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Celestica Inc. (CLS - Free Report) and International Business Machines Corporation (IBM - Free Report) are two major players in the AI infrastructure arena within the technology sector, with key expertise in their respective domains. Celestica is one of the largest firms in the electronics manufacturing services (EMS) industry, primarily serving original equipment manufacturers, cloud-based and other service providers and business enterprises across several industries. It offers a comprehensive range of manufacturing and supply-chain solutions that support various customer requirements, from low-volume, high-complexity custom products to high-volume commodity products.
IBM offers cloud and data solutions that aid enterprises in digital transformation. In addition to hybrid cloud services, the company provides advanced information technology solutions, computer systems, quantum computing and supercomputing solutions, enterprise software, storage systems and microelectronics.
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 Celestica
With more than two decades of experience in manufacturing, backed by a simplified and optimized global network, Celestica is committed to delivering next-generation, cloud-optimized data storage and industry-leading networking solutions to help customers balance performance, power efficiency and space as technologies evolve. The growing proliferation of AI-based applications and generative AI tools is fueling solid AI investments across the technology ecosystem. This, in turn, is driving demand for Celestica’s enterprise-level data communications and information processing infrastructure products, such as routers, switches, data center interconnects, edge solutions and servers and storage-related products.
Celestica’s focus on product diversification and increasing its presence in high-value markets is positive. Its strong research and development foundations allow it to produce high-volume electronic goods and highly complex technology infrastructure products for a wide range of industries, including communication, healthcare, aerospace and defense, energy, semiconductor and various cloud-based and other service providers. Such a diverse customer base enhances business resilience by reducing dependence on a single industry and minimizing the effects on financial results from an economic downturn in a specific sector.
However, the company remains plagued by margin woes. Celestica’s products are highly sophisticated and typically based on the latest technological innovations, which have historically led to high research and development costs. High operating expenses have contracted margins. Moreover, Celestica faces stiff competition from industry giants like Foxconn, Flex and Sanmina Corporation (SANM - Free Report) . The highly cyclical nature of the semiconductor industry remains an overhang, particularly in the aftermath of the tariff war.
The Case for IBM
IBM is poised to benefit from healthy demand trends for hybrid cloud and AI, which drive the Software and Consulting segments. The company’s growth is expected to be aided by analytics, cloud computing and security in the long term. With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, which have led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management, translating into a healthy demand for IBM hybrid cloud solutions.
In addition, the buyout of HashiCorp has significantly augmented IBM’s capabilities to assist enterprises in managing complex cloud environments. HashiCorp’s tool sets complement IBM Red Hat’s portfolio, bringing additional functionalities for cloud infrastructure management and bolstering its hybrid multi-cloud approach.
Despite solid hybrid cloud and AI traction, IBM is facing stiff competition from Amazon.com, Inc.’s (AMZN - Free Report) AWS and Microsoft Corporation’s (MSFT - Free Report) Azure. Increasing pricing pressure is eroding margins, and profitability has trended down over the years, barring occasional spikes. The company faces a potent threat from AI firm Anthropic as the latter’s Claude Code tool can modernize legacy COBOL systems — a foundational programming language deeply embedded in IBM’s mainframe ecosystem. With Claude Code proposing to substantially automate code exploration, documentation, refactoring and security analysis, it threatened to reduce enterprises’ reliance on specialized legacy service providers like IBM, bringing its sustenance at stake.
How Do Zacks Estimates Compare for CLS & IBM?
The Zacks Consensus Estimate for Celestica’s 2026 sales and EPS implies year-over-year growth of 53.8% and 67.9%, respectively. The EPS estimates have been trending up 15.1% over the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for IBM’s 2026 sales and EPS indicates year-over-year growth of 6% and 7%, respectively. The EPS estimates have trended down 0.2% over the past 60 days.
Image Source: Zacks Investment Research
Price Performance & Valuation of CLS & IBM
Over the past year, Celestica has gained 191.2% compared with the industry’s growth of 147.2%. IBM has declined 1.5% over the same period.
Image Source: Zacks Investment Research
Celestica looks more attractive than IBM from a valuation standpoint. Going by the price/sales ratio, IBM’s shares currently trade at 3.58 forward sales, higher than 1.9 for Celestica.
Both Celestica and IBM expect sales and earnings to improve in 2025. Celestica has shown sharp revenue and EPS growth over the years, while IBM has exhibited linear growth. It boasts a better price performance with comparatively more attractive valuation metrics. With a superior Zacks Rank and better operating metrics, Celestica seems to be a better investment option at the moment.
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Celestica vs. IBM: Which AI Infrastructure Stock is the Better Buy?
Key Takeaways
Celestica Inc. (CLS - Free Report) and International Business Machines Corporation (IBM - Free Report) are two major players in the AI infrastructure arena within the technology sector, with key expertise in their respective domains. Celestica is one of the largest firms in the electronics manufacturing services (EMS) industry, primarily serving original equipment manufacturers, cloud-based and other service providers and business enterprises across several industries. It offers a comprehensive range of manufacturing and supply-chain solutions that support various customer requirements, from low-volume, high-complexity custom products to high-volume commodity products.
IBM offers cloud and data solutions that aid enterprises in digital transformation. In addition to hybrid cloud services, the company provides advanced information technology solutions, computer systems, quantum computing and supercomputing solutions, enterprise software, storage systems and microelectronics.
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 Celestica
With more than two decades of experience in manufacturing, backed by a simplified and optimized global network, Celestica is committed to delivering next-generation, cloud-optimized data storage and industry-leading networking solutions to help customers balance performance, power efficiency and space as technologies evolve. The growing proliferation of AI-based applications and generative AI tools is fueling solid AI investments across the technology ecosystem. This, in turn, is driving demand for Celestica’s enterprise-level data communications and information processing infrastructure products, such as routers, switches, data center interconnects, edge solutions and servers and storage-related products.
Celestica’s focus on product diversification and increasing its presence in high-value markets is positive. Its strong research and development foundations allow it to produce high-volume electronic goods and highly complex technology infrastructure products for a wide range of industries, including communication, healthcare, aerospace and defense, energy, semiconductor and various cloud-based and other service providers. Such a diverse customer base enhances business resilience by reducing dependence on a single industry and minimizing the effects on financial results from an economic downturn in a specific sector.
However, the company remains plagued by margin woes. Celestica’s products are highly sophisticated and typically based on the latest technological innovations, which have historically led to high research and development costs. High operating expenses have contracted margins. Moreover, Celestica faces stiff competition from industry giants like Foxconn, Flex and Sanmina Corporation (SANM - Free Report) . The highly cyclical nature of the semiconductor industry remains an overhang, particularly in the aftermath of the tariff war.
The Case for IBM
IBM is poised to benefit from healthy demand trends for hybrid cloud and AI, which drive the Software and Consulting segments. The company’s growth is expected to be aided by analytics, cloud computing and security in the long term. With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, which have led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management, translating into a healthy demand for IBM hybrid cloud solutions.
In addition, the buyout of HashiCorp has significantly augmented IBM’s capabilities to assist enterprises in managing complex cloud environments. HashiCorp’s tool sets complement IBM Red Hat’s portfolio, bringing additional functionalities for cloud infrastructure management and bolstering its hybrid multi-cloud approach.
Despite solid hybrid cloud and AI traction, IBM is facing stiff competition from Amazon.com, Inc.’s (AMZN - Free Report) AWS and Microsoft Corporation’s (MSFT - Free Report) Azure. Increasing pricing pressure is eroding margins, and profitability has trended down over the years, barring occasional spikes. The company faces a potent threat from AI firm Anthropic as the latter’s Claude Code tool can modernize legacy COBOL systems — a foundational programming language deeply embedded in IBM’s mainframe ecosystem. With Claude Code proposing to substantially automate code exploration, documentation, refactoring and security analysis, it threatened to reduce enterprises’ reliance on specialized legacy service providers like IBM, bringing its sustenance at stake.
How Do Zacks Estimates Compare for CLS & IBM?
The Zacks Consensus Estimate for Celestica’s 2026 sales and EPS implies year-over-year growth of 53.8% and 67.9%, respectively. The EPS estimates have been trending up 15.1% over the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for IBM’s 2026 sales and EPS indicates year-over-year growth of 6% and 7%, respectively. The EPS estimates have trended down 0.2% over the past 60 days.
Image Source: Zacks Investment Research
Price Performance & Valuation of CLS & IBM
Over the past year, Celestica has gained 191.2% compared with the industry’s growth of 147.2%. IBM has declined 1.5% over the same period.
Image Source: Zacks Investment Research
Celestica looks more attractive than IBM from a valuation standpoint. Going by the price/sales ratio, IBM’s shares currently trade at 3.58 forward sales, higher than 1.9 for Celestica.
Image Source: Zacks Investment Research
CLS or IBM: Which is a Better Pick?
While Celestica carries a Zacks Rank #2 (Buy), IBM has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Both Celestica and IBM expect sales and earnings to improve in 2025. Celestica has shown sharp revenue and EPS growth over the years, while IBM has exhibited linear growth. It boasts a better price performance with comparatively more attractive valuation metrics. With a superior Zacks Rank and better operating metrics, Celestica seems to be a better investment option at the moment.