There is a version of this story that writes itself almost automatically. A dominant incumbent, protected by spectrum advantages and brand loyalty, grows steadily in a market whose population is young, urbanised, and data-hungry. The regulator is accommodating, the government is a shareholder, and the macro backdrop is one of the most ambitious state-led economic transformations in modern history. That version is accurate as far as it goes. But it misses the more interesting question, which is not whether stc is growing, but what exactly it is becoming, and whether the capital allocation logic of that transformation holds together under scrutiny.

The headline numbers are, by any measure, striking.

stc Group recorded the highest revenue in its history in 2025, reaching SAR 77.8 billion, up 2.5 percent from the previous year.

Earnings before interest, taxes, depreciation, amortisation, and zakat totalled approximately SAR 24.5 billion, marking 6.1 percent growth after excluding non-recurring items, driven by improved operational efficiency and disciplined cost and capital expenditure management.

The profit picture requires a moment of contextual care:

net profit fell 39.9 percent to SAR 14.83 billion, though analysts attributed the drop mainly to a high comparison base in 2024, when exceptional and non-recurring items boosted profits to unusually elevated levels.

Strip out the noise of that base effect and the underlying trajectory is one of steady, if unspectacular, earnings expansion in a business that is simultaneously spending heavily to become something larger than a mobile operator.

The most analytically revealing line in stc's recent results is not the revenue figure. It is the subsidiary performance.

Subsidiary revenues increased by 13.4 percent in the first half of 2024 and a notable 16 percent for the full year, significantly bolstering the group's overall financial health.

This is not incidental diversification. It is the deliberate construction of a second growth engine inside the same corporate perimeter, one that operates on different economics, different margin profiles, and different competitive dynamics from the legacy connectivity business. Understanding stc today requires understanding this subsidiary layer with some precision, because it is where the Vision 2030 dividend is actually being captured.

The most consequential of these subsidiaries is solutions by stc, the enterprise ICT and digital transformation arm that has quietly become one of the more interesting capital allocation stories in the GCC.

The group's revenue grew to SAR 12.06 billion, an increase of 9.3 percent compared to 2023, with a rise in net profits of 33.9 percent, climbing from SAR 1.19 billion to SAR 1.60 billion.

The margin expansion embedded in that result is worth pausing on. Revenue grew at roughly a tenth; profits grew at a third. That is the signature of a business moving up the value chain, away from commodity infrastructure delivery and toward higher-margin managed services, consulting, and digital integration work.

Having established itself as a proactive enabler of digital transformation at the heart of Vision 2030 and a preferred government partner, the company completed its 40 percent acquisition of Devoteam Middle East, bringing digital consulting and business transformation capabilities that reinforce its one-stop-shop value proposition.

The strategic logic here is straightforward even if the execution is not. Saudi Arabia's public sector is in the middle of a multi-decade digitisation programme. Every ministry, every giga-project, every smart city initiative needs ICT integration, cloud migration, cybersecurity, and managed services. solutions by stc has positioned itself as the natural counterparty for that demand, leveraging the parent company's government relationships, network infrastructure, and balance sheet to win contracts that a standalone technology integrator could not.

In 2024, stc secured a substantial SAR 32.64 billion contract to develop and operate telecommunications infrastructure for a government entity over 15 years, projected to contribute approximately SAR 2.0 billion annually to revenue starting from the second half of 2026.

That single contract, when annualised, is worth more than many listed GCC telecom operators generate in total annual revenue.

The network infrastructure story is equally consequential, though it tends to attract less analytical attention because towers and fibre are less glamorous than AI partnerships.

The company achieved fibre connections for 3.6 million households and 54.70 percent 5G population coverage in Saudi Arabia by 2024, with ongoing plans for further 5G deployment.

The company continues expanding its network to reach more than 10,800 5G sites and 3.75 million homes served by fibre, in addition to conducting the first regional trial in the 7 GHz band in preparation for 6G technologies.

That 7 GHz band trial is a detail that deserves more attention than it typically receives. Spectrum strategy in the GCC has historically been reactive, with operators acquiring what regulators offered rather than shaping the conversation about what comes next. A trial in a band associated with 6G planning suggests stc is attempting to move upstream in the spectrum policy dialogue, which has implications for its competitive position over the medium term that are difficult to price today but meaningful in principle.

The data centre and cloud infrastructure layer adds a third dimension to the stc investment thesis that is structurally distinct from both the connectivity and enterprise services businesses.

Center3, a stc group subsidiary, announced a strategic partnership with HUMAIN to develop AI-dedicated data centre infrastructure in Saudi Arabia, with operational capacity reaching up to 1 gigawatt and initial capacity starting at 250 megawatts, to support advanced computing requirements.

One gigawatt of AI compute capacity is not a telecom story in any conventional sense. It is a hyperscale infrastructure story, and the economics of hyperscale infrastructure, particularly when anchored to sovereign AI ambitions and government procurement, are quite different from the economics of mobile connectivity. The capital intensity is higher, the payback periods are longer, but the moats, once established, are deeper.

The company ensures that all data is hosted within Saudi Arabia, reinforcing data sovereignty, while also developing a locally built billing system and SaaS marketplace to guarantee full compliance with local regulations.

Data sovereignty requirements, wherever they exist, are a structural gift to the incumbent infrastructure operator. They convert regulatory compliance into competitive advantage.

💡 Insight

Subsidiary revenues increased by 13.4 percent in the first half of 2024 and a notable 16 percent for the full year, significantly bolstering the group's overall financial health..

The fintech dimension of the stc story is perhaps the most surprising and the most analytically underappreciated.

The number of STC Bank customers surpassed three million within a short period since its launch at the beginning of 2025, reflecting accelerated growth in the adoption of digital banking services.

The group subsequently expanded STC Bank to more than 8 million customers and signed strategic partnerships to establish AI-focused data centres with capacity of up to 1 gigawatt.

The velocity of that customer acquisition, from zero to eight million in under a year, reflects the structural advantage of a telecom operator entering financial services. The distribution network already exists. The customer relationships already exist. The KYC infrastructure, in a market where SIM registration is mandatory and identity verification is embedded in the connectivity relationship, is largely pre-built. What stc is doing with STC Bank is not competing with established banks on their own terms. It is exploiting the asymmetric information advantage that comes from owning the connectivity layer through which a customer's entire digital life flows.

The international dimension of the stc story adds a layer of complexity that is easy to underweight.

stc's continued expansion of regional digital infrastructure is highlighted by the SilkLink project, launched in partnership with the Syrian Sovereign Fund and backed by a SAR 3 billion investment, aiming to modernise Syria's telecommunications infrastructure by building over 4,500 kilometres of fibre-optic networks, along with data centres and international submarine cable landing stations.

The Telefónica stake, meanwhile, represents a different kind of strategic optionality, one that is less about operational synergies in the near term and more about positioning stc as a global-scale operator with a seat at the table in European telecom consolidation conversations.

The group advanced to become the ninth most valuable telecom brand in the world, with brand value increasing by 16 percent to SAR 60.4 billion in 2024.

The capital allocation question that sits beneath all of this is whether stc can sustain the investment required across 5G densification, fibre rollout, data centre buildout, fintech scaling, and international expansion while maintaining the dividend discipline that defines its appeal to the income-oriented institutional investors who form the core of its shareholder base.

The group issued two billion dollars in sukuk that were more than four times oversubscribed,

which speaks to the market's confidence in stc's credit profile but also to the scale of external financing the investment programme requires. The most recent quarterly results suggest the operating leverage is beginning to work in the group's favour.

Q1 2026 brought a 3.8 percent revenue increase to SAR 19.94 billion, with EBITDA growing 7.1 percent and net profit rising 12 percent compared to Q1 2025.

Revenue growing at roughly half the rate of EBITDA, and EBITDA growing at roughly half the rate of net profit, is the arithmetic of a business where the fixed-cost base is being spread across a larger revenue pool with improving efficiency at every layer.

Industry research estimates the Saudi mobile communications market at approximately 27 billion dollars in 2025, with expectations to reach 37 billion dollars by 2030, a compound annual growth rate of 6.64 percent.

That market-level growth rate is the floor, not the ceiling, for what stc is attempting to build. The connectivity market will grow with the economy and the population. But the digital services, cloud infrastructure, fintech, and enterprise ICT markets that stc is simultaneously cultivating are growing faster, carry different margin profiles, and are subject to different competitive dynamics. The operator that successfully captures a disproportionate share of those adjacent markets while defending its connectivity moat will look, by 2030, less like a telecom company in the traditional sense and more like a digital infrastructure conglomerate with a mobile network at its core. Whether stc can execute that transformation without overextending its balance sheet or losing the operational focus that has driven its recent efficiency gains is the analytical question that will define the next chapter of this story. The early evidence, measured in subsidiary revenue growth, EBITDA margin expansion, and the sheer velocity of STC Bank's customer acquisition, suggests the execution is tracking ahead of most reasonable expectations.

For informational purposes only. Not investment advice, a solicitation, or a recommendation. Consult a licensed financial advisor before making any investment decision.