Harmonic's Q3 2025: Contradictions Emerge on Rest of World Revenue, Seasonality, 2026 Readiness, and Akamai's Video Impact

Date of Call: None provided

Financials Results

• Revenue: $142.4 million, exceeded guidance (company noted Q3 exceeded its guidance range)
• EPS: $0.12 per share (non-GAAP), exceeded guidance (no YOY EPS comparison provided)
• Gross Margin: 54.4%, up 70 basis points year-over-year

Guidance:

• Q4 2025 broadband revenue expected $85M–$95M; gross margin 48%–50%; adjusted EBITDA $10M–$16M.
• Q4 2025 video revenue expected $48M–$52M; gross margin 66%–67%; adjusted EBITDA $3M–$6M.
• Total company Q4 EPS expected $0.06–$0.12 (non-GAAP), non-GAAP tax rate 21%.
• Expect modest sequential broadband revenue growth in Q1 2026 versus Q4 guidance with accelerating momentum through 2026 as Unified DOCSIS 4.0 and customer ramps progress.
• Anticipate cumulative cash tax reduction of ~ $50M for 2025–2026.

Business Commentary:

• Revenue Growth and Broadband Segment Performance:
• Harmonic reported revenue of $142.4 million for Q3 2025, exceeding guidance and driven by strong unified RPD and fiber product shipments.

• Growth was fueled by year-over-year gains in broadband markets outside of the US and continued strong performance in the video segment.

• Broadband Segment Expansion and Partnerships:

• The broadband segment achieved $90.5 million in revenue with a gross margin of 47.3%, reflecting 142 COS deployments serving over 37 million cable modems and ONUs.

• Expansion was supported by new partnerships like the expanded collaboration with Chowder and advancements in unified DOCSIS 4.0 technology.

• Video Segment Growth and Market Differentiation:

• Video segment revenue reached $51.9 million, with a sequential increase and a record $16.1 million in SaaS streaming revenue.

• Growth was driven by global live sports deployments, strategic partnerships with platforms like Akamai, and differentiated multi-cloud resiliency.

• Financial Strength and Capital Allocation:

• Harmonic ended Q3 with $127.4 million in cash and cash equivalents, with a year-over-year increase of $69.2 million.
• The company maintained profitability and free cash flow, and continued share repurchases totaling $65.8 million under its program, enhancing its capital allocation plan.

Sentiment Analysis:

Overall Tone: Positive

• Management: "strong third-quarter results that exceeded our guidance"; revenue $142.4M; backlog and deferred revenue ~$494.5M; "we are confident in our ability to expand profit margins and future free cash flow" and expect accelerating broadband growth through 2026.

Q&A:

• Question from Simon Leopold (Raymond James): Should we expect revenue to return to historical levels from top customers or is the current level normalized, and when might you see a second >10% customer?
  Response: Management declined to give timing for large-customer concentration; said the large customer has historically been >10% and could return to that level, while visibility will be refined and momentum should build through 2026.

• Question from Ryan Coombs (Needham & Company): Your Q4 guidance implies a change to normal seasonality — how should we think about that and will seasonality return to normal?
  Response: Q4 guidance is conservative due to DOCSIS 4.0 transition timing and delayed availability of the Unified RF tray (late Q4); management expects growth to accelerate in 2026 as deployments ramp.

• Question from Ryan Coombs (Needham & Company): What is driving rest-of-world strength and how should we think about diversification there?
  Response: Management said global operators are shifting to virtualized DOCSIS to improve QoE, reduce churn and OPEX; Mediacom's 4.0 production launch and ecosystem maturity (modems, amplifiers, interoperability) are catalyzing rest-of-world demand.

• Question from Steve Frankel (Rosenblatt Securities): How material was the pull-in from Q4 into Q3 in the broadband business?
  Response: Management quantified the pull-in as 'a few million dollars.'

• Question from Steve Frankel (Rosenblatt Securities): How should we think about the Akamai impact on the video/SaaS business?
  Response: Onboarding with Akamai drove a large portion of Q3 sequential SaaS growth; further customer onboarding will continue over several months and is expected to be a major growth driver in 2026.

• Question from George Nodder (Wolfe Research): Can you size the Comcast fiber-to-the-home opportunity referenced and how to think about it going forward?
  Response: Management said Harmonic supplies virtual BNG and remote OLT components supporting Comcast's expansion (~1 million new fiber passings per year) but provided no financial or unit-level details.

Contradiction Point 1

Revenue Distribution and Growth in the Rest of the World Segment

It involves differing statements about the revenue distribution between top customers and the rest of the world segment, which can impact investor perceptions of regional growth and market diversification.

How will top customers normalize, and when will Harmonic gain a second 10% customer? - Simon Leopold (Raymond James)

2025Q3: We are not specifically guiding when a top customer will become 10% again. However, we expect this to happen at some point. - Walter Jankovic(CFO)

Can you quantify the strength among non-US customers excluding Comcast and Charter? - Simon Matthew Leopold (Raymond James)

2025Q2: The concentration of revenue from Comcast is 39%. The rest of the company's revenue is strong, with over 50% from rest of world customers across Broadband and Video. - Walter F. Jankovic(CFO)

Contradiction Point 2

Seasonality and Revenue Distribution across Quarters

It involves differing statements about seasonality and revenue distribution across quarters, which can impact investor expectations for future growth and revenue patterns.

How should we interpret the change in seasonality from Q4 guidance, and what is the outlook for normal seasonality? - Matt (Needham & Company)

2025Q3: The DOCSIS 4.0 transition is impacting our Q4 guidance. The transition is on track, with Mediacom being a great example. The Unified RF tray will be available late in Q4, affecting our guidance. - Walter Jankovic(CFO)

How to assess Q4 seasonality and 2026 growth potential? - Timothy Paul Savageaux (Northland Capital Markets)

2025Q2: We expect some sequential growth from Q3 to Q4, but we're not providing Q4 guidance due to tariff uncertainties. - Walter F. Jankovic(CFO)

Contradiction Point 3

Customer Ramp Readiness and 2026 Growth Expectations

It involves differing statements about customer ramp readiness and growth expectations for 2026, which can impact investor perceptions of the company's growth trajectory and strategic direction.

Can you outline the growth drivers in the rest-of-world segment and the customer diversification opportunities? - Matt (Needham & Company)

2025Q3: We are seeing growth in customer ramp readiness. We are seeing momentum in the rest of the world customers, and we are seeing a very good setup for 2026. - Walter Jankovic(CFO)

What is the progress on DOCSIS 4.0 Unified, and how is Charter's CapEx reduction affecting your timelines? - Ryan Boyer Koontz (Needham & Company)

2025Q2: We're seeing some headwinds turning into tailwinds, like Unified 4.0 readiness and customer ramps. We expect these factors to lead to growth in 2026, but it's too early to give exact forecasts. - Nimrod Ben-Natan(CEO)

Contradiction Point 4

Akamai Impact on Video Segment

It involves differing statements about the impact of Akamai on the video segment, which can influence investor expectations for future growth and revenue in the video business.

How has Akamai impacted the video business in terms of revenue or new customer acquisition? - Steve Frankel (Rosenblatt Securities)

2025Q3: We are onboarding customers onto the Akamai platform, which contributed to our sequential video SaaS growth from Q2 to Q3. - Walter Jankovic(CFO)

Are there new customers or video segment expansion that will impact the pipeline in upcoming quarters? - Steven Bruce Frankel (Rosenblatt Securities)

2025Q2: We are not providing Q3 guidance today, but we do expect continued growth in video SaaS. - Walter F. Jankovic(CFO)