Which Telecom Infrastructure Stock Is a Better Buy?

Synopsis: HFCL and Sterlite Technologies are telecom infrastructure plays benefiting from 5G and AI-led data center demand. HFCL’s order book is ~Rs. 21,200 crore with a strong turnaround, while Sterlite’s ~Rs. 7,300 crore order book is growing rapidly with a $1 billion hyperscaler contract.

The telecom infrastructure sector is witnessing strong structural growth driven by rapid 5G rollout, rising broadband penetration, and the explosive expansion of data centers fueled by cloud computing and AI workloads. Global and domestic capex is increasingly shifting toward high-speed fiber networks, optical connectivity, and digital backbone infrastructure, creating sustained multi-year demand visibility for companies in this space.

About the company and stock movement 

HFCL Ltd is an Indian telecom and technology company that designs and manufactures optical fiber cables, telecom equipment, and network solutions for sectors like telecom, defence, railways, and broadband infrastructure. It has grown into a vertically integrated firm involved in 5G products, Wi-Fi systems, routers, optical fiber manufacturing, and defence communication systems. 

It has delivered strong returns over different time periods, including about 305% over the past five years, 113% in the last year, 172% year-to-date, 172% in the past six months, and 46% in the last month.

Sterlite Technologies Ltd is an Indian technology company focused on designing and manufacturing optical fibre, fibre optic cables, and providing end-to-end digital network solutions. It serves telecom operators, data centres, enterprises, and governments, with a strong presence in building high-speed broadband and 5G-ready network infrastructure. 

It has generated strong returns across multiple time frames, including around 216% over the past five years, 724% in the last year, 525% in the last six months, and 90% in the last month.

Financials Overview 

HFCL reported a strong turnaround in its latest financials, with significant year-on-year growth across key metrics. Sales increased sharply by 128% to Rs. 1,824 crore in Q4FY26 compared to Rs. 801 crore in Q4FY25, reflecting strong business expansion. 

EBITDA improved dramatically from a loss of Rs. 37.1 crore to a positive Rs. 314 crore, indicating a major shift in operational efficiency and margin recovery. Net profit also rose substantially from a loss of Rs. 83.3 crore to Rs. 184 crore. Earnings per share turned positive at Rs. 1.17 versus a loss of Rs. 0.56 in the previous year, showing strong earnings recovery. 

Sterlite Technologies Ltd

Sterlite Technologies delivered a mixed but improving financial performance in its latest results, showing a clear recovery in profitability despite still weak historical earnings. Sales grew 37% year-on-year to Rs. 1,441 crore in Q4FY26 compared to Rs. 1,052 crore in Q4FY25, indicating steady revenue expansion. 

EBIDT increased by 56% to Rs. 195 crore, reflecting better operating leverage and cost control, though prior quarters showed some volatility. The company also reported a strong turnaround in profitability, with net profit rising sharply from a loss of Rs. 40 crore to a profit of Rs. 59 crore. Earnings per share also improved significantly to Rs. 1.21 from negative levels earlier, showing a return to positive earnings momentum. 

Order Book Overview and Breakdown

HFCL’s order book has reached an all-time high of Rs. 21,200 crore, with exports contributing Rs. 12,250 crore, accounting for about 58% of the total. This reflects a strong export-led composition alongside a healthy domestic pipeline. Management highlighted that this backlog provides long-term visibility, supporting revenue planning across multiple years.

In terms of structure, roughly Rs. 18,000 crore consists of deliverable product and project orders with execution timelines ranging from within this year up to about five years. The remaining ~Rs. 3,500 crore comes from AMC and O&M contracts, which typically span 6–7 years, adding more stable recurring revenue. The company also indicated a robust pipeline of “thousands of crores” in potential orders, while noting selective order acceptance due to capacity constraints, at times even evaluating whether to take on additional orders.

Sterlite reported a strong acceleration in order inflows for FY26 at Rs. 7,687 crore, marking a 109% year-on-year increase compared with Rs. 3,672 crore in FY25. The open order book also expanded significantly to Rs. 7,309 crore, up 67% YoY from Rs. 4,378 crore, reflecting sustained demand momentum and improved visibility in upcoming quarters.

On execution phasing, Rs. 1,468 crore of the current order book is scheduled for delivery in Q1FY27, with the remaining balance expected to be executed from Q2FY27 onwards. The growth in wins has been primarily driven by large-scale data center projects, especially in North America, alongside long-term contracts from Tier-1 telecom operators in India, indicating a mix of high-value global infrastructure and stable domestic telecom demand.

Capex

HFCL has outlined an aggressive expansion strategy with a FY27 capital expenditure (capex) plan of around Rs. 600 crore, which will be invested across its fiber business, optical fiber cable (OFC) operations, defence segment, and preform manufacturing. For FY28, the capex is expected to moderate to around Rs. 350 crore, indicating that the bulk of the expansion investments will occur in FY27.

To support these growth initiatives, the company has approved a preferential issue of promoter warrants worth approximately Rs. 555 crore. Management highlighted that this reflects strong promoter confidence in the business and will help fund key strategic projects, including backward integration in preforms, scaling up defence operations, and strengthening long-term working capital resources.

A major focus area is the company’s entry into the ammunition segment through a new facility in Andhra Pradesh. The project is included within the overall capex guidance, with around Rs. 125 crore earmarked in FY27 for land, buildings, and initial setup. Over the following two years, the company plans to invest an additional Rs. 250 crore in the facility. 

Sterlite’s management believes the company is positioned at the center of three major long-term capex cycles including FTTx, data centers, and 5G which are expected to drive sustained demand for optical infrastructure over the coming years. 

In the FTTx segment, industry deployments are projected to increase from 151 million fiber-km in 2025 to 170 million fiber-km by 2030. The company also highlighted large government-led programs such as the BEAD program in the US and BharatNet in India as important demand catalysts for fiber deployment.

Among these drivers, management sees data centers as the fastest-growing opportunity. Citing CRU estimates, the company noted that around 40% of global optical cable demand growth in 2026 is expected to come from data centers. North American data center installed capacity is projected to almost double from 60 GW in 2025 to approximately 115 GW by 2030, while hyperscaler companies are expected to spend around $762 billion on infrastructure investments, creating substantial demand for advanced optical connectivity solutions.

The company also expects strong growth from the global rollout of 5G networks. Management highlighted that 5G subscriptions are expected to reach 6.4 billion by 2030, carrying nearly 80% of total mobile traffic. Supporting this growth will require extensive investments in fiber backhaul, fronthaul, and network densification, reinforcing long-term demand for optical fiber and cable products.

A major emerging opportunity is the rapid adoption of AI-driven data centers, which management described as a “once-in-a-generation opportunity for optical connectivity.” As GPU interconnect speeds move from 400G to 800G and eventually 1.6T, copper-based connections become less effective and fiber becomes increasingly essential. AI workloads are also driving a significant increase in fiber usage within data centers. To capitalise on this trend, the company plans to invest around Rs. 500 crore in expanding its high-value data center portfolio and upgrading its asset base to maintain technology leadership.

Data Center Opportunity 

HFCL is positioning Data Center Interconnect (DCI) solutions as a key growth driver, leveraging its subsidiary HTL Limited. Beyond supplying optical fibre cables, the company is expanding into higher-value DCI products such as pre-connectorised systems, which are increasingly required for high-density AI and hyperscale data center deployments. 

The company has announced a multi-fold expansion of its DCI manufacturing capacity and provided clear revenue targets. Management expects DCI solutions to contribute approximately Rs. 400 crore of additional revenue in FY26-27, while indicating the actual figure could potentially exceed Rs. 400–500 crore. For FY27-28, the contribution is expected to rise further to around Rs. 800 crore, reflecting the strong demand outlook from AI-led infrastructure investments.

Importantly, DCI solutions are expected to generate margins above HFCL’s blended corporate margins. Unlike standard optical fibre cables, these products involve greater engineering content, customisation, and value addition, while often being manufactured in smaller batches. As a result, management believes the growing share of DCI revenues will support overall margin expansion and improve profitability over the next few years, making this segment one of HFCL’s most attractive growth opportunities.

In comparison to Sterlite, Data centers are emerging as the fastest-growing demand driver for optical fiber and connectivity infrastructure. Management highlighted CRU estimates that nearly 40% of global optical cable demand growth in 2026 is expected to come from data centers alone. This growth is being fueled by the rapid expansion of cloud computing, artificial intelligence (AI), and increasing data consumption, all of which require large-scale, high-speed fiber connectivity.

In North America, data center installed capacity is projected to almost double from 60 GW in 2025 to 115 GW by 2030, reflecting aggressive investments by hyperscale cloud providers. Management also noted that hyperscalers are expected to spend around $762 billion in capital expenditure, creating significant demand for optical networking solutions, fiber cables, and related infrastructure.

The opportunity is equally compelling in India, where data center installed capacity is expected to increase nearly fivefold, from 1.4 GW in 2025 to 8 GW by 2030. As enterprises, cloud providers, and AI workloads continue to expand, the need for robust fiber networks connecting data centers will rise sharply, providing a strong long-term growth runway for companies operating in the optical fiber and digital infrastructure ecosystem.

CLSA on Sterlite 

Sterlite Technologies (STL) has secured a massive supply order worth over Rs 10,000 crore ($1 billion) from a US-based hyperscale partner. Under the contract, which runs through FY29, Sterlite’s subsidiary will supply optical connectivity products to support the buildout of artificial intelligence (AI) data center infrastructure in the United States. To capture this growing7,300 global demand for high-capacity fiber, the company recently introduced its Celesta IBR cable series, featuring up to 6,912 fibers designed specifically for large-scale AI and cloud infrastructure.

Following this major deal, global brokerage CLSA raised its target price for Sterlite Tech by 60%, shifting it to Rs. 655 from Rs. 405 while maintaining an “Outperform” rating. CLSA noted that the order validates STL’s optical business and could fuel a 49% EBITDA compounded annual growth rate (CAGR) in the coming years. Driven by investor enthusiasm surrounding these AI-linked opportunities, the stock has experienced an explosive rally, surging more than 330% in 2026 and over 544% over the past year.

Conclusion

In conclusion, both HFCL and Sterlite Technologies are positioned to benefit from long-term growth in telecom infrastructure, 5G rollout, and data center expansion driven by cloud and AI demand. HFCL shows greater recent operational improvement, a larger and more diversified order book, and a visible multi-year execution pipeline, while Sterlite demonstrates faster order inflow growth and meaningful exposure to global hyperscale data center contracts. 

However, both companies have experienced earnings volatility in recent years, and their growth trajectories will depend on execution efficiency, margin sustainability, and the pace of industry capex cycles.

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