Tata Communications has posted a much stronger September quarter, with profit nearly doubling and its digital business growing faster than the company as a whole.
The company reported Tata Communications Q2 profit of ₹341.03 crore for the quarter ended September 30, up 86.3% from ₹183.06 crore a year earlier. Revenue from operations rose 9.6% to ₹6,687.89 crore from ₹6,099.75 crore.
The improvement was even sharper compared with the June quarter. Profit more than doubled sequentially, while revenue increased about 1.6%.
What stands out, though, is where the growth is coming from. Data services continue to make up most of the business, but Tata Communications’ digital portfolio is expanding much faster.
Data Revenue Reaches ₹5,810 Crore
Data revenue increased 12.2% year on year to ₹5,810 crore.
That puts it well ahead of the company’s overall revenue growth rate and reinforces how much Tata Communications has changed from its older identity as a traditional telecom connectivity provider.
The business now covers cloud connectivity, cybersecurity, communication platforms, managed network services, media technology and other enterprise digital services.
Demand for basic connectivity has not disappeared. In fact, the company says data-centre-to-data-centre connectivity is becoming a significant growth opportunity.
But customers increasingly want the network combined with other digital services.
That is why Tata Communications data revenue matters more than simply tracking total sales.
Digital Portfolio Revenue Crosses ₹3,000 Crore
The faster-growing part of the quarter was the digital portfolio.
Revenue from these services climbed 18.6% to ₹3,016 crore from ₹2,542 crore a year earlier.
That means digital products now represent a sizeable portion of Tata Communications’ data business.
The portfolio includes cloud, security, unified communications, customer interaction platforms and other services used by enterprises running operations across several locations.
The shift is important because digital platforms can potentially provide better growth and stronger customer stickiness than traditional bandwidth alone.
Once a business connects its cloud systems, security tools and communication platforms through the same provider, replacing that relationship can become considerably more complicated.
EBITDA Growth Outpaced Revenue
Profitability improved faster than sales.
Tata Communications reported EBITDA of ₹1,422 crore during the quarter, up 21.2% from ₹1,174 crore a year earlier.
The Tata Communications EBITDA margin expanded to 21.3% from 19.2%, an improvement of roughly 202 basis points.
That is one of the stronger parts of the Q2 result.
Revenue growth of around 10% is healthy, but it becomes more valuable when operating profit is growing twice as quickly.
It suggests the company is getting better leverage from its existing network and digital infrastructure rather than having to spend at the same rate as every additional rupee of revenue.
The digital business also showed an improvement, with losses narrowing from the previous quarter.
Digital Losses Were Cut in Half
Tata Communications has been investing heavily in newer businesses, and those investments have not always been profitable immediately.
That is normal when a company is building products, acquiring businesses and expanding its global digital capabilities.
In Q2, however, digital losses were roughly halved sequentially.
The digital margin improved to negative 3.6%.
It is still a loss, so the job is not finished. But the direction matters.
If revenue from the digital portfolio continues growing at a high-teens rate while losses keep narrowing, the segment could eventually become a much more meaningful contributor to overall profitability.
That may be one of the figures investors watch most closely over the next few quarters.
AI Is Moving Into the Centre of the Strategy
Chief Executive Ganesh Lakshminarayanan pointed to artificial intelligence as another growth driver.
Tata Communications has been building what it calls a Unified AI Stack, aimed at helping enterprises connect AI models, data, infrastructure and business processes.
The idea is not simply to provide companies with access to an AI model.
Large enterprises often need help moving data securely, connecting applications, managing computing capacity and taking an AI-generated output into an actual business workflow.
That fits naturally with Tata Communications’ existing network and cloud infrastructure.
If companies start deploying AI at scale rather than running isolated pilots, the surrounding connectivity and infrastructure requirements could become just as important as the model itself.
Data-Centre Connectivity Is Becoming a Bigger Opportunity
The company is particularly optimistic about connectivity between data centres.
AI workloads require large amounts of computing power, and those workloads are increasingly spread across multiple facilities.
That creates demand for fast, reliable connections carrying huge quantities of data between data centres.
Tata Communications believes its global network gives it an advantage here.
The company has previously identified data centre connectivity in India as a potentially large opportunity as hyperscalers, enterprises and AI companies continue expanding their infrastructure.
Unlike ordinary internet connectivity, these links often require high capacity, low latency and strong reliability.
That plays directly into the kind of infrastructure Tata Communications has spent years building.
Profit Margin Rose to 5.1%
At the bottom line, the improvement was also clear.
Profit after tax margin rose to 5.1% from 3% a year earlier.
That 210-basis-point improvement helps explain why net profit grew much faster than revenue.
The company reported ₹341 crore in profit attributable to owners, compared with ₹183 crore last year.
Sequentially, the change was even more dramatic because Q1 FY27 profit had been only ₹130 crore.
That earlier quarter included some unusual items, but the Q2 rebound still shows a significant improvement in underlying profitability.
For investors following Tata Communications earnings, the key issue now is whether margins can remain around these levels while the company continues investing in digital products.
The Second Half Starts From a Better Position
The Q2 numbers give Tata Communications a stronger base heading into the second half of FY27.
Revenue is growing at a steady pace. Digital services are expanding faster than the group average. EBITDA growth has accelerated, and margins have moved above 21%.
The company also has two structural themes working in its favour: more data moving between data centres and more enterprises trying to turn AI projects into working systems.
Neither guarantees that growth will remain at the same pace.
Digital services remain competitive, AI infrastructure requires continued investment and enterprise spending can change quickly if economic conditions weaken.
For now, though, Tata Communications Q2 results show a business growing faster in the areas it has spent years trying to build.
The headline profit increase of 86% grabs attention. The more important question is whether the higher-margin digital portfolio can keep moving in the same direction.
