Celestica Inc. CLS-T overtook CGI Inc. GIB-A-T as Canada’s third most valuable technology company Tuesday as its stock shot up after reporting the latest in a string of better-than-expected financial results.
Stock in the Toronto-based global manufacturing giant closed up 16.9 per cent at $278.36 on the Toronto Stock Exchange after it reported significantly higher revenue and profits than expected in the second quarter ended June 30.
Celestica continued to benefit from surging demand for its network switching products from tech giants engaged in a global arms race to build giant artificial intelligence-driven data centres.
The company ended the day with a market capitalization of $32.8-billion, edging ahead of Montreal-based technology services giant CGI at $30.9-billion. Celestica stock has now more than doubled in value this year and is up 18-fold since the end of 2022.
Celestica reported Monday after the market close that it generated US$2.89-billion of revenue in the second quarter, up 21 per cent from the same period a year earlier. It also reported adjusted earnings of US$1.39 a share, up 54 per cent, and net earnings of US$1.82 a share, up 128 per cent.
Those results were significantly above analyst expectations and the company’s own forecasts. It had predicted revenue about $200-million lower than reported for the quarter.
The company also raised its guidance for the rest of the year, forecasting revenue of US$11.55-billion (up US$700-million from its April forecast) and adjusted earnings per share of US$5.50, up from its prior US$5 forecast.
It was the eighth time within the past three years that Celestica had increased its guidance.
“This is a company that has very much underpromised and overdelivered,” said BMO Capital Markets analyst Thanos Moschopoulos in an interview.
The company’s adjusted operating margin reached an all-time high of 7.4 per cent of revenues, 20 basis points above its forecast.
“Demand for our networking products is very robust as these customers continue to significantly invest in their data centre infrastructure,” Celestica CEO Rob Mionis said on a conference call with analysts Tuesday.
“We believe we are positioned to continue to excel and to sustain this positive momentum into 2026 and over the long term.”
Celestica, which supplies networking switching equipment to data centres and server farms that provide the computing power for AI models, has been on a tear since 2022 when OpenAI launched ChatGPT and kicked off the generative AI revolution.
The Canadian company is a key supplier to tech giant “hyperscalers” including Google GOOGL-Q, Meta Platforms META-Q and Amazon.com Inc. AMZN-Q
They have heavily upgraded computing capacity for AI development and are accelerating plans to do more. Google said last week it would make US$85-billion of capital expenditures this year, US$10-billion higher than previously forecast.
Revenue from the Celestica segment that supplies the AI boom increased by 28 per cent in the quarter to US$2.07-billion, accounting for 71.6 per cent of total company revenues. Within that segment, revenues from its switching equipment soared by 75 per cent, well above the company’s guidance.
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Celestica’s ascendance is reminiscent of a quarter-century ago when Onex Corp. ONEX-T bought the former IBM division and spun out into a public company as dot-com mania heated up. (Onex sold out of its position in 2023, before most of the stock’s current run.)
Celestica’s stock soared during the dot-com boom as it supplied fibre-optic cables and other equipment used to build out the internet.
But its shares crashed when the stock market bubble burst and remained in investor purgatory for two decades.
Mr. Mionis arrived in 2015 after the company had experienced years of losses, job cuts and shareholder lawsuits. The American-born private equity and aerospace industry veteran shifted Celestica’s orientation, moving it away from manufacturing low-margin products and competing on price to building more complex equipment that required engineering expertise.
It improved its mix of customer segments with higher margin products in aerospace and defence, renewable energy, electric-vehicle chargers and medical devices.
But the company’s coup was landing a lead position servicing tech giants as they built out data centres. Those relationships, forged before ChatGPT’s arrival, put the company in position to take off with the arrival of the generative AI wave that is now rapidly transforming the global economy, Mr. Mionis said in a 2023 interview.
The company has also invested heavily in research and development and now derives 43 per cent of revenues from products it designs itself, which has enabled it to shift from being a commoditized manufacturer to a supplier of proprietary products.
“That is driving margin expansion and share gains,” Mr. Moschopoulos said.
Now, the company’s shares trade above its peers and at the high end of their 10-year range, and it is likely to maintain its premium valuation, RBC Capital Markets analyst Paul Treiber wrote last week.