Of the ₹23,109 crore total revenue in FY25, data services formed an 84% splitbetween the profitable core connectivity services (53% of data revenue) and loss-making digital portfolio(47%).

By FY28, the digital portfolio is expected to contribute 65% of data revenue. For that, the company is betting on cloud, CPaaS, media and AI platforms to drive growth.This implies a steep digitalrevenue CAGR of 26%, higher than the25% CAGR recorded during FY21–25, even after the Kaleyra acquisition, said a Motilal Oswal Financial Services report dated11 June.

But this digital pivot is already testing timelines. Tata Communications has deferred its ambition of doubling data revenue to ₹28,000 crore by a year to FY28 amid macro-economic headwinds.

The revised ask isa 13% CAGR, lower than the 19% earlier planned, which, according to Motilal Oswal, looks ambitious without another big acquisition in the pipeline.

Moreover, proprietary platforms like AI Cloud and Kaleyra.ai, expected to drive a third of incremental revenue by FY28, are yet to deliver in a meaningful way.

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The real sticking point is the profitability of the digital platform segment. The portfolio posted a ₹890 crore Ebitda loss in FY25 with a margin of negative 9.7%.The management believes this has bottomed out, guiding for a swing to ₹1,500 crore Ebitdain the coming years, aided by scale, Kaleyra synergies and a better product mix.

However, no firm timeline was shared for meeting this target. Moreover, digital revenue today remains skewed towards reselling a low-margin game. Further, the core connectivity segment, the cash cow of the business, is facing its own set of challenges. Multiprotocol label switching (MPLS) services face annual price erosion, prompting the company to add 100 new customers in FY25 to protect volumes.

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Tata Communications reaffirmed its broader goals, targeting a consolidated Ebitda margin of 23-25% by FY27from 19.6% nowand RoCE over 25% from 16%. These targets depend entirely on digital turning profitable soon enough to support overall financial performance.

Meanwhile, the stock performance has been lacklustre, down 10% over the past year. “The stock trades at a reasonable 11x one- year-forward EV/Ebitda. While Tata Communications has built robust capabilities in recent years, more consistent execution is key for a meaningful re-rating, in our view,” said IIFL Securities Ltd report dated 11 June.