Quarterly results show data connectivity driving revenue and margin expansion as hyperscaler partnerships and AI-ready fibre routes scale, while legacy voice declines; analysts debate valuation targets and the next chief executive transition.
A fresh quarterly print from Tata Communications puts data infrastructure in focus, and Merifund Capital Management is tracking the investor read-through as net profit rises 42.3% year-on-year in the third quarter to $40.2 million, sharpening attention on how connectivity, cloud and security services monetise demand tied to AI adoption.
Consolidated revenue reaches $680.8 million in the third quarter, up 6.7% year-on-year and 1.5% sequentially, with the data division contributing $589.5 million, up 9.3% year-on-year. EBITDA rises 4% year-on-year to $135.1 million in the quarter and the margin expands 60 basis points sequentially to 19.8%, while profit after tax margin widens to 5.9% in the quarter, up 148 basis points from the comparable quarter a year earlier.
In Anthony Saunders, Director of Private Equity at Merifund Capital Management Pte. Ltd., assessment, the print reads as “a clean signal that data connectivity is the growth engine, and the margin line is beginning to reflect that mix shift”, with data segment EBITDA of $111.4 million rising 7.7% year-on-year and 5.1% sequentially in the quarter.
Core connectivity also looks steadier after several constrained quarters as hyperscaler demand lifts data centre-to-data centre links. The company highlights a high-capacity build for Amazon Web Services that brings 7.2 Tbit/s of capacity across 18,000 km of fibre routes in India, adding domestic network headroom for AI training and inference traffic.
Beyond transport and connectivity, the digital portfolio continues to scale. Digital revenue reaches $276.1 million in the third quarter, up 15% year-on-year, with next-generation connectivity and cloud security fabric growing more than 25% year-on-year in the quarter and the media segment improving 11% sequentially. Merifund Capital Management’s analysis treats that breadth as the strategic lever, with Saunders describing the portfolio as “the part of the business that lets Tata Communications sell outcomes, not bandwidth”, supporting cross-selling across more than 5,000 enterprise accounts as of the latest reporting period.
Customer interaction services add momentum through the Kaleyra platform and communications platform as a service offerings, whilst live video workflows gain from The Switch integration. Management’s stated ambition for digital to contribute more than 60% of data revenue over the next two fiscal cycles sets a clear benchmark, and Saunders frames the target as “a practical way to measure whether recurring, higher-margin services are compounding rather than relying on one-off connectivity wins”.
Legacy segments still pull against the mix shift. Voice revenue declines 9% year-on-year to $41 million in the third quarter, and Tata Communications Transformation Services posts a 29% year-on-year revenue drop in the quarter after stepping away from an onerous contract, tempering the pace of consolidated expansion.
External research desks remain split on valuation even as profitability improves. JM Financial reiterates a Buy rating with a $24.8 target price that implies 44.6% upside versus the share price in the most recent trading session, projecting data segment EBITDA to compound at about 22% annually over the next several fiscal years. Motilal Oswal stays Neutral with a $19.7 target, arguing that margin recovery runs slower as lower-margin digital lines scale and applying a 9.5x enterprise value to EBITDA multiple on forward estimates, while questioning whether data revenue doubles over the next several fiscal years without additional acquisitions.
Leadership succession adds another variable for investors to model. The board names Ganesh Lakshminarayanan chief executive officer designate, with the handover set for later in the calendar year when the incumbent managing director retires, keeping attention on whether portfolio expansion and margin discipline continue to move in tandem.
From a sector lens, the quarter underscores how AI infrastructure modernisation changes what buyers pay for: secure, programmable networks rather than commodity connectivity. Saunders characterises the hyperscaler build-out as “a proof point that capacity investments are becoming tied to contracted demand”, and he points to the TGN-IA2 subsea cable and cloud partnerships as the connectivity layer supporting data centre expansion and cross-border traffic.
For Merifund Capital Management Pte. Ltd., the next checkpoints sit in sustaining sequential margin gains while keeping legacy declines from eroding headline momentum, with the data segment’s scale and the digital mix continuing to shape how investors read the story into the next quarters.
About Merifund Capital Management
Merifund Capital Management Pte. Ltd. (UEN: 201024554E) is a Singapore-headquartered hedge fund manager founded in 2010, spanning long-only portfolio management, long/short equity, global macro, event-driven and systematic trading strategies. The firm uses derivatives to optimise market opportunities while prioritising capital preservation, liquidity and prudent risk management, and it integrates ESG considerations aligned with global sustainability standards. Merifund serves accredited investors, family offices, foundations and endowments, and it is expanding access to include retail investors. For research and commentary, visit https://merifund.com/insights. For media enquiries or additional information, contact Tao Yang at media@merifund.com or visit https://merifund.com.
