The Shopify exhibit at a National Retail Federation (NRF) show in New York on Jan. 12.Kylie Cooper/Reuters
Our home-grown technology industry had a pretty good year in 2025. The S&P/TSX Information Technology Index finished the year with a respectable gain of 15.89 per cent. Celestica was the top performer, up 206 per cent. Shopify, the largest component of the index, posted a respectable gain of 44.45 per cent.
But by year-end, there were signs of weakness emerging. Shopify hit its 52-week (and all-time) high in late October. It’s been pretty much downhill since. As of the close on Friday, the information technology index was down almost 18 per cent year-to-date.
Celestica touched its high in November but is down about 28 per cent since. Constellation Software, which had racked up gains for several years, went into a deep dive in midyear, which continues. The shares are down about 50 per cent from their 52-week high. My Internet Wealth Builder newsletter issued a sell signal for the stock last September at $3,660. It closed Friday at $2,486.52.
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At that level, analysts are taking a fresh look at the company. RBC Capital Markets issued a note to clients on Feb. 17 suggesting the pullback is overdone.
“We believe lower software valuations are a net positive for Constellation’s capital deployment and value creation strategy, particularly as terminal values are less relevant to Constellation’s investment model,” analyst Paul Treiber wrote. RBC called Constellation’s valuation “compelling,” saying it offers an attractive risk/reward opportunity. They rate the stock “outperform” with a target of $4,800.
We are not reinstating Constellation as a “buy” at this time but aggressive investors may want to take a look.
Here are updates on three of our Canadian tech recommendations that have reported recent quarterly results.
Originally recommended on Aug. 19/12 at $24.42. Closed Friday at $101.85.
Background: Montreal-based CGI is one of the largest independent information technology and business process services firms in the world. The company, founded in 1976, offers IT and business consulting, systems integration, outsourcing services, and intellectual property solutions. It employs about 93,000 professionals in offices and delivery centres across the Americas, Europe, and the Asia-Pacific region.
Performance: The stock has been on a downward trend for most of the past year. The shares have lost 41 per cent during that period.
Recent developments: The company reported first-quarter 2026 results (to Dec. 31), and they were better than the slide in the share price would indicate.
Revenue was $4.08-billion, up 7.7 per cent year-over-year (3.4 per cent in constant currency). Adjusted net earnings were $461-million ($2.12 per diluted share), up 7.6 per cent year-over-year. The company reported bookings of $4.47-billion and a backlog of $31.32-billion or 1.9 times annual revenue.
Dividend and buybacks. The company raised the quarterly dividend in November by 13.3 per cent to 17 cents (68 cents a year) to yield 0.7 per cent at the current price. The company also has an active share repurchase program and spent $576.6-million in the quarter to buy back stock.
Acquisition: CGI is paying an undisclosed sum to acquire Atlanta-based Stratfield Consulting (SC). SC was founded in 2012 and operates in the management and technology consulting space, employing 200 consultants. The acquisition brings CGI’s total consultants in the Atlanta area to 600.
Outlook: The slide in the share price can be traced to several factors. The price got ahead of itself, and some investors took profits. Revenue and profits, while showing gains, slowed down, and some analysts downgraded the stock.
Action now: If you were an early investor and have not taken half-profits, I suggest you do so now. Despite the downturn, the shares are still up 317 per cent from our original recommendation. Otherwise, hold. The P/E ratio has dropped to 13.56, suggesting the shares are reasonably priced.
Originally recommended on Feb. 22/16 at $2.83 (split-adjusted). Closed Friday at $172.89.
Background: Shopify is a cloud-based, multichannel commerce platform designed for small and medium-sized businesses. Merchants use the software to design, set up, and manage their stores across multiple sales channels, including web, mobile, social media, marketplaces, brick-and-mortar locations, and pop-up stores. Shopify is based in Ottawa and is the largest company in the TSX information technology subindex.
Performance: Shopify managed to buck the decline in the tech sector until early January. Then it went into freefall. So far this year, the shares have lost almost 22 per cent of their value.
Recent developments: The company issued strong fourth-quarter and year-end results (to Dec. 31). Revenue came in at US$378.4-billion for the year, up 30 per cent from US$292.3-billion in 2024. Net income (excluding the impact of equity investments) was US$1.5-billion, up from US$1.2-billion in 2024.
Dividend and buybacks: The stock does not pay a dividend, however the board of directors has approved a share repurchase plan. The company will spend up to US$2-billion to repurchase up to 5 per cent of the company’s outstanding stock.
Outlook: The company issued first-quarter 2026 guidance. Revenue growth is expected to be in the low-30s-per-cent range, gross profit dollars to increase at a high-20s-per-cent rate, and a free cash flow margin in the low to midteens.
Action now: Even with the price drop, the shares look expensive with a P/E ratio of 135.07. If you have not taken half profits, do so now for a gain of over 6,000 per cent on the original price. Hold the balance.
Celestica (CLS-T)
Originally recommended on Nov. 20/23 at $38.46. Closed Friday at $401.17.
Background: Toronto-based Celestica was originally part of IBM. In 1996, it was sold to Onyx Corp. It began trading publicly in 1998 with the sale of 20.6 million shares at US$17.50. The company employs 26,000 people.
Celestica has two operating segments: Advanced Technology Solutions (ATS) and Connectivity & Cloud Solutions (CCS).
The ATS segment consists of its aerospace and defence, industrial, healthtech, and capital equipment businesses. The CCS segment consists of the company’s communications and enterprise (servers and storage) end markets.
Performance: I recommended the stock in November, 2023, when it was trading at $38.46. It reached a high of $512.83 in November but has gradually retreated since.
Recent developments: Fourth-quarter results beat estimates. Revenue was $3.65-billion, up 44 per cent from the same period last year. Adjusted earnings per share was $1.89, up from $1.11 a year ago. Both figures exceeded the high end of the company’s guidance.
“We had a solid finish to 2025, achieving revenue of $12.4-billion, up 28 per cent, while our adjusted EPS (non-GAAP) grew 56 per cent year-over-year,” said Rob Mionis, CEO of Celestica. “Driven by very strong results in 2025, and improved momentum into 2026, we are pleased to be raising our annual outlook. As demand for AI-related data centre technologies continues to strengthen, we now expect revenue of $17-billion and adjusted EPS of $8.75 for 2026.”
He went on to say: “We believe the revenue growth trajectory that we anticipate in 2026 will be sustained into 2027, and as a result, we are strategically increasing our planned capital investments to $1-billion this year. Importantly, we anticipate being able to fully fund this expansion organically through our operating cash flow.”
Growth: The company announced it is expanding its manufacturing capacity in the United States to support the growing demand for next-generation AI infrastructure. This expansion, scheduled for completion in 2027, is designed to enhance Celestica’s ability to support the production of complex data centre hardware, including Google Tensor Processing Unit (TPU) systems. The company will also invest in expanding its manufacturing capacity in south-east Asia.
Dividend: The stock does not pay a dividend.
Outlook: Positive. Revenue and earnings are exceeding expectations. But the stock is being dragged down by the weakness in the tech sector.
Action now: Take half-profits if you have not done so already. Otherwise, hold.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.