Technology and hardware business Celestica (NYSE:CLS) has seen massive upward pressure on its share prices over the last 12 months, with total gains of over 115 percent during that period. The driving force behind these incredible returns has been Celestica’s exposure to the ongoing construction of AI infrastructure, a tide that has lifted many other stocks alongside CLS. Is Celestica the best AI stock to buy now, or have the returns of the last 12 months brought CLS to too high a price to attract investors today?
Celestica’s AI Opportunity Is Data Center
Celestica is one of a handful of businesses that have seen their share prices soar due to their positions as makers of data center hardware and networking equipment. Celestica’s data center switches, in particular, could prove to be extremely valuable as larger and more complex models demand ever-greater amounts of computing power. Celestica’s switching technology aims to address the computing needs of these models by reducing latency and enabling peak performance.
Also of great importance for Celestica is its established role as a hardware provider for Google’s AI infrastructure. Celestica helps to produce Google’s Tensor Processing Units, specialized ASICs that are used for AI. Between this and its role as a networking equipment manufacturer that’s used heavily by Google for its AI infrastructure, Celestica is in a prime position to benefit from the roughly $180 billion Alphabet expects to spend on AI this year. Celestica also manufactures hardware for Meta, giving it direct exposure to the AI spending of two of the largest hyperscalers.
How Celestica’s Potential Is Translating to Growth
Celestica’s enormous opportunities for growth were nicely demonstrated by its full-year earnings report for 2025. For the year, revenues rose 28 percent to $12.39 billion. This growth trend accelerated later in the year, with Q4’s revenue of $3.65 billion being 44 percent above the year-ago quarter’s. GAAP EPS, meanwhile, nearly doubled from $3.61 in 2024 to $7.16 in 2025. Adjusted EPS rose from $3.88 to $6.05.
Celestica also expects strong growth rates on both its top and bottom lines in 2026. Management’s full-year guidance calls for revenue of $17.0 billion, up another 37 percent from 2025’s results. Adjusted EPS, meanwhile, is projected to rise by nearly 45 percent to $8.75 per share. While management hasn’t yet issued guidance beyond 2026, it does anticipate that the general growth trajectory of 2026 will continue into at least next year.
More importantly, Celestica is making investments today that could keep its growth rates high for years to come. A new expansion of its US manufacturing capabilities to support Google’s TPU demands is expected to be completed in 2027, and additional investments are being made in manufacturing in Asia. This year, Celestica expects CapEx of about $1 billion as it builds out its capacity to meet the needs of large customers like Google. The capacity will likely be needed, as Celestica gained an as-yet unnamed third hyperscale customer last year.
Celestica’s Large Projected Upside
In addition to its compelling exposure to AI as a hardware manufacturer, Celestica is also believed to be undervalued by analysts. The range of price forecasts for CLS runs from a low of $330 to a high of $450. Even after more than doubling in the past year, Celestica’s current price is $280.66, implying an upside of anywhere from 17.6 percent to 60.3 percent. At the average consensus price of $386.15, the stock would have an upside of 37.6 percent. The stock’s ratings also lean strongly bullish, with 12 buy ratings, only two holds and no sells.
It’s also worth noting that Celestica, while certainly not cheap, trades at a relatively low valuation for a stock with significant AI-driven growth potential. Shares of CLS are currently trading for 39.1 times trailing 12-month earnings and 2.6 times sales. Though its price-to-operating-cash-flow ratio is quite a lot higher at 71.0, a premium price tag seems justifiable for a business that’s performing as well as Celestica is and has its long runway for potential future growth.
Is Celestica a Buy for AI Growth Now?
Despite something of a premium valuation, Celestica looks like it could be a solid business to own for a number of reasons. To begin with, there seems to be little chance of spending on data centers slowing down anytime soon. Between now and 2030, total global data center capacity is expected to roughly double, resulting in an estimated $3 trillion of new investment. Though Celestica certainly faces competition in the data center networking business, it could be in an excellent position to take advantage of this strong growth cycle.
It’s also worth examining Celestica’s deeply positive financial characteristics. In the past 12 months, the business has generated a 29.6 percent return on invested capital and a 44.0 percent return on equity. Celestica has also kept its debt under control, with $776.5 million in long-term debt against $5.67 billion in current assets. Given the strong returns Celestica has been able to deliver without going into unreasonable levels of debt and its ongoing investment in future growth, the business could fare well for the foreseeable future.
It’s important to keep in mind, however, that Celestica is still a highly valued stock operating in a rapidly shifting area of the tech world. This fact may expose CLS to significant volatility, especially as investors currently appear to be rethinking the valuations of some leading AI stocks. A prime example of this occurred in late January, when news that Google would be diversifying some of its TPU manufacturing to Taiwanese firms sent shares of Celestica down by about 8 percent.
Even with this risk of volatility, though, Celestica could be worth owning for the long run. The investments the business is making today could pay off significantly as the hyperscalers keep allocating capital to data center construction. In October, Celestica also issued an authorization for the buyback of up to 5 percent of its public float, indicating that management is looking for ways to use current cash flows to reward long-term shareholders.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.