Harmonic’s ongoing SaaS transition has been headlined by a new Akamai streaming partnership (more on this further down), as the US encoding heavyweight’s video SaaS revenues reached $15.1 million in Q4 2024—a mini-record wrapped inside a bigger record quarter for total revenue of $222.2 million.
A solid fourth quarter brings Harmonic’s total video SaaS sales for 2024 to $56.8 million, up from $51.3 million in 2023—a growth rate which is nowhere near fast enough to meet Harmonic’s target of $100 million video SaaS sales by the end of 2028.
So, how does Harmonic defy the odds by reaching this ambitious (some would say virtually impossible) target?
Barring a miracle wave of new business over the next three years, Harmonic will fall short, with the availability of SaaS business from its current customer base surely not enough to make up the ground.
Harmonic’s SVP of Video Products and Solutions, Gil Rudge, admits that the scale of the task at hand is daunting—telling Faultline that 2025’s performance will be indicative of whether the $100 million SaaS target is reachable (or, more likely, revised down).
Worse, repeated mentions by CFO Walter Jankovic of projected customer spending slowdowns through 2025 do not instill confidence, which on the broadband side of the business caused slides to share this week, despite the record quarter.
On SaaS streaming, Harmonic claims that 2025 will see further growth as sales efforts ramp up into 2026 to build recurring revenue over time.
Still, without concrete examples, it is difficult to see where that extra business comes from.
Rudge reemphasizes Harmonic’s focus on hybrid business, as broadcasters shift channels and DVR storage to the cloud for disaster recovery and pop-up events, while keeping encoding on-premise for greater control.
While there is less new business to go around, Harmonic has identified certain streaming providers bringing workflows on-prem to better manage costs, as cloud bills are still a concern for customers with constant use racking up catastrophic bills.
The cloud is best suited for occasional events, with lower upfront cost and the ability to spin up new technology quickly. Harmonic’s strategy is therefore betting on support clients with maintaining core channels on-prem, while shifting additional or short-term workloads to the cloud.
Harmonic hopes its SaaS transformation will be buoyed by a partnership with Akamai for video streaming, which makes Harmonic’s VOS 360 Media SaaS suite (encoding, transcoding, personalized ad delivery) the exclusive video processing partner for the forthcoming Akamai Media Services Live 5.
This is a dedicated delivery service for live event broadcasting and linear streaming—bringing cloud computing, cybersecurity, and content delivery capabilities to M&E customers in a package with more afforded control over workflows.
An executive at one of Harmonic’s close competitors described the latest partnership with Akamai Media Services Live 5 as “non news”—claiming the RFP has been out in the wild for so long that everyone already knew about it. Some might interpret that response as sour grapes.
Harmonic’s Rudge counters that the integration will help grow Harmonic’s SaaS pipeline for live events—replacing services previously done in-house by Akamai. He pushes back suggestions that this deal is simply Akamai offloading redundant processes to Harmonic, allowing the CDN giant to focus on compute and cybersecurity, without paying Harmonic a penny for its services.
The sooner Harmonic can talk about a new customer acquired via Akamai Media Services Live 5.
As shown in the attached graph, Harmonic’s business has been stable for the past year, though the long-term view is wince-inducing.
With hybrid workflows blurring traditional broadcast and streaming lines, this culminated in the third-best quarter on record in terms of SaaS as a % of video revenue, at 29.5%.
However, whether the market follows remains to be seen, and pricing concerns over SaaS subscriptions are still front of mind for clients even in 2025 (arguably more so against macroeconomic forces), with certain competitors undercutting the market and potentially leading to companies like Harmonic looking bloated and overpriced.
After all, as we highlighted during Ateme’s Q4 earnings last week, larger companies accustomed to the convenience of capex purchases can often be resistant to the opex model of SaaS—potentially creating cash flow problems.
In summary, the two strategic imperatives for Harmonic’s video business are appliance profitability and SaaS transformation. On the appliances side, while sales are down significantly from just three years ago, the US vendor wants to keep the product line fresh, with greater scalability of its core XOS and Spectrum product lines, which involves more functional consolidation.
On broadband, Harmonic now commands a 62% market share of the DAA market, and a 98% share of the vCMTS (virtual Cable Modem Termination System). However, both markets face stiff competition from FWA and fiber, though opportunities will arise as the majority of cable networks are still based on aging CMTS chassis, lower splits and analogy optics transport.
Yet, 2025 won’t be another record-breaker—broadband growth is set to slow, and video revenue will take a Q1 hit before flattening for the year. SaaS is not an easy sell, and customer perceptions may differ from Harmonic’s views on hybrid models.
Harmonic wrapped up 2024 with record Q4 revenue of $222.2 million, as the video division, despite long-term declines, held ground with revenue flat at $51.1 million, and even swinging back to profitability with a 67.4% gross margin.