AI-led data centre boom is boosting fibre optic cable demand, says HFCL MD Mahendra Nahata

Artificial intelligence (AI)-driven investments in hyperscale data centres are creating a sharp rise in global demand for fibre optic cables, according to HFCL Managing Director Mahendra Nahata. The company, which reported record quarterly earnings, said its earlier investments in expanding manufacturing capacity have enabled it to capitalise on the surge in demand, particularly from export markets.

Speaking after the company's first-quarter results, Nahata said the key factor behind HFCL's strong performance has been the rapid growth of the fibre optic cable market, driven by the construction of hyperscale data centres across the world.

AI driving fibre demand

"The fundamental change is the growth of the fibre optic cable market, which we foresaw a couple of years ago, and we continuously increased our capacities," Nahata said.

He explained that the rise in hyperscale data centres is closely linked to the rapid adoption of artificial intelligence.

"Artificial intelligence... is throwing up so much massive amount of data that can only be carried by fibre optic cable. That's the reason the demand for fibre optic cable has increased," he said.

According to Nahata, HFCL anticipated this demand and expanded its manufacturing capacity in advance. As a result, the company has been able to meet rising global demand, with exports accounting for more than 70% of its fibre optic cable production.

Strong order book supports growth outlook

HFCL has also raised its FY27 revenue growth guidance to at least 40%, with Nahata attributing the confidence to the company's order book.

"It is simply our order book. We have an order book of ₹26,000 crore in hand at this point, which is five times the revenue of the last year," he said. The timing of equipment shipments and project execution may influence quarterly performance, but the company sees no reason why it should not achieve the revised growth target.

Data centre business to scale up

HFCL is also investing in new data centre connectivity products and expanding manufacturing capacity to serve growing AI infrastructure requirements.

Nahata said the company's data centre interconnect business is expected to begin contributing meaningfully by the fourth quarter of the current financial year or, at the latest, the first quarter of the next year.

The company expects the new business to generate around ₹800 crore in revenue this year and has decided to increase capacity five-fold to meet demand. HFCL is also expanding its optical fibre cable capacity to 3 million fibre kilometres and investing in preform manufacturing through backward integration to improve supply chain stability and competitiveness.

Margins expected to remain stable

Despite ongoing capital expenditure across telecom, AI data centres and defence, Nahata said the company does not expect margins to decline.

He said HFCL has long-term orders and visibility on raw material prices, providing confidence that profitability will remain protected. The company also expects demand for both fibre optic cables and defence products to remain strong over the next five years, supporting revenue growth.

Q1 results

HFCL reported a sharp turnaround in its June quarter earnings, posting a consolidated net profit of Rs 229 crore compared with a loss of Rs 32.2 crore in the year-ago period, while revenue more than doubled to Rs 1,915 crore from Rs 871 crore.

The company said exports remained the key growth driver during the quarter, contributing Rs 1,063 crore, or 55.5% of total revenue, while its order book touched a record Rs 26,665 crore.

HFCL's board also approved an Rs 215-crore investment in an AI business, including the development of an AI data centre connectivity facility, as the company targets 40% revenue growth in FY27.