Sterlite Technologies Delivers Strong Q1 FY27 Results, Guided for Multi-Year Growth

The shares of this mid cap company majorly engaged in provisioning end-to-end passive optical connectivity for homes, business and many more were in focus after the company delivered Q1 FY27 result. With the market capitalization of Rs. 32,394 Crores, the shares of were trading at around Rs. 630 per share which is 8 percent discount from its 52 week high of Rs. 684 per share and is trading at a P/E of 137 whereas industry P/E stands at 50.5 Q1 of FY27 saw STL put up an exceptional performance, posting 87% growth in its revenue from ₹10.2 billion to ₹19.1 billion. This was on account of a 92% jump in its optical segment. EBITDA margins stood at 20.2%. High-Value Enterprise and Data Center business segments accounted for 39% of total revenues, thus meeting the company’s FY27 goal of 50%. The robust Q1 order bookings of ₹131 billion driven by a record-breaking ₹1.1 billion hyperscaler deal have brought the total order book to an all-time high of ₹186.2 billion. Moreover, STL added another technology feather in its cap with the launch of CONCAT and US Conec certification The data centers are now becoming increasingly fiber-centric with GPU-rich racks having up to 36x more fibers and AI-powered data centers needing about 70% more fiber density. This trend is further cemented by the forecasted capex of hyperscalers touching the level of USD 805 billion in CY26, marking a significant increase from the previously forecasted USD 570 billion for the year. The company, through its emphasis on enterprises and hyperscalers and portfolio of pre-terminated connectivity solutions, is well-placed to benefit from this multiyear demand tailwind. The management emphasized a strong multi-year growth profile driven by AI data centers, telecommunications fiber deployment, and government programs like BEAD in the US and BharatNet in India. Data center business income rose to contribute 21% to Q1 FY27’s revenue compared to 1% in FY26. The combination of data center and enterprise segment’s income together contributed 39%, easily beating the previous target of >30%, causing management to increase FY27’s guidance to 50%. The growth momentum continues to be supported by strong multi-year capex ramp-up by hyperscalers and neo-cloud vendors; in particular, the forecast for global hyperscaler capex in CY26 has been upgraded from ~$570 billion to ~$805 billion. Geographically, although the US is still leading in terms of current data center construction, India has become a key growth driver, while Europe is expected to follow suit in 1-2 years. STL achieved its 20% margin for FY27 EBITDA at the end of Q1 FY27, and due to that management increased the guidance of FY27 EBITDA margin from 20% to 23%. It is believed that this increase will be driven by better capacity utilization, rich customer and product portfolio, better realization rates, and an increasing attach rate for optical connectivity. The optical connectivity attach rate moved up to 16% (compared to 15% during FY26), reflecting increased uptake of value added solutions, with OFC sales reaching higher levels. The management aims to move above 20% in Q2 FY27 and achieve 25% attach rate in Q4 FY27. Having strengthened its positioning within the high-density AI data center infrastructure, STL won the US Conec MMC Certification. Moreover, after successfully testing the solution on one of the network operators’ grids, STL officially unveiled CONCAT, its new pre-terminated optical connectivity solution. The capacity utilization has improved further on a QoQ basis, and management has guided for improvements in the future due to increased demand in both telecom and data center channels. To help meet this, STL has stated that the total capex in the coming three years will be ~₹15 billion (about ₹5 billion per year). The availability of germanium will see gradual improvements due to a wider availability channel and technology that uses less of the material. In terms of reducing the cost of purchase, recycling of helium has started, while the increase in the prices of polyethylene is pass-through. In terms of capital, STL raised ₹15 billion through QIP, with 75% allocation to debt reduction and 25% towards other business purposes. The Nuvama analyst team has retained the ‘Buy’ rating on Sterlite Technologies but increased the price target ₹770, indicating an upside of about 22%. According to the brokerage, the company is well-positioned to capitalize on the investment cycle of data centers driven by artificial intelligence with a record order backlog and improved margin guidance along with increasing contribution from high-value enterprise and hyperscaler customers. Sterlite Technologies seems to be headed into a growth cycle, underpinned by healthy order flows, better profits, and increasing involvement in premium value-added AI data center and enterprise-related work. The company is in good shape to take advantage of the increasing demand across the world for fibre connectivity due to its good execution visibility, strong balance sheet, and continued capacity/technology investments. But continued execution and margin leverage will be key to realizing such expectations. Vachan is a Financial Analyst at Trade Brains with a PGDM in Finance. He is passionate about capital markets and equity research, with expertise in analysing financial statements, market trends, and business fundamentals to support informed investment decisions