Geojit Financial Services has reiterated its “ACCUMULATE” rating on Tata Communications with a revised 12-month target price of Rs. 1,860, implying an upside potential of nearly 13% from the current market price of Rs. 1,645. The brokerage believes the telecom and digital infrastructure major remains strategically positioned to benefit from rising enterprise AI adoption, expanding global connectivity demand, and the growing relevance of digital transformation services. While short-term profitability was affected by tax-related headwinds and one-off expenses, the company’s operational momentum remained intact in Q4FY26. Strong deal wins, improving margins, and sustained traction in high-value digital services continue to reinforce the long-term investment thesis.

Geojit Reaffirms Positive Outlook on Tata Communications

Global digital infrastructure expansion continues to support growth trajectory

Geojit highlighted that Tata Communications delivered a steady operational performance during the March quarter despite a challenging macroeconomic backdrop. The company, which operates in more than 190 countries and serves over 7,000 enterprise clients including 300-plus Fortune 500 corporations, remains one of India’s most diversified telecom and digital ecosystem players.

The brokerage noted that Tata Communications is gradually transitioning from a conventional connectivity provider into a high-value digital solutions enterprise, with increasing exposure to cloud, cybersecurity, artificial intelligence infrastructure, and software-defined networking.

Revenue Momentum Driven by Digital Portfolio Expansion

Data services business remains the core growth engine

Consolidated revenue for Q4FY26 rose 9.4% year-on-year to Rs. 6,554 crore, supported primarily by sustained momentum in the company’s data services segment and stable traction in voice solutions. The data services business generated revenue of Rs. 5,705 crore during the quarter, reflecting a strong 11.4% YoY increase.

Management attributed this growth to:

• 4.5% growth in core connectivity solutions
• 19.2% growth in digital portfolio services
• Healthy demand from international enterprise customers
• Expanding adoption of cloud-based networking solutions

The company’s order book also witnessed double-digit growth during the quarter, indicating sustained enterprise demand for digital transformation services across global markets. According to management commentary, nearly 70% of the company’s pipeline is now linked to digital portfolio offerings.

Operating Performance Improves Despite Tax Pressure

EBITDA margin expansion reflects operational leverage benefits

At the operational level, Tata Communications reported EBITDA of Rs. 1,284 crore during Q4FY26, registering a robust 14.4% YoY increase. EBITDA margins expanded by 90 basis points to 19.6%, compared with 18.7% in the corresponding period last year.

The margin improvement was primarily supported by:

• Higher contribution from digital services
• Improved operating leverage
• Disciplined cost optimization measures
• Better mix within enterprise solutions

However, reported net profit declined sharply by 65.9% YoY to Rs. 259 crore due to elevated tax incidence associated with one-off foreign jurisdiction expenses and a high base effect arising from asset sale gains in the previous year.

Despite the headline decline in reported profitability, Geojit emphasized that adjusted earnings remained relatively resilient, suggesting that the underlying operational business continues to strengthen.

Artificial Intelligence Strategy Emerging as a Structural Growth Catalyst

AI-led enterprise transformation could create long-term monetization opportunities

One of the most important strategic highlights from the quarter was Tata Communications’ growing focus on enterprise AI infrastructure and next-generation connectivity solutions. Management identified India’s data-center-to-data-center connectivity opportunity as a potential US$1 billion market by 2030.

The company recently introduced its IZO DC-to-DC platform, designed to deliver:

• Low-latency data transmission
• Bandwidth-on-demand capabilities
• High-resilience enterprise connectivity
• Scalable AI infrastructure support

Geojit believes the company’s aggressive positioning in AI-ready network infrastructure could shield it from broader macroeconomic weakness and traditional telecom pricing pressures.

Management Maintains Focus on Profitable Growth

Capital discipline remains central to long-term strategy

Management reiterated its emphasis on maintaining continuity in execution while prioritizing profitability and disciplined capital allocation. A major near-term objective remains achieving break-even in the digital portfolio business at the earliest possible stage.

The brokerage also pointed toward potential value unlocking from STT India, where Tata Communications holds a 26% stake. The data center operator is reportedly exploring an initial public offering, which could help the company realize substantial value from the investment over time.

Financial Estimates Reflect Strong Earnings Recovery Ahead

FY27 and FY28 earnings outlook remains constructive

Geojit expects Tata Communications to deliver a healthy recovery in profitability over the next two financial years.

The brokerage expects adjusted earnings per share to grow by nearly 57% in FY27, followed by another 33.5% increase in FY28, driven by stronger digital revenues, margin expansion, and improving operational efficiency.

Valuation Remains Attractive Relative to Long-Term Growth Potential

Improving margins and digital transformation justify premium multiples

Geojit has valued the stock at 23x FY28 estimated adjusted EPS to arrive at the revised target price of Rs. 1,860. The brokerage believes the company’s diversified revenue base, global network infrastructure, and AI-linked digital capabilities support premium valuations relative to traditional telecom peers.

At current levels, Tata Communications trades at:

• 27.1x FY27E earnings
• 20.3x FY28E earnings
• 10.0x FY27E EV/EBITDA
• 8.7x FY28E EV/EBITDA

Investment View: Why Investors May Continue Accumulating the Stock

Digital transformation, AI infrastructure, and global enterprise demand remain key themes

Geojit believes Tata Communications remains strategically positioned to capitalize on the next phase of enterprise digitization. Although near-term earnings volatility linked to taxes and macroeconomic risks may continue, the broader structural growth story appears intact.

Key positives supporting the investment thesis include:

• Strong digital portfolio growth momentum
• Rising AI infrastructure opportunity
• Improving operating margins
• Robust international enterprise demand
• Potential value unlocking from STT India IPO
• Healthy long-term earnings visibility

Investors with a medium- to long-term horizon may continue accumulating the stock on declines, particularly as the company deepens its positioning in AI-led enterprise connectivity and digital ecosystem services.