Celestica (CLS): Engineering the Future of AI and EV Supply Chains for Long-Term Growth

In the race to redefine the global industrial landscape, Celestica (CLS) has emerged as a silent but formidable force. As artificial intelligence (AI) reshapes data centers and electric vehicles (EVs) dominate the energy transition, Celestica's strategic positioning in both sectors has created a rare convergence of demand, innovation, and profitability. For long-term investors, the company's ability to leverage sustainable industrial transformation, supply chain resilience, and high-growth markets makes it a compelling candidate to outperform the broader market over the next decade.

Strategic Contracts: Powering the AI and EV Revolutions

Celestica's recent wins in the AI and EV sectors underscore its role as a critical enabler of the digital and energy transitions. In 2025, the company secured two 1.6-terabit switching programs, part of its Connectivity & Cloud Solutions (CCS) segment, which now accounts for 70% of revenue. These contracts are not just about scale—they reflect a shift in computing demand. The ES1500 campus switch, for instance, delivers 220 Gbps speeds, outpacing legacy models by 2.5x, and aligns with hyperscalers' need for 800GbE infrastructure.

Meanwhile, Celestica's EV initiatives are equally transformative. The company has become a key player in energy storage systems, EV charging stations, and smart grid solutions. In 2024 alone, it enabled 6GW of renewable energy products through customer partnerships, with a 57.4% reduction in Scope 1 & 2 GHG emissions since 2018. This dual focus on AI and EV infrastructure positions Celestica to benefit from two of the most capital-intensive sectors in modern industry.

Operational Efficiency: Turning Growth into Profits

What sets Celestica apart is its ability to convert top-line growth into sustainable profitability. In Q2 2025, the company reported record-adjusted operating margins of 7.4%, a 120 basis point improvement from the prior year. This was driven by disciplined cost management, including a 54% increase in non-GAAP adjusted EPS to $1.39 and a 21% revenue surge to $2.89 billion—both exceeding guidance ranges.

Celestica's supply chain resilience is a cornerstone of its strategy. By localizing production for North American and Asian markets, it mitigates risks from trade policies like U.S. Section 232 tariffs. Tariff-related costs are largely recoverable from customers, ensuring minimal impact on margins. Additionally, the company's circular economy initiatives—such as remanufacturing IT hardware for hyperscalers—reduce waste while lowering total cost of ownership (TCO) for clients.

Earnings Surprises and Macroeconomic Tailwinds

Celestica's Q2 2025 results were a masterclass in execution. The company raised its full-year revenue guidance to $11.55 billion, up from $10.85 billion, and non-GAAP adjusted EPS to $5.50, reflecting confidence in sustained demand. This follows a 28% year-over-year increase in CCS revenue and a 99% surge in Hardware Platform Solutions revenue.

Macroeconomic tailwinds further bolster Celestica's momentum. AI and cloud computing are driving unprecedented capital expenditures, with hyperscalers investing heavily in data center infrastructure. Simultaneously, global EV adoption is accelerating, supported by government incentives and declining battery costs. Celestica's diversified client base—spanning AI, EVs, aerospace, and industrial markets—ensures it is not overly reliant on any single sector.

A Long-Term Investment Thesis

For investors, Celestica offers a rare combination of high-growth markets, operational discipline, and strategic foresight. Its alignment with open-source standards like SONiC ensures interoperability in an increasingly fragmented AI ecosystem. Meanwhile, its EV infrastructure projects align with the global shift to clean energy, a trend that will only intensify as carbon neutrality goals loom.

The company's recent earnings surprises—beating revenue and EPS estimates by double digits—highlight its ability to navigate macroeconomic volatility. With a raised full-year outlook and expanding margins, Celestica is well-positioned to deliver consistent returns over the long term.

Final Thoughts

Celestica is not just a supplier; it is a strategic architect of the future industrial economy. By mastering the intersection of AI, EVs, and supply chain innovation, the company has built a moat that is both scalable and defensible. For those seeking a long-term growth stock with a clear path to profitability, Celestica's blend of technical expertise, operational efficiency, and macroeconomic alignment makes it a standout pick.

In a world where the winners of the AI and EV revolutions will dominate the next decade, Celestica is not just riding the wave—it is creating the tide.