Harmonic's Broadband Bet Pays Off: Q2 Revenue Jumps 54% as Fiber, DOCSIS Momentum Builds

Harmonic capped its transition into a pure-play broadband company with a blockbuster second quarter, reporting revenue up 54% year over year and raising its full-year outlook for the second time in 2026. The company said demand for its converged cOS platform is broadening well beyond its two largest customers, with smaller operators ramping DOCSIS and fiber deployments and new intelligence products starting to contribute.

The results, posted Wednesday after market close, mark the first full quarter since Harmonic completed the sale of its Video business to MediaKind in mid-June. With that divestiture behind it, Harmonic is now entirely focused on broadband infrastructure — a business that executives said is being reshaped by an urgent need for more upstream capacity and the arrival of AI-era traffic patterns.

A Record Quarter, Powered by 'Rest of Market'

Harmonic reported Q2 broadband revenue of $133.5 million, well above its already raised guidance range of $115 million to $125 million and up 54% year over year. The so-called "rest of market" segment — all revenue outside its two largest customers — grew 44% to nearly $50 million and accounted for 37% of total revenue. Bookings reached $144 million for the quarter, with rest of market representing roughly 60% of that total and a book-to-bill ratio well above 1.5.

The company ended the quarter with record backlog and deferred revenue of $587.6 million, up 71% year over year, giving management greater confidence in the quarters ahead. Non-GAAP EPS came in at $0.21, ahead of the $0.15 to $0.19 guidance range, while operating profit of $31.3 million also topped expectations and included $2.3 million in stranded costs tied to the Video sale.

Why Operators Are Choosing Harmonic

CEO Nimrod Ben-Natan framed the quarter's strength around a simple proposition: operators no longer have to choose a single network architecture before they modernize. Harmonic's cOS platform supports DOCSIS 3.1 Plus, DOCSIS 4.0, distributed and centralized access, and fiber — all with the same software foundation. That flexibility, he argued, is increasingly decisive as legacy broadband networks strain under new traffic demands.

"Network traffic is not just growing. It is changing shape," Ben-Natan said on the earnings call. Citing OpenVault data, he noted that upstream traffic is now growing more than three times faster than downstream — the third consecutive year that gap has widened. AI agents and connected devices are generating upload-heavy traffic around the clock, not just during evening peak hours that legacy networks were engineered to handle.

That dynamic is pushing operators to evaluate a range of upstream capacity solutions simultaneously. Ben-Natan pointed to Cable One's CEO, who recently said his company plans to trial DOCSIS 3.1 splits, DOCSIS 3.1 Plus, DOCSIS 4.0 and fiber side by side. All of those options are commercially available on Harmonic's platform today, he said.

"This flexibility matters more than ever as legacy platforms are both constrained on upstream capacity and approaching the end of their useful life," Ben-Natan added. The company also cited its customer Net Promoter Score, which reached 87 in the quarter.

Fiber Gains Traction Beyond Cable

Fiber was a clear highlight, with Q2 setting a record for rest-of-market fiber bookings. The company's SeaStar MDU optical node went live at DNA Finland, bringing multi-gigabit service to apartment buildings that were previously uneconomic to upgrade. In Venezuela, Inter — the country's largest private ISP — is using Harmonic's platform for a nationwide XGS-PON deployment aimed at mobile backhaul for 5G-ready operators.

Harmonic also secured its first multimillion-dollar order for the Pearl-1XL and Oyster+ products introduced at FiberConnect last quarter. Those products, designed for outdoor deployment with integrated power protection, eliminate the need for street cabinets and are aimed at the broader fiber market, not just cable operators.

The company sees its converged platform as a strategic advantage as cable operators increasingly overlay fiber on their footprints. Ben-Natan cited Bluepeak as an example: the operator originally deployed Harmonic's distributed access platform for DOCSIS, then shifted strategy and began overbuilding parts of its network with fiber — reusing the same housing, infrastructure and backhaul to deploy XGS-PON quickly.

DOCSIS 4.0 Ecosystem Matures

The DOCSIS 4.0 outlook brightened during the quarter, as cable modems from six suppliers across two chipset vendors cleared the first CableLabs interoperability milestone on the path to certification. Multi-vendor modem supply is now coming into place, giving operators more confidence to proceed with DOCSIS 4.0 upgrades. Harmonic said it is shipping unified DOCSIS 4.0 nodes in volume and added a new DOCSIS 4.0 customer in Europe during the quarter.

Intelligence Layer Shows Early Promise

Harmonic's newer intelligence products are also gaining traction. The company said Beacon, its network intelligence offering, is now live with approximately 20 customers, with newer offerings running at about 10 operators. Early deployments have produced measurable results, including a reduction of more than 30% in subscriber calls to service providers.

The company's Amply product, which provides real-time visibility into amplifier plant performance, is now in beta with several operators running amplifiers from two different vendors. Citing a recent Dell'Oro report, Harmonic noted that nearly 10 million amplifiers deployed in the industry's current upgrade cycle will be smart amplifiers — a trend that expands the market for its intelligence layer.

Raising Full-Year Guidance

CFO Walter Jankovic said the strong results and record backlog support higher expectations for the rest of 2026. The company now expects full-year broadband revenue of $505 million to $525 million, up from its prior range of $475 million to $495 million. Gross margin is expected in the 51% to 52% range, an improvement over prior guidance, while operating profit is projected at $99 million to $111 million. EPS is expected between $0.67 and $0.75, up roughly 14.5% from the prior midpoint.

For Q3, Harmonic guided to broadband revenue of $125 million to $135 million, gross margins of 51% to 52%, operating profit of $23 million to $28 million, and EPS of $0.15 to $0.19. The guidance includes about $3 million per quarter in net increased memory costs that are not expected to be passed on to customers.

Jankovic said the company has already secured its memory supply for the rest of 2026 and into 2027, mitigating what has been a major industry-wide challenge. The company also reduced its expected non-GAAP tax rate for the year to 23% from 24.5%, reflecting an updated view of profitability.

Balance Sheet Strength and Capital Allocation

The Video sale added $137.9 million in cash proceeds, bringing Harmonic's cash and cash equivalents to $231.9 million at quarter end. The company also has an $85 million undrawn credit facility. Management reiterated its capital allocation priorities: investing in organic growth, returning capital to shareholders, and pursuing strategic M&A. Harmonic has repurchased $122 million under its current $200 million buyback program, though it did not repurchase shares in Q2.

Inventory increased $15.3 million during the quarter as the company took early delivery of memory and other components to secure supply. Days inventory on hand rose to 95 from 80 in the prior quarter, a level management said is intentional given the current supply environment.

Looking Ahead

Harmonic will host an Investor Day on September 15, where management plans to share an updated view of the market opportunity, longer-term strategy, and more details on the intelligence opportunity. Ben-Natan said the core message is straightforward: operators choose Harmonic because it lets them evolve their networks without regrettable spend.

"We are raising our outlook for the second time this year as the visibility we have built supports it," he said.

This article is a transcript of Harmonic's Q2 2026 earnings conference call, produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

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