Unified DOCSIS 40 And Cloud Migration Will Expand Video Opportunities

Key Takeaways

• Leadership in advanced DOCSIS deployments and strong global customer diversification drive revenue growth and reduce reliance on major North American clients.
  
• Shift to cloud-based solutions and strategic partnerships enhances high-margin recurring revenue, product differentiation, and earnings visibility despite short-term uncertainties.
  
• Heavy dependence on a few major clients and narrow product lines exposes Harmonic to revenue volatility from shifting customer strategies, market consolidation, and aggressive competition.

Catalysts

Provides broadband access solutions worldwide.

• Harmonic’s leadership and early wins in Unified DOCSIS 4.0 deployments, alongside proof of large-scale throughput and field-tested technology, position the company for a sharp revenue acceleration beginning in 2026 as key service providers ramp major infrastructure upgrades in response to the global surge in bandwidth demand.
  
• Continued broad customer diversification, including the addition of Tier-1 international operators and pure-play telco fiber wins, supports the expansion of Harmonic’s total addressable market and increases Rest of World revenues, while reducing dependence on a few large North American MSOs.
  
• The rapid adoption of virtualized and cloud-based video processing solutions, as driven by increasing streaming and on-demand content consumption, is powering significant growth in Harmonic’s SaaS revenue streams; this transition to higher-margin recurring revenue improves both earnings visibility and long-term net margins.
  
• Ongoing investment in R&D, including breakthroughs like AI-powered workflow optimization and PTP-less timing, is driving product leadership and differentiation, which supports premium pricing power and higher gross margins over time.
  
• Strategic partnerships—such as the ramp-up of the Akamai collaboration for SaaS streaming—and the company’s robust backlog and deferred revenues provide tangible evidence of sustained top-line growth, even as near-term uncertainties like tariffs and deployment timing are navigated.

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 grow by 3.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 7.7% today to 9.3% in 3 years time.
• The bullish analysts expect earnings to reach $70.4 million (and earnings per share of $0.59) by about July 2028, up from $53.2 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 25.6x on those 2028 earnings, up from 19.6x today. This future PE is lower than the current PE for the US Communications industry at 28.4x.
• Analysts expect the number of shares outstanding to decline by 2.78% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.67%, as per the Simply Wall St company report.

Harmonic Future Earnings Per Share Growth

Risks

• Significant customer concentration remains a critical risk as the company reported that Comcast and Charter together accounted for over 45 percent of total revenue in the quarter, meaning any reduction in spending, shift to in-house platforms, or changed supplier relationships by these large clients could cause major revenue volatility.
  
• The ongoing uncertainty and volatility around global tariffs and trade policy, especially given the heavy reliance on manufacturing in Malaysia and a large portion of sales to US-based customers, may increase costs or delay customer orders, negatively impacting both revenues and net margins.
  
• Harmonic’s dependency on a few product lines (such as CableOS and VOS) as the foundation for growth means product failures, slower-than-expected adoption of Unified DOCSIS 4.0, or accelerated technology shifts by the industry could result in significant earnings volatility and threaten future top-line growth.
  
• The risk of rapid technological disruption and possible commoditization in broadband and video infrastructure may erode Harmonic’s pricing power, especially as open-source alternatives and aggressive competitors target the same market, pressuring net margins over the long term.
  
• Industry consolidation among media, telecom, and broadband operators could shrink the customer base and increase the bargaining leverage of key clients, leading to tougher contract terms and the potential for reduced revenue and profitability.

Valuation

• The assumed bullish price target for Harmonic is $14.0, 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 $14.0, 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 $758.5 million, earnings will come to $70.4 million, and it would be trading on a PE ratio of 25.6x, assuming you use a discount rate of 7.7%.
• Given the current share price of $9.22, the bullish analyst price target of $14.0 is 34.1% higher.
• 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.