Harmonic posted record Q4 results, but its shares dropped Tuesday after the supplier warned of slower spending in 2025 as cable operators gradually transition to 'unified' DOCSIS 4.0 technology.
The cable industry's turbulent spending swings continue to rattle top tech suppliers.
Harmonic shares took a hit last night and into Tuesday after the broadband and video tech specialist reiterated a warning that delays in cable's transition to "unified" DOCSIS 4.0 will result in softer operator spending and weaker results in 2025.
For full-year 2025, Harmonic now expects sales in the range of $585 million to $645 million, down from the $727 million expected by Wall Street and the $745 million expected by Raymond James. Harmonic's 2025 guidance reflects that some operators are pushing out their deployment plans for 2025, with activity expected to accelerate in 2026.
"We're navigating an industry-wide transition to unified DOCSIS 4.0," Harmonic CEO Nimrod Ben-Natan said Monday on the company's Q1 2024 earnings call. "While this change is expected to result in a below trend year for broadband revenue due to the timing of the rollout and ecosystem dependencies, our technology leadership position in unified DOCSIS 4.0 remains clear."
Harmonic shares were down $1.50 (-13.49%) to $9.62 each in mid-day trading.
Waiting for unified DOCSIS 4.0
The good news is that Broadcom's new lineup of unified DOCSIS 4.0 silicon is not holding up the train. "The silicon is available. There is no dependency on availability of silicon," Ben-Natan said.
Harmonic's role in D4.0 upgrades include its virtual cable modem termination system (vCMTS), nodes as well as a new type of FDX amplifier (with partner Sercomm) that will factor into Comcast's DOCSIS 4.0 network deployment. CommScope is also developing FDX amps for Comcast.
Centered on Broadcom silicon for cable modems, amplifiers and nodes, unified DOCSIS 4.0 covers both flavors of the specs – Full Duplex (FDX) and Extended Spectrum DOCSIS (ESD). Comcast and Charter Communications, the nation's two top cable operators, pledged their support for unified DOCSIS 4.0 at last fall's SCTE TechExpo.
Comcast is largely championing the FDX approach, which uses an FDX band that allows upstream and downstream traffic to occupy the same block of spectrum. The development and availability of FDX amplifiers are critical to Comcast's widescale D4.0 network upgrade plan.
Other operators, including Charter Communications, are leaning toward ESD, which envisions cable plant built to 1.8GHz while keeping downstream and upstream traffic running in dedicated spectrum.
Comcast and Charter, which have both signed deals to adopt Harmonic's vCMTS and other products tied into network upgrades, remain key contributors to the vendor. In Q4, they represented 67% of Harmonic's revenue (43% for Comcast, and 24% for Charter).
Broadband-related headwinds in 2025 are being fueled in part by operator readiness and the transition to unified DOCSIS 4.0. "As a result, we see a slight dip or plateau in spending, while providers prepare for the next major technology upgrade," Ben-Natan said.
Share shift?
Raymond James said it believes a slowdown in the first half of 2025 at Harmonic comes from Comcast allocating a greater portion of its remote PHY device purchases (used in distributed access architecture and D4.0 network upgrades) to CommScope.
"We suspect Comcast spending [at Harmonic] will slow, reflecting the ramp of FDX amplifiers and share shifts," Raymond James analyst Simon Leopold said in a research note.
Ben-Natan stressed that market share loss is not a contributor to any near-term troubles, noting that he expects Harmonic to increase its share as it wins more business for unified DOCSIS 4.0.
From a broader standpoint, Harmonic isn't alone in feeling these near-term headwinds. Vecima Networks, which reports earnings on Thursday, warned last week of cable spending delays. CommScope reports Q4 2024 results on February 26.
Ben-Natan expects Harmonic's fortunes to improve in 2026 and beyond as the ecosystem around unified DOCSIS 4.0 solidifies and operators start to ramp up their deployments. Dell'Oro Group's latest five-year forecast calls for cable network upgrade spending to peak in 2028.
Seeking more diversity
Harmonic also aims to diversify its business so that revenues are not so heavily concentrated on the US and a pair of Tier-1 operators. In Q4, broadband revenue for "rest of world" was up 50% versus the prior quarter and Harmonic added five new customers during the period, including Blue Stream Fiber, Ben-Natan said.
Harmonic also is seeing an uptick in how "cOS" – its flagship vCMTS platform – and nodes are being deployed. While most cOS deployments are for hybrid fiber/coax (HFC) networks, the platform has also been adapted for fiber-to-the-premises (FTTP) networks. Harmonic's nodes are also equipped to support FTTP deployments. More than 30% of Harmonic's current DOCSIS customers are purchasing fiber solutions from Harmonic, Ben-Natan said.
Harmonic said cOS served 127 customers and 33.3 million cable modems worldwide at the end of Q4, up from 121 customers and 32 million cable modems served at the end of Q3 2024.
Financial snapshot
Current headwinds aside, Harmonic posted record Q4 2024 revenues of $222 million, beating the $214 million expected by analysts, and up 33% from Q4 2023.
Harmonic also posted record Q4 2024 broadband revenues of $171 million, up 48% year-over-year.
Video revenues dropped 1% to $51.1 million, with about $15.1 million going toward software-as-a-service (SaaS) products.
Gross margins climbed 6.8% to 56.1%.
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