Penguin Solutions Q4 Earnings Call Highlights

Key Points

• Record fourth-quarter performance: Revenue rose 68% year over year to $567 million, while diluted EPS increased 133% to $1.00. Full-year revenue reached $1.73 billion, up 26%, with EPS rising 51% to $2.87.
• AI and memory businesses drove growth: Non-hyperscale AI infrastructure and Integrated Memory represented 78% of fourth-quarter sales and grew 141%. Integrated Memory revenue surged 158% to a record $341 million, supported by AI data-center demand and growing CXL product adoption.
• Fiscal 2027 outlook raised: Penguin expects approximately $2.43 billion in revenue, up about 40%, and diluted EPS of roughly $4.45, up about 55% at the midpoint. The company cited strong backlog and bookings, while noting potential timing risks from deployments, component availability and memory-market conditions.

Penguin Solutions NASDAQ: PENG reported record fourth-quarter results for fiscal 2026, driven by rising demand for AI infrastructure and data-center memory products, while raising its fiscal 2027 outlook for revenue and earnings.

Fourth-quarter net sales rose 68% year over year to $567 million, while diluted earnings per share increased 133% to $1.00. The company said it set quarterly records for net sales, gross profit dollars, operating income, operating margin, net income and adjusted EBITDA.

For the full fiscal year, Penguin reported net sales of $1.73 billion, up 26% from fiscal 2025. Diluted EPS increased 51% to $2.87, which President and CEO Kash Shaikh said reflected operating leverage as earnings grew faster than revenue.

AI businesses drive growth

Penguin said its non-hyperscale AI infrastructure and Integrated Memory businesses accounted for 78% of fourth-quarter sales and grew 141% year over year. The company had experienced relatively flat sales in the first half of fiscal 2026 before growth accelerated to 48% in the third quarter and 68% in the fourth quarter.

“Our team delivered an exceptional quarter, capping off a very strong fiscal year,” Shaikh said. He attributed the second-half acceleration to the company's AI factory platform strategy, greater focus on the data-center market, product investment and expanded go-to-market efforts targeting neocloud and enterprise customers.

Penguin’s Advanced Computing segment produced fourth-quarter sales of $154 million, up 11% from a year earlier. Within that segment, non-hyperscale AI infrastructure sales increased 99% year over year and represented 66% of segment revenue, compared with 60% in the prior-year quarter.

The company added six AI infrastructure customers during the quarter, including four neocloud customers, a quantitative trading firm and an enterprise customer. Across the full year, Penguin added 17 AI infrastructure customers, while 12 customers expanded their business with the company.

Shaikh said the company is increasingly being selected as an end-to-end partner to design, deploy, optimize and operate AI infrastructure. Its platform includes ClusterWareAI operating-system software, memory products, GPU and CPU systems, AI factory architectures, and design, deployment and managed services.

Among the engagements cited by management, Penguin was selected to deploy and operate a 36,000-GPU AI factory in Norway for a neocloud provider with $10 billion in contracted compute from a leading AI lab. The company also cited a multiyear engagement with a publicly traded neocloud provider to provide deployment and 24/7 operational services supported by ClusterWareAI.

In response to analyst questions, Shaikh said bookings had exceeded management’s expectations since the prior earnings report, helping support the increased growth outlook for Advanced Computing. He said neocloud projects have unit economics similar to enterprise on-premises AI factory deployments, while offering opportunities to provide hardware procurement, data-center design, operations and multiyear managed services.

Integrated Memory reaches record revenue

Integrated Memory was Penguin’s largest business during the quarter, generating record sales of $341 million, or 60% of company revenue. Segment sales climbed 158% from the prior-year period and 24% sequentially.

For fiscal 2026, Integrated Memory sales rose 99% to $924 million and represented 53% of total company revenue, compared with 34% in fiscal 2025. Management said the growth reflected both higher volumes and pricing, supported by memory requirements associated with AI and inference workloads in data centers.

Penguin added two new memory customers in the fourth quarter. During the full year, it added 50 new customers and said 29 existing customers expanded their relationships with the company.

The company also highlighted growing bookings and pipeline activity for CXL memory-expansion products. It said it secured business with a global AI server manufacturer and expanded its relationship with an AI infrastructure inference provider using its CXL memory expansion cards.

Shaikh told analysts that memory backlog remained higher than quarterly recognized revenue and now extends at least four quarters. He said demand is being supported by Penguin’s data-center focus, core memory offerings and newer CXL-based products aimed at inference workloads.

Margins and capital structure

Fourth-quarter gross margin was 28.8%, up 70 basis points sequentially. Gross profit rose 57% year over year to a record $163 million. Operating income reached a record $90 million, up 129% year over year, and operating margin expanded 4.2 percentage points to 15.8%.

Full-year operating income increased 44% to a record $241 million, while operating margin expanded 1.7 percentage points to 13.9%. Operating expenses rose 4% for the year to $267 million, below the company’s 26% sales growth rate.

VP of Finance and Accounting Aaron Johnson said Penguin’s asset-light model and disciplined spending helped produce operating leverage. The company spent $12 million on capital expenditures during fiscal 2026, or less than 1% of net sales.

During the fourth quarter, Penguin completed a $750 million offering of 0% convertible notes due in 2031. The company also exchanged about $296 million of 2029 and 2030 convertible notes and repaid the $100 million outstanding under its credit agreement. Penguin ended the quarter with $647 million in cash and cash equivalents.

Working-capital investments increased alongside the company’s growth. Inventory rose to $749 million, while net accounts receivable reached $796 million. Cash used in operating activities was $152 million for the full year, primarily reflecting working-capital investment in its memory and AI infrastructure businesses.

Fiscal 2027 outlook raised

Penguin expects fiscal 2027 net sales of approximately $2.43 billion at the midpoint, representing roughly 40% growth, with a range of plus or minus 10 percentage points. The guidance implies an approximately $700 million increase in sales at the midpoint.

• Advanced Computing: Expected to grow about 40% at the midpoint, supported by non-hyperscale AI infrastructure demand, partly offset by the absence of Edge sales and lower expected hyperscale sales.
• Integrated Memory: Expected to grow about 50% at the midpoint on continued demand for AI-driven data-center memory.
• Optimized LED: Expected to be relatively flat year over year.
• Gross margin: Expected to be about 28%, plus or minus 2 percentage points.
• Operating expenses: Expected to total about $275 million, plus or minus $10 million.
• Diluted EPS: Expected to be about $4.45, plus or minus $0.70, representing approximately 55% growth at the midpoint.

Johnson said the outlook reflects record backlog, bookings growth, demand for AI infrastructure and ongoing strength in the memory business. He also noted that deployment schedules, component availability, extended lead times and memory-market conditions could affect quarterly sales timing and product mix.

Separately, Penguin announced that Stephen Cumming joined the company as chief financial officer. Aaron Johnson, who had served as interim CFO since July, is returning to his role as vice president of finance and accounting.

About Penguin Solutions (NASDAQ:PENG)

Penguin Solutions, Inc provides intelligent infrastructure solutions for artificial intelligence, high-performance computing, enterprise data centers and other demanding technology environments. The company combines specialized hardware, software and professional services to help organizations design, deploy and manage complex computing infrastructure.

Its offerings include AI and high-performance computing systems, servers, storage and networking infrastructure, as well as software and services for infrastructure management, optimization and support.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.