Axiata Group Bhd: Cost Discipline Trumps Revenue Slump, Yet Valuation Pressures Persist

Axiata Group Bhd (KL:AXIATA), Malaysia’s largest telecom player, has delivered a startling 71 % jump in net profit for the first quarter of fiscal year 2026, posting RM273.8 million against RM159.8 million a year earlier. The surge is primarily attributable to sharper cost controls, which more than offset a 3.2 % year‑on‑year decline in revenue to RM2.8 billion. Currency depreciation across all foreign subsidiaries was the chief driver of the revenue dip, but disciplined execution under the Axiata28 initiative has kept the bottom line robust.

Cost Management Wins Amid Adverse FX Conditions

Under CEO Vivek Sood, Axiata has tightened its capital discipline, simplified its portfolio, and leveraged a lean holding structure to unlock operating performance across its telecommunications and technology assets. The company’s earnings per share rose from 1.7 sen to 3.0 sen, reflecting not just revenue resilience but also significant cost reductions. While the group has not declared a dividend this quarter, the sharp profit increase signals that Axiata remains on track to meet its profitability and valuation growth targets.

Revenue on a Constant‑Currency Basis Shows Growth

Despite the headline revenue decline, Axiata’s constant‑currency revenue grew 8.5 % year‑on‑year, underscoring operational resilience across its core business units. This figure indicates that the underlying business is expanding, even though external exchange rates are eroding the headline numbers. The company’s focus on “next‑state growth” through Axiata28 remains a credible strategy to sustain this trajectory.

Market Reaction and Valuation Context

Axiata’s market cap stands at MYR 17.9 billion, with a price‑to‑earnings ratio of 49.14—significantly higher than many peers in the communication services sector. The recent profit spike, while impressive, comes at a premium valuation that could temper investor enthusiasm if the company fails to sustain earnings growth. Moreover, the company’s lack of dividend distribution this quarter may be a double‑edged sword: it preserves cash for investment but may disappoint income‑seeking investors.

Outlook

Axiata’s disciplined cost structure and constant‑currency revenue growth position it well to weather ongoing foreign‑exchange headwinds. However, the high P/E ratio and absence of dividends raise questions about the sustainability of its valuation. Stakeholders must monitor whether Axiata can continue to deliver the disciplined execution promised under Axiata28, or whether the company’s lofty valuation will ultimately prove untenable in a competitive telecom landscape.