Institutional Investors Are Betting Big on Celestica: The AI Infrastructure Play That's Becoming Hard to Ignore

Over the past year, Celestica (NYSE: CLS) has quietly become a favorite among major institutional players. With $6.32 billion in institutional capital flowing in against $4.28 billion in outflows, the company has attracted attention from heavyweight funds like Viking Global Investors, Divisadero Street, Balyasny, and Lazard—all significantly expanding their positions in Q3 2025. But what’s driving this institutional confidence? The answer lies in a perfect storm of near-term demand and long-term growth catalysts.

The Business Model: Why Hyperscalers Can’t Get Enough

Celestica isn’t a household name, but it’s become indispensable to the AI infrastructure boom. The company designs and manufactures high-performance networking solutions—think Ethernet switches and interconnects—alongside custom AI servers, cooling systems, and fully integrated rack-scale infrastructure for hyperscale data centers. In other words, Celestica sits at the heart of the hardware arms race driving the AI revolution.

This positioning has translated into impressive numbers. Q3 2025 revenue jumped 28% year-over-year to $3.19 billion, while adjusted EPS climbed 52% year-over-year to $1.58. Management clearly believes momentum will continue, hiking full-year 2025 revenue guidance from $11.55 billion to $12.2 billion and adjusted EPS from $5.50 to $5.90. Looking ahead, the company projects $16 billion in revenue for 2026—a 31% year-over-year acceleration from their updated 2025 forecast.

Market Dominance and Structural Tailwinds

What makes Celestica a hidden gem is its commanding market position combined with multi-year visibility. The company controls over 50% of the Ethernet switches market—the critical infrastructure component that hyperscalers depend on for their data centers. As tech giants transition from 400G to 800G switches to handle higher bandwidth and lower latency requirements for large AI clusters, Celestica stands to capture disproportionate share gains.

Demand for the company’s custom AI compute systems, built on application-specific integrated circuits (ASICs), is equally robust. A major hyperscaler is currently ramping up its next-generation custom compute program, and Celestica has locked in 12 to 15 months of confirmed demand visibility from various hyperscalers—an unusually long planning horizon in a typically volatile sector.

The Hidden Opportunity: A Multi-Year Growth Story

Perhaps most compelling is the company’s forward guidance and new program wins. Celestica expects to benefit from what it calls the 1.6 trillion dollar networking upgrade cycle at hyperscalers through 2027. More notably, the company is planning to commence mass production of rack-scale custom AI systems for a major digital-native customer in 2027. Management has indicated this single engagement alone could contribute “multiple billions of dollars” in incremental revenue by that time.

This combination of factors—near-term revenue inflection, demonstrated market leadership, locked-in customer commitments, and a clear path to expand into adjacent high-margin segments—explains why institutional money has been quietly accumulating shares. Celestica represents a hidden gem in the AI infrastructure supply chain: less glamorous than chip designers but arguably more essential to the actual deployment of large language models and AI workloads at scale.