Wolfe Research opened coverage of Celestica Inc. (NYSE: CLS) with an Outperform rating and a price target of $350.00, a figure that represents approximately 25% upside from the current share price of $280.66. The analyst note sits alongside a broader market consensus that InvestingPro reports as a Strong Buy, with price targets published by other analysts falling between $330 and $450.
The research firm provided a breakdown of the revenue sources it expects will drive Celestica’s growth over the coming years. Wolfe Research estimates the company’s HPS Switching business produced roughly $5 billion in sales in 2025. It then assumes the switching business will expand by 80% between 2025 and 2027 - consistent with Wolfe’s view of the broader data-center switching market - adding about $4 billion in sales over that interval.
To translate that top-line gain into operating profit, Wolfe applies a 14% operating margin to the incremental switching revenue, which equates to an additional $560 million in operating income in 2027. The note also observes that market research firms have recently been increasing their forecasts for the size of the switching market.
On two server-related revenue streams, Wolfe Research assigns specific contributions. For Celestica’s OpenAI server program, the firm projects around $5 billion in sales in 2027 and applies an 8% to 9% operating margin to this business, yielding an estimated $425 million in operating profit for that year. Wolfe expects this business to grow further into 2028.
Separately, the firm models Celestica’s Google TPU server business as adding about $2.3 billion in incremental sales from 2025 through 2027. Using a 5% operating margin for that stream, Wolfe calculates an additional $125 million in operating income added to the company’s overall results.
Those modeled contributions sit against Celestica’s recent operating performance. InvestingPro data shows the company reported revenue growth of 28.5% over the last twelve months, reaching $12.39 billion. Celestica also released fourth-quarter 2025 results that outperformed consensus: earnings per share of $2.56 versus an analyst forecast of $2.42, and revenue of $4.95 billion versus an expected $4.82 billion.
Despite the beat on both EPS and revenue, Celestica’s stock fell in after-hours trading by 10.7%, a move the market interpreted as a reaction to factors not detailed in the firm’s published estimates. The Wolfe Research initiation and its model assumptions provide a view of how specific data-center and server programs could contribute to operating profit by 2027 under the firm’s stated margins and growth rates.
Analysis
- Wolfe Research’s initiation is driven by modeled contributions from switching, OpenAI servers, and Google TPU server programs based on stated sales and margin assumptions.
- The initiation sits against recent outperformance in Celestica’s quarterly results, but the stock declined meaningfully in after-hours trading following the earnings release.
- InvestingPro consensus remains broadly positive, with analyst price targets clustering above the current share price.
Key figures cited in the initiation
- Price target: $350.00 (about 25% upside from $280.66)
- HPS Switching sales in 2025: $5 billion; assumed growth 80% to 2027 (+$4 billion)
- Operating margin on switching incremental revenue: 14% - $560 million incremental operating income in 2027
- OpenAI server program: ~$5 billion sales in 2027 at 8% to 9% margin - ~$425 million operating profit
- Google TPU server business: $2.3 billion incremental sales 2025-2027 at a 5% margin - $125 million operating income
Recent earnings
- Q4 2025 EPS: $2.56 vs analysts' $2.42
- Q4 2025 Revenue: $4.95 billion vs forecast $4.82 billion
- Stock movement: down 10.7% in after-hours trading following the reported results