Sterlite Technologies Limited (STL) Q3 FY26 Earnings Call Summary

Summary

Sterlite Technologies Limited - Q3 FY 2026 Earnings Call Summary Friday, January 23, 2026 11:00 AM

Event Participants

Executives 2 Ajay Jhanjhari (CFO), Ankit Agarwal (MD)

Analysts 8 Aditya (AK Investments), Akshat Mehta (Seven Rivers Holdings), Anshul Saigal (Saigal Capital Advisors), Bajrang Bafna (Sunidhi Securities), Balasubramanian (Arihant Capital), Dhaval Jain (Sequent Investments), Jalaj (Svan Investment), Nikhil Choudhary (Nuvama), Saket Kapoor (Kapoor & Co), Sunil Jain (Nirmal Bang Securities)

Financials & KPIs

Geographic & Segment Commentary

• Optical Networking Business (ONB): Revenue reached ₹1,174 crores in Q3, driven by triple tailwinds of 5G, FTTx, and AI-led data center demand. While margins faced tariff headwinds, the segment saw volume scale with major wins in North American Tier-1 telcos. Strategic focus remains on high-density ribbon cables and expanding the “Make in India for the world” portfolio.
• North America: Now accounts for 36% of revenue (up from 25% in FY25), becoming the primary growth engine. The region is seeing demand outpace domestic supply, particularly for AI data center build-outs. Management is ramping up the South Carolina facility to mitigate 50% import tariffs on India-origin goods.
• STL Digital: Reported revenue of ₹86 crores with a second consecutive quarter of positive EBITDA (₹1 crore). The business expanded its client base to 34, including a multi-million dollar SAP S/4HANA deal with a U.S. healthcare major. Focus remains on profitable scale-up using a 1,120-consultant strong workforce.

Company-Specific & Strategic Commentary

• AI & Data Center Shift: Data center revenue contribution hit 20% YTD, with a target of 30% in 12-18 months. AI-led racks require 70% higher fiber density, favoring STL’s Intermittent Bonded Ribbon (IBR) and 160-micron fiber.
• Next-Gen Innovation: Launched world’s slimmest 864-fiber ribbon cable and successfully conducted multi-core fiber trials with Colt in the UK. Management is positioned for early leadership in Hollow-Core fiber, offering 30-47% lower latency for AI and quantum applications.
• Manufacturing Strategy: Investing $50M+ in U.S. capacity to serve local content requirements and bypass tariffs. The company is diversifying raw material sourcing for Germanium to mitigate China-related supply chain risks.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Tariff Mitigation & Contract Cycles

• Question: When will the impact of new pricing and mitigation be visible in margins? (Bajrang Bafna)
• Answer: U.S. contracts typically range 12-15 months. Gradual improvement is expected from next quarter, with full impact visible in 2-3 quarters as old contracts roll off and price pass-throughs kick in (Ajay Jhanjhari).

AI Infrastructure & Fiber Density

• Question: How significant is the move to AI-specific products? (Nikhil Choudhary)
• Answer: GPU-dense racks require up to 36x more fiber than traditional setups. STL’s IBR and high-density connectivity solutions are seeing traction, with ₹500 crores in recent orders from this segment (Ankit Agarwal).

Supply Chain (Germanium)

• Question: What is the mitigant if China stops supplying Germanium? (Anshul Saigal)
• Answer: STL is pursuing non-Chinese global sources and utilizing its local China facility. Multiple government and commercial channels are being used to ensure glass manufacturing remains uninterrupted (Ankit Agarwal).

Key Takeaway

STL delivered a quarter of strong top-line recovery, with YTD revenue growing 12% YoY, primarily driven by a surge in North American demand and AI-linked data center infrastructure. While the underlying operational EBITDA margin reached 17.9%, reported margins were compressed to 10.3% due to a 50% U.S. import tariff on India-origin products. Management is aggressively pivoting by ramping up its South Carolina manufacturing facility and negotiating price pass-throughs in new 12-15 month contracts. With a robust order book of ₹5,325 crores and a strategic shift toward high-margin connectivity and AI-ready high-density fiber, the company expects margin normalization as utilization exceeds 70%. Despite risks from global trade dynamics and raw material supply, STL remains positioned as a top-3 global optical player, anticipating that its dual India-U.S. manufacturing base will capture the next decade of digital infrastructure spend.