Massive Rs 64,000 cr order books: 2 Indian stocks cashing in on AI’s hunger for fibre

Future designs could require up to 16,000 fibres per rack, 32X more than the 500 required in conventional setups. For optical fibre manufacturers, this shift is creating an opportunity to move beyond conventional telecom cables and supply specialised products for AI infrastructure. Two companies are already seeing the impact in their financial performance. One reported a 448% year-on-year jump in net profit to ₹394 crore in Q2FY27, while the other recorded net profit of ₹517 crore, compared with just ₹4 crore a year earlier.

Both have also built substantial order books totalling ₹64,000 crore, providing visibility into future demand. The question now is whether both these companies can sustain their recent profit growth as they ramp up production to meet hyperscaler demand. Although demand is currently concentrated in the US, India could become a major future growth driver as data centre projects by Meta and Reliance, Adani Group and Google scale up.

FE Stock Insights on WhatsApPGet instant alerts on high-conviction investment themes and fundamental deep dives—direct from Financial Express.Join now #1 HFCL: Hyperscaler Backlog and Backwards Integration HFCL Limited has established a strong position in the data centre and hyperscaler market. HFCL supplies optical connectivity products and passive infrastructure to several global hyperscalers and international networks.

To capitalise on strong data centre demand, HFCL has developed a specialised product portfolio, including fibre, cabling and interconnect hardware. It designs high-density optical fibre cables to handle data traffic inside and between data centres. The cable line includes micro cables, ribbon cables, and intermittent bonded ribbon cables. Globally, demand for high-density cables is rising because of investments in artificial intelligence and the expansion of server racks.

Order Book Dynamics: ₹28,911-Crore Backlog Anchored in AI Infrastructure HFCL's total confirmed order book reached ₹28,911 crore in Q2FY27. This backlog provides revenue visibility for the next 6-7 years. Optical fibre cables and data centre interconnects make up 64% of the company's total order book. Of the ₹18,500 crore export order book for cables and interconnects, about 70% comes from global hyperscalers.

On the revenue side, data centre products and specialised connectivity solutions generate 65% to 75% of HFCL's product division revenue. Conventional telecommunications operators (telcos) accounted for the remaining 25%. Data centre connectivity products command higher prices and deliver higher operating margins than standard telecom infrastructure. Pricing Power: How Hyperscaler Demand Boosts Realisations to $27/Km ParameterStandard Telecom CablesData Centre / Hyperscaler SolutionsPrimary Fibre TypeStandard 250-micron D-type fibre180-micron A2-type FiberFibre Price Realisation~$15 per kilometre$25-27 per kilometreManufacturing CharacteristicsStandard drawing speeds & jacketingReduced draw speeds, tight geometry, high fibre countsMargin ImpactStandard product marginsAccretive to overall marginsSource: Company HFCL generated ₹300+ crore in connectivity solutions revenue during Q2FY27 alone.

Full-year FY27 connectivity revenue is projected at ₹800 crore, with management targeting ₹2,000 crore in FY28. A higher share of data centre solutions drove EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) margin to 25.9% in Q2 FY27, up from 19.5% in Q2FY26. To meet hyperscalers' demand, HFCL is investing ₹1,800 crore across its manufacturing units. HFCL is investing ₹1,250 crore to build capacity of 600 metric tons (MT) per annum by October 2028.

A preform is a silica glass rod that serves as the primary raw material for optical fibre. This in-house preform production will meet about 50% of HFCL’s internal fibre manufacturing requirements. The remaining half will come from multi-year contracts. Notably, preform prices surged by up to 600% due to market tightness. However, HFCL’s multi-month contracts (up to 24 months) keep unit costs predictable throughout their term.

Current export demand is driven by North American hyperscalers. HFCL also expects demand to pick up from Europe, Southeast Asia, and the Middle East. India's data centre capacity is also projected to expand from 1.6 GW to 6-10 GW by 2030, supported by investments from major domestic conglomerates and government incentives. Earnings Acceleration: Q2 Net Profit Soars 448% to ₹394 Crore Consolidated revenue from operations grew 143.6% year-on-year to ₹2,541.8 crore in Q2FY27.

This surge was fueled by accelerated deliveries to global hyperscalers and a 493% YoY surge in export revenue. EBITDA rose 223.6% to ₹658 crore, and margins expanded 640 basis points to 25.9%. Net profit grew 448.1% to ₹394.2 crore. Management has raised its FY27 revenue growth expectation to at least 80% year-on-year from the initial 20% target. It expects to reach its ₹10,000 crore annual revenue goal well before the original FY29 timeline.

The company's total borrowings stood at ₹1,840.1 crore in H1FY27. Management plans to bring it down by FY28. HFCL Share Price #2 Sterlite Technologies: Global Scale and Debt-Free Turnaround Sterlite Technologies provides an end-to-end data centre portfolio branded as STL Neuralis. This portfolio supports internal cabling within server rooms and external data centre interconnect networks. Sterlite operates manufacturing facilities in North America, Europe, and Asia.

Sterlite reinvests about 2% of annual revenue in R&D to develop advanced optical mediums. Order Book Dynamics: ₹35,274-Crore Backlog Driven by Hyperscalers Driven by data centre demand, STL secured ₹32,026 crore in order intake during H1FY27, which is 4.2 times its total FY26 order intake. The order book reached a record ₹35,274 crore at the end of Q2FY27. Of this, ₹3,021 crore is scheduled for execution for Q3FY27 and ₹32,253 crore for Q4FY27 and beyond.

Revenue has now shifted from spot business toward a backlog of long-term contracts. This includes a ₹11,500 crore multi-year 'long-term supply agreement' with a global hyperscaler, spanning from 2026 to 2030. Additionally, it has a 'product award letter' worth ₹10,500 crore with another global hyperscaler, effective from FY27 to FY29. Value-Chain Evolution: Higher Attach Rates Fuel North American Surge The Data Centre & Cloud segment contributed 33% of revenue in H1FY27.

Management aims to increase this share to 50-60% of total revenue. Telecom & Citizen Networks represented 53%, and Large Enterprise contributed 14%. North America represented 61% of total revenue in H1 FY27, up from 25% in H1FY26. Europe accounted for 21%, while the rest of the world accounted for 18%. Sterlite’s global optical fibre cable market share (excluding China) rose to 9%. The optical connectivity attach rate reached an all-time high of 24% in H1 FY27, up from 20% in H1FY26.

This highlights that for every ₹100 of optical fibre cable sold, Sterlite generated ₹24 in additional revenue from optical connectivity solutions. The rising attach rate shows Sterlite is shifting from selling standalone cables to selling complete, integrated connectivity systems. Connectivity products carry higher profit margins than basic optical cable. In Q2FY27, operational EBITDA surged 385.8% year-on-year to ₹685 crore, while margin expanded 1,348 bps to 27.1%.

The Optical Networking Business reported EBITDA of ₹851 crore (+525.7%) and revenue of ₹2,461 crore (+151.1%). Total revenue surged 145% year-on-year to ₹2,529 crore. Earnings Explosion: Q2 Net Profit Rebounds to ₹517 Crore Net profit rose to ₹517 crore (including a one-time net gain of ₹161 crore) in Q2 FY27, up from ₹4 crore in Q2 FY26 and ₹197 crore in Q1 FY27. Management has set a target of ₹20,000 crore in revenue by FY29, more than four times the ₹4,750 crore recorded in FY26.

Management upgraded its FY29 operational EBITDA margin target from over 27% to more than 30%. After raising ₹1,500 crore, the company has a net cash balance of ₹703 crore. The company plans to invest ₹1,000 crore annually from FY27 to FY29 to increase its preform, fibre, and cable capacity by 50%. The funds will also be used to establish a new (greenfield) facility for 'pre-terminated assembly solutions.'

Sterlite Share Price Comparative Metrics: EV/EBITDA Multiples and Return Ratios Due to historically low profits, both companies have a low 'Return on Capital Employed' (ROCE) and 'Return on Equity' (ROE). HFCL trades at 22.6 times EV/EBITDA, compared with an industry median (8.4x) and its five-year median (20.7x). The premium reflects expectations of sustained growth in data centre connectivity, higher realisations and improving margins.

However, the stock's ability to justify this valuation will depend on how effectively it converts its strong order book into revenue and earnings. Its planned backward integration into optical fibre preforms could support margins over the longer term. Capacity expansion, execution and debt reduction remain important factors to watch. Valuation Comparison (X)ParticularsEV/EBITDA MultipleReturn RatiosCompanyIndustry5Y MedianROCE (%)ROE (%)HFCL22.68.420.710.87.0Sterlite27.028.613.27.71.2Source: Screener.in (Data as of October 23 2026) On the other hand, Sterlite trades at 27x EV/EBITDA, below its industry median of 28.6x but above its 5-year median of 13.2x.

The valuation reflects improving operating performance, a record order book and a growing contribution from data centre and cloud solutions. Its net cash position and planned capacity expansion provide further support. However, profitability should translate into sustainable bottom-line growth, mainly as both companies scale production and execute their agreements. On the risk side, a slowdown in data centre expansion and artificial intelligence investments could weigh on demand for high-density optical fibre cables, affecting both companies’ revenue growth and margins.

Keep these stocks on your watchlist to see how they scale up their data centre businesses. Disclaimer Note: Throughout this article, we have relied on data from and the company's investor presentation. We used an alternative, widely accepted and widely used source of information only when the data were unavailable. This article is meant only to share interesting charts, data points, and thought-provoking opinions.

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