Flex vs. Celestica: Which AI Infrastructure Stock is the Better Buy?

Let’s analyze their fundamentals, growth opportunities, market challenges and valuation to assess which one presents a stronger investment opportunity.

The Case for FLEX

Flex’s CPI business is becoming an increasingly important growth engine as AI infrastructure spending accelerates. In the first quarter of fiscal 2027, total revenue rose 21% year over year to $7.9 billion. CPI revenue grew 35% to $2.2 billion, driven by strong power growth as cloud and cooling programs continued to ramp. Communications and industrial businesses also delivered solid growth, supported by high-value markets such as advanced networking, automation and energy infrastructure.

Flex is also positioned to benefit from the broader, long-term build-out of AI infrastructure, as demand increasingly extends beyond computing to power, cooling and electrical systems. The company is seeing sustained demand in advanced networking, including high-speed switching, optical products and interface technologies, while also gaining share in some product segments. Communications is expected to remain one of Flex’s largest and healthiest businesses, supported by data center demand. Meanwhile, energy infrastructure is benefiting from data center and utility-scale investments, while regionalization, labor shortages and productivity requirements support robotics and warehouse automation.

For the second quarter of fiscal 2027, FLEX expects revenues of $7.95-$8.25 billion. Management expects Regulated Manufacturing Solutions revenues to rise in the mid-single to high-single digits. Integrated Technology Solutions is projected to grow in the high-single to low-double digits, while Cloud and Power Infrastructure is expected to increase 45-55%. Flex raised its fiscal 2027 revenue guidance to $33.7-$35.2 billion from $32.3-$33.8 billion.

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Flex is further expanding its capabilities across power, cooling and compute integration to address increasingly complex AI infrastructure requirements. The company is engaging with hyperscaler customers on next-generation silicon, power and cooling, while its partnership with Cerebras spans manufacturing, cooling and future power opportunities. Its JetCool acquisition has added cold plate capabilities, and Flex is qualifying coolant distribution units with customers. The company is also expanding modular power capacity in Dallas and Iowa to support rising demand.

However, Flex continues to face near-term pressure from investments required to support its rapid CPI expansion. New programs typically require upfront investment before reaching maturity, while the power business is seeing somewhat muted margins as Flex invests to support growth of more than 70%. Although the company expects at least 100 basis points of year-over-year CPI margin improvement, the segment’s growth is back-half loaded and depends on successfully ramping new capacity. In addition, first-quarter free cash flow was $41 million after $24 million of one-time spin-off-related cash costs, while fiscal 2027 free cash flow conversion is now expected at approximately 40% compared with the previously projected 60%.

The Case for CLS

Celestica is benefiting from strong and accelerating demand for AI infrastructure, with its Communications and Cloud Solutions (CCS) segment emerging as a major growth driver. In the second quarter of 2026, revenue increased 62% year over year to $4.7 billion, while adjusted EPS rose 83% to $2.54. CCS revenue surged 84%, supported by strong growth across communications and enterprise markets. Communications revenue increased 62%, driven by 800G networking switch programs and continued demand for 400G programs, while enterprise revenue jumped 167% as an AI/ML compute program with a hyperscaler accelerated.

The company is also seeing strong momentum from next-generation networking and AI compute programs. Celestica expects continued growth in 800G networking, alongside the start of mass production for its first 1.6T programs. The company has 10 active 1.6T programs, which are expected to gain momentum in 2027, while the pipeline continues to expand. In addition, the company expects multiple AI compute programs to ramp, supporting continued growth in its enterprise business.

Celestica is further strengthening its position in AI infrastructure through new custom rack opportunities. The company expects to begin initial deliveries of custom racks for OpenAI later in 2026 and will work with OpenAI and Broadcom on multigenerational custom accelerator road maps, with mass production of the Jalapeño accelerator planned for 2027. Celestica also sees its AMD Helios opportunity as a multibillion-dollar pipeline, with samples expected toward the end of 2026 and the ramp beginning in the first half of 2027.

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Celestica’s outlook has strengthened as customer demand and program visibility continue to improve. The company raised its 2026 revenue outlook to $20.5 billion, implying 65% growth, and increased its adjusted EPS outlook to $11.30, up 87%. Management expects revenue growth to accelerate further in 2027, supported by strong customer demand, new program wins, continued 800G growth, accelerating 1.6T ramps and multiple AI compute programs. The company also expects operating margin expansion as CCS becomes a larger part of the business and benefits from higher utilization and operating leverage.

However, Celestica continues to face supply-chain constraints as demand for AI data center infrastructure exceeds global component supply. On the last earnings call, management highlighted that materials remain the primary constraint, despite having sufficient capacity plans for 2026 and 2027.

FLEX vs. CLS Share Price Performance

Over the past six months, FLEX shares have gained 83.1%, while Celestica jumped 6.2%.

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Valuation for FLEX & CLS

In terms of Price/Book, FLEX shares are trading at 8.08X, below CLS’ 14.4X.

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How Do Estimates Compare for FLEX & CLS?

Analysts have revised their earnings estimates upward for FLEX’s bottom line for the current year.

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For CLS, there have been upward revisions for the current year.

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FLEX or CLS: Which Stock to Bet On?

While CLS sports a Zacks Rank #1 (Strong Buy) at present, FLEX has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank, CLS seems to be a better pick at the moment.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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