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Celestica reported strong results and predicted impressive growth through 2026.
The company is benefiting from booming demand for AI infrastructure.
The stock jumped this week, but the valuation now looks rich.
Shares of data center infrastructure provider Celestica (NYSE: CLS) were up 14.9% for the week as of Thursday at 2:45 p.m. ET, according to data provided by S&P Global Market Intelligence. The main driver of the gain was a strong third-quarter earnings report on Monday, which featured double-digit revenue growth and even faster adjusted earnings growth.
Image source: Getty Images.
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Celestica's revenue soared by 28% year over year in the third quarter, easily beating analyst expectations. Adjusted earnings per share also exceeded analyst estimates, growing by 52% to $1.58.
On top of reporting strong results, Celestica boosted its full-year outlook and provided a solid outlook for 2026. For 2025, revenue is now expected to be around $12.2 billion, with adjusted EPS of $5.90. For 2026, revenue should rise to $16 billion, and adjusted EPS should reach $8.20.
In an interview following the earnings report with CNBC, Celestica CEO Robert Mionis described its role in the artificial intelligence (AI) infrastructure market as "laying the tracks ahead of the freight train." The company designs storage, compute, and networking solutions for cloud data centers, and booming demand for AI infrastructure is helping to push up revenue.
The company's 2026 outlook is supported by strong demand from its largest customers. Celestica also noted that there were "indications of these dynamics continuing into 2027." Revenue will grow by 31% in 2026 if the company hits its guidance, and equally impressive growth could follow in 2027 if demand for AI infrastructure holds up.
Things are going great for Celestica right now, but the stock's valuation has become stretched. Based on that 2026 outlook, Celestica stock trades for roughly 42 times forward earnings. There's not a lot of room for error going forward.
By hitching its wagon to the AI infrastructure boom, Celestica is exposed to the risk of the boom turning into a bust. While all signs point to growing demand for AI infrastructure for now, Celestica's fortunes could shift quickly down the road.
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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celestica. The Motley Fool has a disclosure policy.
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