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Penguin Solutions, Inc. (PENG)
NASDAQ:PENG
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Penguin Solutions
(NASDAQ:PENG)
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Rating:56Neutral
Price Target:
$20.00
▲(9.83% Upside)
The score is held up by improving financial performance and strong free-cash-flow generation, plus reaffirmed FY26 guidance and momentum in Integrated Memory. It is pulled down by very weak valuation (extreme P/E) and negative technical trend signals, with added uncertainty from business mix headwinds (Penguin Edge wind-down, no hyperscale revenue) and timing/supply-chain risks.
Positive Factors
Free Cash Flow Strength
Sustained high free cash flow provides durable funding for R&D, targeted buybacks, debt servicing, and strategic investments in higher‑growth areas (like memory). Over 2–6 months this supports execution without reliance on external financing and improves resilience to cyclical demand.
Integrated Memory Momentum
Rapid, large‑scale growth in Integrated Memory shifts the revenue mix toward a higher‑growth segment, diversifying away from legacy lines. As this now represents ~40% of sales, durable demand and scale should improve gross economics and create a foundation for multi‑quarter product investments.
Margin Improvement Trend
Consistent quarter‑by‑quarter operating margin expansion and a stable ~30% gross margin indicate lasting operational improvements and disciplined cost management. This structural margin momentum increases earnings resilience and amplifies returns on incremental revenue over the medium term.
Negative Factors
Elevated Leverage
Material debt levels constrain financial flexibility for capex, M&A, or cyclical downturns; interest and principal obligations elevate execution risk if demand softens. Even with improving cash flow, leverage limits buffer against shocks and lengthens recovery timelines in stress scenarios.
Loss of High‑Margin Penguin Edge
The planned cessation of Penguin Edge removes a high‑margin revenue stream and materially alters company mix, reducing near‑term growth and margin contribution. This structural loss requires scaling other businesses to offset a multi‑quarter headwind to topline and operating leverage.
Lumpy Advanced Computing Revenue
Wide guidance reflects persistent timing, customer concentration, and convertibility risk for large deals. This lumpy revenue profile complicates planning, increases working capital volatility, and can undermine steady margin expansion if shipments or supply constraints delay revenue recognition over multiple quarters.
Penguin Solutions (PENG) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.04B
Dividend YieldN/A
Average Volume (3M)1.12M
Price to Earnings (P/E)80291.0
Beta (1Y)2.38
Revenue Growth10.76%
EPS GrowthN/A
CountryUS
Employees2,700
SectorTechnology
Sector Strength88
IndustryHardware, Equipment & Parts
Share Statistics
EPS (TTM)0.49
Shares Outstanding52,560,158
10 Day Avg. Volume969,858
30 Day Avg. Volume1,119,120
Financial Highlights & Ratios
PEG Ratio-0.46
Price to Book (P/B)2.15
Price to Sales (P/S)0.94
P/FCF Ratio12.82
Enterprise Value/Market Cap0.98
Enterprise Value/Revenue0.74
Enterprise Value/Gross Profit2.60
Enterprise Value/Ebitda11.42
Forecast
1Y Price Target
$26.00Price Target Upside42.78% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering5
EPS Forecast (FY)2.04
Revenue Forecast (FY)$1.46B
Penguin Solutions Business Overview & Revenue Model
Company DescriptionPenguin Solutions, Inc. engages in the designing and development of enterprise solutions worldwide. It operates through three segments: Advanced Computing, Integrated Memory, and Optimized LED. It offers dynamic random access memory modules, solid-state and flash storage, and other advanced integrated memory solutions for networking and telecom, data analytics, artificial intelligence and machine learning applications; and supply chain services, including procurement, logistics, inventory management, temporary warehousing, programming, kitting, and packaging services. The company also provides Penguin Computing that focus on technical computing for core and cloud environments through high-performance computing and AI solutions; and Penguin Edge, an edge computing solution for embedded and wireless applications, such as high-performance products for government, health care, manufacturing, and telecommunications applications. In addition, it offers Stratus, which provides simplified, protected, and autonomous fault tolerant computing solutions in the data center and at the Edge through hardware and software services; and solutions to education, energy, financial services, government, hyperscale, and manufacturing markets. Further, the company provides LED chip products comprising blue and green LED chips based on gallium nitride, and related materials under Cree LED brand; and surface mount devices under the Cree LED XLamp and J Series brands. It sells its products directly to original equipment manufacturers, enterprise, government and other end customers through direct sales force, e-commerce, customer service representatives, on-site field application engineers, independent sales representatives, distributors, integrators, and resellers. The company was formerly known as SMART Global Holdings, Inc. and changed its name to Penguin Solutions, Inc. in October 2024. Penguin Solutions, Inc. was founded in 1988 and is based in Grand Cayman, Cayman Islands.
How the Company Makes MoneyPenguin Solutions generates revenue through multiple streams: the sale of hardware components such as servers and storage systems, subscription fees for software solutions, and consulting services that assist clients in implementing and optimizing their IT infrastructures. Additionally, the company engages in strategic partnerships with other technology firms to co-develop solutions, which can lead to shared revenue opportunities. Ongoing support and maintenance contracts further contribute to stable, recurring revenue, while bespoke solutions for enterprise clients help to boost profit margins.
Penguin Solutions Earnings Call Summary
Earnings Call Date:Jan 06, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:Apr 07, 2026
Earnings Call Sentiment Positive
The call presented a generally constructive picture: solid cash generation, margin expansion trend, strong and rapid growth in the Integrated Memory business, growing enterprise and sovereign AI pipeline, and disciplined expense management. Offsetting these positives are notable headwinds from the wind down of the high‑margin Penguin Edge business and absence of hyperscale hardware revenue this quarter, weakness in the LED segment (notably China), modest gross margin pressure and some working capital/timing risks tied to supply chain and new customer onboarding. Management reaffirmed full-year guidance while shifting mix assumptions and flagged second-half weighted sales, illustrating confidence in underlying demand but also acknowledging timing and supply constraints.Q1-2026 Updates
Positive Updates
Revenue and Top-Line Performance
Total net sales of $343 million in Q1 FY2026, up 1% year-over-year (CEO noted +2% sequentially). Product net sales were $279 million (up 3% YoY) and services net sales were $65 million.
Strong Integrated Memory Growth
Integrated Memory revenue of $137 million (40% of company net sales), up 41% year-over-year and up 3% sequentially; management raised full-year memory net sales growth outlook to 20%–35%.
Advanced Computing Momentum (Excluding Penguin Edge/Hyperscale)
Advanced Computing reported $151 million in Q1 (44% of sales). While down 15% YoY on a reported basis, management stated that Advanced Computing net sales excluding Penguin Edge and hyperscale hardware grew 52% year-over-year, indicating healthy underlying enterprise demand and new customer bookings.
Improving Profitability and Margin Expansion Trend
Non-GAAP operating income of $42 million (up 1% YoY) and non-GAAP operating margin of 12.1% (up 0.1 ppt YoY). This marks the sixth consecutive quarter of year-over-year non-GAAP operating margin expansion.
Stable Non-GAAP Gross Margin
Non-GAAP gross margin of 30% in Q1, which management says compares favorably to the midpoint of the full-year outlook despite a modest YoY decline.
Earnings and Quarter-over-Quarter EPS Improvement
Non-GAAP diluted EPS of $0.49 in Q1, flat year-over-year and up 14% sequentially.
Strong Cash Generation and Balance Sheet
Cash, cash equivalents and short-term investments of $461 million (up $68 million YoY). Cash flow from operations of $31 million in Q1, an increase of 125% YoY. Share repurchases of $15 million (~791,000 shares) in the quarter with $96.5 million remaining authority.
Cost Discipline
Non-GAAP operating expenses of $61 million, down 4% year-over-year and down 6% sequentially, driven by lower personnel-related and subcontract services costs.
Customer Wins, Pipeline Growth and Strategic Initiatives
New customer bookings in defense and education, growing pipeline across financial services, oil & gas, telecom, manufacturing and sovereign cloud opportunities. Launched a rapid development workshop program and continued partnerships with NVIDIA, AMD, CDW and SKT; development work on ICE ClusterWare and optical memory appliance (OMA) underway.
Negative Updates
Optimized LED Weakness
Optimized LED (Cree LED) revenue of $55 million in Q1, down 18% sequentially; management cited weak demand in China and softness among certain large U.S. OEM customers. Full-year LED net sales expected to decline between -15% and -5%.
Impact of Wind Down of Penguin Edge and Lack of Hyperscale Hardware
No hyperscale hardware revenue recognized in the quarter and ongoing wind down of high‑margin Penguin Edge business contributed to revenue headwinds; company expects Penguin Edge sales to essentially cease by end of fiscal 2026. Management estimates combined effect of these assumptions is ~14 percentage points unfavorable to total company net sales growth and ~30 percentage points unfavorable to Advanced Computing.
Reported Advanced Computing Decline (Reported Basis)
Advanced Computing net sales were down 15% year-over-year on a reported basis (despite +52% growth when excluding Penguin Edge and hyperscale), reflecting the lumpy revenue model and customer concentration effects.
Gross Margin Pressure and Guidance Reduction
Non-GAAP gross margin was down 0.8 percentage points YoY and 0.9 percentage points sequentially. Management lowered full-year non-GAAP gross margin outlook to 29% (+/- 1 ppt), a 50 basis point reduction attributable to a higher mix of lower-margin memory sales.
Services Revenue Decline
Services net sales totaled $65 million, down 9% year-over-year.
Supply Chain and Timing Risks
Management noted ongoing supply constraints and extended lead times for certain components (critical for Advanced Computing and Integrated Memory), and highlighted timing unpredictability for converting new customer master agreements into purchase orders and shipments.
Working Capital Dynamics and Receivables
Net accounts receivable increased to $342 million from $276 million a year ago; days sales outstanding rose to 51 days (from 45 days), reflecting higher sales volumes and sales linearity variations.
Uncertainty in Advanced Computing Linearity
Full-year Advanced Computing guidance remains wide (−15% to +15%), indicating material timing risk and uncertainty around when pipeline opportunities will convert and ship; company expects a back-half weighted year with ~53%–54% of sales in H2 FY2026.
Company Guidance
Penguin confirmed its FY‑26 outlook at a midpoint implying 6% net‑sales growth and non‑GAAP diluted EPS of $2.00 (±$0.25), with non‑GAAP gross margin of 29% (±1ppt), non‑GAAP operating expenses of $250M (±$10M), an expected non‑GAAP diluted share count of ~55M and a non‑GAAP tax rate of 22%; segment guidance is Advanced Computing down 15% to up 15% year‑over‑year, Integrated Memory up 20%–35%, and Optimized LED down 15% to 5%. They assume no hyperscale hardware revenue and a wind‑down of Penguin Edge (together ~14ppt adverse to company net‑sales growth and ~30ppt to Advanced Computing), expect roughly 53%–54% of sales in the second half, and flag supply‑chain/lead‑time and memory‑supply variability as key risks to the outlook.Penguin Solutions Financial Statement Overview
Summary
Financials are improving but still carry risk: TTM revenue rebounded (~14%) and profitability returned, supported by strong free cash flow (~$122M TTM). However, earnings power remains thin/previously volatile and the balance sheet still has meaningful debt (~$504M) despite improved leverage metrics.Income Statement
TTM (Trailing-Twelve-Months) results show a clear recovery: revenue grew ~14% with positive profitability (about 1.9% net margin and ~4.2% operating margin). Gross margin has been relatively steady around ~28–29% over time, suggesting a stable core product economics. Offsetting this, the company’s earnings power remains thin and volatile—large net losses in 2023 and 2024 preceded the current profit, and margins are still modest for the industry, leaving less room for execution missteps or demand swings.63
Positive
Balance Sheet
Leverage has improved meaningfully versus prior years: debt-to-equity is ~0.88 in the latest periods compared with much higher levels in 2022–2023, and return on equity is now positive (~4.7% TTM (Trailing-Twelve-Months)) after being deeply negative during the loss years. However, the balance sheet still carries substantial debt (~$504M TTM (Trailing-Twelve-Months)) and equity declined versus the most recent annual figure, which reduces financial flexibility if profitability weakens again.52
Neutral
Cash Flow
Cash generation is a bright spot: TTM (Trailing-Twelve-Months) operating cash flow (~$130M) and free cash flow (~$122M) are strong relative to reported earnings, with free cash flow running at roughly 92% of net income. Free cash flow growth is also very strong in the TTM (Trailing-Twelve-Months) period, indicating improving cash conversion. The main drawback is that operating cash flow covers only about a quarter of total debt, so while cash flow is healthy, the company is not in a “low leverage” position.76
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 1.37B | 1.17B | 1.44B | 1.40B | 1.06B |
| Gross Profit | 394.27M | 342.91M | 415.17M | 391.05M | 237.97M |
| EBITDA | 112.42M | 62.93M | 68.54M | 113.49M | 19.81M |
| Net Income | 21.58M | -52.47M | -187.53M | 66.56M | 21.31M |
Balance Sheet | |||||
| Total Assets | 1.62B | 1.47B | 1.51B | 1.57B | 1.34B |
| Cash, Cash Equivalents and Short-Term Investments | 453.75M | 389.48M | 390.81M | 313.33M | 222.99M |
| Total Debt | 733.03M | 725.88M | 856.85M | 651.14M | 398.26M |
| Total Liabilities | 1.01B | 1.08B | 1.28B | 1.19B | 1.03B |
| Stockholders Equity | 595.96M | 391.38M | 222.47M | 371.61M | 310.25M |
Cash Flow | |||||
| Free Cash Flow | 100.07M | 57.76M | 64.97M | 84.57M | 136.68M |
| Operating Cash Flow | 109.08M | 77.19M | 104.39M | 104.93M | 153.35M |
| Investing Cash Flow | 24.97M | 107.58M | -298.57M | -38.97M | -84.18M |
| Financing Cash Flow | -63.46M | -210.10M | 236.42M | 73.88M | 2.85M |
Penguin Solutions Technical Analysis
Negative
18.21
Price Trends
20.07
Negative
21.82
Negative
21.49
Negative
Market Momentum
-0.28
Positive
37.62
Neutral
21.51
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PENG, the sentiment is Negative. The current price of 18.21 is below the 20-day moving average (MA) of 19.78, below the 50-day MA of 20.07, and below the 200-day MA of 21.49, indicating a bearish trend. The MACD of -0.28 indicates Positive momentum. The RSI at 37.62 is Neutral, neither overbought nor oversold. The STOCH value of 21.51 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PENG.
Penguin Solutions Risk Analysis
Penguin Solutions disclosed 68 risk factors in its most recent earnings report. Penguin Solutions reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Penguin Solutions Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
72 Outperform | $1.15B | 178.91 | 2.64% | ― | -6.13% | -76.92% | |
72 Outperform | $1.07B | 56.60 | 6.58% | 0.22% | -2.88% | 26.14% | |
71 Outperform | $2.69B | 42.42 | 16.40% | 0.16% | 23.70% | 14.78% | |
64 Neutral | $1.92B | 52.66 | 3.37% | 1.44% | -2.93% | -40.33% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
58 Neutral | $1.76B | -27.71 | -5.34% | ― | -4.87% | -235.48% | |
56 Neutral | $1.04B | 80,291.01 | 4.85% | ― | 10.76% | ― |
* Technology Sector Average
PENG
Penguin Solutions
18.21
-1.90
-9.45%
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64.01
39.46
160.73%
BELFB
Bel Fuse Inc
217.25
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171.40%
BHE
Benchmark Electronics
56.02
14.67
35.48%
DAKT
Daktronics
24.26
7.49
44.66%
ROG
Rogers
100.50
11.19
12.53%
Penguin Solutions Corporate Events
Business Operations and StrategyExecutive/Board Changes
Penguin Solutions Appoints Kash Shaikh as New CEO
Positive
Feb 2, 2026
On February 2, 2026, Penguin Solutions announced that Mark Adams retired as president, chief executive officer and director, following a five-year tenure during which he unified the company’s businesses under the Penguin Solutions brand, expanded its portfolio and market reach, and positioned it as a key partner for critical AI infrastructure; he will remain as an advisor for nine months under a transition agreement that provides consulting fees and continued vesting of certain equity awards. The board has appointed technology veteran Kash Shaikh as president, CEO, principal executive officer and Class III director effective February 2, 2026, with a compensation package heavily weighted toward performance-based equity tied to relative total shareholder return and share price appreciation, signaling an emphasis on growth, disciplined execution and shareholder value as the company seeks to capitalize on accelerating enterprise demand for production-scale AI infrastructure.
The most recent analyst rating on (PENG) stock is a Buy with a $25.00 price target. To see the full list of analyst forecasts on Penguin Solutions stock, see the PENG Stock Forecast page.
Business Operations and StrategyM&A Transactions
Penguin Solutions to Divest Remaining Stake in Zilia
Neutral
Dec 30, 2025
On December 29, 2025, SMART Modular Technologies (LX) S.à r.l., an indirect subsidiary of Penguin Solutions, agreed to sell its remaining 19% stake in Brazilian electronic components maker Zilia Technologies to Lexar Europe B.V. for $46.08 million, a deal that will make Zilia a wholly owned subsidiary of the buyer and terminate the existing quotaholders’ agreement signed in November 2023. The transaction, which follows Lexar’s November 2023 purchase of the other 81% stake in Zilia, is expected to close remotely by March 30, 2026, or by April 28, 2026 if required approvals are delayed, and will complete Penguin’s exit from Zilia, potentially streamlining its portfolio while consolidating ownership of Zilia under the Lexar/Longsys corporate group.
The most recent analyst rating on (PENG) stock is a Hold with a $23.50 price target. To see the full list of analyst forecasts on Penguin Solutions stock, see the PENG Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.