Key Takeaways CLS grew operating cash flow to $408.9M for the first nine months of 2025, up from $330.5M a year earlier.Celestica saw a 43% jump in CCS revenue, led by 400G and 800G switches amid strong AI-driven demand.CLS raised 2025 free cash flow guidance to $425M as revenue growth and a stable cash cycle support liquidity.Celestica, Inc. (CLS) generated an operating cash flow of $126.2 million compared with $122.8 million in the year-ago quarter, bringing the respective tallies for the first nine month ...

Key Takeaways The EMS industry has surged in 2025, driven by AI demand and strong momentum in manufacturing services.Celestica is seeing robust growth from AI data centers and high-speed networking products. Jabil and Sanmina are benefiting from AI infrastructure, diversification and rising enterprise demand. The electronics manufacturing services (EMS) space primarily consists of companies that provide design, engineering and manufacturing services to electronics original equipment manufacturers (OEMs). Th ...

Core Insights - Celestica, Inc. (CLS) reported quarterly revenues of $3.19 billion, reflecting a year-over-year increase of 27.8%, surpassing management's guidance and the Zacks Consensus Estimate by $170 million [1][8] Group 1: Company Performance - The growth in revenue was driven by strong demand in the Connectivity and Cable Solution portfolio, which saw net sales surge 43.2% year over year to $2.41 billion, primarily due to the demand for 800G and 400G switching products [3][8] - Celestica's management is optimistic about future revenue growth, projecting revenues between $3.325 billion and $3.575 billion for the next quarter, indicating a potential 36% year-over-year growth [4][8] - The company's shares have increased by 215.6% over the past year, significantly outperforming the industry growth of 93.7% [7] Group 2: Market Opportunities - The global data center networking market is valued at $38.49 billion in 2024, with a projected compound annual growth rate of 17.2% from 2025 to 2033, presenting a substantial growth opportunity for Celestica [4] - Celestica is actively collaborating with industry leaders like AMD and Broadcom to enhance its product offerings in the expanding AI infrastructure market [2] Group 3: Competitive Landscape - Competitors such as Jabil, Inc. and Flex Ltd. are also performing well, with Jabil reporting revenues of $8.3 billion, up from $6.96 billion year over year, and Flex generating $6.8 billion, up 4% year over year [5][6] - Jabil's growth was driven by demand in Capital Equipment and AI-related Cloud and Data Center Infrastructure, while Flex's diversified portfolio across multiple industries remains a key strength [5][6] Group 4: Valuation and Earnings Estimates - Celestica trades at a forward price-to-earnings ratio of 37.68, higher than the industry average of 24.13 [9] - Earnings estimates for 2025 have increased by 6.3% to $5.90, and for 2026, they have risen by 20.9% to $8.20 over the past 60 days [10]

Core Insights - Flex Ltd. is experiencing robust business performance, primarily due to increasing demand in its data center and technology-driven sectors, while facing challenges in the automotive sector within its Reliability Solutions segment [1] Financial Performance - In the last reported quarter, revenues from the Reliability Solutions Group grew by 3% to $3 billion, representing 45% of net sales, driven by strong growth in Power and moderate gains in Health Solutions and Core Industrial, despite ongoing automotive sector weakness [2] - The adjusted operating margin for the Reliability Solutions division increased to 6.5%, up 105 basis points from the previous year, attributed to a favorable mix from the Power business, effective cost management, and disciplined execution [4] - Flex anticipates Reliability Solutions revenues to grow in the low- to mid-single digits, supported by strong power demand and accelerating growth in medical devices in fiscal 2026, although concerns remain regarding the automotive and renewables sectors [5] Market Dynamics - The durability of data center demand is crucial for Flex to continue offsetting pressures from the automotive sector, with revenues expected to rise at least 35% this year in the data center segment, providing significant mix benefits [6] - Flex's diversification across mission-critical industrial and healthcare verticals reduces reliance on any single end market, including automotive [6] Competitive Landscape - Jabil is positioned to benefit from AI-driven data center expansion and higher demand for advanced cooling solutions, but faces challenges in consumer-driven products and volatile automotive demand [7][8] - Celestica is capitalizing on AI investments driving demand for its data communications and processing infrastructure products, although it faces concerns in its ATS segment and customer concentration risks [9][10] Stock Performance and Valuation - Flex's shares have increased by 19.5% in the past month, outperforming the Electronics - Miscellaneous Products industry, which grew by 10.1% [11] - Flex trades at a forward 12-month price-to-earnings (P/E) ratio of 21.09, below the industry average of 25.53 [13] - The Zacks Consensus Estimate for Flex's earnings for fiscal 2026 has been revised upward over the past 60 days, indicating positive sentiment [14]

Industry Overview - The electronics manufacturing services (EMS) industry is rapidly evolving and is expected to grow at a compound annual growth rate (CAGR) of 6.06% due to factors such as digital transformation, AI data center expansion, consumer electronics, IoT markets, 5G adoption, and automotive innovation [1] Company Profiles Sanmina Corporation - Sanmina is a global provider of electronics contract manufacturing services, focusing on engineering and fabricating complex components and offering complete end-to-end supply chain solutions [2] - The company emphasizes strengthening technology leadership and a customer-focused approach as key elements of its long-term growth strategy [4] - Sanmina's comprehensive portfolio includes product design, manufacturing, assembly, testing, and aftermarket support, allowing customers to rely on a single partner throughout the product lifecycle [5] - The company has a strong liquidity position, with a current ratio of 1.72 and a debt-to-capital ratio of 10.6%, which is significantly lower than the EMS industry average of 37.9% [8][15] Celestica Inc. - Celestica primarily serves original equipment manufacturers and cloud-based service providers, offering a wide range of manufacturing and supply-chain solutions [3] - The company is experiencing strong growth in the AI data center market, with a 43.2% year-over-year sales increase in the Connectivity & Cloud Solutions segment [11][12] - However, Celestica's Advanced Technology segment saw a decline of 4.1% year-over-year, primarily due to elevated inventory levels in industrial end markets [13] - Celestica's current ratio is 1.47, indicating it is well-positioned to meet short-term obligations, but its quick ratio of 0.88 suggests potential challenges in fulfilling these obligations without selling inventory [15] Financial Performance - In the third quarter, Sanmina generated $1.247 billion in revenues from Industrial & Energy, Medical, Defense & Aerospace, and Automotive markets, a slight decrease from $1.253 billion [7] - Celestica generated $126.2 million in cash from operations, up from $122.8 million year-over-year, with free cash flow increasing by 15.7% [14] - Sanmina's full-year sales are expected to grow by 72.24%, while Celestica's sales are projected to grow by 26.34% [16][18] Market Position and Valuation - Over the past year, Celestica's share price has increased by 280.1%, while Sanmina's has risen by 105% [18] - From a valuation perspective, Sanmina appears more attractive, trading at a price/earnings ratio of 16.45 compared to Celestica's 42.36 [19] - Both companies hold a Zacks Rank 1 (Strong Buy), indicating strong demand across multiple verticals and resilience amid macroeconomic challenges [21]

Core Viewpoint - Former Cisco CEO John Chambers believes that 2026 will be a pivotal year for AI, predicting significant productivity growth that the market is currently underestimating on earnings [1]. Group 1: AI Utility and Adoption - Chambers emphasizes the rapid adoption of AI across various sectors, including retail, automotive, healthcare, and government, with companies like Walmart and Ford integrating AI into their supply chains [2]. - The widespread utility of AI is expected to materialize quickly, showcasing its potential across different industries [2]. Group 2: Historical Context and Leadership - Chambers led Cisco through significant growth, increasing annual sales from $1.2 billion to approximately $50 billion, making it the most valuable company in the world during the late 1990s [3]. - His experience during the internet revolution provides a unique perspective on the current AI landscape [3]. Group 3: Market Skepticism and Challenges - While optimistic about AI, Chambers expresses skepticism regarding the current euphoria surrounding major industry players, warning of potential market pain for others [4]. - He predicts that some companies among the "Magnificent Seven" may face difficulties in the next couple of years, with mid-level companies and startups at greater risk [5]. Group 4: Investment and Strategy - Chambers notes that while there is capital available for AI investment, securing financing will be challenging for companies without a clear AI strategy [5]. - He identifies Microsoft and Google as strong players for investors to consider, praising Nvidia's role in the AI boom and highlighting AMD's aggressive moves in the AI chip market [6].

This networking company has proven to be a significantly better investment than Broadcom in 2025.Broadcom (AVGO +0.41%) has been gaining prominence in the artificial intelligence (AI) chip market thanks to its application-specific integrated circuits (ASICs). The custom AI processors designed by the company have helped it secure multibillion-dollar deals with hyperscalers and AI companies.That's not surprising, as these chips can help lower the operating costs of data centers while boosting performance when ...

Core Insights - The ongoing growth trend in generative artificial intelligence (AI) presents significant investment opportunities beyond the "Magnificent Seven" stocks, with companies like Arista Networks positioned to benefit greatly from this trend [1][2]. Company Overview - Arista Networks has been a key player in cloud networking solutions for over 20 years, achieving a billion-dollar valuation approximately a decade ago, with a notable resurgence in growth over the past three years [4]. - The launch of ChatGPT in late 2022 marked the beginning of a generative AI growth trend, leading to substantial investments by tech companies in AI infrastructure [5]. Financial Performance - Arista Networks has seen a dramatic increase in demand for networking hardware and software, resulting in annualized revenue growth from approximately $4.4 billion in 2022 to around $8.5 billion in the trailing-12-month period [6]. - The company's diluted earnings per share (EPS) rose from just over $1 in 2022 to around $2.63, reflecting a nearly 150% increase, while the stock price surged by nearly 267%, from about $35 to around $129 [7]. Market Potential - Currently, Arista Networks has a market capitalization of approximately $161.3 billion, with the potential to reach $500 billion within six years, necessitating a sustained annualized growth rate of 20% [9]. - The company faces skepticism regarding the sustainability of the AI boom, but if AI meets productivity growth projections, it could lead to continued elevated growth levels for Arista [11][12]. Competitive Landscape - Concerns about "whitebox" competition and reduced demand due to customers building their own networking solutions exist, but Arista's history of technological innovation may mitigate these risks [12]. - The stock's forward price-to-earnings (P/E) ratio is just under 40, and while growth may remain around 20%, a potential de-rating could occur as investors anticipate a slowdown [14]. Strategic Considerations - To achieve its ambitious market cap goal, Arista may need to pursue mergers and acquisitions to enhance growth and cost synergies [15]. - Investors are advised to consider market conditions and potential buy-the-dip opportunities rather than entering positions at any price [16].

Core Insights - Arista Networks is a significant player in the AI data center market, offering ultra-fast switches and a programmable operating system that can transform cloud infrastructure [1][2] - The company's Extensible Operating System (EOS) allows for modular and programmable networking solutions, making it appealing to AI data center builders and hyperscalers [2] - Despite a recent sell-off in the AI sector affecting major companies, Arista is expected to continue benefiting from the growth in AI infrastructure spending [3] Financial Performance - In the third quarter, Arista reported a 28% year-over-year revenue growth, reaching $2.3 billion, with diluted earnings per share increasing from $0.58 to $0.67 [4] - Management forecasts fourth-quarter revenue between $2.3 billion and $2.4 billion, indicating a flat quarter-over-quarter performance but a 19% increase year-over-year [4] Stock Performance - Arista's stock is currently trading around $130.72, down from an all-time high of $165, but is still up 13% year-to-date and 25% over the last 52 weeks [5][6] - The stock is valued at approximately 55 times its earnings, which is higher than the tech sector average of 39 times, reflecting a strong position in the AI infrastructure market [6] Competitive Advantage - Arista's ultra-fast 400G/800G switches provide low latency and high bandwidth, essential for handling heavy workloads in the AI sector [7] - The EOS platform enhances network management with features like downtime-free upgrades and real-time monitoring, making it a reliable choice for AI applications [8] Market Outlook - There is ongoing optimism regarding AI spending, with Arista's products deemed necessary for the ecosystem's functionality [11] - However, potential pullbacks in AI infrastructure spending could disproportionately affect Arista, as indicated by comments from industry leaders about irrational capital expenditures in AI [9][10]

Core Viewpoint - Nvidia has issued a seven-page rebuttal to counter accusations of accounting practices similar to those of Enron, defending its financial transparency and business integrity [1][3]. Group 1: Nvidia's Defense - The rebuttal addresses claims of hidden debt and inflated revenue through special purpose vehicles and vendor financing, which are reminiscent of past corporate scandals [1]. - Nvidia's response is a direct reaction to criticisms from Michael Burry, who has raised concerns about the company's revenue recognition and stock-based compensation practices [2][3]. Group 2: Michael Burry's Position - Burry does not label Nvidia as a fraud but compares it to Cisco Systems, suggesting it reflects the excesses of the current AI boom [4]. - He criticizes Nvidia's memo as "disingenuous," arguing that it fails to address his main points regarding stock-based compensation and chip depreciation [4]. Group 3: Historical Context - The comparison to Cisco highlights the potential risks of overvaluation in the tech sector, as Cisco's stock soared 3,800% from 1995 to 2000 before experiencing a significant decline [6][7]. - Cisco's experience serves as a cautionary tale about the consequences of overly optimistic demand forecasts and subsequent overcapacity in the market [7]. Group 4: Current Market Dynamics - Burry notes that major tech companies, referred to as the "Five Horsemen," are investing nearly $3 trillion over three years in AI data centers, significantly increasing demand for Nvidia's GPUs [8].