CLS raised its 2026 outlook as AI demand powers an aggressive 2027 ramp.
Celestica Inc. (CLS) turned its third-quarter earnings beat into a forward-looking growth event by raising its 2026 outlook and setting ambitious targets for 2027. The company is scaling rapidly as AI infrastructure spending lifts demand for networking, compute and storage products.
The opportunity is substantial, but so are the execution demands. Investors must weigh accelerating customer demand against heavier capital spending, rising inventories and the risks of building capacity around aggressive growth forecasts.
**CLS Q3 Beat Shows AI Infrastructure Demand Accelerating**
Celestica reported third-quarter 2026 adjusted earnings of $3.30 per share, topping the Zacks Consensus Estimate of $3.02 by 9.3%. Revenues rose 82.5% year over year to $5.83 billion, surpassing the consensus mark of $5.50 billion by 6%.
Connectivity & Cloud Solutions revenues increased 102% year over year to $4.87 billion. Within the segment, Compute & Storage revenues jumped 242%, while Networking revenues increased 68%, reflecting heavy investment in AI and data-center infrastructure.
The same spending cycle is attracting investment across the manufacturing ecosystem. Jabil Inc. (JBL) said fiscal 2026 growth benefited from AI infrastructure demand and brought additional capacity online. Flex Ltd. (FLEX) is expanding its Cloud and Power Infrastructure capabilities, including power-conversion technology aimed at AI data centers.
**Celestica Raises 2026 Revenue and Earnings Guidance**
Management increased its 2026 revenue outlook to $21 billion from $20.5 billion, citing the stronger third-quarter performance and expected demand improvement in the fourth quarter. Adjusted earnings guidance rose to $11.55 per share from $11.30.
Celestica kept its 2026 adjusted operating margin outlook at 8.4%. Holding that profitability target while lifting the revenue forecast suggests management expects the business to absorb higher volumes without giving up the margin progress achieved during the year.
**CLS Sets a $40 Billion Revenue Goal for 2027**
Celestica's initial 2027 outlook calls for $40 billion in revenues, adjusted earnings of $21.50 per share and a 9% adjusted operating margin. The revenue target implies approximately 90% growth from the company's updated 2026 outlook.
Management expects demand from hyperscalers and AI infrastructure customers to remain strong and said 2028 customer demand forecasts are meaningfully above the 2027 revenue outlook. That visibility supports the scale of the planned expansion, but it also raises the importance of converting customer forecasts into timely deployments.
**Celestica's Expansion Plan Raises Execution Demands**
The 2027 plan requires substantial investment. Celestica expects capital expenditures of $1.5 billion to $2 billion next year as it adds capacity to support projected multi-year demand.
Working-capital needs are already rising. Inventory reached $4.51 billion at Sept. 30, 2026, up from $2.19 billion at year-end 2025. Celestica also reduced its 2026 free cash flow outlook to $460 million from $600 million, primarily because of targeted working-capital investments for 2027 growth. Any change in deployment schedules or customer demand could therefore affect cash generation and capacity utilization.
**CLS Signals Reinforce the Growth Case**
The latest outlook strengthens the growth narrative, but the investment case still depends on execution. Celestica must deliver a large capacity ramp while protecting margins and translating higher earnings into cash flow.
CLS currently carries a Zacks Rank #2 (Buy) and a VGM Score of A. Its Growth Score of A and Momentum Score of A support a favorable growth and earnings-revision profile, while its Value Score of C keeps valuation discipline relevant. The combination favors the stock's growth and momentum characteristics, though the scale of the 2027 ramp leaves little room for operational slippage.
This article originally published on Zacks Investment Research (zacks.com).