Q3 2025: Contradictions Emerge on Customer Concentration, DocSIS 4.0 Transition, and Akamai Partnership Impact

Date of Call: November 3, 2025

Financials Results

• Revenue: $142.4M total; broadband $90.5M; video $51.9M (video up 2.9% YOY); exceeded guidance
• EPS: $0.12 per share
• 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 (includes estimated tariff impact < $1M).
• 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 tax rate 21%.
• Expect modest sequential broadband revenue growth in Q1 2026 vs Q4 guidance and accelerating revenue growth through 2026 as Unified DOCSIS 4.0 ramps.
• Plan to invest in inventory to support broadband growth and continue opportunistic share repurchases.

Business Commentary:

• Strong Financial Performance:
• Harmonic reported revenue of $142.4 million for Q3 2025, exceeding guidance and driven by strong business performance in both broadband and video sectors.

• The growth was attributed to increased broadband rest of the world sales, unified RPD shipments, and a growing market momentum for the company's video segment.

• Broadband Expansion and Innovation:

• Broadband segment revenue reached $90.5 million for the quarter, with a gross margin of 47.3%, reflecting successful execution and market leadership in virtualized broadband.

• This growth was fueled by the deployment of unified DOCSIS 4.0, fiber convergence, and innovative cloud platform tools that enhance customer experience and operational efficiency.

• Video Segment Growth and Partnerships:

• The video segment delivered $51.9 million in revenue, up sequentially and year-over-year, with SaaS streaming achieving $16.1 million in quarterly revenue.

• Growth in the video segment was driven by customer adoption of VOS streaming platform, strategic partnerships like Akamai, and new live sports deployments.

• Operational Efficiency and Shareholder Returns:

• The company maintained profitability and generated $21 million in free cash flow during the quarter, despite a challenging macroeconomic environment.

• Harmonic returned capital to shareholders by repurchasing $16 million in common shares, bringing total repurchases under the current program to $66.1 million.

• Fiber-to-the-Home Opportunities:

• Harmonic's fiber business demonstrated robust year-over-year growth with increasing customer momentum, driven by enhanced collaboration with Comcast, which is deploying fiber solutions for network expansion.
• This strategic partnership is expected to expand connectivity to new communities and accelerate fiber reach, positioning the company for further growth in this market segment.

Sentiment Analysis:

Overall Tone: Positive

• "We shared strong third quarter results that exceeded our guidance"; management highlighted $142.4M revenue, repurchases of $16M in the quarter, and said "we are confident in our ability to expand profit margins and future free cash flow" and that "2026 will mark a return to growth."

Q&A:

• Question from Simon Leopold (Raymond James): So it looks like your top customers continuing to be on an improving trend through this year. Just wondering how you're thinking about that long term? In other words, should we expect that you're on a path now to getting back to levels you've had historically? Or would you consider the current level somewhat normalized? And just wondering, you haven't had that second 10% customer in a bit. We think that, that customer has been absorbing inventory. Just sort of what's your expectation for when you get a second 10% customer?
  Response: No specific timing on customer-level shifts; management expects that the large customer will return to >10% at some point and is refining 2026 planning as customer visibility improves.

• Question from Matt (Needham & Co.): Your fourth quarter guidance implies a change to normal seasonality, which if you look historically, is usually up strong sequentially. How should we think about that change this year? And then going forward, should we expect a return to normal seasonality?
  Response: Q4 guide is conservative due to DOCSIS 4.0 transition readiness and the unified RF tray becoming available late in Q4; seasonality should normalize as 4.0 deployments ramp into 2026.

• Question from Matt (Needham & Co.): Great. And as a follow-up, earlier in the call, you had highlighted the strong growth coming out of your rest of world segment. Could you just share what the current market drivers are there for that strength? And how we should think about that opportunity for more customer diversification going forward?
  Response: Rest-of-world strength is driven by operators modernizing to improve customer experience, reduce churn and lower operating costs; DOCSIS 4.0 maturity, interoperability and landmark launches (e.g., Mediacom) are accelerating adoption and diversification.

• Question from Steven Frankel (Rosenblatt Securities): I'm wondering if you might quantify a couple of things for me. The extent of that pull-in in the broadband business that you mentioned, how material was that in pulling revenue, which you anticipated in Q4 into Q3? And then I have a video question for you when you're finished with that.
  Response: The pull-in was modest—a few million dollars.

• Question from Steven Frankel (Rosenblatt Securities): Okay. And then maybe a ballpark on or some description of the Akamai impact on the video business that you mentioned in the slides, either in terms of revenue or new customer acquisition? How should we think about the leverage from that partnership?
  Response: Akamai onboarding contributed materially to Q3 sequential video SaaS growth; onboarding will continue over several months and is expected to be a significant SaaS growth driver in 2026 as customers reach run-rate.

• Question from Steven Frankel (Rosenblatt Securities): This Spectrum announcement today, that's saying there was a portion of their network originally they thought was going to stay 3.1. Now it's going to look like the 85% that you were focused on before, correct?
  Response: Management deferred to Spectrum's public details and noted Harmonic's virtual CMTS supports DOCSIS 4.0 and future spectrum evolution (including discussions beyond 1.8 GHz).

• Question from George Notter (Wolfe Research): I just wanted to get a better idea of the sizing or potential opportunity of this fiber-to-the-home opportunity, the announcement you guys made with Comcast. I would love any more detail there and how you guys think about that going forward?
  Response: Comcast is deploying Harmonic's remote OLTs and virtual BNG as it adds roughly one million new fiber passings per year; management provided no unit or financial details.

Contradiction Point 1

Customer Concentration and Growth Expectations

It involves differing statements about customer concentration and growth expectations, which could impact financial predictions and investor confidence.

What is the long-term trend of your top customers, and when do you expect the return of the second 10% customer? - Simon Leopold(Raymond James & Associates, Inc., Research Division)

2025Q3: We cannot specifically guide when any large customer will be 10% of revenue. Historically, that customer has been 10% in past quarters, and we expect it to return to that level at some point. - Walter Jankovic(CFO)

Could you quantify the strength from non-US customers, excluding Comcast and Charter? - Simon Matthew Leopold(Raymond James & Associates, Inc., Research Division)

2025Q2: Rest of world customer contributions are stronger than 50% of their total revenue. They have not listed a significant customer from the last 5 quarters, indicating a diversification beyond the top customers. - Walter Jankovic(CFO)

Contradiction Point 2

DocSIS 4.0 Transition and Seasonality

It highlights differing expectations about the impact of the DocSIS 4.0 transition on quarterly seasonality and growth expectations.

How should we think about changes in normal seasonality this year and going forward? - Unknown Analyst(Needham & Co.)

2025Q3: Our Q4 guidance accounts for DOCSIS 4.0 transition preparations. We're seeing progress in customer readiness for Unified 4.0, such as at Mediacom. This transition is why we're not guiding to normal seasonality this year. We expect growth in 2026 as Unified 4.0 ramps up. - Walter Jankovic(CFO)

How should we interpret your optimism about 2026 growth given analysts’ 40% projection? - Simon Matthew Leopold(Raymond James & Associates, Inc., Research Division)

2025Q2: We expect growth in 2026 as Unified DOCSIS 4.0 ramps up. - Walter Jankovic(CFO)

Contradiction Point 3

Impact of Akamai Partnership on Video Business

It involves differing statements about the immediate impact of the Akamai partnership on the video business, which could affect revenue expectations.

How significant was the revenue pull-in from Q4 to Q3? And can you quantify Akamai’s impact on the video business? - Steven Frankel(Rosenblatt Securities Inc., Research Division)

2025Q3: Akamai has begun onboarding customers, contributing to Q3 video SaaS growth. This partnership will drive further growth as additional customers are brought on board in FY '26. - Walter Jankovic(CFO)

Can you discuss the Video segment and new customer wins that may drive future revenue? - Steven Bruce Frankel(Rosenblatt Securities Inc., Research Division)

2025Q2: We are transitioning media services with Akamai, with some customers taking additional services, resulting in incremental revenues already seen in Q3. - Nimrod Ben-Natan(CEO)

Contradiction Point 4

Expected Return of a Top Customer

It directly impacts expectations regarding the stability and predictability of the company's customer base, which is crucial for financial forecasting and investor confidence.

How do we assess the long-term trend of your top customers, and when do you expect the second 10% customer to return? - Simon Leopold (Raymond James & Associates, Inc., Research Division)

2025Q3: We cannot specifically guide when any large customer will be 10% of revenue. Historically, that customer has been 10% in past quarters, and we expect it to return to that level at some point. We plan for our top customers and rest of world customers in tandem as we look at broadband for 2026 and beyond. - Walter Jankovic(CFO)

Have your largest MSO customers' spending trends changed? - Victor Chiu (Raymond James)

2025Q1: We haven't seen any change in customer behavior. The current situation aligns with our expectations. - Nimrod Ben-Natan(CEO)

Contradiction Point 5

Impact of Tariffs on Guidance

It involves changes in financial forecasts, specifically regarding the impact of tariffs, which are critical for investors to understand the company's risk management and financial strategy.

How should we think about the shift in normal seasonality this year and forward? - Unknown Analyst (Needham & Co.)

2025Q3: Our Q4 guidance accounts for DOCSIS 4.0 transition preparations. We're seeing progress in customer readiness for Unified 4.0, such as at Mediacom. This transition is why we're not guiding to normal seasonality this year. We expect growth in 2026 as Unified 4.0 ramps up. - Walter Jankovic(CFO)

Can you explain the visibility and uncertainty in the second half, including factors like tariffs and technology readiness? - Ryan Koontz (Needham)

2025Q1: Macroeconomic uncertainty due to tariffs impacts Q2 guidance. There's a 90-day pause in tariffs, but future rates remain uncertain. We're exploring mitigation strategies, but lack of visibility prevents full-year guidance. - Walter Jankovic(CFO)