As hyperscalers turn to light to transmit high volumes of data, optical testing firm Santec Holdings, led by president and CEO Mototaka Tei, is reaping a windfall.

This story is part of Forbes Asia’s coverage of Best Under A Billion list, which highlights 200 Asia-Pacific public companies with less than $1 billion in revenue and consistent top- and bottom-line growth. See the full list, sorted alphabetically, here.

Five years ago, Mototaka Tei was poised to make a leap. The president and CEO of Santec Holdings, a Japanese maker of optical testing equipment used in industries as varied as AI data centers and medical imaging, had agreed to pay ¥1.9 billion (equivalent to $17 million at the time) to acquire two North American companies specializing in testing fiber-optic cables. Due to Covid-19 lockdowns, Tei couldn’t travel to seal the deals in person. “That was the biggest risk I’ve taken,” says the 62-year-old, recalling his nervousness about conducting due diligence remotely for Santec’s first-ever acquisitions in its more-than-40-year history.

In today’s AI era, Tei’s somewhat blind bet is paying off. To handle massive AI workloads, hyperscalers such as Amazon, Google, Meta and Microsoft are connecting multiple racks of servers inside data centers. They are also linking data centers together across vast distances that make it impossible to transmit information over copper cables without overheating, signal loss and data corruption. To ensure seamless transmission, the tech giants are leaning increasingly on optical communications, tapping fiber-optic cables that use light pulses to transmit data. As a result, Tei’s 2021 acquisitions have become growth engines for Santec, with sales growing substantially under the company’s fold, he says.

The pandemic-era deals fit squarely into Santec’s playbook of exploiting niche markets. Operating from Komaki, an industrial hub 350 kilometers west of Tokyo, the company has built a successful business supplying critical testing equipment and certain key components for optical communications. “We don’t make hundreds of products,” Tei discloses. “We try to be very good at the few products we make and become a champion in those fields.”

Santec’s revenue and net profit more than tripled between 2022 and 2026.

Investors, in turn, are championing the stock, which has tripled over the past year, boosting Santec’s market cap to ¥221 billion ($1.4 billion) as of late July. That’s an 11-fold jump from its market value of about ¥21 billion in 2021. For the year ended Mar. 31, the company posted a 31% jump in revenue to ¥31.5 billion on a 51% surge in net profit to ¥7.7 billion, securing a spot on the........

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