Earnings call transcript: Sify Technologies Q1 2025 sees revenue growth and strategic investments

Sify Technologies, with a market capitalization of $595 million, presented its Q1 FY 2025-2026 earnings, highlighting a 14% increase in revenue year-over-year, reaching INR 723 million. Despite a loss before tax of INR 322 million, the company continued to invest heavily in its infrastructure, with capital expenditures totaling INR 2,874 million. The stock price saw a modest increase of 1.16% to close at $8.265, reflecting cautious optimism among investors. Year-to-date, the stock has delivered an impressive return of 189%.

According to InvestingPro, Sify shows several notable characteristics, including being a prominent player in the Diversified Telecommunication Services industry. InvestingPro subscribers have access to 8 additional key insights about the company’s performance and prospects.

Key Takeaways

• Revenue grew by 14% year-over-year, driven by strong performance in data center services.
• Sify commissioned 8.6 MW of additional data center capacity.
• The company launched a unique pay-per-use colocation AI model.
• Sify is the first NVIDIA-certified liquid cooling data center provider in India.
• The stock price increased by 1.16% following the earnings announcement.

Company Performance

Sify Technologies reported a strong revenue increase of 14% year-over-year, demonstrating robust growth in its core business areas. The company capitalized on India’s growing demand for digital infrastructure, with significant contributions from its network services and data center colocation services. Despite the positive revenue growth, Sify reported a loss before tax of INR 322 million, indicating ongoing challenges in achieving profitability amidst its expansion efforts.

Financial Highlights

• Revenue: INR 723 million, a 14% increase year-over-year.
• EBITDA: INR 2,111 million, up 18% year-over-year.
• Loss before tax: INR 322 million.
• Loss after tax: INR 388 million.
• Capital expenditure: INR 2,874 million.

Outlook & Guidance

Sify Technologies remains optimistic about its future, focusing on AI workload enablement and expanding its data center capacity. The company plans to see results from recent investments within 12-18 months. Sify’s guidance for FY 2026 and FY 2027 indicates a gradual improvement in EPS and revenue, with projections showing significant growth in both areas. Analysts have set a target price of $14 per share, suggesting potential upside from current levels. The company maintains a FAIR Financial Health Score of 2.35 out of 5, according to InvestingPro’s comprehensive analysis framework.

Executive Commentary

Chairman Raju Weksana stated, "India is not just consuming AI, it’s rapidly combining up with the value chain to become a creator of AI tools." This highlights Sify’s strategic positioning in the burgeoning Indian AI market. CFO M.P. Vijayakumar emphasized, "Every investment decision is taken with long-term value creation in mind," underlining the company’s commitment to sustainable growth.

Risks and Challenges

• Continued losses before tax may impact future profitability.
• High capital expenditure could strain cash flow if returns are delayed.
• Market competition in digital infrastructure and AI services is intensifying.
• Economic fluctuations and regulatory changes in India could affect operations.
• Shifting from project-based to annuity-based digital services requires careful execution.

Q&A

During the Q&A session, analysts inquired about the pay-per-use colocation model and its potential impact on margins. Executives clarified that customers bring their own GPUs, allowing for flexible and scalable solutions. Questions also focused on data center capacity expansion and expectations for margin improvements, with management expressing confidence in their strategic direction.

Full transcript - Sify Technologies Limited (SIFY) Q1 2026:

Conference Operator: Ladies and gentlemen, thank you for your patience. This call will begin shortly. Once again, thank you for your patience, and this call will begin shortly.

Janine, Conference Operator: Good morning, everyone, and welcome to Sify Technologies Financial Results for the First Quarter Fiscal Year twenty twenty five to 2026. At this time, all participants are placed in a listen only mode and the floor will be open for questions following the presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Praveen Krishna of Sify Technologies. Praveen, the floor is yours.

Praveen Krishna, Investor Relations, Sify Technologies: Thank you, Janine. I’d like to extend a warm welcome to all our participants on behalf of Sify Technologies Limited. I’m joined on the call today by Mr. Raju Weksana, Chairman and Mr. M.

P. Vijayakumar, Executive Director and Group CFO of Sify Technologies. Following our comments on the results, there will be an opportunity for questions. If you do not have a copy of our press release, please call Weber Shandwick at (212) 546-8260, and we’ll have one sent to you. Alternatively, you may obtain a copy of the release at the Investor Information section on the company’s corporate website at www.sipitechnologies.com/investors.

A replay of today’s call may be accessed by dialing in on the numbers provided in the press release or by accessing the webcast in the Investor Information section of the Sify corporate website. Some of the financial measures referred to during this call and in the earnings release may include non GAAP measures. Sify’s results for the year are according to the International Financial Property Standards or IFRS and will differ somewhat from the GAAP announcements made in previous years. A presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP and a reconciliation of such non GAAP measures and of the differences between such non GAAP measures and the most comparable financial measures calculated will be made available on Citi’s website. Before we continue, I’d like to point out that certain statements contained in the earnings release and on this conference call are forward looking statements rather than historical facts and are subject to risks and uncertainties that could cause actual results to differ materially from those described.

With respect to such forward looking statements, the company seeks protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors, including competitive developments and risk factors listed from time to time in the company’s SEC reports and public releases. Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward looking statements, but are not intended to represent a complete list of all risks and uncertainties inherent to the company’s business. I would now like to introduce Mr. Raju Ichner, Chairman of Sify Technologies.

Chairman?

Raju Weksana, Chairman, Sify Technologies: Thank you, Praveen. Good morning, and thank you for joining us on the call. As India is entering into new generation of IT transformation, I firmly believe that next decade of digital infrastructure will be returned in India. The pace at which public and private enterprises are investing in technology, cloud adoption and automation is unmatched, driven by an urgency not just to participate in the digital economy, but to lead it. Government policy, industry ambitions and a vibrant innovation ecosystem are combining to create a perfect storm of opportunity.

National programs like Digital India, the India AI Mission are bringing in investments in compute infrastructure and digital access, while regulatory clarity is unlocking private capital into hyperscale data centers, five gs and beyond. India is not just consuming AI, it’s rapidly combining up with the value chain to become a creator of AI tools, frameworks and domain specific solutions. This ambition will translate into robust demand for integrated infrastructure that supports high performance workloads, edge computing and sovereign data requirements. India will not just be the growth market, it will be the growth engine. Let me now bring in our Executive Director and Group CFO, Mr.

M. E. Vijaykumar, to explain both the business and the financial highlights of the last quarter. Vijay Kumar?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: Thank you, Chairman. Greetings to all. We remain steadfast in our commitment to cost efficiency and fiscal discipline as we navigate an increasingly complex business environment. Every investment decision is taken with long term value creation in mind, overseen by a rigorous approach to risk management and effective execution. While our current results reflect the impact of depreciation, interest cost and increased manpower expense, these are highly conscious trade off in our strategy to build future ready capabilities across our businesses.

At the same time, we are embodying sustainability as a foundational business tenet well beyond the requirements of regulatory compliance. Ultimately, our focus remains on delivering predictable long term value to the stakeholders while staying true to our disciplined investment philosophy and high standards of accountability. Let me now expand on the business highlights for the quarter. The revenue split between the three businesses for the quarter was Network Services 41%, Data Center Colocation Services 37% and Digital IT Services 22%. During the quarter, SIFI commissioned 8.6 megawatts of additional data center capacity.

As of December 2024, SIFI was providing services via fiber nodes across the country, and since then, we have seen an increase of 14% over the same quarter quarter on quarter. Sify has deployed about 9,473 contracted SD WAN service points across the country. A detailed list of our key wins is recorded in our press release, which is now live on our website. Let me briefly sum up the financial performance for quarter one of financial year twenty twenty five-twenty twenty six. Revenue was INR 723,010,000, an increase of 14% over the same quarter last year.

EBITDA was INR INR2111 million, an increase of 18% over the same quarter last year. Loss before tax was INR322 million. Loss after tax was INR $388,000,000 after considering tax on the profits from our data center subsidiary. Capital expenditure during the quarter was INR2874 million. I will now hand over to our Chairman for his closing remarks.

Chairman?

Raju Weksana, Chairman, Sify Technologies: Thank you, Ajikma. In the quarters to come, we will deepen our focus on enabling AI workloads and attracting a new generation of forward thinking enterprises. With our integrated infrastructure, digital infrastructure and proven service maturity, we are uniquely positioned to lead. I thank you for your continued belief in our journey. We remain energized by the possibilities that lie ahead.

Thank you for joining on this call. I will now hand over to the operator for any questions. Operator?

Janine, Conference Operator: Thank you very much, Chairman. At this time, we will be conducting our question and answer Thank you. Your first question is coming from Greg Burns of Sidoti and Company. Greg, your line is live.

Greg Burns, Analyst, Sidoti and Company: Good morning. Thanks for the update on the data center capacity that you added this quarter. Can you just remind us how much data center capacity has already been commissioned, is in operation? And maybe what your expectations are for the next twelve months in terms of how much capacity you expect to be coming online?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: Yeah. So two things. One is two greenfield data center projects at the National Capital Region, Delhi and at Chennai have gone live in the last four months, both of which have a design capacity of 26 megawatts each. From the operational capacity perspective, about 8.6 megawatts got added in the quarter, taking the total operational capacity, built capacity available for sale to 138 megawatt.

Greg Burns, Analyst, Sidoti and Company: Okay. Great. Thank you. And then I guess, is is there a, like, a timeline or a road map for other greenfield data centers that you’re bringing online this year, or is that not something you’re ready to share? Yeah.

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: No, there is there are two data center facilities which are coming up in Mumbai, which are under construction, which will go live later part of this financial year. Both of them have a design capacity of about 52 megawatt. And beside that, there is another greenfield project also, which is under construction, which details we’ll discuss once the project reaches a little advanced stage of completion. Okay.

Greg Burns, Analyst, Sidoti and Company: Great. Thank you. And I just wanted to talk a little bit about the pay per use colocation AI model that you, I guess, press released a couple months ago. Can you just talk about, you know, maybe how that model works? What kind of investment is required on your end?

And maybe what you expect the returns to be, that maybe the payback period or the types of returns you expect to get on that model? Thank you.

Raju Weksana, Chairman, Sify Technologies: Okay. So, Greg, the way payback colo model works see, we have three data center campuses, Mumbai, Chennai, and Noida. All are certified by NVIDIA. We are the first guys certified by NVIDIA liquid cooling for 130 kilowatt per rack. So the way these data centers are ready to use for a liquid cooling, And now what we are doing, if anybody wants globally, wants to host their GPUs in one of these facilities, we are offering Colo as a per usage model.

So for example, we took about five or six different GPU types from Nvidia, and we are offering per hour base, per demand base, per monthly base, per year base. That way anybody wants to deploy like AI cloud for either AI training, AI inferencing globally, so they can host with us. And so that is a business model we are offered. I think we are offered probably unique, I don’t think anybody offered colo pay as you go model. And we are getting some interest.

All these three centers are capable of doing this. So we just started, and we are getting some interest, global presence, global requirements to host here. At this point we don’t know the numbers and we are marketing at this point and there is some interest.

Greg Burns, Analyst, Sidoti and Company: Okay. Great. Thanks. So just so I understand, you you are you are buying your own GPUs, hosting them in your own facilities, and then leasing them out on a per use basis. That’s what’s happening here?

That’s the model?

Raju Weksana, Chairman, Sify Technologies: No. No. No. No. We are not buying GPUs.

Other than GPUs, bring your own GPUs, and we can offer you pay per use model.

Greg Burns, Analyst, Sidoti and Company: Okay.

Raju Weksana, Chairman, Sify Technologies: So if you look at if you if you look at it, you know, GPU per hour, they charge. Right? Something like that. So to complement that, if somebody has GPUs, they can bring these GPUs, and we are offer colo model to match that GPU pricing. So that way one can offer GPU as a paper model service.

Greg Burns, Analyst, Sidoti and Company: Okay. Thanks. Then, Vijay, you talked about kind of the how you’ve been investing into the business and how that’s maybe detracting from from near term profitability, but obviously, you expect to benefit from that over time. Is there a timeline on maybe when we might see a little bit more leverage flowing through the model? Is there a horizon on that?

Is it a one, two year of still investment period that’s going to be going on? Is there anything you could help us there with kind of looking out to the future and when we might see a little bit more leverage in the business?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: Yeah. So Greg, as you would have observed from the press release information, segment reporting, the network business and the data center business are doing pretty well. The digital IT services is the business where we continue to invest on people to build capabilities. In terms of an horizon at this point in time, while I don’t want to sound forward looking, but I see anywhere between twelve to eighteen months for us to start seeing results from the efforts we have put in over the last two years should to start flowing in.

Greg Burns, Analyst, Sidoti and Company: Okay, great. That’s very helpful. Thank you.

Janine, Conference Operator: Thank you very much.

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: Thank you.

Janine, Conference Operator: Your next question is coming from Mihir Saka of Priti. Mihir, your line is live.

Mihir Saka, Analyst, Priti: Thank you so much for the opportunity. So, actually, I’m joining this call for the first time, and I joined the call a little bit late.

Janine, Conference Operator: Oh, Mihir, your your signal seems to be cutting out. It’s very difficult to hear. Can we just try a diff different location? Yeah.

Mihir Saka, Analyst, Priti: Yeah.

Sri Kant, Private Investor: Just a second.

Praveen Krishna, Investor Relations, Sify Technologies: Okay. Mahesh, if you are on a

Sri Kant, Private Investor: handheld Can you hear me now? Yes.

Janine, Conference Operator: That’s better. Okay. Thank you.

Mihir Saka, Analyst, Priti: Yeah. My question was regarding the data center business. What is our current capacity after the 8.3 megawatts that we have added as of today?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: 138 megawatt of capacity is built and operational.

Mihir Saka, Analyst, Priti: Okay. And, what is our plan for this financial year? How much are we planning to add?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: As I was responding to the earlier queries, we have Yeah. Taken two Greenfield Data Center projects live, where both of them have a design capacity of 26 megawatt each. And as the customer demand gets built up, we will keep operationalizing that portion of the capacity.

Mihir Saka, Analyst, Priti: Okay. Okay. And are there any plans to for the IPO of the digital CC Infinite space on the cards?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: At at at this point in time, we continue to evaluate various sources of raising capital, and Mhmm. We’ll get guided by our board as to what will be the best option for raising capital and the timing of the same. We’ll keep the market informed at the when there’s a tangible decision.

Mihir Saka, Analyst, Priti: Okay. Okay. And on the digital services business, so I was just going through the detailed segmental report. So on year on year basis, I think so, pretty much, the top line has been flat, and losses have also increased on the operational basis. So what kind what are the plans for the digital services business?

And can you throw some color, like, paint some picture, like, why the top line has been flat, and what are plans to turn around this segment?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: Yeah. Reason for top line to be flat is a change in the model where there is a focus more on annuity revenues versus project based revenues. So earlier, share of project based revenues is to be high. We have been gradually moving to recurring or annuity services business. So we’ll continue to build our annuity business.

And as far as the losses are concerned, they’re a function of the investment we are making in people. We started this journey about three years back, and we continue to build capabilities to be relevant for the India IT services market, about which we are very confident about India enterprises outsourcing their IT to enter to companies like us.

Mihir Saka, Analyst, Priti: Mhmm. Okay. And, like, what kind of timeline or of horizon have you planned to turn this around, like, into profit?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: Yes. Well, I don’t want to sound as forward looking. The current plan is over the next twelve to eighteen months, we should see the losses shrinking and operating performance getting better.

Mihir Saka, Analyst, Priti: Okay. Okay. And, actually, I was trying to reach out to mister Praveen, who handles our IR, and I actually wanted to get more detailed understanding of our business model, like, offline. So would it be possible to arrange a call, or can we connect offline after this call?

Raju Weksana, Chairman, Sify Technologies: You You can tell me here.

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: We can be here. We can be here.

Mihir Saka, Analyst, Priti: Yeah. Yeah. Actually, I already, shoot you a mail, like, a month ago. I will, send the mail again. So, what would be the email ID Sure.

On which I can send?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: Pravin dot Krishna, pravwen,.Krishna@SifyCorp.com.

Greg Burns, Analyst, Sidoti and Company: Okay.

Mihir Saka, Analyst, Priti: Thank you so much. Yeah.

Conference Operator: That’s it from me, sir.

Mihir Saka, Analyst, Priti: Thanks. Have a good day.

Janine, Conference Operator: Thank you very much. Just a reminder there, if there are any remaining questions, you can still join the queue by pressing star one on your phone keypad now. Just wait a moment to see if anyone else has a question. Yes. We have a question coming from Sri So who is a private investor.

Sri, your line is live.

Sri Kant, Private Investor: Sir, good evening. This is Sri Kant here. Thank you for the opportunity. I have a couple of questions which are, you know, more or less in line with what I have asked probably in the previous earnings call as well. The first question would be, the the newly opened Chennai DC has now started adding to the revenue?

Yes. Okay. Okay. Second thing is that, you know, given that you are in, you know, IT services, that kind of a company, not a pure brick and mortar manufacturing company, I would have thought the EBITDA margin should expand. Right?

I mean, closer to the 25% range, but I see that it’s consistently always in that 20%, including this quarter, it’s about roughly 20%. When do you see that margins expanding? You know, given that so many DCs are already functional over a period of time, when you see some kind of, you know, operating leverage kicking in?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: Yeah. Shrikanth, Vijay Kumar here. Shrikanth, we have these three distinct businesses with different capital deployment characteristics. The data center business has an EBITDA margin of close to 45%. And we have our network business, which has an EBITDA margin of about 18%.

And we have the IT services business, which the earlier queries also sought information, which is work in progress.

Sri Kant, Private Investor: Okay. Okay. And the the full the year, I mean, I know generally, you know, you don’t give any guidance. In terms of growth across the three segments, would it be safe to assume a double digit kind of a growth for the rest of the year?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: That’s a wish list all of us work for.

Sri Kant, Private Investor: Okay, okay. And and I see that, you know, the the the network business has always been stable, you know, roughly around 40% of the overall business. Data data center, obviously, being an emerging emerging sector and a growth sector, you know, has slowly creeped up from, I don’t know, from 25% contribution to the top line to now almost close to 35, 36%, I think. And the digital has been of degrowing from, you know, 28, 29% to now, I think, this quarter, maybe roughly 21, 22%.

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: You’re right.

Sri Kant, Private Investor: This is in line with the with the conscious call that the digital will remain a part of the offering, but we don’t see that as a growth driver. No,

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: no, no. That will be a growth driver, but there’s a change of the business model, which I was articulating earlier. The digital services earlier used to be more project based revenue, whereas now it’s more of services based revenue. And when you do annuity recurring kind of a business, the revenues are small, but they come over a longer period. So that’s a conscious decision we took about few years back, and it is work in progress as we are changing the mix.

Sri Kant, Private Investor: Right, right. And I’m not looking at the net income as such, but even the EBITDA margins have been slightly improving, not that much. What are the you know, I’m sure it’s it’s a combination of both, like, you know, wherever we can get some kind of premium pricing or premium offerings or add on services to get that additional margin, or maybe some sort of operating leverage or reduction in SG and A. When do you see the margins more towards at the, the group level, I’m talking about the consolidated level, seeing more in in in the 25% region?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: No. At I

Sri Kant, Private Investor: mean, there an aspirational goal? Yeah. Yeah. Sorry. No.

No. Of course. Of course. Of course.

Raju Weksana, Chairman, Sify Technologies: Of course. We have bigger operational goals, but we

Sri Kant, Private Investor: are trying to achieve that. Yeah. Yeah.

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: Yeah. So once we see the IT services business gain traction, automatically, we should see that reflecting in the consolidated EBITDA.

Sri Kant, Private Investor: Of course, I know you guys are trying very hard. Will it see a gradual, like a 100 basis point kind of improvement over the next several quarters?

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: No, we are certainly working for that.

Sri Kant, Private Investor: I think at 25% margin, everything changes. Right? You know, the the the books look far more clearer.

M.P. Vijayakumar, Executive Director and Group CFO, Sify Technologies: Our focus is not on the consolidated one because all the three businesses are different, different characteristics, So I think we will I don’t want to spell out the target EBITDA, but data center will be more or less will get little operating leverage benefit. Network, we will see little higher operating leverage benefit. On the IT services business, once we get the offerings more stable and it gets to profitability, it will improve.

Sri Kant, Private Investor: Okay. That’s it, sir. I I don’t have any further questions. And and once again, thank you for the opportunity, and all the best for the future. Thank you.

Janine, Conference Operator: Thank you very much. Well, we appear to have reached the end of our question and answer session. I will now hand back over to the management team for their closing remarks.

Raju Weksana, Chairman, Sify Technologies: Thank you for your time on this call. Have a great day. Thank you.

Janine, Conference Operator: Thank you very much. That does conclude today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.

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