Celestica Soars on AI Demand, Unveils Aggressive $1B Capex Plan for Hyperscale Growth
Manufacturing Partner Rides AI Wave to Record Profits, Plans Major Expansion
Celestica Inc. (NYSE: CLS), a key manufacturing partner for technology giants, delivered a powerhouse finish to its fiscal year, with fourth-quarter results soaring past expectations. The company's performance, driven overwhelmingly by demand for artificial intelligence (AI) and cloud infrastructure, has prompted an aggressive and costly expansion plan to secure its position in the booming market.
The electronics manufacturing services provider reported Q4 revenue of $3.65 billion, a stunning 44% increase year-over-year. Adjusted earnings per share jumped 70% to $1.89, while the adjusted operating margin reached a company-record 7.7%. For the full year 2025, revenue hit $12.4 billion, with adjusted EPS at $6.05.
The engine of this growth is unequivocally the Connectivity & Cloud Solutions (CCS) segment, which saw quarterly revenue surge 64% to $2.86 billion, now constituting 78% of total sales. Management pointed directly to "hyperscaler" demand for networking and AI compute systems as the primary catalyst. In contrast, the Advanced Technology Solutions segment saw a slight 1% decline to $795 million, in line with expectations amid portfolio adjustments.
Betting Big on the Future: A $1 Billion Capex Gamble
The most significant revelation from the earnings call was a dramatic shift in capital strategy. Celestica announced plans to increase capital expenditures to approximately $1 billion in 2026—a figure representing about 6% of its revenue outlook and a fivefold increase from 2025 levels.
CFO Mandeep Chawla framed this massive investment as a direct response to "record bookings" and improved long-term visibility with major cloud customers. The build-out, which the company insists is based on "booked business," includes major expansions in Texas and Thailand. In Texas, Celestica is adding over 700,000 square feet of space across Richardson and a new Fort Worth site, slated for 2027. In Thailand, the plan involves over 1,000,000 square feet of new and upgraded facilities with advanced capabilities like liquid cooling manufacturing.
"We are increasingly viewed less as a supply chain partner and more as a technology leader," CEO Rob Mionis stated, indicating a strategic shift in how the company's hyperscaler clients perceive their role.
Raised Guidance and Long-Term Pipeline
Bolstered by this confidence, Celestica issued bullish new guidance. For Q1 2026, it projects revenue between $3.85 billion and $4.15 billion. More strikingly, the full-year 2026 outlook was raised to $17 billion in revenue and $8.75 in adjusted EPS, representing growth of 37% and 45%, respectively.
The company's technology pipeline appears robust. Management disclosed it has secured a design win for a 1.6-terabit networking switch with a third hyperscaler customer, with production expected in 2027. They noted about ten active 1.6T programs in development, with several anticipated to ramp up in late 2026. Mionis also highlighted the company's "stronger than ever" partnership with Google as a preferred manufacturer for its Tensor Processing Unit (TPU) systems.
While acknowledging "macro uncertainties," executives expressed high confidence, with customer visibility extending into 2027 and even 2028 for some programs. The company expects to fund its aggressive expansion entirely through operating cash flow, maintaining a free cash flow outlook of $500 million.
Market Voices: Analyst & Investor Reactions
Celestica Inc. is a multinational electronics manufacturing services (EMS) company headquartered in Toronto, Canada, providing end-to-end design, engineering, and supply chain solutions.
Priya Sharma, Technology Analyst at Horizon Capital: "Celestica's transformation is remarkable. They've successfully pivoted from a broad-based EMS player to a focused, mission-critical partner for AI infrastructure. The capex plan is substantial, but the 'booked business' rationale and the specific, detailed location plans suggest this is demand-driven, not speculative. The raised 2026 guidance seems conservative if their pipeline holds."
David Chen, Portfolio Manager: "The numbers are undeniably impressive, but the valuation now demands perfection. A $1 billion capex commitment is a huge bet on hyperscaler demand remaining red-hot for years. Any slowdown in AI investment or a shift in customer strategy could leave them with overcapacity. The margin expansion has been stellar, but can it continue with such a massive build-out?">
Marcus Johnson, Independent Investor: "This is a classic 'feast or famine' cycle play. They're pouring concrete and buying tools based on promises from a handful of mega-cap tech firms. What happens if one of those clients decides to in-source or switch vendors? The stock has had a huge run. This feels like the peak of the optimism, not the time to double down. That capex number is terrifying."
Rebecca Lee, Supply Chain Specialist: "The operational execution here is what's most compelling. To grow at this speed while expanding margins is exceptionally difficult in manufacturing. Their deep integration with Google's TPU program is a major moat. The geographic diversification of their expansion—Texas, Thailand, Mexico—also smartly de-risks their supply chain."