Celestica Inc. (CLS): Institutional Backing and Revenue Surge Position It for 2025 Outperformance

Celestica Inc. (TSE:CLS) has emerged as a compelling investment opportunity in 2025, fueled by robust institutional backing and a financial turnaround that positions the company for sustained growth. With a 67.38% institutional ownership stake—the highest in its sector—Celestica benefits from stabilizing influence and strategic alignment with major investors. Pair this with a 22% year-over-year revenue surge in Q3 2024 and an upgraded 2025 revenue outlook of $10.85 billion, and the case for Celestica's outperformance grows stronger. Let's dissect the drivers behind this momentum and why now is the time to act.

Institutional Ownership: Stability and Strategic Influence

Celestica's institutional ownership of 67.38% (as of May 2025) is a testament to investor confidence. Major holders like FMR LLC (11.7 million shares) and Whale Rock Capital Management LLC (over $432 million invested) have consistently added to their stakes, with institutions net buying $78 million worth of shares over the past two years. This level of ownership not only reduces volatility but also grants institutional investors significant sway over corporate strategy and governance.

The dispersed nature of ownership—44% held by the top 25 shareholders—mitigates concentration risks, ensuring no single entity dominates decisions. Meanwhile, the stock's 95.68% year-to-date return (as of May 2025) underscores market validation of this institutional trust.

Financial Performance: From Strong to Stronger

Celestica's Q3 2024 results marked a turning point. Revenue hit $2.50 billion, a 22% jump from Q3 2023, driven by its Connectivity & Cloud Solutions (CCS) segment, which grew 42% on stronger demand for AI servers and hyperscaler infrastructure. This segment's margin expanded to 7.6%, outpacing the prior-year's 6.2%, while non-IFRS operating margins rose to 6.7%—a 1.0% improvement year-over-year.

The company's Q4 2024 guidance and full-year 2025 outlook reflect this momentum. Celestica now projects $10.85 billion in 2025 revenue (up from $10.40 billion) and a 7.2% non-IFRS operating margin, supported by:
- A strategic partnership with Groq, Inc. to manufacture AI server racks, ramping in early 2025.
- A $1.6 Terabyte switching program win with a hyperscaler, set to contribute from 2026.
- A $350 million free cash flow target for 2025, up 8% from 2024.

Strategic Advantages in a High-Growth Market

Celestica's focus on AI, cloud computing, and advanced networking aligns with secular trends driving enterprise IT spending. Its Hardware Platform Solutions division, part of CCS, saw a staggering 99% revenue surge in Q1 2025 compared to 2024, signaling accelerating demand. This segment's 8.0% margin in Q1 2025 further highlights operational leverage.

The company's Normal Course Issuer Bid (NCIB)—allowing up to 10% of its public float to be repurchased—adds a tailwind, while its transition to U.S. GAAP reporting (effective 2025) enhances transparency for global investors.

Risks and Considerations

No investment is without risks. Celestica's Advanced Technology Solutions (ATS) segment posted a 5% revenue decline in Q3 2024, though margins held steady. Management attributes this to sector-specific headwinds, which may persist. Additionally, tariffs and trade restrictions could impact margins, though Celestica has stated it will recover these costs from customers.

The $1.50 billion institutional buying activity over two years highlights confidence in Celestica's ability to navigate these challenges. However, investors should monitor macroeconomic conditions and competitive pressures, particularly from peers like Flex Ltd. and Amphenol Corp.

Why Act Now?

Celestica's 95.68% stock price surge year-to-date (May 2025) reflects market anticipation of its growth trajectory. With institutional ownership stabilizing the stock and Q1 2025 results exceeding guidance, the company is primed to capitalize on its strategic wins.

Final Analysis

Celestica's combination of sector-leading institutional support, operational execution, and high-growth market exposure makes it a standout play in 2025. While risks like ATS volatility and trade policies linger, the stock's valuation and track record suggest these are manageable. With a revised 2025 revenue target of $10.85 billion and a 7.2% margin, the path to outperformance is clear.

For investors seeking exposure to AI and cloud infrastructure's next wave, Celestica's stock offers both stability and upside—a rare and compelling mix. Act swiftly: with institutions already doubling down, the window for entry at current valuations may narrow.

Data as of May 26, 2025. Past performance does not guarantee future results.