It appears that the US-China rivalry is deepening in the data centre segment as well. As per a report by Reuters, the US is preparing to ban the import of certain data centre parts. This report, published a week ago, has already led to a 25% surge in the two major optical fibre companies with a strong interest in the US market. Financial Express has not independently established the veracity of this claim.
Having said that, we know the US, which is the hub of ongoing data centre expansions, has constrained related imports from China earlier. China’s optical-fibre cables already face a 35% anti-dumping duty. These higher duties have reduced the price competitiveness of Chinese fibre manufacturers. Many US buyers do not consider procuring fibre from China anymore, regardless of the price.
Commodity Research Unit expects optical-cable demand from data centres to rise 63% globally in 2026. The rapid expansion of Artificial Intelligence workloads is driving higher bandwidth requirements and increasing fibre intensity across data-centre networks.
Join now
Thus, the reported ban, if it were to be implemented, could provide an additional near-term boost to non-Chinese optical-fibre and connectivity suppliers. This tariff barrier, combined with US customer avoidance, has allowed globally competitive enterprises outside of China to capture significant US market share as US data centre capacity rapidly expands.
#1 Sterlite Technologies: The Hidden Beneficiary of Shortage Caused by China’s Exit
Sterlite Technologies leads the digital connectivity infrastructure market. The company has been a key beneficiary of strong demand from data centres and telecom operators. The company holds a 9% market share in optical cable outside of China. This means that Sterlite could be a major beneficiary of this ban, as evidenced by the surge its share saw before this development.
Sterlite Share Price is up 25% from 30 July
Q1FY27 Metrics: Achieving Target Margins Early
Sterlite also reported its highest ever quarterly performance across key financial metrics in Q1FY27. Revenue grew by 87% year-on-year to ₹1,910 crore. EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) grew 184% to ₹397 crore, from a lower base, and margins stood at 20.8%.
The company initially projected a 20% margin by the end of FY27. But it achieved this target in Q1FY27 itself. Net profit increased from ₹10 crore in the same quarter last year to ₹197 crore. Sterlite also became net debt-free during Q1FY27 and held a net cash balance of ₹483 crore. Higher fibre demand has structurally acted as a tailwind for Sterlite.
Increasing the attach rate of optical connectivity solutions to 16% in Q1FY27 from 15% in FY26 reflects the demand. Management aims to increase this to above 20% in Q2 and hit 25% by the end of FY27. Attach rate is the percentage of optical connectivity revenue relative to core optical fibre revenue. An increase in attach rate implies that it is selling higher connectivity solutions.
Decoding the ₹20,000 Crore Order Book
Sterlite’s order book stood at ₹18,618 crore as of June 30, 2026. Additionally, on August 5, 2026, the company received another order for $210 million (approximately ₹2,000 crore) for optical fibre supplies. The total order book has now grown to over ₹20,000 crore. Demand is so high that in Q1FY27 alone, the company received orders worth ₹13,100 crore.
Execution Pipeline and Strategic Shifts
A large hyperscaler placed an order worth approximately ₹10,000 crore with the company to supply optical connectivity products from FY27 to FY29. This was a key reason for the high order inflow during the quarter. Sterlite also received a US$ 100 million order in total for its Neuralis data centre portfolio.
About ₹2,228 crore of orders are scheduled for execution in Q2FY27. The remaining ₹16,390 crore of backlog will be executed in Q3FY27 and subsequent quarters.
North American Expansion and R&D Investments
Sterlite’s strategic execution shows a clear shift toward high-value integrated solutions and the US market. The Data Centre segment contributed 21% of total revenue in Q1FY27, a significant surge from just 1% in FY26. Together with the Enterprise segment, the revenue contribution is projected to scale to up to 50% in FY27.
Revenue from North America expanded to 54% in Q1FY27 (up from 39% in FY26), driven by robust demand and localised US manufacturing. This higher revenue contribution, combined with local US manufacturing, ensures that Sterlite can capture demand created by the shortage caused by Chinese players.
Further, to support this growth, STL plans to invest ₹500 crore per year over the next 3 years. It has also filed 9 new patents in Q1FY27, bringing its total IP portfolio to over 785 patents. Also, Sterlite won a dispute regarding its European patent with Fujikura. This has now removed all legal and commercial uncertainty for its data centre and telecom business in the UK and Europe.
#2 HFCL: The Indian Supplier Fueling the US Hyperscaler Data Centre Boom
Although HFCL is gradually expanding into the defence business, its core business remains telecommunications and digital infrastructure. HFCL is a leading optical fibre cable supplier in India and a major global player in optical connectivity. Like Sterlite, HFCL is also benefiting from the demand for optical fibre from hyperscale data centres.
Data centre connectivity revenue was ₹100 crore in Q1FY27. Management expects this business to generate revenue of over ₹700 crore in FY27. To support this, HFCL has data centre orders worth over ₹850 crore as of 30 June 2026. It is expanding its data centre interconnect plant capacity by 5x.
Strategic Shift Toward High-Margin Global Markets
The company has intentionally shifted away from lower-margin engineering, procurement, and construction turnkey work. Segment revenue from telecom products reached approximately 85% of total revenue in Q1FY27, up from 62% in Q1FY26.
HFCL is aggressively expanding its global footprint. Export revenues stood at ₹1,063 crores in Q1 FY27, compared to ₹210 crore in Q1FY26. Exports currently represent around 56% of revenue. Management is targeting an export share of 60%+ from FY27 onwards. Although HFCL didn’t share specific US market exposure, it remains a major part of its export business.
Capturing the US Hyperscale Infrastructure Boom
Notably, HFCL is already capturing demand vacated by Chinese suppliers who are facing heavy US restrictions. The recent move can further help HFCL to gain market share. Management also stated that the US market is a key buffer against domestic seasonality. During the second quarter in India, the monsoon season slows down optical fibre cable deployments.
HFCL Shares have also gained 20%
However, the US does not experience monsoons. It helps HFCL maintain a stable run-rate quarter-on-quarter. HFCL states the US as the fastest-growing market for hyperscale data centres. Data Centre capacity is expected to grow from 150 GW to 300 GW in 3 years. To capture demand, HFCL maintains an office in the USA.
It is supplying optical fibre cables to the majority of global Tier-1 telecom customers and hyperscalers, many of whom are based in the US.
Moreover, HFCL is positioning its highest-value portfolios to cater to the stringent requirements of US hyperscale networks. HFCL has commercialised advanced 7,000-fibre cables tailored for high-density hyperscaler data centres. While these cables are already being sold in other international markets, they are currently undergoing the US approval and qualification process.
HFCL is also developing ultra-high-density 14,000-fibre cables. This is expected to be finished within months to capture the next wave of US demand. Financially, HFCL also reported its highest-ever revenue and profitability during Q1FY27. This was driven by strong order execution across core segments and healthy demand in global optical connectivity.
Financial Turnaround: From Loss to Record Profitability
The company’s revenue from operations in Q1FY27 surged by 119.9% to ₹1,915 crore. EBITDA grew 937% to ₹445.3 crore as margins improved by 1,832 bps to 23.3%. This high growth is due to the low base of last year. HFCL turned profitable with a ₹245.6 crore profit in comparison to a loss of ₹29.3 crore.
HFCL management also initially projected an EBITDA margin of over 20% in FY27. However, it improved to 23.3% in Q1FY27. Technology products with in-house R&D and operating leverage further boosted margins.
Record ₹26,665 Crore Order Book Drives Upgraded Guidance
Looking ahead, management has increased FY27 revenue growth guidance from 20% to 40% and above. Products accounted for 85% of segment revenues in Q1FY27, and this is expected to remain around the same level. Exports are projected to account for 60% of revenue in FY27.
HFCL’s consolidated order book stands at an all-time high of approximately ₹26,665 crore. Of this, about ₹22,000 crore is scheduled for execution within five years. Optical Fibre Cable (OFC) orders constitute the bulk of the backlog at approximately ₹16,000 crore, while defence order backlog is ₹2,300 crore.
The Valuation Reality Check
Both companies have weak Return on Capital Employed (ROCE) and Return on Equity (ROE) due to their capital-intensive businesses and their historical loss-making trend. However, given the sharp improvement in profits due to the structural demand tailwind for optical fibre from data centres, return ratios may gradually improve.
Valuations also appear to be high, with both trading at a premium to their three-year historical median multiple and the industry median. If profits are sustained, the higher valuations could gradually come down due to a higher denominator. That said, the sharp return delivered by both the companies captures most of the near-term optimism.
| Peer Valuation | |||||
Particulars | EV/EBITDA Multiple (X) | Return Ratios | |||
| Company | 3Y Median | Industry | ROCE (%) | ROE (%) | |
| Sterlite | 38.2 | 14.9 | 37.8 | 7.7 | 1.2 |
| HFCL | 27.8 | 25.8 | 8.8 | 10.9 | 7.0 |
| Source: Screener.in (Source: 10 August 2026) | |||||
The US optical-fibre opportunity is becoming more interesting as AI data-centre capacity expands and the supply chain potentially moves away from China. Sterlite Technologies and HFCL are both well placed to benefit, with strong order books, rising exports and improving margins providing visibility.
However, the recent rally has already priced in much of the near-term optimism. Both stocks also trade above their historical and industry valuation benchmarks. The key question now is not whether demand will grow, but how much of this growth will translate into sustained earnings and higher return ratios.
Meanwhile, it’s worth keeping them on your watchlist.
Disclaimer:
Note: Throughout this article, we have relied on data from http://www.Screener.in and the company’s investor presentation. Only in cases where the data was not available have we used an alternate but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.
About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends.
A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The articles’ content and data interpretation are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources, and only after consulting such independent advisors as may be necessary.