CLS is becoming a scaled AI infrastructure partner, with awarded programs supporting growth well above current expectations and potential to re-rate.
The growth opportunity is real, but weak cash conversion, margin pressure, and execution demands could dilute returns and cap the multiple.
The company provided a strong FY27 outlook that significantly exceeded street expectations, helping to alleviate concerns regarding TPU share loss.
The company's stock saw decent price action after providing a better FY27/FY28 guide and reporting that its top customer's growth undercut the bear narrative of TPU share loss.
CFO demand forecasts based on awarded programs are significantly higher than the company's 2027 revenue outlook, with new wins including full racks for OpenAI's Jalapeño ASIC.
CLS +12% with decent price action after a better FY27/FY28 guide (even though ‘27 FCF guide negative) and saying its top customer (believed to be GOOGL) grew 35% q/q which undercut the TPU share loss narrative bears have been talking about heading into the...
Adjusted gross margins missed expectations, and the company reduced its FY26 free cash flow guidance to fund working capital requirements.
The company's FY27 free cash flow guidance is negative.
JPM expects Investor Day to reinforce a materially above-Street growth path, with 2027 revenue of approximately $38.9B, an 80% year-over-year increase, driven by compute/ASIC programs and networking.
2027 EPS of $21.30 is also above the Street's $19.88.
Despite a projected fall in gross margin due to lower-margin compute growth, opex leverage should still expand operating margin to approximately 8.8%.
At approximately 10x CY28 EPS, JPM sees substantial re-rating potential if 2027 proves to be the investment trough.
CLS: JPM sees 2027 revenue +80% y/y vs. Street +73%, but FCF/funding is the key swing factor
Working capital and approximately $1.8B in CapEx are expected to drive JPM to approximately -$3B FCF in 2027, making FCF recovery and any 2028 capital raise the key debate.
JPM sees networking as an increasingly critical gating factor in AI data center infrastructure, which favors Celestica alongside other compute and foundry beneficiaries.
The analyst sees ~$25B from new AI programs, with ’27 revenue/EPS materially above Street estimates, including ~$8B incremental Google TPU, ~$11.5B Jalapeno, and ~$6B from 1.6T switching/AMD Helios.
Even after heavily haircutting execution risk, the analyst models $40.0B revenue/$23.79 EPS versus Street estimates of $35.7B/$19.87, with company growth expected to accelerate from +65% in 2026.
The analyst sees positive risk/reward into the 10/27 analyst day.
Key risks include Jalapeno manufacturing/ramp and Tomahawk 6 timing.
The stock recovered some of its previous day's losses, benefiting from positive sentiment in the contract manufacturing sector.
The company is expected to see material revenue and EPS growth driven by Google TPU and OpenAI Jalapeno demand.
EMS peers were lower too (FLEX -3.4%; CLS -1.4%).
The stock is showing nice follow-through from a UBS upgrade.
UBS upgraded the stock to Buy and raised its price target to $430 from $410, citing three AI-driven growth levers.
Scale-out and scale-up switching demand, including AMD Helios from Google, Amazon, and Meta, is expected to drive approximately 40% three-year CAGR in Communications.
Custom ASIC programs tied to hyperscalers like Google and OpenAI are projected to drive Enterprise revenue growth of approximately 127% in CY27 and a 52% CAGR over the next three years.
Despite gross margins remaining around the mid-11% range, operating leverage is expected to increase operating margins to approximately 8.8% by CY28 from approximately 8.4% in CY26.
UBS believes the stronger growth profile and margin expansion justify a higher approximately 20x multiple and an upgrade to Buy, despite EPS dilution from a recent equity raise.
EPS was lowered due to dilution from a recent equity raise.
Scotiabank resumed coverage at Outperform with a $500 price target, citing Celestica's differentiated exposure to AI infrastructure as a co-design partner rather than a traditional contract manufacturer.
Scotiabank highlights Celestica's growing position in Ethernet-based AI fabrics, hyperscaler networking, and custom-compute systems, which should allow the company to capture more value as AI architectures scale.
The higher-value engineering content supports a stronger growth and margin profile than traditional EMS peers.
The stock declined despite Scotia initiating coverage with a buy rating, suggesting other negative factors outweighed the positive initiation.
A secondary offering of 9.7 million shares was priced at $310.
The stock declined after pricing a 9 million-plus share secondary offering.
The company reported solid Q2 results with a beat and raise above buyside expectations, driven by improved component supply and increased visibility from new program wins and customer demand.
The company expects revenue growth in 2027 to accelerate beyond the 65% growth rate anticipated in 2026, and adjusted EPS to grow at a faster rate than revenue due to higher expected adjusted operating margin.
The company holds approximately 55% share of the ODM networking market, with customer order visibility extending nearly three years, up from one year historically.
Additional upside is possible if Ethernet scale-up deployments accelerate, given the company's strong position in high-speed switching infrastructure.
Management expects operating margins to expand by approximately 60bps in 2026 with further SG&A leverage in 2027, despite gross margin pressure from enterprise mix and higher silicon costs.
The investment cycle, including a ~$1B CapEx ramp, is viewed as increasingly credible given improving customer visibility, even though free cash flow will lag earnings growth near term.
JPM came away constructive following meetings with CLS management, highlighting roughly 55% share of the ODM networking market and customer order visibility that now extends nearly three years versus about one year historically. The firm sees additional ups...
Gross margins face pressure from enterprise mix and higher Tomahawk 6 silicon costs.
Free cash flow will lag earnings growth near term due to a ~$1B CapEx ramp.
CLS: JPM Says Networking Visibility Extends to Three Years, Sees Margin Expansion Despite Near-Term Headwinds
The company's stock outperformed due to the $80 billion Google raise, which positively impacted the TPU supply chain.
The stock was among some of the weaker names.
JPM argues that networking is increasingly becoming the key bottleneck and performance gating factor for AI infrastructure, leading it to favor networking names over pure compute exposure.
The company was noted as not hitting new highs along with the broader index, despite being an AI semi beta name that led earlier rallies.
The stock reversed lower, breaking back below its 20-day moving average and earnings gaps after a miss last week.
The stock, despite a miss, was bought up by investors, indicating underlying confidence.
Charts are being bought aggressively on any mini-pull back (AVGO, LITE, AMD), plenty of names breaking out to new highs, beats are following through to the upside (NOK, STX, QCOM, WDC, TXN, VRT, INTC), and misses are being bought up (CLS, TER, GLW, ON, AMZN...
Rothschild Redburn initiated coverage with a Buy rating and a price target of $460, citing over 50% revenue growth driven by customized Ethernet switching and increased hyperscaler capital expenditures in FY2026.
The firm anticipates significant market share gains in the ESUN switching market due to the adoption of Broadcom Tomahawk Ultra silicon and an expected ramp-up with AI customers in early 2027.
The company delivered better EPS and operating margins, and provided a much stronger FY26/FY27 demand outlook.
The Q2 guidance was above Street expectations for both revenue and adjusted EPS.
The FY26 revenue guidance was significantly raised to $19.0B, and adjusted EPS guidance moved to $10.15.
The company expects 2027 revenue growth to be 'significantly more' than the implied $6.5B+ for 2026, suggesting FY27 revenue above $25.5B.
A new 1.6T co-packaged optics switch award with a hyperscaler, expected to ramp in 2027, was disclosed, adding to previously announced AI rack/networking opportunities.
Despite appearing 'ok,' the revenue and FY guide were in-line or slightly below very high buy-side expectations.
A lot of this does seem backward looking and before OAI pivoted to enterprise and the Codex ramp, but with Oil +5% encouraging a risk off morning, semis having had a huge run MTD, froth reading near highs, along with some weaker earnings from RMBS/CLS, all...
BofA reiterated a Buy rating and raised its price target, positioning the company for accelerating revenue and margin expansion driven by AI networking demand and strength in white-box switching.
The firm highlights additional upside from custom ASIC server demand and new digital-native customer ramps, alongside capacity expansion supporting growth.
Susquehanna initiated coverage with a Positive rating.
The company pointed to a multi-billion dollar total addressable market tied to AMD Helios, with limited near-term CPO impact.
The stock experienced weakness, consistent with the broader GOOGL complex.
The stock experienced weakness along with other optical names.
BofA initiated coverage with a Buy rating and a $400 price objective, citing strong revenue and EPS upside compared to Street expectations, as the company maintains leadership in white-box switching and scales its custom ASIC server business.
The firm anticipates 2027 to be a breakout year, with digital-native customers ramping up and multiple new programs driving share gains across 400G/800G/1.6T switching and AI-accelerated platforms.
The price target is based on 32x CY27E EPS of $12.36, with upside supported by engineering-led margin expansion and continued AI infrastructure demand.
The company benefits from Google's expanding TPU supply chain and accelerating network demand, which offsets risks from ODM rebalancing.
Celestica remains a key supplier for Google's TPU L6 and rack-level systems, and Meta's Iris pause implies CoWoS capacity shifting towards Google, increasing TPU contribution.
Sustained 800G growth and a 1.6T ramp into 2026 in networking support margin and EPS upside due to higher switch profitability.
Celestica is a key beneficiary of rising AI data center buildouts, leveraging its engineering depth to capture market share.
Strong projected revenue and EPS growth driven by its expanding high-margin ODM server business.
Post-close a strong set of results from AMKR +6%, CLS +119 and CDNS +7% WEE, AMKR Eik 6%, CLS Eik 11%, LXI CDNS Eik 7% AMKR beat and raised and guided Q3 to $1.925B vs $1.76B CDNS posted a huge beat on stronger than expected growth and margins and raised FY...
NVDA +1.9% JT MS Asia analyst outjust now saying Wistron seeing ~7% raise to their GBZOO rack orders TSM -1% likely on the SamsungITSLA foundry deal although we think that says more about TSM being supply constrained than any mfg advantage Sammy might have...
Research through 2026-10-27 · 2025-07-28 to 2026-10-27 · 31 source reports.
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Research through 2026-11-03. Artifact validity does not establish factual accuracy or research freshness.