Harmonic Q1 Earnings Call Highlights

Key Points

• Harmonic beat Q1 expectations with broadband revenue of $121.7 million, up 43% year over year and well above guidance, while non-GAAP EPS of $0.17 also topped forecasts. The company raised its full-year broadband revenue outlook to $475 million to $495 million.
• Growth is broadening beyond the biggest customers, with Rest-of-Market revenue rising 78% year over year and reaching 42% of total broadband revenue. Management said adoption is expanding across DOCSIS 4.0, fiber, and network intelligence, supported by a record backlog of $582.1 million.
• Harmonic remains on track to become a pure-play broadband company as the sale of its video business to MediaKind is still expected to close in Q2. Executives said the company continues to manage tariff and supply-chain risks, while free cash flow and share repurchases remain strong.

Harmonic NASDAQ: HLIT reported a stronger-than-expected first quarter for fiscal 2026, driven by sharp growth in its broadband business and broader adoption beyond its largest customers, according to comments from executives on the company’s earnings call.

President and CEO Nimrod Ben-Natan said the quarter “marked a strong start to the year” and validated the strategy Harmonic outlined previously as it moves toward becoming a more focused broadband company. The company also said the pending sale of its video business to MediaKind remains on track to close in the second quarter, subject to customary closing conditions.

Chief Financial Officer Walter Jankovic said Harmonic is raising its full-year broadband revenue outlook to a range of $475 million to $495 million, up from its prior range of $440 million to $480 million, citing better visibility from bookings, backlog and customer deployments.

Broadband Revenue Tops Guidance

Harmonic reported first-quarter broadband revenue from continuing operations of $121.7 million, up 43% year over year and above the company’s guidance range of $100 million to $105 million. Non-GAAP earnings per share were $0.17, compared with guidance of $0.11 to $0.12, while operating profit was $26 million, above the guided range of $18 million to $20 million.

Jankovic said revenue upside came from multiple customers and accelerated service deployments. Two customers each accounted for more than 10% of revenue, together representing 58% of total broadband revenue in the quarter.

The company highlighted particularly strong performance in what it calls Rest-of-Market revenue, which excludes its two largest customers by subscriber count. Rest-of-Market revenue grew 78% year over year and represented 42% of total revenue in the quarter.

Ben-Natan said the result demonstrates expanding adoption of Harmonic’s platform across a broader group of operators. Harmonic’s deployed cOS base now includes 150 customers serving 45.7 million CPE devices, he said.

Backlog Reaches Record Level

Harmonic ended the quarter with broadband backlog and deferred revenue of $582.1 million, up 87% year over year. Jankovic said 60% of that total is expected to convert to revenue within the next 12 months, giving the company increased visibility for the remainder of 2026.

Free cash flow was $30.3 million in the quarter, while Harmonic repurchased approximately 4.2 million shares for $43 million. The company ended the quarter with $109 million in cash and cash equivalents and an $82 million undrawn credit facility.

Jankovic said Harmonic has repurchased $122 million of stock under its current $200 million share repurchase program, including the $43 million bought back in the first quarter. He said the company expects to continue funding repurchases through free cash flow, with a minimum goal of offsetting dilution from equity compensation awards each year.

Fiber, DOCSIS 4.0 and Network Intelligence Drive Strategy

Ben-Natan said Harmonic is focused on multiple broadband growth drivers, including DOCSIS, fiber and network intelligence. He said fiber products represented more than 14% of appliance and integration revenue over the past year, and the company expects that contribution to grow.

During the quarter, Harmonic announced customer wins including KBRO, which selected the company’s Fiber-on-Demand solution for its network in Taiwan, and Vyve Broadband, which selected Harmonic’s platform to modernize its U.S. network with a path toward DOCSIS and fiber convergence.

Ben-Natan said operators are increasingly seeking platforms that can begin with a specific use case and expand over time across DOCSIS, fiber and autonomous network intelligence. He also said Harmonic secured multiple new fiber wins in the first quarter and expanded deployments with its largest tier 1 fiber customers.

The company also pointed to continuing traction in DOCSIS 4.0. Ben-Natan said operators are using DOCSIS 4.0 not only to extend networks and increase downstream speeds, but also to expand upstream capacity while densifying networks and optimizing existing infrastructure.

Harmonic also discussed its newer intelligent software offerings, including Beacon, Pathfinder and Amply. Ben-Natan said early deployments of Beacon have shown “a measured reduction of more than 30% in customer calls” after enablement. Amply, described as a multi-vendor amplifier management software solution, is intended to help operators identify network interference and direct field technicians more precisely.

Guidance Reflects Growth and Supply Chain Caution

For the second quarter of 2026, Harmonic expects broadband revenue of $115 million to $125 million, gross margin of 52% to 53%, operating profit of $23 million to $28 million and EPS of $0.15 to $0.19. Jankovic said second-quarter guidance includes an estimated tariff impact of less than $1 million and approximately $2.3 million in stranded costs related to the pending video business sale.

For the full year, the company expects gross margin of 50% to 51.5%, operating profit of $87 million to $101 million and EPS of $0.57 to $0.67. Full-year gross margin guidance includes an estimated tariff impact of about $2.3 million and approximately $10 million in stranded costs.

Jankovic said margins are expected to decline from first-quarter levels due to elevated memory costs and new product ramps. In response to an analyst question, he said the company sees a net impact of about $6 million related to memory in the second half of the year. He also cited CPUs, PCBs and aluminum as areas being monitored in the supply chain, though key silicon is “not a concern at this point.”

Executives Address Customer Momentum

During the question-and-answer portion of the call, Needham & Company analyst Ryan Koontz asked about what was unlocking growth in Rest-of-Market customers. Ben-Natan said it was “obviously DOCSIS 4, fiber, and any DOCSIS migration to a virtualized platform,” adding that recent revenue reflects wins from the past 18 months that are now ramping.

Raymond James analyst Simon Leopold asked whether the full-year outlook implied conservatism, given the strong first quarter and second-quarter guidance. Jankovic said Harmonic is being prudent due to macroeconomic conditions, the situation in the Middle East and supply chain constraints tied to AI-related demand. He emphasized that the caution “has nothing to do with customer demand,” which he said remains strong.

Ben-Natan said Harmonic’s priorities remain extending leadership in DOCSIS, accelerating fiber, increasing customer diversification, leading with intelligence and driving operating leverage as the company becomes a pure-play broadband business.

About Harmonic NASDAQ: HLIT

Harmonic Inc NASDAQ: HLIT is a leading provider of video delivery infrastructure that enables service providers, broadcasters and content owners to capture, process and distribute high‐quality video across broadcast, cable, satellite and IP networks. The company's portfolio spans real‐time video compression solutions, including encoders and transcoders, as well as storage and server products designed for live production, playout and streaming on any device.

Harmonic's product lines include cable edge QAM modules and set‐top video processing platforms for traditional pay‐TV operators, alongside cloud‐native software for over‐the‐top (OTT) delivery, origin servers and content delivery network (CDN) services.

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