Celestica Reports Record Margins, Driven by AI Hardware Demand
Celestica, a Canadian original design manufacturing (ODM) company, has reported record adjusted operating margins of 7.4% this quarter. The company, which works with tech firms to design, build, and assemble ace hardware, expects margins to continue rising. Management is confident it will outperform the consensus analyst estimate of $5.57 for 2025 earnings, with a guidance of $5.50.
Celestica's growth is primarily driven by the demand for AI-related hardware. The Connectivity & Cloud Solutions (CCS) segment, which focuses on communications and enterprise ace hardware for data centers, has grown faster than the Advanced Technology Solutions (ATS) segment, representing 68% of revenue and 79% of earnings. Notably, Celestica achieved record sales for its 800G switches with major telecommunications and data center companies.
The company has benefited from the boom in AI data centers due to its advantageous global footprint. It has been diligent in share buybacks, and its margins are still improving, with CCS margins at around 8.3%. Celestica trades at a high 45x forward earnings multiple, with consensus EPS estimates of $5.57 for 2025, $6.87 for 2026, $8.11 for 2027, and $13.57 for 2028.
Celestica's strong performance is underpinned by its focus on AI-related ace hardware and its global footprint. With expanding margins, particularly in the higher-margin CCS segment, the company is well-positioned for future growth. Despite its high valuation, management's confidence in outperforming analyst estimates suggests a positive outlook for Celestica.
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