Penguin Solutions, Inc PENG Q1 2026 Earnings Call

Q1 FY2026 Financial Highlights

• 💡 Revenue reached $343 million, showing a 2% sequential and 1% year-over-year increase, despite not recognizing hyperscale hardware revenue.
• 📊 Non-GAAP gross margins were 30%, reflecting favorable mix and execution, while non-GAAP operating income grew 1% year-over-year to $42 million.
• 📈 Diluted earnings per share (non-GAAP) remained flat at 49 cents compared to the prior year, with a 14% increase from the previous quarter.

Strategic Market Shift & Diversification

• 🚀 Penguin Solutions observes a broader market shift towards enterprise adoption and production-scale AI implementations, moving beyond hyperscaler deployments and pilot programs.
• 🎯 The company is actively pursuing customer diversification, securing new customers in sectors like defense, education, financial services, and oil & gas.
• 🌍 Significant sovereign cloud opportunities outside the US are emerging, reinforcing the need for Penguin's rapid deployment solutions and services for large-scale AI.

Business Segment Performance

• 💻 Advanced Computing revenue was $151 million, growing 9% quarter-over-quarter, supported by new customer bookings and an expanding pipeline.
• 🧠 Integrated Memory revenue reached $137 million, up 41% year-over-year, driven by strong demand and early development of Compute Express Link (CXL) solutions and Optical Memory Appliance (OMA).
• 💡 The Optimized LED business generated $55 million, experiencing an 18% sequential decline due to weak demand in China and among certain US OEM customers, but operating income increased 24% sequentially.

Technology & Partnership Initiatives

• 🛠️ Penguin launched a Rapid Development Workshop program to help customers plan for complex AI implementation at scale, leveraging its design, build, deploy, and manage framework.
• 🔗 The company is investing in CXL solutions and an Optical Memory Appliance (OMA) to address GPU/CPU memory bandwidth limitations in AI workloads.
• 🤝 Penguin is strengthening partnerships with ecosystem partners like Nvidia, AMD, and CDW, and customizing its ICE Clusterware platform for compatibility with open-source software.

Financial Outlook & Inventory Management

• ✅ The full-year FY2026 outlook was confirmed, projecting 6% net sales growth and $2 non-GAAP diluted EPS, with stronger sales expected in the second half.
• 📊 Memory net sales are now expected to grow 20-35% year-over-year, while the full-year non-GAAP gross margin was adjusted to 29% due to a higher mix of memory sales.
• 📦 Inventory levels, though elevated, show healthy inventory days and turns, with the company securing supply in the constrained memory environment for future orders.