Under CEO Rob Myonis, Celisica has not been around for years. It's a story of growth.Fred Lamb/Globe and Mail
Celestica Inc. CLS-T continued in the second quarter to benefit from a surge in demand that it engaged in the global arms race to build a massive artificial intelligence-driven data center and engaged in a global arm race that exceeded market expectations.
The Toronto-based global manufacturing giant reported that it generated revenue of US$28.9 billion in the quarter ended June 30 after the market closed on Monday, up 21% from the same period last year. It also reported adjusted earnings of USD 1.39 per share, an increase of 54 per cent, USD 1.82 per share, and 128 per cent.
Celesta's US listed stock jumped more than 10% in off-market trading on Monday after the stock closed at a record high of $238.07 on the Toronto Stock Exchange. The stock has been highly valued at nearly 80% this year, and has grown more than 15 times since the end of 2022, offering a market capitalization of nearly $27 billion. This makes Celesta the fourth most valuable technology company on the Toronto Stock Exchange.
Celesta has entered a quarter that is expected to beat the forecast growth from April, as well as beat the revenue and adjusted revenue estimates for each of the last four quarters before entering a quarter that is expected to beat recent analyst forecasts. That's what I did.
Revenue was about $200 million above the company's forecast revenue and the top edge of analyst estimates, but the adjusted operating profit margin of 7.4% was 20 basis above the forecast. The company also raised its guidance for 2025, adjusting revenues to US$115.5 billion (an increase of US$700 million from the April forecast increase) and an adjusted profit of US$5.50 from its previous forecast of US$5.
Analysts were widely anticipating that Celesta would increase its forecast after the last quarter. Three times in the past two years. Additionally, Rivals Accton Technology Corp., Broadcom Inc., Jabil Inc. AI chip giant Nvidia Corp. has recently surpassed its stock market value of between 4-4 trillion US dollars.
Celestica, which supplies equipment to data centers and server farms that provide computing power to AI models, has been in tears since 2022, when Openai launched ChatGPT and launched its generation AI revolution.
Canadian Company is a leading supplier of Tech Giant's “Hyperscalers” including Google, Meta Platforms and Amazon.com Inc. They have significantly upgraded their computing capabilities for AI development, and last week they said they would earn US$8.5 billion in capital expenditures. Revenue from the Celesta segment, which supplies the AI boom, rose 28% in the quarter to US$20.7 billion, accounting for 71.6% of the company's total revenue.
“Celestica benefits from the expansion of AI-driven data centers through servers for AI applications, produced by storage and networking,” RBC Capital Markets' Analyst Paul Treiber said in a note to client last week.
Celesta offers server farm computing modules, network switches and data storage capacity, but none of them are easy manufacturing. It incorporates custom silicon and features a unique thermal and power management design to allow businesses to manage the extreme heat and electricity they need to run their data centers.
Celesta was a short-term stock market beloved quarter century ago after the previous IBM division was purchased by OneX Corp. and spun into a public company as Dot-Com Mania became hot. (OneX sold out of its position in 2023 before most of the current execution of the stock). Its inventory skyrocketed as the company supplied textile optical cables and other equipment used to build the internet.
However, Celesta's share crashed in the bust of Dot-Com and remained in investor purgatory for 20 years.
Chief Executive Rob Mionis arrived in 2015 after the company went through years of losses, employment cuts and shareholder litigation. The American-born private equity and aerospace industry veteran shifted the orientation of Celesta, moving it away from manufacturing low-margin products, and competed to build more complex equipment that required competing engineering expertise at prices. Improved combinations of aerospace and defense higher margin products, renewable energy, electric vehicle chargers, medical equipment and customer segments.
However, the company's coup had landed a lead position serving the tech giant when building the data center. These relationships, forged before ChatGpt arrived, put the company in a position to take off with the arrival of the generated AI waves, which are currently rapidly transforming the global economy. Mr. Mionis He said in an interview in 2023.
Currently, the company's stock is trading at high-end peers and a decade-long range, and is likely to maintain a premium rating, Traver wrote last week.
