaler, with significant contributions anticipated by way of 2026. Administration sees additional alternatives throughout compute, storage, and rack integration as digital-native and hyperscaler purchasers increase their infrastructure footprints.

Its ATS section can even contribute meaningfully to its progress. Industrial packages that ramped within the second quarter are anticipated to stay robust by way of year-end, whereas the aerospace and defence unit is seeing profitability enhance as the corporate exits lower-margin contracts.

Whereas tariffs stay a problem, the corporate expects to recuperate most of those prices from clients, minimizing any affect on earnings.

With AI adoption accelerating, hyperscaler investments increasing, and secular tailwinds throughout its portfolio, Celestica seems well-positioned to maintain momentum regardless of broader macro uncertainty.

In brief, Celestica affords a compelling case for traders because the AI growth continues to be in its early innings. Although the inventory might not replicate its astonishing features of the previous three years, it nonetheless has loads of room to climb.

Assuming that CLS inventory grows at a CAGR of round 30%, far beneath the triple-digit features of latest years, the share worth may greater than double from its September 5 closing stage of $336.26 to roughly $738.76 inside three years.