Shares of Celestica Inc. (NYSE: CLS) declined in after-hours trading on Monday, even as the Canadian electronics manufacturing services company reported better-than-expected first-quarter results and lifted its full-year guidance. The stock, which had surged nearly 50% in April, closed at a record high of $422.21 before slipping in extended trading, suggesting that investors were taking profits after an already strong run.
The Toronto-based company posted Q1 revenue of $4.05 billion, a 53% year-over-year increase, driven by surging demand for data center infrastructure and AI-related hardware. Adjusted earnings per share came in at $2.16, topping analyst expectations and representing roughly 80% growth from the prior-year period. The company also raised its 2026 revenue forecast to $19 billion, up from a prior $17 billion, and lifted its adjusted EPS target to $10.15 from $8.75.
Data Center Strength Powers Results
Celestica's Connectivity and Cloud Solutions (CCS) segment, which includes communications equipment, enterprise servers, and storage, saw revenue jump 76% to $3.24 billion. Within that, Hardware Platform Solutions, encompassing custom cloud and AI hardware, climbed 63% to approximately $1.7 billion. The Advanced Technology Solutions (ATS) unit reported roughly flat revenue of $810 million, though its operating margin improved to 6.0% from 5.0% a year earlier.
Chief Executive Rob Mionis highlighted the company's adjusted operating margin of 8.0% as a new milestone, noting accelerating growth in the CCS division. The company guided for second-quarter revenue in the range of $4.15 billion to $4.45 billion and adjusted EPS between $2.14 and $2.34.
Market Context and Profit-Taking
The after-hours pullback came as Celestica's results were released amid a busy week for tech earnings from major hyperscalers including Apple, Amazon, Microsoft, Alphabet, and Meta. Investors are closely watching capital expenditure levels and the return on AI investments from these key customers. Steven Cress, head of quantitative strategy at Seeking Alpha, had noted ahead of the report that capital outlays and AI returns would be a central focus as five of the "Magnificent 7" report earnings.
Celestica's lofty valuation also set a high bar. With trailing and forward price-to-earnings ratios of 56.02 and 44.64, respectively, the stock had already priced in significant growth. A beat-and-raise quarter, while strong, was not enough to sustain the upward momentum.
New Growth Catalyst for 2027
Celestica announced a major new program: a co-packaged optics Ethernet switch for a hyperscaler customer. The 1.6-terabit initiative, which integrates optical connections directly onto switching chips to boost data transfer speeds and reduce power consumption in AI networks, is scheduled to begin scaling production in 2027. This adds a longer-term growth driver to the company's pipeline.
Competitive Landscape and Risks
Celestica is not alone in capitalizing on the AI infrastructure boom. Competitor Sanmina Corporation also reported strong results on Monday, with revenue doubling to $4.01 billion, driven by its ZT Systems acquisition and momentum in AI-focused hardware. The space remains competitive, with more players entering the market.
Celestica's risk factors include potential shifts in customer capacity plans, concentration among a few large clients, ongoing supply chain bottlenecks, and trade barriers. The company also flagged data center power and water constraints, as well as competition from lower-cost or open-source AI models. Options traders had anticipated a significant move, with contracts pricing in a swing of about 9.8% after earnings, per TheFly.
Management will discuss the results on an 8 a.m. Eastern conference call Tuesday. The key question for investors is no longer whether AI demand exists, but how long Celestica can sustain margin expansion, cash flow generation, and production growth without sacrificing pricing power.
