Summary of Penguin Solutions Q2 2026 Earnings Call

1Key Financial Results and Metrics

Net Sales: $343 million, down 6% year-over-year.

Non-GAAP Gross Margin: 31.2%, up 0.4 percentage points year-over-year.

Non-GAAP Diluted EPS: $0.52, flat year-over-year.

Advanced Computing Segment Sales: $116 million, 34% of total sales, down 42% year-over-year.

Integrated Memory Segment Sales: $172 million, 50% of total sales, up 63% year-over-year.

LED Segment Sales: $56 million, 16% of total sales, down 7% year-over-year.

Operating Income: $45 million, down 8% year-over-year.

2Strategic Updates and Business Highlights

CEO Transition: Kash Shaikh highlighted his focus on building Penguin into an AI factory platform company, emphasizing the shift from model training to real-time inference in AI workloads.

Product Innovations: Introduction of the Penguin MemoryAI line and KV Cache server aimed at enhancing AI inference capabilities.

Customer Engagement: Strong demand across enterprise, neocloud, and sovereign AI markets, with notable wins including partnerships with Deepgram and Georgia Tech.

Diversification Strategy: Progress in reducing reliance on hyperscaler customers, with non-hyperscale AI/HPC sales growing significantly.

3Forward Guidance and Outlook

Revised Full-Year Outlook:

Net Sales Growth: Raised to a midpoint of 12%, up from 6%.

Non-GAAP Diluted EPS: Expected to be approximately $2.15, up from $2.

Advanced Computing Segment: Expected to decline between 15% and 25% year-over-year.

Integrated Memory Segment: Expected to grow between 65% and 75% year-over-year.

LED Segment: Expected to decline between 5% and 15% year-over-year.

Gross Margin Outlook: Adjusted to 28%, reflecting a higher mix of lower-margin memory sales.

4Bad News, Challenges, or Points of Concern

Advanced Computing Decline: Significant year-over-year decline in advanced computing sales attributed to the wind-down of the Penguin Edge business and reduced hyperscale hardware sales.

Sales Cycle Lengthening: Delays in revenue recognition due to extended deployment cycles, with bookings not translating into revenue as quickly as anticipated.

Memory Costs: Rising memory costs could pressure margins in the second half of the fiscal year.

Supply Chain Constraints: Ongoing challenges in securing materials may impact the ability to meet demand.

5Notable Q&A Insights

Memory Segment Growth: Majority of the growth in the memory segment is attributed to favorable pricing, with strong demand across various sectors.

Advanced Computing Guidance: The reduction in guidance was primarily due to the lag in revenue recognition from bookings, with expectations for future growth based on a strong pipeline.

CXL Technology: CXL adoption is seen as timely due to the shift towards inference, with confidence in revenue generation from new products.

Competitive Landscape: Collaboration with NVIDIA is viewed as complementary rather than competitive, enhancing Penguin's offerings in the AI infrastructure space. Overall, Penguin Solutions is navigating a complex landscape with a focus on AI infrastructure and memory solutions, while facing challenges in certain segments and a need for careful management of supply chain and cost pressures.