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

INDIA, 23 JULY 2026 —

India’s data centre sector will expand sharply as AI adoption, cloud computing and digitalisation lift demand, JM Financial said in a report released on Monday.

The domestic industry remains small but long-term prospects are strong, the report noted, with land and power access the main constraints on growth. Companies that have completed large projects or control land with grid connections can move faster, it said.

“Access to land and power remains the key differentiator,” JM Financial wrote. Firms with established supply chains for these inputs can cut deployment times materially.

The report also described a shift in business models. Operators are choosing between colocation services, which rely on long-term contracts, and integrated full-stack infrastructure, which yields higher revenue per megawatt but carries higher capital intensity and execution risk.

Service providers are weighing capital expenditure versus operating expenditure strategies. Leasing data centre capacity under an opex model offers flexibility and lower risk, while owning infrastructure under a capex model gives strategic control but demands far larger investments.

Sustainability is another challenge. As AI workloads raise power use, enterprises now demand both low power usage effectiveness and renewable energy supply.

“Maintaining a low PUE remains important; however, enterprises are also prioritising access to renewable energy,” the report said. Securing renewable power through procurement deals is likely to grow in importance.

The report contrasted strategies of major IT firms. Tata Consultancy Services is building AI-ready infrastructure through its HyperVault initiative and leasing space to clients, while HCL Technologies is pursuing a full-stack AI strategy that bundles data centres, compute and AI models for enterprise customers.

Overall, JM Financial said the sector’s long-term outlook is positive, but success will hinge on securing land, reliable power, renewable energy and efficient execution.

Related: JM Financial · India