Celestica Reports Strong Growth Amid AI Boom, Faces Valuation Concerns

Celestica Inc. (NYSE: CLS) has demonstrated significant growth as a key player in the ongoing AI and data center boom. The company has benefited from increased capital expenditures from hyperscalers, contributing positively to both its top and bottom lines. Recently, management raised its fiscal year 2025 guidance for the fourth time, alongside an ambitious outlook for fiscal year 2026. This upward revision signals strong momentum within the company, particularly in the Application-Specific Integrated Circuit (ASIC) segment, which has shown improved pricing power.

In addition, the Cloud and Connectivity Solutions (CCS) segment is emerging as a crucial growth driver, further enhancing Celestica’s revenue potential. However, despite these positive developments, concerns are mounting regarding the company’s valuation. Since hitting lows in April 2025, the stock has surged over triple digits, prompting questions about the sustainability of the approximately 50% year-on-year adjusted earnings per share growth rate.

The company’s reliance on a limited number of clients is a point of concern. In the third fiscal quarter of 2025, three customers accounted for a substantial 59% of Celestica’s revenue. Should there be a downturn in capital expenditure trends, which are often cyclical, the company could face challenging year-on-year comparisons, potentially leading to painful corrections in its stock price.

Analysts continue to monitor these developments closely, as the intersection of robust growth and high valuations presents both opportunities and risks for investors. Those considering investments in Celestica are advised to conduct thorough research and due diligence, given the inherent risks associated with capital investments in the sector.

The analysis provided here reflects a personal opinion and should not be construed as professional investment advice. Investors are encouraged to evaluate their individual circumstances before making any financial decisions.