Sterlite Technologies (STL) may be moving into a different league as the rapid build-out of artificial intelligence (AI) infrastructure drives demand for the fibre networks that connect data centres. CLSA believes US and Indian data centres could become the company's biggest growth engine, with its expanding order book offering visibility into what it calls a structural, multi-year opportunity.
Analysts Saurabh Mehrotra and Deepti Chaturvedi have retained their ‘Outperform' rating on Sterlite Tech with a target price of Rs 950, on the back of accelerating data-centre demand, strong order wins and the company's positioning across the optical connectivity value chain.
Data Centres Are Becoming The Big Growth Driver
Data centres accounted for 21% of STL's revenue in Q1FY27, up from 16% in FY26, making the segment its fastest-growing business avenue.
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CLSA believes the underlying opportunity is structural. As AI workloads become more intensive, data centres require denser fibre interconnections, increasing the amount of fibre needed per rack and, consequently, the connectivity opportunity for STL.
In North America, data-centre capacity driven by hyperscalers and AI is expected to double from 63GW to 126GW by 2030, according to the brokerage.
India offers another major opportunity, with data-centre capacity expected to expand seven-fold from 1.6GW to 10GW by 2030.
Neuralis Opens Another Door
STL's ‘Neuralis' AI data-centre portfolio is helping the company participate directly in this opportunity.
The platform has already contributed to a $1.1 billion order win for an AI data centre of a US hyperscaler, giving the company a significant foothold in the rapidly expanding market.
CLSA also sees supportive conditions in India, where data-centre expansion is being backed by policy incentives, power availability and commitments from global hyperscalers and Indian conglomerates.
Order Book Jumps 155%
The growth opportunity is already showing up in STL's order pipeline.
The company's order book surged 155% quarter-on-quarter (QoQ) to Rs 186 billion in Q1FY27, led by the US hyperscaler order. The momentum has continued, with STL securing $210 million of orders from a leading international telecom infrastructure company in the current quarter, along with another Rs 9.6 billion order from a domestic telecom operator.
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STL's Q1 performance also reflected the improvement, with revenue and EBITDA rising 33-97% QoQ, while EBITDA margin expanded to 20%.
CLSA Sees Earnings Compounding Ahead
CLSA forecasts 14-21% CAGR in revenue and EBITDA between FY27 and FY29, with further upside possible if the current pace of order wins continues.
The brokerage also highlighted STL's position as India's No. 1 end-to-end optical manufacturer, with operations spanning fibre, specialty cables and connectivity solutions. Its integrated "glass to gigabit" model, 785 patents and 10 manufacturing facilities globally, including in the US, add to its competitive positioning.
With the balance sheet now net cash, CLSA believes STL is better placed to capture the next wave of data-centre investment.
That said, as AI pushes data centres to become denser and more interconnected, fibre is becoming a critical part of the infrastructure build-out — and STL is positioning itself to ride that demand.
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