Streaming And Cloud Demand Will Expand Markets Despite Legacy Hurdles

Key Takeaways

• Regulatory incentives and global network modernization efforts could create outsized revenue growth and operating leverage for several years.
  
• Diversifying customer base and leadership in cloud-native streaming tech positions Harmonic for stable, high-margin recurring revenue beyond traditional media.
  
• Declining legacy revenues, customer concentration, slow SaaS adoption, supply chain disruptions, and rising competition threaten Harmonic's profit growth and long-term market positioning.

Catalysts

Provides broadband access solutions worldwide.

• While analyst consensus expects Harmonic to benefit from the 2026 DOCSIS 4.0 and fiber upgrade cycle, this may in fact understate the magnitude and duration of the opportunity; regulatory tailwinds like the OBBBA tax incentives could pull forward a multi-year, global infrastructure buildout, leading to several years of outsized revenue growth and operating leverage as operators race to modernize networks far faster than currently anticipated.
  
• Analysts broadly agree on the impact of global customer diversification, but they may underestimate the scale: Harmonic's rapidly growing rest-of-world bookings, expansion into new operator segments, and cross-sell of both fiber and DOCSIS products suggest a transformative reduction in customer concentration risk and a step-function increase in recurring revenues and margin stability as the installed base broadens and matures.
  
• Harmonic's expanding leadership in cloud-native SaaS video and AI-driven monetization tools positions the company to become a core enabler of next-generation, data-rich streaming platforms, which could unlock high-margin recurring revenue well beyond traditional media markets, enhancing both net margins and total addressable market.
  
• The accelerating global shift to ultra-high-capacity broadband and edge connectivity driven by proliferation of connected devices and real-time applications (e.g., cloud gaming, IoT, enterprise SaaS) is likely to drive structural, secular demand for Harmonic's scalable platforms, supporting double-digit revenue CAGR and sustained gross margin expansion for the foreseeable future.
  
• Operational execution on proprietary, patent-protected innovations such as the PTP-less timing solution and ultra-low latency broadband could position Harmonic as essential infrastructure for differentiated network service quality, driving pricing power, share gains, and premium margin opportunities as operators prioritize performance and reliability in competitive markets.

Harmonic Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Harmonic compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Harmonic's revenue will decrease by 1.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 10.0% today to 8.6% in 3 years time.
• The bullish analysts expect earnings to reach $60.8 million (and earnings per share of $0.5) by about August 2028, down from $68.6 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 27.6x on those 2028 earnings, up from 14.5x today. This future PE is greater than the current PE for the US Communications industry at 25.1x.
• Analysts expect the number of shares outstanding to decline by 2.21% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.21%, as per the Simply Wall St company report.

Harmonic Future Earnings Per Share Growth

Risks

• The ongoing decline in traditional pay-TV subscriptions, as viewers shift to streaming and on-demand content, threatens Harmonic's legacy video processing revenues, risking a steady erosion of revenue and margins in this business line.
  
• Heavy dependence on a concentrated customer base, with Comcast alone representing 39 percent of total company revenue this quarter, exposes Harmonic to revenue volatility and potential earnings instability if any single large customer delays projects or reduces spending.
  
• Slower-than-expected adoption of Harmonic's SaaS video platforms could stall growth in high-margin recurring revenue streams, threatening the company's ability to drive steady net margin expansion in the face of competition and technology shifts.
  
• Increased supply chain disruption and uncertain global trade environments, including unpredictable tariff impacts and rising component costs, threaten to compress gross margins and could delay customer deployments, undermining both revenue growth and profitability.
  
• Accelerating market consolidation among major telecom and media service providers-as well as growing preference for open-source, cloud-native, and hyperscale video processing solutions-intensifies competitive pressures and could diminish Harmonic's addressable market and long-term revenue opportunities.

Valuation

• The assumed bullish price target for Harmonic is $12.5, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Harmonic's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.5, and the most bearish reporting a price target of just $7.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $709.4 million, earnings will come to $60.8 million, and it would be trading on a PE ratio of 27.6x, assuming you use a discount rate of 8.2%.
  
• Given the current share price of $8.74, the bullish analyst price target of $12.5 is 30.1% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.