Sterlite Technologies Limited — Q3 FY26 earnings call

Call held 23 Jan 2026

Management summary

Sterlite Technologies Limited reported strong revenue growth in Q3 FY26, with total revenue at ₹1,257 crores and YTD revenue up 12% YoY to ₹3,311 crores. Despite tariff-related headwinds moderating Q3 EBITDA margin to 10.3%, YTD EBITDA grew 35% YoY to ₹410 crores. The company's open order book expanded to ₹5,325 crores, and its enterprise and data center business is targeted to reach 30% revenue contribution within 12-18 months, driven by innovation in next-gen optical technologies.

Highlights

  • Q3 FY26 revenue stood at ₹1,257 crores, reflecting strong growth momentum.

  • YTD FY26 revenue increased 12% YoY to ₹3,311 crores.

  • YTD FY26 EBITDA grew 35% YoY to ₹410 crores, with margins improving to 12.4% YoY.

  • Open order book reached ₹5,325 crores, providing strong revenue visibility.

  • STL Digital achieved positive EBITDA of ₹1 crore in Q3 FY26, marking its second consecutive positive quarter.

Concerns

  • Q3 FY26 consolidated EBITDA margin moderated to 10.3% due to tariff-related headwinds.

  • A one-time impact of ₹15 crores related to the new labor code was recorded as an exceptional item.

  • Optical connectivity attach rates moderated to 17% in YTD FY26 from 22% in FY25 due to product mix and project timing.

Key financials

  1. Total Revenue ₹1,257 Cr
  2. Total EBITDA ₹129 Cr
  3. Total EBITDA Margin 10.3%
  4. YTD Total Revenue ₹3,311 Cr +12%YoY
  5. YTD Total EBITDA ₹410 Cr +35%YoY
  6. YTD Total EBITDA Margin 12.4%

What they filed

Q1 FY27: revenue up 87.4%, net profit up 1870.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,074 998 1,052 1,019 1,034 −4%1,257 +26%1,441 +37%1,910 +87%
EBITDA117 106 125 132 129 +10%120 +13%195 +56%385 +192%
Net profit-14 -24 -40 10 4 +129%-17 +29%59 +248%197 +1870%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Q3 FY26 Revenue
₹1,260 Cr Total
  • Optical Networking Business (ONB) ₹1,174 Cr 93.2%
  • STL Digital ₹86 Cr 6.8%

Order book

high confidence

Total value

₹5,325 Cr

as of 2025-12-31 quantified

2.6% QoQ

Execution

INR 988 crores slated for execution in the next quarter, remaining INR 4,337 crores scheduled for execution over FY '27 and beyond.

Composition

  • Enterprise and Data Center (client type) ₹500 Cr
The robust order pipeline provides strong revenue visibility and reinforces the growth outlook for the year.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Net ₹1,331 Cr · 2.6× EBITDA
    Net debt stands at INR1,331 crores with debt-to-equity ratio of 0.87 and net debt to EBITDA at 2.58x.

Guidance & targets

Market Share

  • Enterprise and Data Center Revenue Contribution Market Share · next 12 to 18 months · High confidence 30%

    From 20% today

    Our enterprise and data center business is gaining traction with 20% revenue contribution in YTD FY '26, and we remain on track to scale this to 30% and expect it to be a key growth driver in the medium term.

    — Ankit Agarwal

Profitability

  • EBITDA Margin Profitability · long-term · High confidence 20%
    Directionally, this is a business where if we operate with the right utilizations of 70% plus, we are confident that ultimately, this is a business that should be 20% EBITDA margins.

    — Ankit Agarwal

What to watch in Q4 FY26

Tariff Impact Mitigation & Margin Recovery

Next quarter (Q4 FY26) and beyond
Current Q3 FY26 EBITDA margin 10.3% (17.9% operational before tariff impact)
Target Improvement in reported EBITDA margin

Why it matters

Direct impact on profitability and reflects effectiveness of mitigation strategies against tariff headwinds.

While underlying margin momentum remains strong, we have proactively started implementing some mitigation measures, such as passing on some proportion of tariff cost to customers and aggressively ramping up local production in the U.S. facility.

Risks & concerns

  • Tariff-related headwinds

    medium

    Moderated Q3 FY26 EBITDA margin to 10.3% due to US tariff reset effective mid Q2 FY26, reducing reported EBITDA by almost 760 bps. Management is implementing mitigation measures and negotiating with customers.

    Management acknowledged

  • Germanium availability

    medium

    Germanium, a critical raw material for glass operations, is tightly controlled, particularly in China. Management is evaluating global sources and utilizing local supply from its China facility to mitigate this risk.

    Management acknowledged

  • US Lawsuit

    low

    The US entity's case has moved to the US Court of Appeals after appealing a District Court judgment. Management is confident in their strong case and states there are no financial payout obligations at this stage.

    Management downplayed

  • Income Tax Order

    low

    A regular assessment regarding transfer pricing adjustments has resulted in a notice. Management is confident that, based on the merits of the case, no material financial impact is expected, though some deposits might be required (not exceeding 15-20%).

    Management downplayed

Q&A highlights

6 direct
Tariff Impact on Margins and Mitigation Direct
So as we shared, this has been a full quarter of the tariff impact. Definitely, ultimately, the amount of tariff we pay is a function of the amount of business that we do, particularly the products that we manufacture from India and we sell into the U.S. market. ... We are evaluating various other options of how we can reduce our impact of the tariffs...

Addresses the direct cause of Q3 margin moderation and outlines management's strategy to counter it, including client negotiations and US plant utilization.

Asked by Jalaj

AI Opportunity and Enterprise Business Revenue Target Direct
If you would have seen the press release, we shared, we had almost INR500 crores of orders broadly from the enterprise and data center segment. So, this is where our portfolio is now getting converted into good order wins. And as the demand continues, as our portfolio continues to improve, both on cable and connectivity, we do expect this ratio that we spoke about 20% to move towards 30% in probably next 12 to 18 months.

Provides a clear timeline and numerical target for a key strategic growth area, indicating confidence in AI-led demand.

Asked by Nikhil Choudhary

Long-term EBITDA Margin Outlook Direct
We won't be able to give a specific number, but what we have discussed Nikhil, in our previous calls as well. Directionally, this is a business where if we operate with the right utilizations of 70% plus, we are confident that ultimately, this is a business that should be 20% EBITDA margins. And actually, you can see that in our results already that if you exclude the tariff impact, then we would almost be at that 19-odd-percent, 18%, 19%.

Reiterates the long-term margin potential of the business and clarifies the underlying profitability before tariff impacts.

Asked by Nikhil Choudhary

Commercial Rollout of Hollow-Core and G.654.E Fiber Direct
I think practically over the next 2 to 3 years is when we see larger scale rollouts happening. ... G.654.E, as well, in some similar ways, is a little bit more advanced. There is a reasonable amount of demand that we are seeing globally...

Gives a timeline for the commercialization of next-generation fiber technologies, which are critical for future market leadership and growth.

Asked by Balasubramanian

North America Revenue Contribution and Tariff Impact Partial
So basically, as Ankit mentioned previously, we majorly act into the major long-term contracts. So ideal way to deal with it is that yes, we are bullish on the U.S. market, but at the same time, the tariff impact can be passed on to customers only at the time of renewal of contracts.

Clarifies how tariff costs are managed in long-term contracts and the mechanism for passing them on, impacting future margins.

Asked by Dhaval Jain

US Lawsuit and Income Tax Order Updates Direct
And linked to the legal matter in the U.S., so in September 2025 our U.S. entity, against which the case is there, it has appealed District Court's judgment. And now the case has moved to the U.S. Court of Appeals. ... So, as we are confident of our appeals, we believe we have a very strong case. ... So, see this income tax matter is in the regular assessment. ... no material financial impact is going to be there.

Provides updates on two significant legal/tax matters, reassuring investors about the financial impact and ongoing legal process.

Asked by Akshat Mehta

Germanium Sourcing Risk Mitigation Direct
So, as I said, there are global sources available. While China is the majority, there are other global geographies available for sourcing of germanium, which we are both evaluating and pursuing. ... And of course, we also have a facility in China itself, which we are also utilizing where we can use the germanium that is available locally.

Addresses a critical raw material supply chain risk and outlines multiple mitigation strategies, including diversification and local sourcing.

Asked by Anshul Saigal

US Manufacturing Facility Utilization Partial
So currently, it is only a part of revenue. So, it is a lengthy process to qualify your manufacturing unit for all the standard products which we do. ... So all that is currently going on with the clear objective of utilizing U.S. facility for full...

Highlights the current state and ongoing efforts to fully utilize the US plant, which is key for tariff mitigation and serving the North American market.

Asked by Anshul Saigal

2 min read 6 chapters

Detailed narrative

Q3 FY26 Financial Performance Overview

Sterlite Technologies Limited reported a Q3 FY26 revenue of ₹1,257 crores, contributing to a YTD FY26 revenue of ₹3,311 crores, marking a 12% YoY increase. The consolidated EBITDA for Q3 stood at ₹129 crores, with a margin of 10.3%. YTD FY26 EBITDA grew 35% YoY to ₹410 crores, with margins improving to 12.4% YoY, despite a one-time exceptional impact of ₹15 crores from the new labor code.

Optical Networking Business (ONB) Momentum

The Optical Networking Business (ONB) recorded revenues of ₹1,174 crores in Q3 FY26 and ₹3,115 crores YTD FY26, driven by strong volume recovery. The segment's Q3 FY26 EBITDA margin was 11.2%. The company maintains its #1 position in India as an end-to-end optical manufacturer and holds an almost 8% optical fiber cable market share outside of China, focusing on gaining market share and improving connectivity attach rates.

STL Digital's Growth and Profitability Turnaround

STL Digital demonstrated steady progress, achieving ₹86 crores in revenue for Q3 FY26 and ₹215 crores for 9M FY26. The segment reported a positive EBITDA of ₹1 crore in Q3 FY26, marking its second consecutive EBITDA positive quarter. This growth was supported by adding a new major customer and securing a multimillion-dollar SAP S/4HANA deal, expanding its consultant base to 1,120 professionals.

Robust Order Book and Future Visibility

The company's open order book reached ₹5,325 crores, showing an increase from ₹5,188 crores in Q2 FY26. YTD FY26 order intake was strong at ₹4,263 crores, representing a 40.3% growth over the previous year. Of the current order book, ₹988 crores is slated for execution in the next quarter, with the remaining ₹4,337 crores scheduled for FY27 and beyond, providing significant revenue visibility.

Advancements in Next-Generation Optical Technologies

STL is at the forefront of innovation in optical technologies, with successful multi-core fiber trials and upcoming launches of G.654.E and Hollow-Core fiber. Hollow-Core fiber, offering 30-47% lower latency, is expected to see large-scale rollouts in 2-3 years, while G.654.E, which delivers 30% lower signal loss, is more advanced and already seeing demand. These innovations position STL for future high-bandwidth, low-latency networks.

Managing Tariff Headwinds and Strategic Market Focus

Q3 FY26 EBITDA margins were impacted by tariff-related headwinds, reducing reported margins by approximately 760 bps. Management is actively mitigating this through negotiations with customers to pass on costs, ramping up US production, and hoping for a resolution of the India-U.S. bilateral trade agreement. The company's strategic focus on FTTx, data centers, and 5G is creating a strong multiyear demand tailwind, with North America and APAC (ex-China) being key growth markets.

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