Sify Technologies Q3 2026: Contradictions Emerge in Capacity, Profitability, Margins, and Data Center Roadmap

Date of Call: Jan 13, 2026

Financials Results

• Revenue: INR 11,596 million, an increase of 11% over the same quarter last year

Guidance:

• Data Center business to become breakeven in the latter part of fiscal year 2026-2027, with profitability thereafter.
• Network business will grow alongside Data Center business, though at a different pace.
• IPO of Sify Infinit Spaces is expected to proceed with SEBI approval anticipated in January 2026, with listing guided by bankers.
• Capital expenditures are focused on data center expansion, with additional growth from new facilities in 2026.

Business Commentary:

Revenue and EBITDA Growth:

• Sify Technologies reported revenue of INR 11,596 million for Q3 FY 2025-2026, an 11% increase over the same quarter last year. EBITDA was INR 2,470 million, a 29% increase year-on-year.
• The growth was driven by strong demand for data center co-location services and network services, supported by investments in hyperscaler data centers and resilient networks.

Data Center Capacity and Sales:

• Sify sold 9.1 megawatts of data center co-location capacity in the quarter. The total design capacity is 188 megawatts, with 130 megawatts ready for service and 127 megawatts sold.
• The increase in capacity sales is attributed to rising demand for secure, high-performance digital infrastructure, particularly from enterprises and government sectors focusing on AI and cloud technologies.

Network Services Expansion:

• Network services accounted for 37% of the quarter's revenue. Sify Network Services provides services via 1,214 fiber nodes, a 9% increase over the same quarter last year.
• The expansion is due to strategic investments in fiber nodes and SD-WAN service points, enhancing network coverage and capacity to meet growing digital demands.

Digital Services and Future Outlook:

• Digital services constituted 23% of the quarter's revenue, although they continue to operate at a loss. Sify expects this segment to reach breakeven by the latter part of the next fiscal year.
• Investments in AI-driven platforms and digital services are aimed at capturing new opportunities in enterprise transformation, with a focus on long-term value creation.

Capital Expenditure and Financial Strategy:

• Capital expenditures during the quarter were INR 3,452 million, with a cash balance of INR 3,627 million as of December 31, 2025.
• The company is balancing fiscal discipline with strategic investments in data centers, networks, and digital platforms, supported by plans for an IPO to fund future growth and manage debt.

Sentiment Analysis:

Overall Tone: Positive

• Management highlights strong growth in revenue and EBITDA, with a strategic focus on AI and cloud infrastructure. The tone is optimistic regarding India's growth story and Sify's positioning as a leader in digital infrastructure, citing rising demand for secure, high-performance digital solutions.

Q&A:

• Question from Gregory Burns (Sidoti & Company, LLC): Update on the timing for the IPO of Infinit Spaces and major milestones.
  Response: Draft prospectus filed in October 2025; expecting SEBI approval in January 2026, with listing timing guided by bankers.

• Question from Gregory Burns (Sidoti & Company, LLC): Total design capacity and sold capacity.
  Response: Total design capacity is 188 MW; out of 130 MW ready for service, 127 MW has been sold.

• Question from Gregory Burns (Sidoti & Company, LLC): Roadmap for new data center construction over the next 6 to 12 months.
  Response: Two facilities at Rabale campus to go live in 2026; two other greenfield projects under construction, with deliveries middle of 2026 and 2027.

• Question from Gregory Burns (Sidoti & Company, LLC): Outlook for Digital services to reach breakeven or profitability.
  Response: Expect to reach breakeven in the latter part of fiscal year 2026-2027, with profitability thereafter depending on market scaling.

• Question from Unknown Analyst (StockHifi): Capacity sold since June 2025 and revenue generating portion.
  Response: Of the 12.16 MW sold, about 4 MW is revenue generating; remaining will generate revenue in upcoming quarters.

• Question from Unknown Analyst (StockHifi): Average contract tenure and return on capital employed per megawatt.
  Response: Hyperscale contracts are 7 years with renewals; enterprise are 5 years. Return on capital employed for stabilized facilities is in high teens.

• Question from Prateek Singh (IIFL Capital): Depreciation policy for power equipment and useful life.
  Response: Depreciation policy of 8-10 years aligns with capital recovery pricing model; actual equipment life is north of 15 years.

• Question from Prateek Singh (IIFL Capital): Margins in data center business and pricing environment.
  Response: EBITDA margins fluctuate 100-200 bps between 44%-45% due to ramp-up periods; no significant pricing challenges observed.

• Question from Sourabh Arya (Oaklane Capital Management LLP): Network business flatness in the quarter.
  Response: Price corrections and customer shift from MPLS to Internet contributed; Network business will grow alongside Data Center but at different pace.

• Question from Sourabh Arya (Oaklane Capital Management LLP): Details on new Google partnership and networking CapEx.
  Response: Partnership involves cable landing station in Visakhapatnam; strategic investment with minimal balance sheet impact, typically funded by customer.

Contradiction Point 1

Capacity Sold and Revenue-Generating

Conflict on the amount of sold capacity that is currently generating revenue, directly impacting financial transparency and revenue recognition.

How much of the 12.16 MW capacity sold since June 2025 is revenue-generating? - Unknown Analyst (StockHifi)

2026Q3: Approximately 4 MW is currently revenue-generating. - M. Vijay Kumar(CFO)

Why is the proposed IPO of Sify Infinite Spaces happening now, what percentage of the new entity will Sify retain, will Kotak’s investment convert into equity and what portion is being offered, how will the split affect customer contracts between the network and data center businesses, and what is the data center capacity (design vs. operational) along with the build roadmap? - Gregory Burns (Sidoti & Company)

2026Q2: The company has 188 MW of designed capacity (130 MW built), with 3 MW sold in Q2. - M. Vijay Kumar(CFO)

Contradiction Point 2

Digital Services Segment Profitability Timeline

Contradiction regarding when the digital services segment is expected to reach breakeven, affecting strategic focus and investor expectations for segment turnaround.

When do you expect the digital services segment to reach breakeven or become profitable? - Gregory Burns (Sidoti & Company)

2026Q3: The company expects the digital services business to reach breakeven in the latter part of fiscal year 2026–2027. - M. Vijay Kumar(CFO)

(1) Why structure the IPO through a holding company instead of a direct demerger, and will it be simplified post-IPO? (2) What is the expected IPO timeline? (3) Why has the network services margin structurally compressed, and can it return to 20%+? (4) Why is the digital services segment underperforming, and what is the turnaround plan? - Prithvi (Private Investor)

2026Q2: The company is focused on becoming relevant in the new market, with results expected in the coming quarters. - M. Vijay Kumar(CFO)

Contradiction Point 3

Network Services Margin Outlook

Contradiction on the near-term outlook for network services margins, influencing investment in the segment and financial planning.

What caused the Network business's flat performance this quarter and its growth outlook? - Sourabh Arya (Oaklane Capital)

2026Q3: The flatness was due to price corrections for existing customers... The Network business is expected to grow in line with the Data Center business, though likely at a slower pace. - M. Vijay Kumar(CFO)

(1) Why structure the IPO via a holding company instead of a direct demerger, and will it be simplified post-IPO? (2) What is the expected IPO timeline? (3) What caused the structural compression in network services margin, and can it return to 20%+? (4) Why is the digital services segment underperforming, and what is the turnaround plan? - Prithvi (Private Investor)

2026Q2: Margins are expected to improve and revert to the 20%+ range. - M. Vijay Kumar(CFO)

Contradiction Point 4

Data Center Operational Capacity

The reported total operational data center capacity differs between the two quarters, affecting understanding of the company's asset base and growth potential.

What is the current total design capacity, sold capacity, and new data center construction roadmap for the next 6–12 months? - Gregory Burns (Sidoti & Company)

2026Q3: The total design capacity is 188 MW; of this, 130 MW is ready for service... - M. Vijay Kumar(CFO)

What is the current commissioned data center capacity in operation, and what capacity is expected to come online in the next 12 months? - Gregory John Burns (Sidoti & Company, LLC)

2026Q1: As of the latest addition, the total operational capacity is 138 megawatts. - M. P. Vijay Kumar(CFO)

Contradiction Point 5

Data Center Capacity and Roadmap

Inconsistent statements about the design capacity of new facilities and the status of under-construction projects, impacting future capacity planning and investor confidence.

Could you provide an update on total design capacity, sold capacity, and the data center construction roadmap for the next 6–12 months? - Gregory Burns (Sidoti & Company)

2026Q3: The total design capacity is 188 MW; of this, 130 MW is ready for service... Two other greenfield projects are under construction, with one expected to deliver mid-year and the other mid-year next calendar year. - M. Vijay Kumar(CFO)

What new capacity is currently being brought online over the next 12 months? - Greg Burns (Sidoti & Company)

2024Q4: The company currently has 130 megawatts of operational design capacity. The two new facilities (Delhi and Chennai) each contribute 26 megawatts in Phase 1, with the Mumbai facility representing additional future capacity. - M.P. Vijay Kumar(CFO)