When AI Needs a Backbone: How Celestica Became the Power Supply to the Future
Celestica Inc. was a sturdy but unassuming cog in the global tech machine. Today, it’s the high-voltage wire humming at the center of the AI revolution—its stock up 168.7% in just half a year, and a jaw-dropping 245.5% over twelve months. What flipped the switch?
Wires, Racks, and Revenues: The Anatomy of a Runaway Rally
Celestica’s transformation didn’t happen in a vacuum—it rode a surge in global AI data center buildouts and hyperscaler spending. As Big Tech’s appetite for AI servers and ultrafast ethernet switching turned ravenous, Celestica’s factory lines delivered. Q3 2025 revenue leapt to $3.19 billion, up 28% year-over-year. The star: its Connectivity & Cloud Solutions (CCS) segment, where revenue soared 43% to $2.41 billion, powered by 1.6T switch programs and AI-optimized server racks.
Margins didn’t just tag along—they expanded. Adjusted operating margin reached a record 7.4%, and non-GAAP adjusted EPS spiked 52% to $1.58 in Q3. Return on equity? A muscular 36.2% over the trailing twelve months, nearly tripling since 2023. This wasn’t just growth; it was profitable, capital-efficient growth. Cash from operations hit $152.4 million in Q2, with free cash flow up 83% year-over-year at $119.9 million.
Silicon, Sanctions, and the Great Global Shuffle
Celestica’s meteoric rise is inseparable from the world’s shifting economic tectonics. As US-China tensions rerouted supply chains, Celestica’s regionalized manufacturing footprint in North America and Asia became a strategic moat. With tariffs and sanctions forcing hyperscalers to diversify away from China, the company scooped up contracts others couldn’t fulfill as nimbly. This agility, coupled with investments in 800GbE and full-rack AI infrastructure, meant Celestica was first in line for hyperscale dollars—and unburdened by single-region risk.
The Quiet Revolution: Original Design, Bold Results
Once pigeonholed as a contract manufacturer, Celestica has stealthily reinvented itself as an Original Design Manufacturer (ODM), capturing more value from the booming AI hardware stack. The CCS segment, now 70% of revenues, saw its Hardware Platform Solutions arm post an 82% revenue jump to $1.2 billion in Q2 alone. And the company wasn’t content to bask in yesterday’s wins—Celestica launched the DS4100, an 800G data center switch, in October, targeting precisely the AI/ML workloads driving industry capex.
Competitors in the Rearview Mirror
Jabil and Flex, Celestica’s traditional rivals, have solid growth stories—but neither matched Celestica’s velocity or margin expansion. With a trailing P/E of 16.3, Celestica even trades at a discount to faster-growing peers, despite its outsized momentum. Analysts have noticed: upgrades and price target hikes abound, with some seeing room to $565.81 per share.
Risks Lurking in the Server Room
Yet even the most robust power supply can short-circuit. Celestica’s dependency on a handful of hyperscale clients leaves it exposed to any AI capex slowdown—a risk not lost on management, whose guidance, while bullish ($12.2 billion revenue and $5.90 EPS for 2025, $16.0 billion and $8.20 EPS for 2026), remains measured. Tariffs, trade wars, and supply chain snarls could squeeze margins overnight. But for now, the company’s diversified manufacturing and capital discipline (including a new share buyback program) provide ballast.
The Macro Theme: AI’s Gold Rush Needs Shovels, Not Just Dreams
The semiconductors and servers might grab headlines, but it’s the companies building the racks, switches, and power supplies—the shovels of this gold rush—that are quietly minting fortunes. Celestica, once the backstage crew, is now center stage. The global semiconductor market is set to hit $1 trillion by 2030; hyperscaler capex is forecast to jump 40% in 2026. Celestica is already cashing these checks, not just waiting for them.
In the story of AI, not every hero writes code. Some build the backbone. And for six months and counting, Celestica has been the quiet giant carrying the world’s data dreams on its shoulders—one switch, one server, one quarter at a time.