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    HLIT
    Earnings call· Jun 2026(Q2 FY26)

    HARMONIC Q2 FY26 earnings call HLIT

    Aug 12, 2026 Source

    Executive summary

    Harmonic Inc. Q2 FY26 — Strong Broadband Growth and Raised Full-Year Outlook

    Harmonic delivered a strong Q2 FY26, driven by robust broadband demand, particularly in the rest of market segment, and accelerating fiber deployments. The company completed the sale of its Video business, becoming a pure-play broadband provider, and raised its full-year revenue and EPS guidance, reflecting increased visibility and strategic momentum. The converged cOS platform continues to enable operators to modernize networks across DOCSIS and fiber architectures.

    Highlights

    5

    • Q2 revenue grew 54% year-over-year to $133.5 million, exceeding guidance.

    • Rest of market revenue grew 44% year-over-year to nearly $50 million.

    • Bookings reached $144 million, with rest of market representing approximately 60% of total.

    • Backlog and deferred revenue hit a record $588 million, up 71% year-over-year.

    • Full-year 2026 Broadband revenue outlook raised to $505 million-$525 million, up $30 million from prior midpoint.

    Concerns

    3

    • Negative free cash flow of $7 million for the quarter, primarily due to increased memory inventory.

    • Stranded costs of $2.3 million in Q2 and $10 million for full year 2026 related to the Video business sale.

    • Memory costs impact of approximately $3 million per quarter built into second half guidance.

    Guidance & targets

    11
    CategoryTargetConfidence
    Broadband revenue
    $125 million and $135 million
    high materiality
    High
    Gross margins
    51% and 52%
    medium materiality
    High
    Operating profit
    $23 million and $28 million
    medium materiality
    High
    Non-GAAP EPS
    $0.15 and $0.19
    high materiality
    High
    Broadband revenue
    $505 million and $525 million
    high materiality
    High
    Gross margins
    51% and 52%
    medium materiality
    High
    Operating profit
    $99 million and $111 million
    medium materiality
    High
    Non-GAAP EPS
    $0.67 and $0.75
    high materiality
    High
    Non-GAAP tax rate
    23%
    low materiality
    High
    Memory costs impact
    $3 million per quarter
    medium materiality
    High
    Stranded costs elimination
    30% eliminated
    medium materiality
    High

    Operational metrics

    24
    Revenue
    $133.5 million54% year-over-year growth
    Q2 FY26

    Above the high end of guidance.

    Rest of market revenue
    nearly $50 million44% year-over-year growth
    Q2 FY26
    Rest of market revenue
    over $100 millionapproximately 60% higher than H1 FY25
    H1 FY26
    Revenue from 2 largest customers
    63%
    Q2 FY26

    Each accounted for more than 10% of revenue.

    Non-GAAP gross margin
    53%consistent with guidance
    Q2 FY26
    Net unrecovered memory cost impact
    well below $1 million
    Q2 FY26
    Operating expenses
    higher
    Q2 FY26

    Mainly due to company incentive-based accruals tied to improved full year 2026 financial performance forecast.

    Operating profit
    $31.3 millionexceeded guidance of $23 million to $28 million
    Q2 FY26

    Includes $2.3 million in stranded costs related to the Video business sale.

    Stranded costs (Video business sale)
    $2.3 million
    Q2 FY26

    Included in operating profit.

    Non-GAAP EPS
    $0.21above guidance range of $0.15 to $0.19
    Q2 FY26
    Cash and investments balance
    $231.9 million
    Q2 FY26 end

    Strong capital infusion from Video transaction closing.

    DSO
    61 dayscompared to 62 in Q1 '26 and 72 in Q2 '25
    Q2 FY26 end

    Expected to trend back to the low 70s going forward based on customer mix.

    Inventory increase
    $15.3 million
    Q2 FY26
    Days inventory on hand
    95 daysfrom 80 days last quarter
    Q2 FY26
    Share repurchase program authorization
    $200 million
    current
    Share repurchases executed
    $122 million
    to date

    No shares repurchased during Q2 FY26.

    Undrawn credit facility
    $85 million
    Q2 FY26 end
    Deployed cOS footprint customers
    161
    Q2 FY26
    CPE devices served by cOS
    48.2 million
    Q2 FY26
    Customer NPS
    87
    Q2 FY26
    Beacon deployments
    approximately 20
    Q2 FY26
    Broader intelligence platform deployments
    about 10
    Q2 FY26
    Subscriber calls reduction (intelligence platform)
    more than 30%
    Q2 FY26

    Early deployments continue to show significant value.

    Smart amplifiers projected
    nearly 10 million
    industry upgrade cycle

    Dell'Oro report projects this amount of amplifiers deployed in the industry's current upgrade cycle.

    Industry KPIs

    9
    MetricValueDetails
    Capital return$122 millionUSD
    Backlog order book$587.6 millionUSD
    Book to bill ratio1.1
    Orders backlog qualityrecord
    Product orders order growth$144 millionUSD
    Ai cloud infrastructure orders—
    Recurring software service revenue—
    Revenue mix by product customer type37%%
    Design wins product cycle transitions—

    Orderbook & backlog

    2
    Backlog and deferred revenue$587.6 millionQ2 FY26 end

    up 71% year-over-year

    73% expected to convert to revenue within the next 12 months

    Bookings$144 millionQ2 FY26

    Led by rest of market, which represented approximately 60% of total bookings

    Product announcements

    2
    ProductTypeDetails
    SeaStar MDU optical nodemilestone
    Pearl-1XL and Oyster+launch

    Deals & partnerships

    1
    MediaKindSale of Video business$137.9 million

    Completed the sale of the Video business to MediaKind, marking the completion of Harmonic's transformation to a pure-play broadband company.

    Risks & headwinds

    4
    Negative free cash flow due to inventory buildQ2 FY26

    -$7 million in Q2 FY26

    Mitigation: Increase in memory inventory was a strategic decision to secure supply for growth.

    Stranded costs from Video business saleQ2 FY26 and FY26

    $2.3 million in Q2 FY26; $10 million for full year 2026

    Mitigation: Approximately 30% of these costs are temporary and expected to be eliminated within 1 year of the Video sale closing.

    Elevated memory costsQ2 FY26 and H2 FY26

    Net unrecovered memory cost impact well below $1 million in Q2; $3 million per quarter built into H2 FY26 guidance

    Mitigation: Team has secured memory supply for the rest of 2026 and into 2027; full year gross margin guidance was raised due to mitigation efforts.

    External factors

    Not quantified

    Mitigation: Company is taking a measured approach to guidance due to the situation in the Middle East and component supply dynamics/pricing.

    What to watch in Q3 FY26

    5

    Rest of market revenue growth

    next quarter
    Current44% YoY in Q2 FY26
    TargetContinued strong growth

    Why it matters

    Indicates continued customer diversification and adoption beyond top 2 accounts, crucial for overall growth.

    Rest of market revenue grew 44% year-over-year to nearly $50 million.

    Q&A highlights

    7

    Are smaller regional MSOs following the upgrade playbook, and are these actual deployments or just lab trials?

    These are ramping deployments across the board, well past lab trials, covering DOCSIS 3.1 Plus, DOCSIS 4.0, and fiber use cases for a growing list of customers outside the top two.

    “This is way past the lab trials. This is ramping deployments across the board.”

    asked by Victor Chiu · answered by Nimrod Ben-Natan

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Imperatives & cOS Platform

    Harmonic's cOS platform is a key differentiator, supporting all access architectures including DOCSIS 3.1 Plus, DOCSIS 4.0, distributed, centralized, and fiber. This flexibility allows operators to evolve their networks without regrettable spend, addressing changing traffic patterns like the 3x faster growth in upstream traffic. The platform enables operators to modernize across current and future architectures, positioning Harmonic uniquely in the market.

    02

    Rest of Market Momentum & Customer Diversification

    The company saw continued strong momentum in the 'rest of market' segment, with revenue growing 44% year-over-year to nearly $50 million in Q2, and surpassing $100 million in the first half of the year. This growth is driven by an expanding base of 161 customers serving 48.2 million CPE devices, demonstrating successful customer diversification beyond the two largest accounts. Deployments are ramping up across various use cases, including DOCSIS 3.1 Plus, DOCSIS 4.0, and fiber.

    03

    Fiber Expansion & New Products

    Q2 marked a record for rest of market fiber bookings, with deployments accelerating globally. The SeaStar MDU optical node went live at DNA Finland, enabling multi-gigabit service in apartment buildings. Inter Venezuela is building a nationwide XGS-PON service for mobile backhaul using Harmonic's platform. New products like Pearl-1XL and Oyster+, offering high port density and extended power outage protection, have already secured multi-million dollar orders, expanding market reach beyond traditional residential broadband.

    04

    DOCSIS 4.0 Ecosystem Progress

    The DOCSIS 4.0 ecosystem achieved a significant milestone with cable modems from six suppliers and two chipset vendors clearing the first CableLabs interoperability hurdle. Harmonic is actively shipping unified DOCSIS 4.0 nodes in volume to a broad range of customers and secured a new DOCSIS 4.0 customer in Europe during the quarter. This progress enables operators to deliver fiber-like upstream speeds over existing infrastructure, meeting the demands of AI-era applications.

    05

    Intelligence Layer Adoption & Impact

    Adoption of Harmonic's intelligence layer continues to build, with Beacon live at approximately 20 customers and broader offerings running with about 10 operators. Early deployments show significant value, including a more than 30% reduction in subscriber calls to service providers. The Amply beta program, extending real-time visibility into the amplifier plant, is running with multiple vendors, aligning with Dell'Oro's projection of 10 million smart amplifiers in the current upgrade cycle, indicating a substantial market opportunity.

    06

    Video Business Divestiture & Capital Allocation

    Harmonic completed the sale of its Video business to MediaKind on June 16, 2026, for $137.9 million, transforming the company into a pure-play broadband provider. This transaction significantly strengthened the balance sheet, bringing cash and cash equivalents to $231.9 million. Capital allocation priorities remain organic growth, shareholder returns (with $122 million already repurchased under a $200 million program), and strategic M&A to further enhance growth and diversification.

    AI-generated summary of the company’s earnings call. Not investment advice.