Buoyed by a holistic growth model, Celestica Inc. CLS stock has witnessed more than a two-fold upsurge over the past six months compared with the industry, with respective growths of 147.3% and 67.4%. The stock has also outperformed peers like Flex Ltd. FLEX and Jabil Inc. JBL over this period. 

Boasting more than two decades of manufacturing experience, Celestica is among the lesser-known winners of the AI (artificial intelligence) revolution. Supported by a simplified global network, the company is committed to delivering next-generation, cloud-optimized data storage and industry-leading networking solutions to help customers balance performance, power efficiency and space as technologies evolve.

Six-Month CLS Stock Price Performance

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CLS’ Key Growth Drivers

Celestia had primarily been a beneficiary of the ongoing generative AI boom, thanks to the solid demand trends for AI/ML compute and networking products from hyperscale customers. In addition to the high-performance 800G family of network switches (which are vital for data centers that power AI applications) and storage solutions like the SC6100 controller and SD6200 platform (which provide efficient and scalable data storage for AI), Celestia offers Photonic Fabric – an optical compute and memory fabric solution capable of supercharging AI infrastructure. This transformational solution provides a foundational technology to advance AI while maintaining scalable, sustainable and profitable business models.

By integrating next-generation networking products with silicon photonics packaging solutions, Celestica aims to optimize supply chain solutions to reduce time to market. The data center switches combined with optical transceivers have the potential to handle and sustain high volumes of both inbound and outbound network traffic and cater to the demand for data center bandwidth for supporting AI/ML and data analytics applications. Innovative portfolio additions at steady intervals have been the hallmark of the company, which have helped it to record healthy top-line growth over the past few years.

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CLS Aims for Economies of Scale

With the proliferation of AI-based applications and generative AI tools, business enterprises are increasingly forced to scale future computing platforms to address the burgeoning AI workloads with low-power, high-bandwidth data transfer. This, in turn, is leading to an exponential growth in I/O bandwidth.

To strengthen its market-leading position of AI-enabled products, Celestia is currently developing more than 100,000 square feet of additional capacity in Thailand. Moreover, it is adding 80,000 square feet of incremental capacity in Malaysia to augment its production capabilities. Celestia is also working with industry leaders to commercialize technologies such as On-Board Optics and Co-Packaged Optics to address the demand for speed and cost-efficiency amid the evolving technology landscape.

CLS Offers Bullish Outlook

Celestia recorded solid fourth-quarter 2024 results with all-time high adjusted earnings of $1.11 per share on revenues of $2.55 billion (up 19% year over year). For 2024, the company’s revenues grew 21% year over year to $9.65 billion on robust demand trends, while adjusted earnings rose 58% to $3.88 per share. 

With strong quarterly results, CLS expects 2025 revenues to be about $10.7 billion, up from the previous projection of $10.4 billion. Non-GAAP operating margin is expected to be 6.9%, up from the prior outlook of 6.7%. Non-GAAP adjusted earnings are expected to be $4.75 per share, up from the previous outlook of $4.42. Adjusted free cash flow is expected to be $350 million, up from the prior outlook of $325 million.

Estimate Revision Trend

Earnings estimates for Celestia for 2025 have moved up 42.2% to $3.65 over the past year. The positive estimate revision depicts optimism about the stock’s growth potential.  

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End Note

As the company scales up production volumes and costs go down, possible uses for silicon photonics are likely to soar across several industries, including automotive, data center and high-performance computing, telecommunications, medical, aerospace and defense. We believe that Celestia is well poised for sustained growth over the years, backed by its robust infrastructure investments, solid technology know-how and wide industry experience spanning three decades.

The stock delivered a trailing four-quarter average earnings surprise of 10.3%. It has a VGM Score of B. Celestia currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.. 

Riding on a robust earnings surprise history and favorable Zacks Rank, it appears primed for further stock price appreciation. Consequently, investors are likely to profit if they bet on this high-flying stock now.

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