CLS Gains Traction in the AI Data Center Market: Will it Persist?

Celestica, Inc. CLS is witnessing healthy traction in the AI data center market backed by its comprehensive portfolio. Enterprises across several industries, from financial services, healthcare, automotive and consumer electronics, are increasingly digitalizing their operations. The companies are generating a large pool of information from their day-to-day operations.

Competitive edge in today’s digital world depends on real-time analytics of that vast information, which helps organizations to make informed decisions. Hence, businesses worldwide are rushing to develop high-performance computing infrastructure and utilize AI data centers. Hyperscalers such as Microsoft, Amazon and Google are expanding their data center footprint to match these requirements. Per a report from Grand View Research, the AI data center market is expected to witness a compound annual growth rate of 28.3% from 2025 to 2030.

These AI investments are driving demand for Celestica’s enterprise-level data communications and information processing infrastructure products, such as routers, switches, and data center interconnects. The AI data center has become Celestica’s largest and fastest-growing market in the third quarter of 2025. Celestica is one of the first to develop a prototype 1.6T liquid-cooled switch using Broadcom Tomahawk 6 silicon.

Net sales from the company’s Hardware Platform Solution business, which is part of the company’s Connectivity & Cloud solutions segment, grew 79% year over year to $1.4 billion. The growth was driven by growing adoption of 800G switches.

How are Competitors Faring?

Celestica faces competition from Jabil, Inc. JBL and Flex Ltd. FLEX.

Flex is aggressively moving into the high-growth data center market. Flex introduced a new high-efficiency power shelf system designed to accelerate the transition to 800 VDC power architectures and support the growing demands of AI infrastructure. The system delivers up to 33 kW per shelf with 97.5% peak efficiency, significantly reducing power losses and cooling needs. Flex remains on track to generate approximately $6.5 billion in revenues from data centers, reflecting year-over-year growth of at least 35% and accounting for 25% of its total revenues.

Jabil is benefiting from healthy demand in the Capital Equipment, AI-related Cloud and Data Center Infrastructure verticals. The company recently announced a $500 million multi-year investment initiative in the Southeast U.S. region. The investment is focused on expanding manufacturing capabilities and workforce development for the cloud and AI data center infrastructure market. The strategic investment will strengthen Jabil’s position in the AI hardware supply chain.

Celestica's Price Performance, Valuation and Estimates

Celestica’s shares have gained 366.6% over the past year compared with the industry’s growth of 136.9%.

From a valuation standpoint, Celestica trades at a forward price-to-earnings ratio of 48.79, up from the industry average.

The Zacks Consensus Estimate for Celestica’s earnings for 2025 and 2026 has increased in the past 60 days.

Celestica currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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