Penguin Solutions 2026 Q1 Earnings Beats Expectations as Net Income Grows 1.5%

Penguin Solutions (PENG) reported fiscal 2026 Q1 earnings on January 6, 2026, delivering revenue that exceeded estimates and reaffirming its full-year guidance. The company’s non-GAAP EPS of $0.49 beat analyst expectations by $0.05, while revenue rose 0.6% year-over-year to $343.07 million. Management maintained its 6% net sales growth and $2.00 non-GAAP EPS guidance for 2026, citing progress in enterprise AI adoption and supply chain improvements.

Revenue

Penguin Solutions’ revenue of $343.07 million reflected mixed performance across segments. The Integrated Memory division led with a 41% year-over-year increase to $136.5 million, driven by strong demand in networking and computing. In contrast, the Advanced Computing segment saw a 15% decline to $151.5 million, impacted by the absence of hyperscale hardware revenue. Meanwhile, Optimized LED revenue fell 18% to $55.1 million due to weak demand in China and U.S. OEM markets.

Earnings/Net Income

Despite a 60% decline in GAAP EPS to $0.04, the company’s net income grew 1.5% to $6.05 million. This resilience underscores improved operating efficiency, though the EPS shortfall highlights challenges in translating revenue gains to profitability.

Post-Earnings Price Action Review

The strategy of buying PENG shares on the earnings release date and selling 30 days later yielded a modest 1.01% compound annual growth rate, underperforming the benchmark by 17.08%. While the strategy exhibited a low-risk profile with a Sharpe ratio of 0.02 and no maximum drawdown, the stock’s 41.91% volatility underscored its sensitivity to market fluctuations. Investors observed a 1.60% intraday gain and a 7.75% weekly rally, reflecting short-term optimism.

CEO Commentary

CEO Mark Adams emphasized progress in enterprise AI adoption and customer diversification, noting a 9% sequential rise in Advanced Computing revenue. He highlighted strategic investments in CXL and optical memory technologies, as well as ICE ClusterWare compatibility with open-source tools. Adams acknowledged supply chain constraints and first-half revenue headwinds but expressed cautious optimism about AI-driven growth in the second half.

Guidance

Penguin Solutions reaffirmed its full-year 2026 guidance: 6% net sales growth (±10%) and non-GAAP diluted EPS of $2.00 (±$0.25). Non-GAAP gross margin is targeted at 29% (±1%), with operating expenses capped at $250 million (±$10 million). Management anticipates second-half sales outpacing the first half due to momentum in its AI pipeline.

Additional News

Penguin Solutions announced the sale of its remaining 19% stake in Zilia Technologies for $46.08 million, expected to close by April 28, 2026. This divestiture aligns with its focus on core AI and memory segments. Additionally, the company strengthened partnerships with NVIDIA, AMD, and CDW, enhancing ICE ClusterWare’s compatibility with open-source tools. Insider trading activity showed no purchases in the past six months, while institutional holdings surged, with BlackRock and Vanguard adding millions in shares.