Tata Communications reported a 21% rise in EBITDA for the second quarter of fiscal 2027, supported by improved margins and reduced losses in its digital segment. While the company's shift toward AI and cloud services is gaining traction, brokerages like Motilal Oswal maintain a neutral stance with a price target of 1,980 rupees, citing the need for sustained profitability.
Tata Communications posted a strong operational performance for the second quarter of the 2027 fiscal year, with EBITDA increasing by 21% compared to the same period last year. This result surpassed some market expectations, with profit margins improving to 21.3%. The company is currently navigating a major business transition, pivoting from its traditional voice and connectivity business toward higher-value digital services such as cloud solutions, cybersecurity, and artificial intelligence-led infrastructure.
The core of the company’s recent performance lies in its digital portfolio, which grew by 19% year-on-year. While this segment has historically pressured overall profits due to the high cost of building new services and integrating acquisitions, the company showed progress in the second quarter by halving its digital losses compared to the previous quarter. Management noted that their current order book is growing at a double-digit rate, backed by diversified deals across global markets. Following a 15% EBITDA growth in the first half of the fiscal year, leadership remains confident in achieving double-digit growth for the full year.
Despite these operational improvements, brokerages are taking a balanced view. Motilal Oswal has maintained a neutral rating on the stock, setting a price target of 1,980 rupees. This approach suggests that while the company is successfully managing its transition, market analysts are closely watching its ability to sustain these gains. The target price reflects an expectation that the company must continue to improve revenue quality while strictly controlling the spending required for its digital expansion.
For investors, it is important to understand the risks inherent in this transformation. The company operates in a highly competitive enterprise connectivity and cloud services market. Expanding into new digital territories often requires heavy spending on infrastructure, which can impact cash flow in the short term. Additionally, execution risks—such as the time taken to integrate new technologies or win major contracts—can affect quarterly results.
The most important monitorable for shareholders in the coming quarters is the speed at which the digital segment reaches break-even. Investors should track whether the company can maintain its current cost controls while scaling its revenue from new, high-margin digital products. Any signs of margin pressure or delays in the planned profitability of the digital portfolio could shift the market outlook on the stock.