Celestica's AI Ramp Goes Vertical, But the Market Looks Past It
Record Q2, 2027 acceleration, and a new OpenAI win—yet the stock sits 37% off its high.
CLS · Earnings Call · 2026-07-28
The Ramp Accelerates
Celestica has become the quiet powerhouse of AI infrastructure. In its second quarter of 2026, the company reported revenue of $4.7 billion, up 62% year-over-year, and adjusted EPS of $2.54, up 83%. Both figures came in above the high end of guidance, and the company once again raised its full-year outlook: revenue now expected to reach $20.5 billion (65% growth) and adjusted EPS of $11.30. Management attributes the strength to 'sustained and accelerating momentum across our portfolio,' with 800G networking switches and AI/ML compute programs leading the way.
But the more striking news came in the prepared remarks when CEO Rob Mionis revealed the name of the previously anonymous digital native customer.
Later this year, we expect to commence initial deliveries of custom racks for our digital native customer whom we are pleased to share is OpenAI.
This confirms a major design win that will scale into 2027 and beyond. OpenAI is a brand-new keyword for Celestica, appearing for the first time in the company's keyword trajectory this quarter. It's a strategic pivot from being a mere supplier to being a key systems partner in the custom silicon ecosystem. The company also touted the AMD Helios scale-up switch as a multibillion-dollar opportunity. AMD Helios is another fresh entry, indicating a deepening of the scale-up fabric opportunity.
The 2027 Acceleration
The company's outlook for 2027 is what caught investor attention. Management guided for revenue growth to accelerate beyond the 65% expected this year. When asked what changed, Rob Mionis noted, “So just some 90 days ago, our AI/ML compute demand has significantly increased for 2026 and also leading into 2027.” — Robert Mionis, Chair of the Board and Chief Executive Officer · 2026-07-28 Meanwhile, CFO Mandeep Chawla reinforced the durability: “we're going to see accelerated growth in HPS, the ramping of network switches, which are primarily in HPS. And that definitely helps us.” — Mandeep Chawla, Chief Financial Officer · 2026-07-28 The company now has 10 active 1.6T programs, with mass production starting for two hyperscaler customers in Q3. Mass production of the next-generation switch is a key driver.
This is a dramatic step up from the prior quarter's messaging. On the April call, Mandeep had already hinted at the size of 2027: “we think we're going to grow significantly more than that, which means the floor would be somewhere around [ 25.5 ]” — Mandeep Chawla, Chief Financial Officer · 2026-04-28. Now the company is even more confident. The fundamental trend supports this: Total Revenue is up 53% year-over-year as of the most recent filing, and the company is guiding to 65% growth in 2026. The margin story is also intact; adjusted operating margin hit 8.2% in Q2, a record.
The Stock's Disconnect
Yet the stock tells a different story. Celestica's shares are down 15.6% over the last 90 days and sit 37% below the June peak. This is a classic case of 'buy the rumor, sell the news' — expectations have run so far ahead that even a record raise isn't enough. The tape shows a steady decline since early June, with no meaningful bounce. Investors may be concerned about component supply constraints. Chairman Rob Mionis acknowledged that “demand across the AI data center infrastructure continues to outpace the global component supply” — Robert Mionis, Chair of the Board and Chief Executive Officer · 2026-07-28, but he stressed that the company is 'appropriately hedged' for 2026 and 2027.
The market's skepticism stands in contrast to the operational momentum. The company raised its free cash flow outlook to $600 million, and its balance sheet remains strong. The real question is whether the massive order book can translate into sustained profitability. The company is investing about $1 billion in capex this year to support the ramp, which is a necessary cost of doing business in this hyper-growth phase. Management reiterated its confidence in margin expansion, with gross margin expected to hold around mid-11s. In the prior quarter, Rob had mentioned a prior win: “We actually believe it's the first major production scale deployment of co-packaged optics using Broadcom Tomahawk [ 6 Davidson ] module.” — Robert Mionis, President and Chief Executive Officer · 2026-04-28 That kind of technology leadership is what underpins the current share gains. Yet the stock's reaction suggests the market is looking for even more—or worries that the supply chain can't keep up. AI compute is a hot theme, but the market may be waiting for evidence that Celestica can convert its design wins into durable margins and cash flows.