Hook / Thesis
Celestica has quietly turned a run of sequential quarters into a credible growth story: revenue ramp, accelerating operating margins and consistent cash generation. The company sits squarely in the AI/data-center supply chain via its Connectivity & Cloud Solutions business and product platforms (management has highlighted the SD6300 family and storage-density wins).
That combination - visible end-market demand plus improving unit economics - makes CLS an attractive tactical long for aggressive growth portfolios today. This is a trade, not a low-volatility investment: take a size appropriate for high-risk positions, use a clear stop-loss and hold for catalysts (product ramps, hyperscaler contract announcements, continued margin expansion).
What the business does and why the market should care
Celestica provides outsourced electronics manufacturing and supply-chain solutions across two segments: Advanced Technology Solutions (ATS) - which houses aerospace, defense, industrial and capital-equipment (semiconductor, display, robotics) - and Connectivity & Cloud Solutions (CCS), where the company serves communications and enterprise (servers and storage). The company reports that the majority of revenue now comes from CCS - effectively giving Celestica direct exposure to data-center and hyperscaler spending cycles.
Why that matters now: hyperscalers are the obvious growth engine for infrastructure suppliers. Celestica's recent commentary and filings reference storage / density platforms targeted at AI/data-center workloads. If the SD6300-class wins scale, Celestica benefits both in revenue and improved margin mix because CCS business carries higher per-unit value and (recently) better operating leverage.
Proof in the numbers
Look at the quarterly progression through fiscal 2025:
- Q1 (ended 03/31/2025) revenue: $2.6486B; gross profit: $273.9M; operating income: $128.8M; net income: $86.2M; diluted EPS: $0.74.
- Q2 (ended 06/30/2025) revenue: $2.8934B (+9% vs Q1); gross profit: $371.0M; operating income: $272.5M; net income: $211.0M; diluted EPS: $1.82.
- Q3 (ended 09/30/2025) revenue: $3.1940B (+10.4% vs Q2); gross profit: $416.1M; operating income: $325.0M; net income: $267.8M; diluted EPS: $2.31.
Sequential improvement is clear: operating income margin moved from ~4.9% in Q1 to ~10.2% in Q3, and net margin expanded in the same window (Q3 net income margin ~8.4%). Management then reported Q4 results (published 02/01/2026) with revenue of $3.6549B and EPS of $1.89 - a top-line beat versus the prior estimate and a fourth quarter that pushes FY2025 revenue to roughly $12.4B when you sum the four quarters (Q1+Q2+Q3+Q4 ≈ $12.39B).
Cash flow: operating cash flow has been positive each quarter (Q1: $130.3M; Q2: $152.4M; Q3: $126.2M), and the company used cash for financing activity (buybacks/other) rather than a liquidity run-off. Balance sheet snapshot (Q3): assets $6.6067B, liabilities $4.5781B, equity $2.0286B; inventory sits around $2.0467B. That working-capital profile is typical of EMS/ODM companies but bears watching if order cadence swings.
Valuation framing
Use the actual share count and price to frame the trade. Diluted average shares are ~115.9M; the intraday price is around $296.88 (last trade). That implies an approximate market capitalization of:
Market cap ≈ $296.88 × 115.9M ≈ $34.4B (estimate)
On an FY2025 basis (sum of quarterly diluted EPS: Q1 $0.74 + Q2 $1.82 + Q3 $2.31 + Q4 $1.89 ≈ $6.76 annual diluted EPS), the implied P/E is roughly:
P/E ≈ $296.88 ÷ $6.76 ≈ 44×
That multiple is demanding compared with broader industrial peers but starts to look more palatable when you consider a) direct exposure to hyperscaler AI infrastructure, b) recent margin expansion and c) the potential for higher incremental margins on new platform wins. If management sustains operating margins in the 9-11% band while revenue continues to grow mid-teens year-over-year, the multiple can compress or be justified by growth.
Note: debt and cash detail needed for an enterprise-value view are not granularly disclosed in our snapshot; treat the market-cap/P/E as a first-order valuation anchor.
Trade idea - actionable plan (for aggressive growth portfolios)
Thesis: Long CLS with defined sizing for a multi-week to multi-month hold to capture continued product ramps, hyperscaler wins and further margin tailwind.
Entry: 280 - 300 (aggressive entries between the current price and a ~5% pullback). If you prefer a single hard entry, use $290. Stop-loss: $250 (protects against a ~15-16% drop from $290; move the stop to breakeven once up 8-10%.) Targets (scale out):
- Target 1: $360 (near the recent multi-month peak and previous intraday highs) - ~24% upside from $290.
- Target 2: $420 (stretch target if AI/data-center momentum accelerates and full-year guidance is raised) - ~45% upside from $290.
Catalysts to watch (2-5)
- Public announcements of larger-scale wins with hyperscalers or big cloud customers for SD6300 or similar platforms.
- Quarterly results that sustain revenue growth and operating margin above the mid-single-digit baseline (continuation of the Q1→Q3 margin expansion trend).
- Management commentary showing increased content-per-server or higher ASPs from storage/density products.
- Share-buyback activity (Normal Course Issuer Bid was referenced in prior releases) supporting EPS and supporting float reduction.
- Macro: continued capex cycles from hyperscalers for AI/datacenter infrastructure.
Risks and counterarguments
At least four meaningful risks that could derail the trade:
- Customer concentration / order volatility: Celestica’s exposure to a handful of large hyperscalers means revenue can be lumpy; one large program pause or restart can swing quarterly results materially.
- Supply-chain and inventory risk: inventory on the balance sheet is sizable (~$2.05B as of the latest quarter); if demand falters, inventory write-downs would pressure margins and cash flow.
- Competitive pressure and pricing: the EMS/ODM market is competitive. New entrants, aggressive pricing by peers or a move by customers to insource capacity could compress margins.
- Macro capex downturn: AI and cloud spend remains cyclical; a macro slowdown or pause in hyperscaler procurement could quickly reduce forward revenue visibility.
- Execution risk: higher ASP products carry integration and execution complexity; missed delivery timelines or quality issues could hurt client relationships and margins.
Counterargument to the trade: You could argue that the company is already priced for perfection. A ~44× P/E (using FY2025 EPS) assumes continued growth and margin strength; any evidence of slowing demand or one-time customer pushouts could cause a quick re-rating. If you believe hyperscaler capex is near a cyclical peak, you should remain cautious or use a much tighter stop.
Conclusion - stance and what would change my mind
Stance: Long (aggressive). The combination of sequential revenue growth, visible margin improvement and direct AI/data-center exposure makes Celestica an attractive high-risk, high-reward trade for aggressive growth portfolios. The recommended execution is an entry in the $280-$300 range, a stop at $250 and scale-out targets at $360 and $420. Keep initial position sizes small relative to portfolio and treat this as a directional trade tied to the AI infrastructure cycle.
What would change my mind:
- Evidence of a single quarter of materially weaker revenue or margin (e.g., Q-o-Q revenue decline or margin contraction driven by order cancellations) would invalidate the thesis and prompt exit.
- Material inventory impairments or a clear move by major customers to insource production would also change my view.
- Conversely, sustained sequential beats, higher guidance and public hyperscaler design wins would justify upping the position and re-rating the name to a longer-term growth holding.
Execution checklist (quick)
- Enter 280-300 zone; default single entry $290.
- Initial stop $250; move stop to breakeven at +8-10% and trail thereafter.
- Scale partial profits at $360; hold remainder to $420 if catalysts continue.
- Review quarterly results and customer disclosures closely; be ready to exit if order cadence slows or inventory writedowns appear.
Disclosure: This is a trade idea for aggressive portfolios and not investment advice. Size and stop levels should match your risk profile.
Important dates cited in the analysis: Q3 FY2025 filing date 10/27/2025; Q4 FY2025 results announced 02/01/2026.