Harmonic Raises 2026 Outlook as Q3 Revenue Jumps 64.5%

Harmonic Inc. (NASDAQ: HLIT) reported sharply higher third-quarter revenue and non-GAAP operating profit and raised its full-year 2026 guidance again, supported by broader customer adoption beyond its largest accounts and new DOCSIS and fiber wins.

Revenue from continuing operations reached $148.8 million in the quarter ended in 2026, up 64.5% from $90.5 million a year earlier and above the company’s guidance range of $125 million to $135 million. Harmonic’s Video business is classified as discontinued operations, and the presentation focused on the remaining broadband business.

On a non-GAAP basis, gross margin expanded to 52.1% from 46.9%, an increase of 520 basis points. Operating profit more than tripled to $33.0 million from $10.1 million, while diluted earnings per share rose to $0.23 from $0.07. Operating expenses increased 37.7% to $44.5 million.

Customer diversification supports growth

Harmonic highlighted progress in expanding its customer base. Revenue from its “Rest-of-Market” customers accounted for a record 46% of total revenue and increased 101% year over year. Those customers also represented more than 60% of total company bookings during the quarter.

The company secured nine new DOCSIS and fiber wins, including Liberty Latin America, Denmark’s TDC and a Tier 1 customer in Belgium. Harmonic said it continues to hold a high share in virtual cable modem termination systems, or vCMTS, and DOCSIS, while its Pearl-1XL and Oyster+ products are ramping.

The company is also extending its cOS platform into fiber and network intelligence. Harmonic launched SensAI after customer trials and said customers have begun signing up. It acquired a vendor-neutral fiber management and provisioning platform, now branded cOS Loop, to add multi-vendor fiber management capabilities. Harmonic also launched Recon with Comcast to address fiber reliability and reported interest from cable and telecommunications customers.

Harmonic said development of differentiated 50G technology is progressing toward a planned 2027 introduction as it seeks to expand its fiber presence into telecommunications markets. Longer-term areas identified in the presentation include connectivity, intelligence software and edge artificial intelligence. The company estimated its 2030 total addressable market at $6.4 billion to $7.4 billion or more, although edge AI computing was not included in that estimate because the opportunity has not yet been sized.

Full-year outlook raised

For 2026, Harmonic now expects non-GAAP revenue of $545 million to $555 million, implying $550 million at the midpoint and approximately 53% year-over-year growth. The company said the midpoint was raised by 6.8%.

Full-year non-GAAP operating profit is projected at $118 million to $124 million, with gross margin of 52.1% to 52.4%. Non-GAAP diluted EPS is expected to be $0.80 to $0.84, with the midpoint increased by 15.5%. The guidance includes an estimated $7.6 million of stranded costs associated with the Video divestiture.

For the fourth quarter, Harmonic forecast revenue of $141 million to $151 million, non-GAAP gross margin of 51% to 52%, and operating profit of $28 million to $34 million. Non-GAAP diluted EPS is expected to range from $0.19 to $0.23. The quarterly outlook includes an estimated $1.5 million of stranded Video divestiture costs.

Liquidity remains substantial as working capital rises

Harmonic ended the third quarter with $142.8 million in cash and $160 million available under its revolving credit facility, for total liquidity of $302.8 million. The company reduced its revolving-credit borrowing during the quarter.

Free cash flow from continuing and discontinued operations was negative $5.1 million, compared with negative $7.0 million in the second quarter and positive $21.0 million a year earlier. Accounts receivable rose to $117.1 million, with days sales outstanding increasing to 71 from 61 in both the preceding quarter and prior-year period. Inventory climbed to $94.8 million, and inventory days increased to 120 from 95 in the second quarter and 91 a year earlier. Backlog and deferred revenue totaled $534.0 million, down from $587.6 million in the second quarter but above $338.0 million a year earlier.

Management identified organic investment as its first capital-allocation priority, including fiber and 50G research and development, the intelligence platform, working capital for the growth ramp and expansion into new markets. Harmonic has used $142 million of its current $200 million share-repurchase authorization and said it will also retain financial flexibility to assess acquisitions that could support diversification and scale its intelligence platform.

The company expects strong free cash flow to continue over the next three years, but its projections remain subject to execution and other risks identified in its regulatory filings. Harmonic also noted that its non-GAAP measures exclude items including stock-based compensation, restructuring charges, certain advisory fees, tax normalization adjustments and depreciation, and may not be comparable with similarly labeled measures used by other companies.