Comcast’s push to roll out DOCSIS 4.0 by the second half of this year is proving to be a boon for cable vendor Harmonic, which noted on an earnings call the operator accounted for 48% of the $164.3 million in revenue it posted in Q4 2022. That proportion was up significantly from 26% of revenue in Q4 2021 and 38% in Q3 2022.
Dell’Oro Group VP Jeff Heynen told Fierce Harmonic supplies both the Remote-PHY hardware and virtual cable modem termination system (vCMTS) CableOS software Comcast needs for its network upgrades and transition to distributed access architecture (DAA). He added Harmonic is the incumbent vCMTS supplier for Comcast.
Heynen noted that given the large percentage of revenue attributed to Comcast, one could make the argument that perhaps Harmonic hasn’t expanded its broadband customer base as quickly as it would like. “You wonder about the wider adoption of these architectures thus far given that percentage because no other vendor thus far is reporting significant vCMTS or DAA shipments at this point,” he said. “So again, that suggest that outside of Comcast, we’re still really in the early stages of vCMTS and overall DAA deployments.”
Harmonic CEO Patrick Harshman said during the earnings call that Comcast is leading the network upgrade push among cable operators. However, he noted Harmonic has disclosed deals with a total of 11 tier-one operators to date, with seven of those in the process of ramping upgrades. Another four are “just getting going.”
That said, he conceded there’s plenty of room to grow that number given “there is a big chunk of the market, over two-thirds of the market that is not on board with our platform yet. And that’s also very much in our sights.” Harshman added “We think we’re very well positioned to do well in the rest of the market. And over the next couple of years, we see corresponding aggressive deployment.”
Metrics
Revenue of $164.3 million was up 5.5% year on year, with broadband revenue of $96 million up 37.7% and video segment revenue down 20.7% to $68.3 million. Net income of $6.1 million was down significantly from $19.9 million. The vendor said previously it is aiming to grow revenue to over $820 million in 2025.
Harmonic said commercial deployments of its CableOS vCMTS system grew 24.7% to 91 customers, with the software now serving 15.2 million cable modems.
Heynen told Fierce CableOS likely accounted for roughly half of Harmonic’s total broadband revenue in Q4, up from the low- to mid-40% range in recent quarters. That suggests that Comcast is expanding the number of systems it is converting to DAA in 2023, he added.
The analyst explained that operators usually purchase the CableOS licenses first and then buy the required Remote PHY devices. Given the gross margin projections Harmonic released for 2023 suggest the revenue mix will be weighted toward CableOS, Heynen said it appears “other customers will be ramping up and following a similar deployment cycle,” just as Harshman implied.
Fiber foothold
On the fiber front, Harshman said Harmonic’s converged PON and DOCSIS product has caught the attention of both new and existing customers. He noted the majority of interest has been from cable operators who are interested in deploying “fiber on demand” in brownfield areas and building greenfield fiber footprints.
So, while it only recorded “modest” fiber revenue in 2022, the CEO said it is heading into this year with “several” new wins in hand as well as a “good order backlog.” Putting the pieces together, he concluded Harmonic is on track to reach its 2025 growth target for the segment.