India’s data centre sector set for expansion on AI and cloud demand: JM Financial

INDIA, 23 JULY 2026 —

India's data centre sector is poised for significant expansion, driven by increasing demand for artificial intelligence (AI), cloud computing, and enterprise digitalisation, according to a report by JM Financial. The report highlights that despite the sector's long-term growth prospects, challenges such as land acquisition, power availability, and execution complexity are likely to impact the pace of growth. As the domestic data centre industry remains at a nascent stage, access to land and power has emerged as the biggest differentiator for developers, with companies that have already executed large data centre projects or possess land banks with grid connectivity expected to enjoy a competitive advantage.

The Indian data centre sector has been growing rapidly in recent years, with the country's favourable business environment, skilled workforce, and government support contributing to its growth. However, the sector still faces several challenges, including high energy costs, limited access to renewable energy sources, and infrastructure constraints. The report by JM Financial notes that companies with established relationships and ready access to land and power are likely to benefit from materially shorter deployment timelines, allowing them to accelerate project deployment and gain a competitive edge. The report also highlights the evolving debate over business models, with operators weighing traditional colocation services against integrated full-stack infrastructure offerings, each with its own set of advantages and disadvantages.

The current development in the Indian data centre sector is marked by a significant increase in demand for AI and cloud computing services, driving the need for more data centre capacity. The report notes that while colocation remains a stable and predictable business driven by long-term contracts, full-stack offerings can generate higher revenue per megawatt and improve customer retention. However, these also bring greater technology risk, higher capital intensity, and execution complexity, making business model selection another key challenge for the sector. Service providers are also evaluating capex and opex strategies, with leasing data centre capacity under an opex model offering greater flexibility and lower execution risk, while owning infrastructure through a capex model provides stronger strategic control but requires significantly higher investments.

In the Malaysian market, the expansion of India's data centre sector is likely to have a positive impact, as Malaysian companies look to tap into the growing demand for data centre services in the region. The report's findings on the importance of access to land and power, as well as the evolving debate over business models, are likely to be relevant to Malaysian data centre operators and investors. As the Malaysian government continues to promote the country's digital economy, the growth of the data centre sector is expected to play a critical role in supporting this initiative. Details on the specific impact of India's data centre sector expansion on the Malaysian market are not yet available, but it is likely that Malaysian companies will be watching the developments in the Indian market closely.

The report by JM Financial highlights the strategies adopted by major IT companies in India, such as TCS and HCLTech, which are pursuing different approaches to building AI-ready infrastructure and serving enterprise clients. TCS is focusing on building AI-ready infrastructure through its HyperVault initiative and leasing capacity to enterprises, while HCLTech is pursuing a full-stack AI strategy by combining data centres, compute infrastructure, and AI models to serve enterprise clients. These contrasting strategies are likely to be of interest to Malaysian companies looking to learn from the experiences of Indian IT companies. The report also notes that the sector's long-term outlook remains favourable, but the availability of land, power, renewable energy, and efficient execution will determine which players emerge as leaders in India's rapidly expanding data centre market.

The outlook for the Indian data centre sector remains positive, with the report by JM Financial highlighting the sector's long-term growth prospects. As the demand for AI, cloud computing, and enterprise digitalisation continues to drive the need for more data centre capacity, companies that can navigate the challenges of land acquisition, power availability, and execution complexity are likely to emerge as leaders in the market. The report's findings on the importance of access to land and power, as well as the evolving debate over business models, are likely to be relevant to data centre operators and investors in Malaysia and other countries in the region. As the data centre sector continues to evolve, it is likely that we will see new developments and innovations emerge, driving further growth and investment in the sector. Details on the specific outlook for the Malaysian market are not yet available, but it is likely that the growth of the data centre sector in India will have a positive impact on the region as a whole.

Related: JM Financial · India