Penguin Solutions Inc. reported first‑quarter fiscal 2026 revenue of $343.1 million, a 1 % year‑over‑year increase from $341 million in Q1 FY25. The growth was driven by $151.5 million in Advanced Computing, $136.5 million in Integrated Memory, and $55.1 million in Optimized LED. Advanced Computing revenue rose 9 % sequentially, but the segment’s year‑over‑year growth was muted by the wind‑down of the high‑margin Penguin Edge business and the absence of hyperscale hardware sales that were present in the prior year. Integrated Memory grew 41 % YoY, reflecting strong demand from data‑center and enterprise customers, while Optimized LED revenue fell 18 % YoY due to continued demand weakness in China and softness among select U.S. OEM customers.
Gross profit for the quarter was $96.1 million, giving a GAAP gross margin of 28.0 %. Non‑GAAP gross margin was 30.0 %, down 0.8 percentage points YoY. The margin compression is largely attributable to the wind‑down of the Penguin Edge business, which had a higher gross‑margin profile, and to the loss of hyperscale hardware revenue that previously boosted the overall mix. Despite the compression, operating income reached $19.6 million, a 24 % sequential increase, driven by the higher mix of higher‑margin Advanced Computing and Integrated Memory and by disciplined cost management.
Net income attributable to Penguin Solutions was $5.3 million, translating to a GAAP diluted EPS of $0.04. The company’s non‑GAAP diluted EPS was $0.49, beating consensus estimates of $0.41–$0.445 by $0.04–$0.08. The EPS beat was driven by strong operating leverage in the core segments and by the elimination of one‑time charges that had impacted the prior quarter. The GAAP EPS miss reflects the lower gross margin and the impact of the Penguin Edge wind‑down, but the non‑GAAP figure demonstrates that the company’s core operating performance remains robust.
Penguin Solutions reaffirmed its fiscal 2026 outlook, maintaining a 6 % year‑over‑year net‑sales growth target (±10 % range) and a 27 % GAAP gross‑margin target (±1 % range). Management also reiterated a non‑GAAP diluted EPS guidance of $2.00 (±$0.25). The unchanged guidance signals confidence in the company’s ability to sustain growth in Integrated Memory and Advanced Computing while managing the short‑term margin compression associated with new AI infrastructure deployments. The guidance also reflects expectations of continued demand in enterprise AI and data‑center markets, offset by the wind‑down of legacy high‑margin businesses.
CEO Mark Adams highlighted that the quarter’s results demonstrate “solid operating results” amid a shift toward enterprise AI adoption. He noted that Advanced Computing revenue was up 9 % QoQ, driven by new customers in defense and education, and that Integrated Memory growth was 41 % YoY. Adams acknowledged the headwinds from the Penguin Edge wind‑down and the lack of hyperscale hardware revenue, but emphasized the company’s focus on cost discipline and strategic investments in high‑return verticals. He also pointed to the divestiture of the remaining stake in Zilia Technologies as a step toward streamlining operations and concentrating on core AI and memory businesses.
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