What happened

Shares of Harmonic (HLIT 3.65%) are up big on Tuesday after the company reported third-quarter results that beat Wall Street's expectations. The stock was up as much as 19% on the day, and as of this writing, shares are up 13.4%.

So what

After the market closed on Monday, Harmonic released its financial results for the three months ending in September. Revenue was $126.3 million in the quarter, and its adjusted earnings per share were $0.09. Both numbers beat the consensus analyst estimates coming into the release, which is why Harmonic stock is up so much today.

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Harmonic's revenue grew 33% year over year in the third quarter. This was driven by Cable Access revenue growing 43% to $57.6 million, which counteracted the slower 26% year-over-year growth in its video segment revenue.

Harmonic offers solutions to streaming and cable companies that help them bring high-quality video content to customers' homes. With the streaming wars and the need for better and better internet connections, it looks like Harmonic is seeing an increase in demand.

For example, in the earnings release, management highlighted CableOS deployments growing 77% year over year to 3.9 million and software-as-a-service (SaaS) customers growing 36% year over year in the third quarter, with SaaS revenue increasing a delightful 69% year over year. If this growth continues, Harmonic should see its overall financials grow as well.

For all of 2021, Harmonic is guiding for $499 million to $509 million in revenue and expects to be around breakeven on profitability.

Now what

With the jump in the stock price today, Harmonic trades at a market cap of around $1.1 billion. If the company can hit its revenue target of approximately $500 million and reach its guidance for gross margin of 50.6%, then Harmonic will generate $253 million in gross profit this year. This would give the stock a price-to-gross-profit multiple of 4.3, which is quite reasonable if you believe that Harmonic can continue growing its financials at the rate it has this year.