PENG — Penguin Solutions, Inc.

Summary of Penguin Solutions Q4 and Full Year 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 Revenue: $338 million, up 9% year-over-year.
• Full Year Revenue: $1.37 billion, up 17% year-over-year.
• Non-GAAP Gross Margin: Q4 at 30.9%, flat year-over-year; full year at 31%, down 0.9 percentage points.
• Non-GAAP Operating Income: Q4 at $39 million, up 16% year-over-year; full year at $168 million, up 39%.
• Non-GAAP Diluted EPS: Q4 at $0.43, up 18%; full year at $1.90, up 53%.
• Adjusted EBITDA: Q4 at $43 million, up 11%; full year at $187 million, up 28%.

2. Strategic Updates and Business Highlights

• Transitioned from a holding company to a provider of AI infrastructure solutions.
• Expanded advanced computing pipeline and diversified customer base, including notable wins in financial services and federal sectors.
• Launched first international AI infrastructure implementation in South Korea with SK Telecom.
• Strengthened partnerships with NVIDIA, CDW, Insight, and Dell.
• Rebranded as Penguin Solutions and moved corporate domicile to the U.S.
• Closed a $200 million investment from SK Telecom and refinanced debt to improve balance sheet strength.

3. Forward Guidance and Outlook

• FY 2026 Revenue Growth: Expected to grow 6%, plus or minus 10%, reflecting a more back-end loaded sales year.
• Advanced Computing Segment: Expected to change between -15% and +15% year-over-year, factoring in the wind down of Penguin Edge and no hardware sales to hyperscale customers.
• Memory Segment: Forecasted growth of 10% to 20%.
• LED Segment: Expected to change between -5% and +5%.
• Non-GAAP Gross Margin Outlook: Estimated at 29.5%, reflecting pressure from lower-margin businesses.
• Non-GAAP Diluted EPS: Expected around $2, plus or minus $0.25.

4. Bad News, Challenges, or Points of Concern

• Anticipated decline in revenue from the Penguin Edge business, which is being phased out, and no expected hardware sales to hyperscale customers in FY 2026.
• Gross margin pressure expected due to the transition to lower-margin businesses such as Memory and AI hardware.
• Ongoing supply chain constraints could impact project ramp-up times, particularly in advanced computing and LED segments.

5. Notable Q&A Insights

• Management confirmed that while there are no anticipated hardware revenues from hyperscale customers in FY 2026, they maintain ongoing service relationships and discussions for future opportunities.
• The company is seeing strong pipeline growth in non-hyperscale sectors, particularly in financial services and federal sectors, which are expected to drive revenue in FY 2026.
• The 75% growth in HPC AI revenue from non-hyperscalers reflects successful customer diversification efforts.
• Management emphasized that while pricing in the memory market is improving, their business model focuses on value-add rather than just commodity sales, allowing for differentiation and higher margins.

Overall, Penguin Solutions reported strong financial results for FY 2025 and outlined a cautious yet optimistic outlook for FY 2026, with strategic initiatives aimed at enhancing growth despite anticipated challenges in certain segments.