Tata Communications Q3 Results: Net profit jumps 55% YoY to ₹364 crore, revenue rises 7%

Tata Communications, a Tata Group company, released its financial performance for the December quarter today, January 21, reporting a consolidated net profit of ₹364.28 crore, up 55% compared with ₹236 crore in the same period last year.

Sequentially, net profit rose 99% from ₹183.21 crore reported in the September quarter. Revenue from operations during the reporting quarter stood at ₹6,189 crore, a 6.74% increase over ₹5,798 crore in the December 2024 quarter.

The net profit growth was largely led by other income, which came in at ₹259.29 crore during the quarter.

In terms of segment-wise performance, revenue from the Data Services segment, which accounted for the bulk of total revenue, stood at ₹5,379.81 crore, up from ₹4,917 crore in the same period last year.

Revenue from the Voice Solutions segment declined to ₹373 crore, compared with ₹410.52 crore in the corresponding quarter of the previous year, according to the company's earnings filing.

The company's Voice Solutions segment includes international and national long-distance voice services, while the Data Services include core connectivity services and digital platforms & connected services.

On the operating front, the company reported an EBITDA of ₹1,228 crore, a marginal 4% increase from ₹1,181 crore in Q3 FY25. EBITDA margins stood at 19.84%, slightly lower than the 20.36% recorded in the December 2024 quarter.

Commenting on the results, Amur Lakshminarayanan, MD & CEO, Tata Communications, said, “This quarter’s performance reflects our disciplined focus on driving data-led growth with expanding margins and a healthy order book.”

"We are gaining momentum across the business, and the capability shift we have invested in is now clearly translating into stronger products and sharper execution for customers. With multiple launches ahead, we are well-positioned to build sustainably and accelerate the next phase of growth," Lakshminarayanan further stated.

The cable cuts issue in the Red Sea continues to restrict the growth and impact the margins of Tata Communications.

"We are not out of the woods (on the Red Sea issue). I think those cables are still under repair. So, we hope that will be completed in the next few months,” Lakshminarayanan told Mint.

Data services, which account for 87% of Tata Communications’ revenue, saw a 9.4% increase in revenue to ₹5,380 crore during the quarter. Data services include core connectivity services, digital platforms, and connected services. Lakshminarayanan attributed the growth to revenue generation from a large data centre to data centre connectivity project and some core connectivity products.

In the September quarter, Tata Communications had said it was looking to team up with its sister company Tata Consultancy Services Ltd (TCS), as the IT services company had announced a massive $6.5 billion investment to set up 1 gigawatt (GW) of new data centre capacity.

“It is too soon to comment. It is a process, they have to select a location, build a building and then comes the connectivity. We do have a partnership, we are engaged and so we will continue to have that engagement,” Lakshminarayanan said.

For Tata Communications, the Ebitda margins continue to decline. During the quarter, the margins fell 52 basis points to 19.8%. The management has earlier stated a target to improve the company’s margin to 23-25% by FY28.

During the earnings call with analysts, the management acknowledged that margins have been pressured by the integration of recent acquisitions, specifically Kaleyra and The Switch. These businesses currently operate at lower margins than the core connectivity business, leading to an initial dilutive effect.

Notably, Tata Communications is shifting its focus toward "SaaS-like" and software-defined products. These strategic bets, including AI Cloud (GPUs) and advanced security services, carry significantly higher margins than traditional connectivity, the management said during the call.

“The digital portfolio has many verticals – next gen connectivity, cloud and security, media, IoT, digital fabric elements. Within this portfolio, some are profitable and some are not. In the last few quarters, the margins are steadily improving. The higher the revenue and we keep the cost to deliver that at a lower trajectory, the margins will improve. We also have a new set of products, which are having high gross margins,” Lakshminarayanan said.

The company is looking to launch a suite of high-margin "SaaS-like" products by the end of January 2026, aimed at enhancing its "Digital Fabric" offering.

Tata Communications has been investing in AI cloud and agentic AI solutions, while also offering graphic processing units (GPUs) as a service to enterprises to help them manage their cloud computing requirements.

The company has bought close to 1,000 GPUs to date. On monetization of the same, Lakshminarayanan said, “We are more focused on enterprise workloads, rather than the big training models. So it is beginning to gather pace for us. We saw a good jump in the quarter and we anticipate that it will continue to grow for us.”

The company is currently focusing on utilisation of the remaining 500 GPUs out of the 1,000 before looking at further investments.

Tata Communications share price trend

The sell-off in Tata Communications accelerated following the release of its December quarter performance, with the stock crashing 6% to ₹1,607 apiece, extending its losing streak to a second consecutive session.

The decline has also contributed to a 12% drop in January so far. The stock had finished CY25 with a gain of 7.2%. Looking at its long-term performance, Tata Communications has underperformed the broader market, delivering only a 53% return over the past five years.

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