Sterlite Technologies: US tariff pressure, FY26 orders jump

STL’s positioning in fibre and digital connectivity

Sterlite Technologies Limited (STL) positions itself as a digital solutions company focused on building the “digital backbone” for global communication and connectivity. The company supplies fibre and connectivity solutions and works with telecom operators as they upgrade networks from 2G to 5G. STL says it partners with global service providers such as British Telecom and Vocus. It also supports Indian telecom operators and connectivity programs such as BharatNet for rural connectivity. STL operates with ten global production facilities and says it has deployed more than 45 million fibre km of optical cable in Europe.

US tariffs create near-term profitability pressure

STL has flagged US tariffs on fibre optics as a near-term headwind that is affecting profitability. The company said the tariff impact is creating margin pressure even as demand signals remain strong. In the same context, STL indicated that the tariff on exports to the US is 50%, which is weighing on near-term performance. Management also expects the tariff could be reduced through a BTA, although no timeline was provided. The key message from the company is that tariffs are a constraint on near-term profitability, but not a demand constraint in the markets it is targeting.

Demand remains strong in the US and Europe

Despite the tariff overhang, STL said it is seeing robust traction across its key markets, particularly the US and Europe. The company’s order book in the first half of FY26 has nearly doubled year-over-year. STL attributed the growth in orders to strong requirements from telecom operators and increasing demand from data centre clients. Management commentary linked this demand to telecom expansion and AI-led data centre infrastructure buildouts. For the US market specifically, STL cited industry growth expectations of a 10-12% CAGR for the next three to four years.

Manufacturing footprint and near-term execution focus

STL operates manufacturing facilities in India, Italy, and the US. The company is not planning a major expansion immediately, but it is focusing on improving utilisation at existing facilities. Management said capacity utilisation is targeted at around 80% in the coming quarters. The company linked this operational goal to an improvement in profitability, indicating that better utilisation could push EBITDA margins toward 20%. The emphasis, as described, is on execution and efficiency rather than a fresh capacity build.

R&D push for next-generation optical products

To address emerging data infrastructure requirements, STL said it is investing over Rs 100 crore in R&D this year. The company is developing next-generation optical products such as multi-core and hollow-core fibre. It also referenced high-capacity, high-density cables and advanced connectivity solutions. STL said these products are aimed at hyperscalers and data centre companies that need low-latency, high-bandwidth networks. The stated intent is to align product development with AI-led data centre network requirements.

India data centres seen as a multi-year opportunity

While the US remains STL’s largest growth market in its commentary, the company also highlighted India as an upcoming demand driver. Management said India is still in early stages but expects a growing requirement for fibre to power the country’s data centres over the next four to five years. This view is tied to hyperscalers and telcos expanding local infrastructure. STL’s commentary suggests it is preparing for this shift through product and capacity planning, even as the current order momentum is strongest in the US and Europe.

Defence applications and new use-cases like drones

STL said it has developed tactical cables for Indian defence requirements. It also said it is evaluating applications such as fibre optics for drone use. These statements indicate the company is looking beyond traditional telecom deployments into specialised connectivity applications. However, STL did not provide timelines or revenue contribution expectations for these newer use-cases.

Sustainability: green hydrogen partnership with Hygenco

STL announced a collaboration with Hygenco for Maharashtra’s first green hydrogen and green oxygen project for optical fibre. The planned project in Chhatrapati Sambhaji Nagar will supply green gases to STL’s glass preform facility. STL said this initiative would make it one of the world’s first optical fibre manufacturers to deploy 100% green hydrogen in its production processes. The company linked the move to its stated goal of achieving Net Zero by 2030. Hygenco will build, own, and operate the facility and supply green hydrogen for 20 years.

South Carolina facility and local manufacturing strategy

STL has strengthened its US presence with an advanced manufacturing facility in South Carolina. In earlier commentary around the facility launch, the company described the rationale as manufacturing locally to support customers with shorter lead times, customisation, and joint R&D. The overall investment cited for the South Carolina project is $16 million. STL also described the facility as about 168,000 square feet. The company said the facility is compliant with ISO 9001, 14001, and 45001 covering quality, environment, and health and safety.

Financial snapshot and key disclosed metrics

STL reported a net profit of Rs 4 crore for the quarter ended September 2025, compared with a net loss of Rs 14 crore in the same period last year. The company’s commentary also pointed to a capex plan of around Rs 350 crore for that year in the context of the US facility investment. Separately, in a regulatory filing referenced by the company, STL said it has worked with TruVista since 2021, supplying products such as Nova A1 fibre optic cable and MST Optoblaze optical connectors, and intends to expand the partnership for fibre-to-the-home in rural South Carolina and beyond.

Why the story matters for investors

The key tension in STL’s current outlook is between a tariff-driven margin hit and a demand-driven order build-up. The company has framed the US and Europe as strong demand markets, supported by telecom network upgrades and AI-led data centre infrastructure. At the same time, profitability in the near term is influenced by tariffs, making execution levers like utilisation and product mix more important. Investors will likely track whether STL can move utilisation toward its 80% target and whether that translates into the margin improvement it has signalled.

Conclusion

STL says US tariffs are pressuring profitability, but it is seeing strong demand across the US and Europe with an FY26 first-half order book that has nearly doubled year-over-year. The company is focusing on higher capacity utilisation, investing over Rs 100 crore in R&D, and expanding initiatives from data centres to defence and sustainability. The next milestones to watch are tariff-related developments referenced by management, progress toward utilisation targets, and the pace of telecom and data centre ordering across its key markets.