Harmonic's dominance of the early stages of the virtual cable modem termination system (vCMTS) market continued into the first quarter of 2023, as the company said its "CableOS" platform was connected to about 18.4 million modems worldwide. That means an additional 3.2 million modems were connected to the CableOS platform during Q1.

Harmonic estimates that its CableOS rollouts now cover about 10% of the global market of cable modems. Jeremy Rosenberg, Harmonic's SVP of business development and interim chief financial officer, clarified on Monday afternoon's earnings call that the 10% mark cited is for DOCSIS 3.1, noting that DOCSIS 4.0 is on the way and that CableOS has also been adapted to support fiber-to-the-premises (FTTP) networks.

Figure 1: (Source: Kristoffer Tripplaar/Alamy Stock Photo)

"Looking ahead, we see expanding opportunity associated with both the remaining 90% of this global cable footprint for distributed DOCSIS 3.1 and follow-on investment waves associated with DOCSIS 4.0, fiber-to-the-home and network expansions," Harmonic President and CEO Patrick Harshman said.

Harmonic said it ended the quarter with commercial deployments of CableOS to 94 operators worldwide, up 22% year-over-year. That gives it a massive lead over vCMTS competition like Casa Systems, which is starting to gain some initial traction, and CommScope, which has recently refocused efforts on the vCMTS market. Vecima Networks is also expected to join the vCMTS mix.

Comcast, which represented 47% of Harmonic's Q1 revenues of $157.6 million, remains Harmonic's marquee CableOS customer. Comcast is also starting to use CableOS for its targeted use of FTTP.

Charter Communications has also signed on to deploy CableOS for a multi-phased, network evolution plan that calls for vCMTS tech to support about 85% of Charter's hybrid fiber/coax (HFC) footprint. It's not yet clear how heavily Charter will rely on Harmonic for new fiber nodes that support its emerging distributed access architecture (DAA).

No fear of a Q3 pause

Harmonic's CableOS momentum is expected to gain speed as the year goes on. Harmonic is now forecasting $460 million of broadband revenues for 2023, implying a heavily weighted second half of the year.

"Our fears of a 3Q23 pause appear unfounded; Harmonic's outlook shows that growth comes from more than just Comcast and Charter," Simon Leopold, analyst with Raymond James, explained in a research note issued after Harmonic's earnings call. "The 2023 outlook likely reflects modest new customer (e.g., Charter) contributions, and leaves room for strong growth in 2024."

Harmonic's backlog and deferred revenue also rose to $625.5 million in Q1 versus $457.1 million in the prior quarter. "We think this reflects more than just the Charter CableOS award and commitments from several large customers for spending beyond 12 months," Leopold added.

Harmonic posted record Q1 revenues of $157.6 million, up 6.9% year-over-year. Broadband-related revenues climbed 23%, to $100.4 million. Video revenues were down 13%, to $57.3 million, but video revenues tied to software-as-a-service (SaaS) technology jumped 72%.

Fueled by its revised outlook for the year, Harmonic shares were up $2.04 (15.10%) to $15.52 each in Tuesday morning trading.

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— Jeff Baumgartner, Senior Editor, Light Reading