We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
CLS vs. SANM: Which Stock is Better Positioned for the AI Boom?
Read MoreHide Full Article
Key Takeaways
Celestica's Q3 2026 revenues surged 82.5%, driven by strong networking and Compute & Storage growth.
Sanmina's ZT Systems acquisition expands its AI exposure, but inventory rose to $3.15 billion.
Celestica's 8.5% record margin and 28.5% ROIC strengthen its position relative to Sanmina.
The rapid expansion of AI and cloud computing is creating substantial opportunities for electronics manufacturing services (EMS) providers. Celestica Inc. (CLS - Free Report) and Sanmina Corporation (SANM - Free Report) are two prominent participants in this market. Both companies provide comprehensive manufacturing and supply-chain solutions to original equipment manufacturers (OEMs) and technology customers. While Sanmina is strengthening its position in advanced computing through its vertically integrated manufacturing capabilities and the acquisition of ZT Systems, Celestica is expanding its presence in high-performance networking, cloud infrastructure and data center computing platforms.
With domain-specific expertise in core areas, both Celestica and Sanmina are strategically positioned in the EMS landscape and have the wherewithal to cater to the evolving demands of business enterprises. Let us delve a little deeper into the companies’ competitive dynamics to understand which of the two is relatively better placed in the industry.
The Case for Sanmina
Sanmina is benefiting from increasing demand for advanced computing infrastructure, supported by its broad manufacturing capabilities and expanding portfolio of AI-related solutions. The company's acquisition of ZT Systems has strengthened its exposure to accelerated computing and high-performance data center systems. By combining ZT Systems' system-level capabilities with its existing expertise in component manufacturing, power infrastructure, liquid cooling and engineering, Sanmina is better positioned to address customers' increasingly complex requirements. Its integrated model allows customers to consolidate several stages of product development and manufacturing with a single supplier, potentially strengthening customer relationships and creating opportunities for additional business.
The company is already seeing encouraging results from this strategy. In the third quarter of fiscal 2026, Sanmina reported revenues of $3.46 billion, up 69.7% year over year. Its Integrated Manufacturing Solutions segment generated $2.95 billion in revenues, reflecting growth of 79.4%. ZT Systems contributed $1.1 billion, while revenues from Sanmina's core business increased 17% to $2.4 billion. Demand from communications networks, cloud and AI infrastructure was particularly strong, with the combined market accounting for 62% of quarterly revenues or $2.15 billion, representing a 173.2% increase from the year-ago period. A book-to-bill ratio above 1.1 also indicates healthy order activity and provides support for the company's growth outlook.
However, Sanmina faces execution and working-capital challenges as it expands its manufacturing footprint. Inventory stood at approximately $3.15 billion in the third quarter of fiscal 2026, while free cash flow was only $24 million, reflecting significant investment and working-capital requirements.
Additionally, Sanmina operates in a highly competitive EMS market, where established players such as Celestica and Jabil (JBL - Free Report) compete for high-value AI infrastructure programs. Celestica's strong growth in networking and cloud solutions shows the competitive pressure facing Sanmina. Jabil's established manufacturing presence adds to the challenges of securing new customer programs.
The Case for Celestica
Celestica is well-positioned to capitalize on growing investments in AI infrastructure, thanks to its strong portfolio of networking, computing and storage solutions. Its Connectivity & Cloud Solutions (CCS) segment provides enterprise-level data communications and information-processing products, including routers, switches, data center interconnects, servers and storage platforms. The increasing adoption of AI applications is driving demand for higher-speed networking and advanced computing infrastructure, creating opportunities for Celestica to expand its relationships with hyperscale customers. Its offerings include 800G networking products and emerging 1.6T solutions, while continued product innovation and strategic collaborations are strengthening its position in the evolving AI hardware ecosystem.
The company's latest financial performance highlights the strength of this opportunity. In the third quarter of 2026, Celestica reported revenues of $5.83 billion, an increase of 82.5% year over year. Adjusted earnings rose 108.9% to $3.3 per share, surpassing the Zacks Consensus Estimate. Growth was largely driven by its CCS segment, where revenues surged 102% to $4.87 billion. Within the segment, networking revenues increased 68%, while Compute & Storage revenues jumped 242% to $1.61 billion. Hardware Platform Solutions revenues also advanced 70% to approximately $2.3 billion. These results demonstrate the company's growing participation in the infrastructure investment cycle and its ability to address demand across multiple layers of AI data center hardware.
Celestica is also translating higher business volumes into improved adjusted profitability. In the third quarter, adjusted operating earnings increased to $496.1 million from $242.2 million in the year-ago period, while adjusted operating margin reached a company record of 8.5%, up from 7.6%. Its Advanced Technology Solutions segment provides additional diversification through exposure to aerospace and defense, industrial, HealthTech and capital equipment markets.
How Do Zacks Estimates Compare for CLS & SANM?
The Zacks Consensus Estimate for Celestica’s full-year sales implies year-over-year growth of 79.77%, while that of EPS suggests growth of 88.36%. The EPS estimates have improved over the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Sanmina’s 2025 sales and EPS implies year-over-year growth of 13.18% and 29.13%, respectively. The EPS estimates have increased over the past 60 days.
Image Source: Zacks Investment Research
Price Performance & Valuation of CLS & SANM
Over the past year, Celestica has declined 33%, while SANM has fallen 8.4% over the same period.
Image Source: Zacks Investment Research
SANM looks more attractive than Celestica from a valuation standpoint. Going by the price/earnings ratio, Sanmina’s shares currently trade at 10.75 forward earnings, lower than 11.01 for Celestica.
Image Source: Zacks Investment Research
CLS or SANM: Which is a Better Pick?
Celestica sports a Zacks Rank #1 (Strong Buy) at present, while Sanmina carries a Zacks Rank #2 (Buy). Both companies are witnessing solid momentum across several verticals. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sanmina has a strong growth opportunity through its vertically integrated manufacturing capabilities, ZT Systems acquisition and expanding accelerated computing business. However, Celestica’s stronger third-quarter revenue growth, rapid expansion in networking and Compute & Storage solutions, record adjusted operating margin and ambitious fiscal 2027 targets highlight its growth potential. The company's ROIC of 28.5%, compared with 12.4% for Sanmina, also indicates a stronger current return profile relative to the capital employed. With a better Zacks Rank, Celestica appears better positioned for investors seeking exposure to the expanding AI infrastructure market.
View the Zacks #1 Rank List
Image: Bigstock
CLS vs. SANM: Which Stock is Better Positioned for the AI Boom?
Key Takeaways
The rapid expansion of AI and cloud computing is creating substantial opportunities for electronics manufacturing services (EMS) providers. Celestica Inc. (CLS - Free Report) and Sanmina Corporation (SANM - Free Report) are two prominent participants in this market. Both companies provide comprehensive manufacturing and supply-chain solutions to original equipment manufacturers (OEMs) and technology customers. While Sanmina is strengthening its position in advanced computing through its vertically integrated manufacturing capabilities and the acquisition of ZT Systems, Celestica is expanding its presence in high-performance networking, cloud infrastructure and data center computing platforms.
With domain-specific expertise in core areas, both Celestica and Sanmina are strategically positioned in the EMS landscape and have the wherewithal to cater to the evolving demands of business enterprises. Let us delve a little deeper into the companies’ competitive dynamics to understand which of the two is relatively better placed in the industry.
The Case for Sanmina
Sanmina is benefiting from increasing demand for advanced computing infrastructure, supported by its broad manufacturing capabilities and expanding portfolio of AI-related solutions. The company's acquisition of ZT Systems has strengthened its exposure to accelerated computing and high-performance data center systems. By combining ZT Systems' system-level capabilities with its existing expertise in component manufacturing, power infrastructure, liquid cooling and engineering, Sanmina is better positioned to address customers' increasingly complex requirements. Its integrated model allows customers to consolidate several stages of product development and manufacturing with a single supplier, potentially strengthening customer relationships and creating opportunities for additional business.
The company is already seeing encouraging results from this strategy. In the third quarter of fiscal 2026, Sanmina reported revenues of $3.46 billion, up 69.7% year over year. Its Integrated Manufacturing Solutions segment generated $2.95 billion in revenues, reflecting growth of 79.4%. ZT Systems contributed $1.1 billion, while revenues from Sanmina's core business increased 17% to $2.4 billion. Demand from communications networks, cloud and AI infrastructure was particularly strong, with the combined market accounting for 62% of quarterly revenues or $2.15 billion, representing a 173.2% increase from the year-ago period. A book-to-bill ratio above 1.1 also indicates healthy order activity and provides support for the company's growth outlook.
However, Sanmina faces execution and working-capital challenges as it expands its manufacturing footprint. Inventory stood at approximately $3.15 billion in the third quarter of fiscal 2026, while free cash flow was only $24 million, reflecting significant investment and working-capital requirements.
Additionally, Sanmina operates in a highly competitive EMS market, where established players such as Celestica and Jabil (JBL - Free Report) compete for high-value AI infrastructure programs. Celestica's strong growth in networking and cloud solutions shows the competitive pressure facing Sanmina. Jabil's established manufacturing presence adds to the challenges of securing new customer programs.
The Case for Celestica
Celestica is well-positioned to capitalize on growing investments in AI infrastructure, thanks to its strong portfolio of networking, computing and storage solutions. Its Connectivity & Cloud Solutions (CCS) segment provides enterprise-level data communications and information-processing products, including routers, switches, data center interconnects, servers and storage platforms. The increasing adoption of AI applications is driving demand for higher-speed networking and advanced computing infrastructure, creating opportunities for Celestica to expand its relationships with hyperscale customers. Its offerings include 800G networking products and emerging 1.6T solutions, while continued product innovation and strategic collaborations are strengthening its position in the evolving AI hardware ecosystem.
The company's latest financial performance highlights the strength of this opportunity. In the third quarter of 2026, Celestica reported revenues of $5.83 billion, an increase of 82.5% year over year. Adjusted earnings rose 108.9% to $3.3 per share, surpassing the Zacks Consensus Estimate. Growth was largely driven by its CCS segment, where revenues surged 102% to $4.87 billion. Within the segment, networking revenues increased 68%, while Compute & Storage revenues jumped 242% to $1.61 billion. Hardware Platform Solutions revenues also advanced 70% to approximately $2.3 billion. These results demonstrate the company's growing participation in the infrastructure investment cycle and its ability to address demand across multiple layers of AI data center hardware.
Celestica is also translating higher business volumes into improved adjusted profitability. In the third quarter, adjusted operating earnings increased to $496.1 million from $242.2 million in the year-ago period, while adjusted operating margin reached a company record of 8.5%, up from 7.6%. Its Advanced Technology Solutions segment provides additional diversification through exposure to aerospace and defense, industrial, HealthTech and capital equipment markets.
How Do Zacks Estimates Compare for CLS & SANM?
The Zacks Consensus Estimate for Celestica’s full-year sales implies year-over-year growth of 79.77%, while that of EPS suggests growth of 88.36%. The EPS estimates have improved over the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Sanmina’s 2025 sales and EPS implies year-over-year growth of 13.18% and 29.13%, respectively. The EPS estimates have increased over the past 60 days.
Image Source: Zacks Investment Research
Price Performance & Valuation of CLS & SANM
Over the past year, Celestica has declined 33%, while SANM has fallen 8.4% over the same period.
Image Source: Zacks Investment Research
SANM looks more attractive than Celestica from a valuation standpoint. Going by the price/earnings ratio, Sanmina’s shares currently trade at 10.75 forward earnings, lower than 11.01 for Celestica.
Image Source: Zacks Investment Research
CLS or SANM: Which is a Better Pick?
Celestica sports a Zacks Rank #1 (Strong Buy) at present, while Sanmina carries a Zacks Rank #2 (Buy). Both companies are witnessing solid momentum across several verticals. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sanmina has a strong growth opportunity through its vertically integrated manufacturing capabilities, ZT Systems acquisition and expanding accelerated computing business. However, Celestica’s stronger third-quarter revenue growth, rapid expansion in networking and Compute & Storage solutions, record adjusted operating margin and ambitious fiscal 2027 targets highlight its growth potential. The company's ROIC of 28.5%, compared with 12.4% for Sanmina, also indicates a stronger current return profile relative to the capital employed. With a better Zacks Rank, Celestica appears better positioned for investors seeking exposure to the expanding AI infrastructure market.