Harmonic (HLIT) Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Revenue: Q2 revenue reached $133.5 million, a 54% year-over-year increase, surpassing guidance of $115 million to $125 million.

Rest of Market Revenue: Grew 44% year-over-year to nearly $50 million, representing 37% of total revenue.

Bookings: Total bookings were $144 million, with rest of market accounting for approximately 60%.

Backlog and Deferred Revenue: Increased to $588 million, up 71% year-over-year.

Gross Margin: Maintained at 53%.

Operating Profit: Reported at $31.3 million, exceeding guidance of $23 million to $28 million.

EPS: Came in at $0.21, above the expected range of $0.15 to $0.19.

Cash Position: Cash and cash equivalents rose to $231.9 million following the sale of the Video business.

2Strategic Updates and Business Highlights

Business Transformation: Completed the sale of the Video business, transitioning to a pure-play broadband company.

Product Development: Continued momentum in fiber deployments and the adoption of the cOS platform, which supports various access architectures (DOCSIS 3.1, DOCSIS 4.0, and fiber).

Intelligence Layer Adoption: The new intelligence platform, Beacon, is live with approximately 20 customers, showing significant operational improvements.

Market Expansion: Increased customer base with 161 customers now deploying cOS, serving over 48 million CPE devices.

Fiber Market Growth: Record bookings in fiber deployments, with notable projects like SeaStar in Finland and Inter Venezuela's XGS-PON service.

3Forward Guidance and Outlook

Q3 2026 Guidance: Expected Broadband revenue between $125 million and $135 million, with gross margins between 51% and 52%.

Full Year 2026 Guidance: Raised to $505 million to $525 million, reflecting strong demand and backlog. Operating profit projected between $99 million and $111 million, with EPS between $0.67 and $0.75.

Long-term Strategy: Focus on organic growth, capital allocation for shareholder returns, and potential M&A opportunities.

4Bad News, Challenges, or Points of Concern

Memory Costs: Rising memory costs remain a concern, with $3 million per quarter built into guidance to account for these costs.

Stranded Costs: Approximately $10 million in stranded costs from the Video business sale are expected to impact profitability, although some are anticipated to be temporary.

Market Risks: External factors such as geopolitical tensions (e.g., the situation in the Middle East) and component supply dynamics could impact future performance.

5Notable Q&A Insights

Demand Dynamics: Strong demand from the rest of the market is evident, with deployments ramping beyond lab trials, particularly among smaller regional MSOs.

Intelligence Platforms: Expected to significantly contribute to recurring revenue, with material growth anticipated in the coming years.

Geographic Expansion: While North America remains the primary market, there are increasing opportunities in Latin America, Asia, and Europe.

Operational Complexity: Harmonic's platform simplifies deployment for customers, mitigating concerns over the complexity of virtual CMTS and DAA implementations.

Fiber Market Catalysts: Operators are cautiously expanding fiber deployments, with some overbuilding strategies emerging, supported by Harmonic's converged platform capabilities. Overall, Harmonic's Q2 2026 results reflect strong growth and strategic progress, although challenges related to memory costs and external market conditions remain. The company is well-positioned for future growth with its expanded product offerings and customer base.