PENG

Global investment in artificial intelligence has surged, and the U.S. market is now heavily concentrated on that single long term bet. If you believe the real opportunity sits in the hardware that actually runs all this AI software, the supply chain behind it deserves attention. This article highlights three stocks from a curated chip ecosystem screen that focuses on hardware players linked to this AI build out. The three semiconductor supply chain stocks in this article are only a sample, with the full screen surfacing 12 more companies with equally detailed narratives that are not covered below. To size up the full opportunity set and identify your own highest conviction angles across equipment makers, foundries and chip designers, go straight to the Semiconductor Supply Chain screener. Micron Technology is a memory and storage heavyweight in the AI hardware supply chain, supplying DRAM, NAND and high bandwidth memory that help keep GPUs and data center accelerators productive as cloud, mobile and automotive customers scale their compute-heavy workloads. Micron generates US$43.1b from its Cloud Memory unit, US$37.6b from Core Data Center, US$36.6b from Mobile and Client, and US$15.9b from Automotive and Embedded, with smaller contributions from other activities, and the stock carries a market value of about US$1,014b. "The central change is HBM. High bandwidth memory is stacked DRAM designed to feed AI accelerators with enough bandwidth to keep them busy. It is more complex, more valuable, and more capacity-hungry than conventional DRAM." What happens to Micron's rich AI memory story depends heavily on how one unseen pressure shapes future pricing and margins. That pressure is exactly what the full narrative for Micron Technology unpacks, showing where Micron's AI memory story could accelerate and where pricing power might quietly slip. Super Micro Computer is one of the purest AI hardware plays in this screener, building GPU-heavy servers and full rack systems that power data centers racing to stand up training and inference capacity at scale. Super Micro Computer develops high performance server and storage systems for AI, cloud, and data center workloads, earning about US$39.1b from high performance server solutions, and the stock carries a market value of roughly US$21.3b. "Customer concentration is extreme. One customer represented roughly 63% of Q2 FY2026 revenue." What happens to Super Micro Computer's AI rack growth story depends on how that single relationship shapes pricing, mix, and future demand resilience. That concentration cut both ways, and the full full narrative for Super Micro Computer shows how that single customer risk could still mask accelerating opportunities across Super Micro Computer's broader AI rack footprint. Penguin Solutions builds and runs AI focused data centers while its SMART Modular memory and storage products plug directly into the semiconductor supply chain. With a market value of about US$2.9b it gives you exposure to both infrastructure services and theme linked components. Penguin Solutions ties the AI hardware story together for this screener by pairing on the ground data center buildouts with memory and storage products that feed accelerators. The key question is how durable that demand looks as bigger customers ramp their projects. "Accelerating adoption of AI and high-performance computing across major enterprise verticals (financial services, energy, biotech, federal, and neo-cloud providers) is driving robust demand for turnkey compute infrastructure, as evidenced by rising customer bookings and a diversified pipeline; this is likely to support sustained growth in revenue." What happens to Penguin Solutions' earnings power hinges on how one unresolved margin pressure shapes the balance between hardware intensity and higher value services. To see how that margin question could reshape Penguin Solutions' AI leverage, read the full narrative for Penguin Solutions and see what accelerating demand might still be masking. New themes can gain momentum quickly. Once the crowd arrives, the easy entry points may be harder to identify amid noise and shifting quality. Scan fresh ideas while it matters and consider acting early. - Identify early movers in fast-changing sectors and filter for strength using the 21 high quality undiscovered gems before these stories potentially shift from quiet accumulation to more widely followed momentum. - Focus on resilient cash generators and review your income watchlist with the 7 dividend fortresses so you can evaluate opportunities before any changes in yields or prices. - Monitor picks that appear to be building pricing power with the list of solid balance sheet and fundamentals (25 results) and prepare potential entries before any perceived balance sheet strength becomes broadly reflected in valuations. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Penguin Solutions stock dropped 11.1% to US$51.91 today, extending a weak 7 day patch even as the latest quarter landed with eye catching numbers. The company just reported Q4 2026 results with net sales of US$566.7m and basic earnings per share of US$1.46, both sharply above recent run rates. That gap between a sliding share price and a powerful profit trend is the real story. For investors looking beyond today's screen, the key question now is whether this earnings surge is the start of a sustained margin story or a high point before pressure builds. Impressed by Penguin Solutions' sharp earnings print but uneasy about a share price that is still sliding? Use our benchmark and compare it with a 30 high quality undervalued stocks to see how other companies pair strong operations with more resilient market pricing. - Revenue (Q4 2026 vs Q4 2025): US$566.7m vs. US$337.9m (very large year-on-year increase, a little under 2x) - Net Income (Excl. Extra Items, Q4 2026 vs Q4 2025): US$81.0m vs. US$5.8m (very large year-on-year increase, well over 7x) - Basic EPS (Q4 2026 vs Q4 2025): US$1.46 vs. US$0.11 (very large uplift, more than 10x higher) - Net Profit Margin (Trailing 12 Months vs Prior Year): 8.7% vs. 1.1% (margin expanded significantly as earnings turned consistently positive) Prefer clean charts instead of another wall of earnings tables and margin footnotes? View Penguin Solutions' full financial picture, including a visual breakdown of its recent profitability and earnings trend, in the interactive company report for Penguin Solutions. Penguin Solutions bulls argue that AI and higher value services can make earnings less choppy and more recurring. "Expansion of recurring software and managed services (e.g., Penguin ICE ClusterWare and post-deployment operations) is raising earnings stability and aggregate profitability, as services revenue is recognized steadily over time and attached to each new customer win." Recent Q4 numbers show record net sales and profit, with EPS growth outpacing revenue as operating expenses rose slowly. That supports the idea of a richer mix and better operating leverage. At the same time, Q4 cash used in operations and higher inventory and receivables highlight that stability is still funded by heavy working capital commitments. The bear story leans on revenue lumpiness and hardware centric pressure that could blunt this AI wave. "Penguin Solutions faces persistent revenue lumpiness and timing risk in its Advanced Computing segment, driven by high customer concentration, large project-based deals, and unpredictable deployment schedules, which may lead to significant quarterly volatility in both revenue and operating income." Advanced Computing grew far more slowly than Integrated Memory in Q4, and AI projects and memory now represent most sales. That concentration in big GPU factories and memory contracts keeps the lumpiness argument alive. The stock falling 11% today despite a very strong Q4 and raised FY2027 guide shows that execution strength has not yet neutralized concerns about timing risk and earnings swings. The price and this Narrative do not agree. → Uncover what this Narrative says Penguin Solutions is actually worth. Penguin Solutions just showed how reported numbers can sit beside a falling share price. The real opportunity is finding stocks that could be undervalued before the market corrects them. - Company 1 - 46% below our estimate - expands a regional banking footprint by integrating an acquired franchise while protecting a conservative credit culture. - Company 2 - 41% below our estimate - scales device trade-in and refurbishment as policy backed recycling incentives push more consumers toward recommerce channels. - Company 3 - 36% below our estimate - broadens cross border payment flows for large merchants while adjusting pricing mix toward higher margin products and automation. Those are three of them. See every one of the 30 undervalued companies on it → This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include PENG. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Penguin Solutions, Inc. (PENG) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company. The upward trend in estimate revisions for this company reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight. The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008. For Penguin Solutions, Inc., strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year. The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate: The company is expected to earn $1.01 per share for the current quarter, which represents a year-over-year change of +106.1%. Over the last 30 days, the Zacks Consensus Estimate for Penguin Solutions, Inc. has increased 39.68% because one estimate has moved higher compared to no negative revisions. The company is expected to earn $4.58 per share for the full year, which represents a change of +59.6% from the prior-year number. In terms of estimate revisions, the trend for the current year also appears quite encouraging for Penguin Solutions, Inc.. Over the past month, one estimate has moved higher compared to no negative revisions, helping the consensus estimate increase 41.12%. The promising estimate revisions have helped Penguin Solutions, Inc. earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500. Penguin Solutions, Inc. shares have added 49.1% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Penguin Solutions, Inc. (PENG) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Penguin Solutions delivered a strong third quarter, with results surpassing Wall Street's expectations and prompting a significant positive market reaction. Management attributed this performance to accelerated demand in its AI infrastructure and data center memory businesses, noting that AI-driven workloads were a primary source of top-line growth. CEO Kash Shaikh emphasized the company's momentum with neocloud and enterprise customers, highlighting that non-hyperscale AI infrastructure and integrated memory represented a growing share of sales and bookings in the quarter. Penguin's platform approach and recent product innovations supported customer wins across both established and emerging AI infrastructure providers. Is now the time to buy PENG? Find out in our full research report (it's free). - Revenue: $566.7 million vs analyst estimates of $521 million (67.7% year-on-year growth, 8.8% beat) - Adjusted EPS: $1 vs analyst estimates of $0.77 (29.5% beat) - Adjusted EBITDA: $93.27 million vs analyst estimates of $73.68 million (16.5% margin, 26.6% beat) - Adjusted EPS guidance for the upcoming financial year 2027 is $4.45 at the midpoint, beating analyst estimates by 31.3% - Operating Margin: 12.3%, up from 3.7% in the same quarter last year - Inventory Days Outstanding: 166, up from 131 in the previous quarter - Market Capitalization: $3.72 billion While we enjoy listening to the management's commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. - Katherine Murphy (Goldman Sachs) asked about the drivers behind the improved advanced computing outlook and margin impact from neocloud customers. CEO Kash Shaikh explained recent booking strength and noted that neocloud projects offer similar unit economics to enterprise deployments, with higher software and services attach rates. - Sajal Dogra (Rosenblatt Securities) inquired how Penguin is achieving greater operating leverage versus the prior quarter's preliminary guidance. Shaikh clarified that the new guidance reflects increased visibility and confidence in scaling the business, with margin expansion driven by both the memory and advanced computing segments. - Ananda Baruah (Loop Capital) questioned the mechanics behind accelerating growth across key businesses and the impact of partnerships with NVIDIA and Dell. Shaikh pointed to Penguin's consultative approach, deep architectural expertise, and the strategic value of its NVIDIA partnership as key differentiators. - Rustam Kanga (Citizens) followed up on the mix of price versus volume in the memory business and backlog conversion. Shaikh confirmed that backlog remains robust and extends multiple quarters, with data center-focused demand and new CXL memory products contributing to pipeline strength. - Matthew Calitri (Needham & Company) asked about the timing of neocloud project contributions and the reasons for recent deal success. Shaikh responded that most projects are already underway, citing unique product-market fit and expertise in designing AI factories as drivers of momentum. In upcoming quarters, the StockStory team will be monitoring (1) the pace at which Penguin converts its record backlog and bookings into reported sales, (2) new wins and expanded deployments with neocloud and enterprise customers, and (3) ongoing margin expansion driven by operational efficiency and higher software and services mix. Key signposts will also include the adoption of CXL memory expansion products and the scaling of managed AI infrastructure services. Penguin Solutions currently trades at $72.89, up from $64.87 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it's free for active Edge members). ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time. Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks — FREE. Get Our Strong Momentum Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. - Achieved record Q4 net sales of $567 million, up 68% year-over-year, driven by the successful launch of the AI Factory Platform strategy and a pivot toward data center markets. - Non-hyperscale AI infrastructure and integrated memory now represent 78% of total company sales, reflecting a structural shift toward high-growth AI workloads. - Management attributes the acceleration in Advanced Computing to a unique 'product-market fit' where Penguin acts as a single operating partner for design, deployment, and 24/7 management. - The Integrated Memory segment reached record sales of $341 million, benefiting from both volume and pricing increases as agentic AI drives memory-intensive inference workloads. - Strategic differentiation is maintained through an asset-light model and a global engineering footprint in low-cost locations like India and Taiwan, enabling high operating leverage. - The company is increasingly targeting 'Neo-cloud' providers, offering end-to-end services that allow these customers to meet strict SLAs and generate revenue faster. - Established new supply arrangements with additional AI hardware and memory suppliers to expand availability and support the surge in infrastructure demand. - Increased fiscal 2027 net sales growth guidance to approximately 40% at the midpoint, up from a preliminary view of 30%, based on record backlog and booking momentum. - Expect diluted EPS growth of approximately 55% to outpace net sales growth, driven by disciplined expense management and structural improvements in operating scalability. - Guidance assumes continued strength in data center memory demand, with the Integrated Memory segment expected to grow approximately 50% year-over-year. - The outlook incorporates variability in customer deployment schedules and potential supply chain lead times for specific high-demand components. - Management plans to reallocate resources toward high-return AI infrastructure and memory programs while keeping total spending growth well below revenue growth. - Completed a $750 million 0% convertible note offering to strengthen the capital structure and provide flexibility for AI Factory Platform investments. - Inventory increased to $749 million to support record backlog and expected customer deployments, reflecting higher memory costs and proactive supply positioning. - The wind-down of the legacy Penguin Edge business and lower hyperscale hardware sales acted as a partial headwind to Advanced Computing growth. - Management flagged that while memory is historically cyclical, AI is introducing a durable structural demand driver specifically for data center solutions. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. - The revision from mid-teens to 40% growth was driven by booking strength and a pipeline that exceeded internal expectations over the last 90 days. - Management noted that the visibility into conversion ratios for AI infrastructure projects has improved significantly since the preliminary outlook. - Unit economics for Neo-cloud providers are similar to enterprise on-premise deployments, but with higher potential for multi-year managed services attach rates. - While large hardware wins can put downward pressure on gross margin percentages, the high attach rate of ClusterWare software and services drives higher gross profit dollars. - Operating leverage is sustained by a model where 95% of engineering is located in low-cost regions and manufacturing is centralized in Malaysia. - The company is utilizing agentic AI internally for code generation and operational tasks, allowing them to scale innovation without linear increases in headcount. - The memory backlog now extends at least four quarters into the future and is currently higher than the record revenue recognized in Q4. - Growth is a balanced function of core data center memory demand and new CXL-based products designed specifically for inference workloads.

Penguin Solutions, Inc. PENG used its fiscal fourth-quarter 2026 earnings call to frame AI infrastructure, memory and neocloud demand as the main drivers of its next growth phase. Management raised its fiscal 2027 outlook as bookings and backlog strengthened. Non-GAAP earnings per share (EPS) of $1 topped the Zacks Consensus Estimate of $0.75, while revenues of $566.7 million exceeded the $512.5 million consensus estimate. Penguin Solutions, Inc. price-consensus-eps-surprise-chart | Penguin Solutions, Inc. Quote President and chief executive officer Kash Shaikh said stronger AI infrastructure bookings and continued memory demand gave management greater confidence entering fiscal 2027. The company now expects net sales growth of about 40% at the midpoint, plus or minus 10 percentage points. Aaron Johnson, vice president of finance and accounting, interim chief financial officer and principal financial and accounting officer, said that implies roughly $2.43 billion in net sales at the midpoint. Non-GAAP EPS is projected at $4.45, plus or minus $0.7, representing about 55% growth. Johnson added that operating expenses should rise much more slowly than sales, supporting further operating-margin expansion. Full-year non-GAAP gross margin is expected at about 28%, plus or minus 2 percentage points. Shaikh said Advanced Computing growth is increasingly being driven by non-hyperscale AI infrastructure. That business grew 99% year over year in the quarter and represented 66% of Advanced Computing sales. Penguin added six AI infrastructure customers, including four neocloud providers. Shaikh emphasized the company's ability to design, build, deploy and operate AI factories while attaching ClusterWareAI software and multiyear managed services. In Q&A, a Goldman Sachs analyst asked what drove the sharp increase from the prior preliminary Advanced Computing outlook. Shaikh pointed to stronger-than-expected bookings, a robust pipeline and accelerating AI infrastructure demand. Shaikh described Penguin's differentiation as combining hardware procurement, architecture, deployment, software and ongoing operations. He said this model is particularly relevant for neocloud operators that must meet service-level agreements. Management highlighted several large engagements, including a 36,000-GPU AI factory in Norway and a GB300 NVL72-based deployment for a neocloud backed by a South Korean technology company. A Loop Capital analyst asked about faster neocloud capture. Shaikh cited Penguin's long experience designing NVIDIA-based clusters, consultative architecture work and its ability to remain involved through managed services. Integrated Memory remained the largest segment, with quarterly sales of $341 million, up 158% year over year. Shaikh said growth reflected both volume and pricing, while data-center demand remained the strategic focus. In Q&A, a Citizens analyst revisited prior comments about supply constraints. Shaikh said memory backlog was higher than quarterly revenue and now extends for at least four quarters. Management also highlighted rising demand for CXL memory expansion products tied to inference workloads. Shaikh said the pipeline and bookings for these newer solutions continue to strengthen. Johnson said fiscal 2026 operating expenses rose 4%, well below the 26% increase in net sales. He attributed the operating leverage to higher gross profit dollars and disciplined spending. A Stifel analyst questioned whether the modest planned expense increase could constrain investment. Shaikh said engineering in India and Taiwan, manufacturing in Malaysia and wider use of AI tools allow capacity to scale efficiently. Shaikh also said Penguin will keep investing in ClusterWareAI, CXL products and other differentiated offerings even as costs grow more slowly than revenues. Management's tone was confident, but the fiscal 2027 range reflects execution variables. Johnson cited customer deployment timing, product availability, component lead times and memory-market conditions as factors that could shift quarterly cadence. Working capital is another focus. Inventory and receivables rose sharply as Penguin supported record backlog and deployments, while operating activities used $163 million of cash in the fourth quarter. Shaikh and Johnson consistently emphasized scale, backlog conversion and operating discipline as fiscal 2027 priorities. PENG currently carries a Zacks Rank #3 (Hold), which can remain appropriate for those who want to retain the stock. However, stronger near-term return potential is generally associated with Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks paired with a favorable Style Score. You can see the complete list of today's Zacks #1 Rank stocks here. The stock has a Value Score of C, Growth Score of F, Momentum Score of C and VGM Score of F. Those grades indicate weaker style characteristics, particularly in growth and the combined VGM measure. The Zacks Rank can change as earnings estimates are revised after the just-reported results. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Penguin Solutions, Inc. (PENG) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Penguin Solutions Inc. (NASDAQ:PENG) ended 13.08 percent higher on Wednesday at $72.61 apiece, as investors resumed buying positions after the company recorded an over-ninefold jump in profits in the fourth quarter of fiscal year 2026. In an updated report, the AI factory platform firm said that its attributable net income surged by 888 percent to $93.2 million from only $9.4 million in the same period last year, thanks to a 460 percent higher operating income. Total net sales increased by 67.7 percent to $566.68 million from $337.9 million year-on-year on the back of strong memory and AI infrastructure businesses. For illustration purposes only. Photo by Brett Sayles on Pexels "Our company performance accelerated significantly in the second half of fiscal 2026 following the launch of our AI Factory Platform and increased focus on the data center market. We prioritized and aligned our AI Infrastructure and Memory businesses with strong AI-driven data center demand, increased investment in product innovation, and sharpened go-to-market execution with a focus on making neocloud and enterprise customers successful," Penguin Solutions Inc. (NASDAQ:PENG) President and CEO Kash Shaikh said. On a broader note, the strong fourth quarter performance helped bolster its full fiscal year profits, having jumped by 611 percent to $180.6 million from only $25.39 million year-on-year. Total net sales increased by 26 percent to $1.731 billion from $1.369 billion last year, primarily driven by a 99 percent jump in net sales from the integrated memory segment, which offset the weak performance from its advanced computing and optimized LED businesses. "As we enter fiscal 2027, our memory business remains strong, and our AI Infrastructure business is accelerating further. Based on this continued momentum, particularly the strength in AI Infrastructure, we are increasing our fiscal 2027 expectations for both net sales and non-GAAP diluted EPS beyond the preliminary growth view shared during the third-quarter earnings call, as we continue to drive strong operating leverage across the business," Shaikh said. Encouraged by the results, Penguin Solutions Inc. (NASDAQ:PENG) raised its net sales growth outlook for fiscal year 2027 to $2.43 billion at the midpoint from $2.17 billion as expected previously. This would imply a 40 percent growth year-on-year, plus or minus 10 percentage points. It also expects diluted earnings per share to be at $3.50 on a GAAP basis and at $4.45 non-GAAP, or an implied year-on-year growth of 35 and 55 percent, respectively. Penguin Solutions Inc. (NASDAQ:PENG) welcomed Stephen Cumming as its new chief finance officer (CFO) and senior vice president effective immediately. Prior to joining the company, Cumming most recently served as CFO for Edgio, alongside other firms such as Cambium Networks, Kenandy Inc., and Atmel Corporation. Institutional investors signaled their highly optimistic outlook for the company's long-term growth prospects, as hedge fund conviction more than tripled quarter-on-quarter. Data from Insider Monkey showed that 35 hedge funds held positions in the stock in the second quarter of the year, up from 22 in the first quarter. More notably, their collective holdings surged by 251 percent to $302 million from only $86 million quarter-on-quarter. While we acknowledge the potential of PENG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 33 Stocks That Should Double in 3 Years and Cathie Wood 2026 Portfolio: 10 Best Stocks to Buy. Disclosure: None. Follow Insider Monkey on Google News.

- Penguin Solutions shares rose 13% after record fiscal fourth-quarter sales of $567 million, up 68%, and non-GAAP EPS of $1.00, well above the 77-cent consensus. - Penguin raised its fiscal 2027 outlook to about $2.43 billion in sales and $4.45 in non-GAAP EPS, well above consensus of $2.21 billion and $3.38. - Integrated Memory drove the quarter's growth, while management credits AI infrastructure, including a new 36,000-GPU AI factory in Norway, for the raise. - Growth used $152 million of operating cash in fiscal 2026, and the forward P/E sits well above its five-year average. Penguin Solutions (PENG:NASDAQ) shares are up 13% following a record fiscal fourth quarter, reported after Tuesday's close, and a raised outlook for fiscal 2027. Sales for the three months to Aug. 28 rose 68% to $567 million, ahead of the $521 million analysts expected. Non-GAAP EPS of $1.00 beat the 77-cent consensus. That's how president and CEO Kash Shaikh put it, pointing to the trend: "After relatively flat year-over-year net sales in the first half, growth accelerated to 48% in Q3 and 68% in Q4, driving second-half growth of 58%." Hard to argue with that. Nearly all of the jump came from memory. Integrated Memory sales rose to $341 million from $132 million a year ago, while Advanced Computing grew 11% to $154 million. The AI factory business is what moved the outlook. Penguin won six new AI infrastructure customers in the quarter, four of them neoclouds. One, with $10 billion in contracted compute from a leading AI lab, picked Penguin to deploy and operate a 36,000-GPU AI factory in Norway. Shaikh said the raise rests on "continued momentum, particularly the strength in AI Infrastructure." Penguin now expects fiscal 2027 sales of about $2.43 billion at the midpoint, up from the $2.17 billion preliminary view it gave last quarter. Its non-GAAP EPS guide of $4.45 would be 55% growth on fiscal 2026's $2.87, and analysts were at $3.38 before the report… Even after Wednesday's updates, consensus sits at $4.09, below the $4.45 guide, so I'd expect estimates to keep rising. The stock isn't, like, terribly cheap: before today's move, it traded at 20x forward earnings, well above its five-year average of 11.9x… At today's price, it's closer to 23x, below the 29.4x peak from June. But for a company guiding to 55% earnings growth, that looks pretty good. The risk is cash. Growth used $152 million of operating cash in fiscal 2026, as inventories rose to $749 million from $255 million. With help from a new $750 million convertible with a 0% coupon, Penguin ended the year with $647 million in cash. So yes, the results back Shaikh up, and the neocloud wins give the raised outlook something real behind it. Of course, this quarter leaned on memory, and that Norway AI factory still has to show up in sales. TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR's valuation model and see what Penguin Solutions could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It's free to use. Value Penguin Solutions for free

Image source: The Motley Fool. Tuesday, Oct. 6, 2026 - Investor Relations - Lana Adair - President and Chief Executive Officer - Kash Shaikh - Senior Vice President and Chief Financial Officer - Stephen Cumming - Vice President of Finance and Accounting - Aaron Johnson Operator: Hello, everyone. Thank you for joining us, and welcome to the Penguin Solutions Fourth Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Lana Adair, Investor Relations. Please go ahead. Lana Adair: Thanks, everyone, for joining us. With me today are Kash Shaikh, Stephen Cumming, and Aaron Johnson. Our earnings materials are available on the Investor Relations section of our website, and I encourage you to review these materials. Also, please take some time to review the presentation, which includes additional content to complement our discussion today. During this call, unless otherwise indicated, all references to financial measures refer to non-GAAP financial measures. Non-GAAP measures should not be considered in isolation from, as a substitute for, or superior to our GAAP results. A reconciliation of these measures to their most directly comparable GAAP measures can be found in our press release and accompanying slide presentation. Statements made during this call that relate to future results and events are forward-looking statements based on current beliefs and assumptions and are not guarantees of future performance. Actual results and events could differ materially from those projected due to a number of risks and uncertainties, which are discussed in our press release, our earnings call presentation and our SEC filings. Except as required by applicable law, we assume no obligation to update our forward-looking statements. Now I'll turn it over to Kash. Kash Shaikh: Good afternoon, everyone, and thank you for joining Penguin Solutions Fiscal 2026 Fourth Quarter and Year-end Earnings Call. Before we get into our results, I want to start with an important addition to our leadership team. Earlier today, we announced that Stephen Cumming has joined Penguin Solutions as our new Chief Financial Officer. Stephen is an experienced public company executive with a strong track record in financial leadership, operational scaling and investor relations. We are pleased to welcome Stephen at an exciting time for Penguin, and investors will have the opportunity to get to know him in the coming months. For today's call, Aaron Johnson, who has served as our Interim CFO since July, will walk you through our financial results and fiscal 2027 outlook as planned. I want to thank Aaron for his leadership during the transition, and I look forward to continuing to work with him as he returns to his role as Vice President of Finance and Accounting. Now let's turn to our results. Our team delivered an exceptional quarter, capping off a very strong fiscal year. In Q4, we set company records for net sales, gross profit dollars, operating income, operating margin, net income and adjusted EBITDA. Net sales were $567 million, up 68% year-over-year, and EPS was $1, up 133%, reflecting strong operating leverage that enabled EPS to grow faster than net sales. I would also like to thank our customers for their continued confidence in Penguin. Our AI-driven businesses continue to scale. In Q4, non-hyperscale AI infrastructure and integrated memory represented 78% of company net sales and grew 141% year-over-year. Our overall company performance accelerated meaningfully in the second half of fiscal 2026, following the launch of our AI Factory Platform strategy and increased focus on the data center market. We aligned the business more closely with strong AI-driven demand, increased investments in product innovation and accelerated go-to-market execution with a focus on neocloud and enterprise customers. The proof is in the results. After relatively flat year-over-year net sales in the first half, growth accelerated to 48% in Q3 and 68% in Q4, driving second half growth of 58%. Full year net sales were approximately $1.73 billion, up approximately 26% year-over-year. We also achieved record full year operating income. In AI infrastructure and Integrated Memory, bookings grew faster than net sales in the fourth quarter, and we ended fiscal 2026 with record company backlog and strong momentum heading into fiscal 2027. Based on our second half performance, bookings growth, continued strength of our memory business and, more importantly, accelerating demand from neocloud customers for our data center AI infrastructure solutions, we are increasing our fiscal 2027 growth outlook from the preliminary view we shared last quarter. We expect record fiscal 2027 net sales with EPS growth expected to outpace net sales growth as we continue to scale and drive operating leverage. I'll walk through what we are seeing in the market before turning to the outlook. AI is becoming super intelligence, SI, as it continues to move from chatbot adviser to agentic operator, executing tasks and workflows with increasing autonomy. This shift is driving inference at scale and creating increasingly memory-intensive workloads. Inference is increasing demand across the entire data center stack. GPUs remain critical, but CPUs and conventional memory, including DRAM, must also scale. We believe Penguin is well positioned to lead in this market opportunity at the intersection of data center AI infrastructure and memory solutions. We are seeing enterprise and AI native companies address these AI compute infrastructure needs in a variety of ways, primarily consuming AI infrastructure from neocloud providers and, in some cases, building their own on-premises AI factories. For persistent high utilization AI workloads such as inference, large enterprises are increasingly considering on-premises AI infrastructure, which can offer better token economics, data control and performance. Our Full-Stack AI Factory Platform combines 5 core elements with our partner ecosystem. First, ClusterWareAI operating system software for AI factories. Second, MemoryAI and Integrated Memory solutions. Third, GPU and CPU systems under our compute AI brand. Fourth, OriginAI factory architectures. And fifth, end-to-end design, build, deploy and manage services. What sets our platform apart is its rare combination of OEM-like differentiated product innovations and end-to-end AI infrastructure systems integration capabilities. This allows us to serve as the single builder and operator of AI factories across the entire life cycle for our customers. Customers need more than hardware and assembly. This is particularly important for neocloud providers, where we have seen a recent surge in interest that we believe reflects strong product market fit for our full-stack platform. For neoclouds, we can serve as a single operating partner across the entire life cycle, helping customers meet service level agreements and generate revenue faster while they focus on securing additional offtakers and scaling their businesses. Let me now turn to our business results, starting with Advanced Computing. In Q4, Advanced Computing net sales totaled $154 million, representing 27% of company net sales and growing 11% year-over-year. Data center AI infrastructure growth within Advanced Computing, driven by our AI Factory Platform, was significantly stronger. Non-hyperscale AI infrastructure net sales grew 99% year-over-year and represented 66% of Advanced Computing net sales, up from 60% in the prior year quarter. This growth more than offset continued runoff from other traditional businesses and reflects the ongoing shift in Advanced Computing toward data center AI infrastructure. During the quarter, we added 6 new AI infrastructure customers, including 4 neoclouds, a large quantitative trading firm, and an enterprise customer. We exited fiscal 2026 with strong momentum, and bookings have accelerated further entering fiscal 2027. Our land-and-expand model remains central to our go-to-market strategy. Successful initial deployments create opportunities to expand across our platform, including ClusterWareAI and multiyear managed services engagements that typically span 3 to 5 years. Across fiscal 2026, we added 17 new AI infrastructure customers, while 12 customers expanded their business with Penguin. We are seeing strong momentum with neocloud customers, including a neocloud backed by a leading South Korean technology company selected us to design, build, deploy and manage an NVIDIA GB300 NVL72-based platform with the initial deployment expected to support a broader GPU-as-a-Service expansion. A publicly traded neocloud provider that has more than $3 billion in signed multiyear AI infrastructure contracts selected Penguin for a multiyear engagement to provide AI infrastructure deployment and 24/7 operation services supported by ClusterWareAI, our AI Factory operating system software. Lektra, a neocloud selected our Full-Stack AI Factory Platform to deploy and optimize distributed AI micro data centers powered by existing carbon-free energy. We provide validated reference designs, NVIDIA-based AI GPUs, and expert services with ClusterWareAI and support. And for another neocloud provider with $10 billion in contracted compute from a leading AI lab, we were selected to deploy and operate a 36,000 GPU AI factory in Norway. This multiyear engagement demonstrates the scale of our platform and our ability to bring large-scale AI infrastructure into production. These engagements demonstrate an important evolution in our business. Customers are increasingly selecting Penguin as an end-to-end partner to design, deploy, optimize and operate AI infrastructure. We also continued to advance ClusterWareAI with new agentic AI capabilities that automate AI factory operations, remediation and infrastructure monitoring. Our AI Factory operations agent provides administrators with a natural language interface for operational insights. Put simply, administrators can now talk to their AI factory. We are also an NVIDIA AI Factory Specialized Partner, an invitation-only designation that reflects the depth of our partnership with NVIDIA, which continues to strengthen and more than a decade of experience building and managing NVIDIA-based AI factories. Finally, we established a relationship with another AI hardware supplier to help expand supply availability and support growing demand. Now turning to Integrated Memory. Fourth quarter net sales reached a record $341 million, representing 60% of company net sales, up 158% year-over-year and 24% sequentially. In Q4 fiscal 2026, we added 2 new memory customer logos. Our land-and-expand strategy also continues to produce results. Across fiscal 2026, we added 15 new customers, while 29 existing customers expanded their business with us. We are seeing an increase in both volume and pricing. Our growth reflects strong data center demand driven by agentic AI, including increasing memory requirements from AI and inference workloads. While memory is a cyclical market, we believe AI is adding a structural demand driver, particularly for memory solutions in the data center. Penguin operates differently from a traditional commodity memory manufacturer. Our focus is primarily on data center solutions. Our engineering design, firmware development, advanced validation, negotiated pricing and asset-light model are designed to deliver more resilient economics across memory cycles. We continue to see strengthening bookings and pipeline for our CXL memory expansion products. A couple of proof points. In Q4, we secured business with a leading global AI server manufacturer whose platforms support large-scale AI training and inference. This win reinforces the strength of our memory portfolio for data center AI infrastructure. We also expanded our relationship with a leading next-generation AI infrastructure inference provider rapidly scaling AI inference deployments with our CXL memory expansion cards. Beyond our core memory business, we are developing new solutions designed to address the growing memory bottleneck in data center AI infrastructure. Our CXL-based large memory expansion cards and MemoryAI KV cache solution are designed to increase memory capacity and improve the economics of agentic AI and real-time inference. Our MemoryAI road map also extends to future memory appliances, including photonic high-bandwidth memory solutions designed to expand GPU memory capacity and bandwidth. We are also developing a CXL AIC product line designed to repurpose installed DDR4 memory for AI infrastructure, helping customers extend asset life and lower the cost of scaling memory-intensive workloads. Finally, we established a new supply arrangement with a leading memory supplier to support the growth of our data center AI infrastructure portfolio and strengthen our supply position. Together, these developments reinforce our long-term focus on data center memory and AI infrastructure. Turning briefly to Optimized LED. Our LED business also performed well in the quarter with Q4 net sales totaling $72 million, up 7% year-over-year. Our strategic investment priorities remain focused on data center, AI infrastructure and memory, while we continue to manage our LED business with discipline. As we enter fiscal 2027, our focus is not simply on capturing demand, it is on building a more repeatable and scalable operating model around that demand while keeping customer success at the center of everything we do. As part of that, we are deploying agentic AI across our operations with a focus on measurable business outcomes. Our engineering teams are using agentic AI coding workflows to accelerate ClusterWareAI development, while AI-driven tools are helping compress product cycles and improve supply chain responsiveness. With that, let me share our updated fiscal 2027 outlook. During our Q3 earnings call, we provided preliminary fiscal 2027 expectations for net sales and diluted EPS growth of approximately 30% year-over-year from the midpoint of our fiscal 2026 outlook. Based on our fourth quarter results and AI-driven demand, we are providing a fiscal 2027 outlook that exceeds that preliminary view for both net sales and diluted EPS. We expect our diluted EPS to grow faster than net sales due to our strong operating leverage. Aaron will provide the details in a moment. Let me close with three observations. First, our strategy is working and growth is broadening. Our AI-driven businesses represented 78% of Q4 net sales and grew 141% year-over-year with Integrated Memory remaining strong and AI infrastructure now accelerating significantly. Second, strong operating leverage is driving profitable growth while enabling continued investment in innovation. EPS is growing faster than net sales, while we continue investing in differentiated products and capabilities. Third, we believe the value creation opportunity is durable and still in the early innings with our position at the intersection of AI infrastructure and memory combined with ClusterWareAI and services, creating a differentiated long-term advantage. I want to thank our team for their focus and execution throughout fiscal 2026 and for the strong momentum we carry into fiscal 2027. With that, I'll turn it over to Aaron to walk through the financials and our outlook. Aaron Johnson: Thank you, Kash. I'll begin with our fourth quarter and full year fiscal 2026 results and then turn to our outlook for fiscal 2027. In the fourth quarter, net sales and earnings per share exceeded our outlook, reflecting growing adoption of our AI infrastructure solutions and continued AI-driven demand for data center memory. Strong net sales growth, disciplined expense management and improved profitability drove meaningful operating leverage. We set company records for net sales, gross profit dollars, operating income, operating margin, net income and adjusted EBITDA. For the full year, we also set records for gross profit dollars and operating income. Starting with the fourth quarter, net sales were $567 million, up 68% year-over-year and up 18% sequentially. Gross margin was 28.8%, operating margin was 15.8%, and diluted earnings per share was $1, up 133% year-over-year. For the full year, net sales were $1.73 billion, up 26% versus fiscal 2025, while diluted earnings per share increased 51% to $2.87, roughly twice the rate of net sales growth, demonstrating the operating leverage in our model. Fourth quarter product net sales were $510 million or 90% of total company net sales, up 86% year-over-year. Services net sales were $57 million or 10% of total net sales, down 11% year-over-year, reflecting lower hyperscale services volumes, partially offset by growth in multiyear AI factory managed services. Net sales by business segment were as follows: For Advanced Computing, fourth quarter net sales were $154 million, up 11% year-over-year and 12% sequentially. For the full year, Advanced Computing net sales were $559 million, down 14%, reflecting the wind down of Penguin Edge and lower hyperscale hardware sales. Non-hyperscale AI infrastructure business grew 99% in the fourth quarter and represented 66% of segment net sales, while growing 72% for the year and reinforcing its position as the segment's primary growth driver. For Integrated Memory, fourth quarter record net sales were $341 million, representing 60% of total company net sales, up 158% year-over-year and 24% sequentially. For the full year, Integrated Memory net sales were $924 million, up 99% and represented 53% of total company net sales, up from 34% in fiscal 2025. The growth reflects strong demand for memory supporting AI-driven data center applications, consistent with our strategic focus on this market. For Optimized LED, fourth quarter net sales were $72 million, representing 13% of total company net sales, up 7% year-over-year. For the full year, net sales were $249 million, down 3%. The business delivered improved profitability as we continue to execute with discipline and focus on profitable opportunities. Fourth quarter gross margin was 28.8%, up 70 basis points sequentially, supported by improved profitability in Integrated Memory, partially offset by lower Advanced Computing margins. Together with strong net sales growth, this drove record gross profit of $163 million, up 21% sequentially and 57% year-over-year. For the full year, gross profit reached a record $508 million. Gross margin was 29.3%, down 1.7 percentage points, primarily due to a greater contribution from AI infrastructure hardware even with stronger margins in Integrated Memory. The growth in gross profit dollars demonstrates the leverage generated by our increased scale. Fourth quarter operating expenses were $73 million, up 4% sequentially and 13% year-over-year. The sequential increase primarily reflects higher incentive compensation associated with our strong financial results. For the full year, operating expenses increased 4% to $267 million, well below our 26% growth in net sales. As a result, operating expenses declined by 3.4 percentage points as a percentage of net sales, reflecting a structural improvement in the scalability of our operating model. That combination of higher gross profit dollars and expense discipline drove record fourth quarter operating income of $90 million, up 39% sequentially and 129% year-over-year. With net sales growth significantly outpacing operating expense growth, operating margin expanded 2.4 percentage points sequentially and 4.2 percentage points year-over-year to 15.8%. For the full year, operating income reached a record $241 million, up 44%, with operating margin expanding 1.7 percentage points to 13.9%. These results demonstrate how scale and disciplined spending are translating growth into higher profitability. Fourth quarter diluted earnings per share was $1, up 19% sequentially and 133% year-over-year. The sequential EPS growth rate trails our 39% operating income growth, reflecting a higher share count following our convertible notes offering. For the full fiscal year, diluted earnings per share were $2.87, up 51% and $0.22 above the high end of our July outlook. Adjusted EBITDA was a record $93 million in the fourth quarter, up 115% year-over-year and 38% sequentially. Full year adjusted EBITDA was $256 million, up 37%. Before I walk through working capital, a reminder that we calculate days sales outstanding, days payables outstanding and inventory days on a gross sales and gross cost of goods sold basis. Gross sales were $1.57 billion and gross cost of goods sold was $1.42 billion in the fourth quarter. The difference between gross and net sales relates primarily to our memory business' logistics services, which are accounted for on an agent basis. Turning to working capital. Net accounts receivable increased to $796 million from $308 million a year ago, reflecting the growth in our memory business and the associated gross billings. Despite the higher balance, days sales outstanding improved to 46 days from 53 days last quarter and 51 days a year ago. We are managing these investments against customer deployment schedules and supply availability as we support growth. Inventory increased to $749 million from $255 million a year ago, reflecting purchases to support record backlog and expected customer deployments across our memory and AI infrastructure businesses as well as higher memory costs. Inventory days were 48, up from 42 last quarter as we positioned inventory against a record backlog and down from 51 a year ago. Accounts payable increased to $817 million from $267 million a year ago, reflecting purchasing activity to support the growth of our memory and AI infrastructure businesses as well as higher memory costs. Days payable outstanding was 52, down from 62 last quarter and 54 a year ago, primarily reflecting the timing of purchases within the quarter. Our cash conversion cycle was 42 days compared with 33 days last quarter and 49 days a year ago. Funding growth efficiently and maintaining disciplined working capital management remain important priorities. Moving to our broader capital structure. During the quarter, we completed a significantly oversubscribed $750 million 0% convertible note offering due in 2031, which we believe reflects strong investor confidence in our business and long-term strategy. The notes have an initial conversion price of approximately $116.70 per share, representing an approximately 50% premium to our share price at pricing. We also entered into capped call transactions designed to reduce potential dilution up to an initial cap price of approximately $175.05 per share. Concurrently, we exchanged approximately $296 million principal amount of our 2029 and 2030 convertible notes for a combination of cash and shares of common stock and used a portion of the proceeds to fully repay the $100 million outstanding under our credit agreement. This disciplined and proactive approach extended our maturity profile and strengthened our capital structure, providing additional flexibility to invest behind our AI Factory Platform strategy and the growth opportunities ahead. Following these actions, we ended the fourth quarter with cash and cash equivalents of $647 million. That is up $207 million from the third quarter and $193 million from a year ago. We remain focused on managing liquidity and the working capital required to support our growth. Cash used in operating activities was $163 million in the fourth quarter and $152 million for the full year, primarily reflecting working capital investments to support growth in our memory and AI infrastructure businesses. This compares with cash used of $70 million in the prior year quarter and cash provided of $113 million in fiscal 2025. We believe our capital structure and liquidity provide flexibility to fund this growth while improving working capital efficiency remains an important priority for fiscal 2027. Capital expenditures were $4 million in the quarter and $12 million for the year, well under 1% of net sales, with depreciation expense of $5 million and $20 million, respectively. Our asset-light model allows us to scale without significant capital spending, and we expect that to continue in fiscal 2027. Now turning to our outlook. We enter fiscal 2027 with strong momentum, supported by our second half performance, record backlog, bookings growth, continued integrated memory strength, and further acceleration in demand for our AI infrastructure business. We expect strong net sales growth to increase gross profit dollars while operating expenses grow at a considerably slower rate. That combination is expected to expand operating margin and drive diluted EPS growth that outpaces net sales growth. For fiscal year 2027, we expect net sales to grow approximately 40% at the midpoint, plus or minus 10 percentage points or an increase of approximately $700 million to approximately $2.43 billion at the midpoint. Last quarter, we shared a preliminary view of approximately 30% growth from the midpoint of our then current fiscal 2026 outlook. Using that same fiscal 2026 outlook midpoint as the starting point, Our current fiscal 2027 midpoint represents growth of approximately 45%. The range reflects different growth expectations across our businesses as well as variability in customer deployment schedules and the availability, lead times, and cost of certain products and components. Our record backlog, together with the demand we are seeing across the business provides a strong foundation for our fiscal 2027 growth expectations. At the same time, customer deployment schedules, product availability, and evolving memory market conditions could affect the mix and cadence of net sales throughout the year. We believe the range appropriately balances the opportunities ahead with these execution and market variables. Looking at the net sales outlook by segment, for advanced computing, we expect full year net sales to grow approximately 40% at the midpoint, plus or minus 10 percentage points, driven by continued momentum in non-hyperscale AI infrastructure partially offset by the absence of edge sales and lower expected hyperscale sales. For integrated memory, we expect full year net sales to grow approximately 50% at the midpoint, plus or minus 10 percentage points driven by continued strong demand for memory supporting AI-driven data center applications. And for optimized LED, we expect full year net sales to be relatively flat year-over-year as we continue to manage the business with discipline. We expect full year gross margin of approximately 28%, plus or minus 2 percentage points. Our outlook reflects the expected mix across our businesses, including the mix of hardware, software, and services as well as our current assumptions for memory pricing and costs. While these factors influence the gross margin rate, we expect net sales growth and scale to drive higher gross profit dollars. We expect full year operating expenses of approximately $275 million, plus or minus $10 million. Within that range, we are reallocating resources toward our highest return AI infrastructure and memory programs while holding total spending growth well below net sales growth. This disciplined investment approach, together with higher gross profit dollars, is expected to drive further operating margin expansion. For the full year, we expect diluted earnings per share of approximately $4.45, plus or minus $0.70, representing growth of approximately 55% at the midpoint and exceeding our expected rate of net sales growth. The EPS outlook reflects higher gross profit dollars, disciplined operating expense growth, and further operating margin expansion. The range also allows for variability in the timing of large customer deployments as individual project schedules can shift between quarters. Our EPS outlook assumes a diluted share count of approximately 63 million shares and an effective tax rate of approximately 20%. We anticipate using this normalized rate throughout fiscal 2027, though it may change with our geographic earnings mix and developments in the global and U.S. tax environment. Our fiscal 2027 outlook is based on the current demand environment, backlog, customer deployment schedules, expected product mix, and our present assumptions regarding supply availability and costs. The timing of customer deployments and product availability may create variability between quarters, and certain components continue to have extended lead times that can affect project and shipment timing. Our outlook also incorporates current assumptions for memory supply and costs, which may evolve during the year, including the expected impact of new memory and AI infrastructure suppliers that strengthen our overall supply position and support growth. These factors may affect quarterly cadence and mix but are reflected in our full year planning assumptions. Overall, our outlook reflects the momentum in our AI-driven businesses and the benefits of a more scalable operating model. We plan to invest selectively behind our highest return opportunities while maintaining expense discipline. Our objective is clear: convert strong net sales growth into higher gross profit dollars, operating margin expansion, and earnings growth that outpaces net sales growth. Please refer to the non-GAAP financial information section and the reconciliation of GAAP to non-GAAP measures in our earnings release and the investor materials available on our website for additional detail. With that, operator, we are ready for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Katherine Murphy with Goldman Sachs. Katherine Murphy: Very helpful to see the improved advanced computing segment guidance for 40% plus or minus 10% for fiscal 2027. I think last quarter, you had talked about mid-teens growth as being the preliminary starting point for your outlook there. My first question would be, can you help us think about what has improved in the last 90 days that allows you to take up your outlook for advanced computing? And as a follow-up, as Penguin expands more into the neo cloud customer type, how does that change the unit economics relative to some of the enterprise customers and quant wins that you had in the first part of 2026? Is there more hardware? How do we think about the margin impact? Anything that you could share to help us from a modeling perspective would be helpful. Kash Shaikh: Thanks, Kath, for the questions. To your first question about our initial preliminary guidance last quarter in the mid-teens over to 40% advanced computing, mainly driven by AI infrastructure. So this is primarily the growth that we have seen since the last earnings announcement. The booking strength, we have booked more than we expected, and we have a very strong pipeline and as you heard, some of these bookings that I shared as examples, give us the confidence that our memory business strength continues and our AI infrastructure is further accelerating, which is really resulting into the increased guidance for AI infrastructure, driving advanced computing guidance and also increasing the guidance at the company level, primarily driven by AI infrastructure. And on your question about neo clouds and unit economics. Unit economics are quite similar to our enterprise on-premise AI factory deployments. However, one of the things we have observed with the neo cloud customers, we have a pretty unique product market fit for these neo cloud customers. As in, we can provide them end-to-end build and operate their factories on their behalf, including procurement of the hardware, end-to-end designing the hardware, building the data center, and then taking on the management of the data centers, day 2 and beyond for up to 3 to 5 years, as I shared in some of the examples, along with our ClusterWare, which is really our differentiation in terms of how we deliver the services and, more importantly, meet the SLAs, which are really important for these neo cloud customers to be able to provide SLAs to their offtakers. But all in all, similar unit economics, further expansion, and pretty unique product market fit with neo cloud customers. Operator: Your next question comes from the line of Sajal Dogra with Rosenblatt Securities. Sajal Dogra: You're essentially front-running my bull case by a full year, so congrats. I guess for my question, on your previous outlook, your revenue growth and earnings growth was roughly in line but now you're finally showing operating leverage for next year. So I just want to understand what's changed versus 90 days ago that's allowed you to drive that earnings expansion? And I was wondering, like, is that all -- like is it -- how much of that is memory or are we finally seeing some margin expansion in advanced computing as well? Kash Shaikh: Sure. So Sajal, first of all, the outlook we've provided last quarter was more of a color and preliminary outlook than the actual outlook because it was sooner than we provide, right? As typically, we provide in Q4 earnings, the time frame where we are providing the update. So that was much more directional versus what we are providing is looking at all the aspects, and we have more visibility and more clarity, and also the confidence of operating in this new model where if you look at Q3, our EPS grew faster than net sales company level. And then same in Q4, net sales grew 68% versus the EPS growth of 13%. And the line of sight we have in terms of the bookings and then the conversion ratios and so on and so forth, we have much more clarity and it is much more of a formal outlook than the high-level color we provided directionally. So as we are closer, we have more visibility, and we have more confidence in continuing the model as we scale the business. And in terms of the margins at the segment level, we won't disclose the margins at the segment level. But I can tell you at the high level, memory continues to be strong, stronger than we expected, given the value we provide and the focus on the data center. Advanced computing overall has the advantage of the services and the software. However, as we increasingly have the wins where we have both hardware and the software, AI infrastructure may have some downward pressure but at the same time, the advantage of ClusterWare, software as well as the services, has a very high attach rate in general with these opportunities that I shared in the earnings call earlier and the rest of the pipeline we see. So that's at the high level, to give you an idea of how we are looking at the segment margins. Operator: Your next question comes from the line of Ananda Baruah with Loop Capital. Ananda Baruah: Yes, really appreciate it. What are some of just sort of in keeping with Kash, Aaron, and Stephen welcome. The dynamics that are sort of underpinning sort of the -- not just the increase in the fiscal year '27 guide, but the acceleration of the growth rate, actually, across the key businesses. What are some of the mechanics that you're seeing out there in the marketplace that are leading to sort of increase neo cloud capture? What are you seeing, to the degree that you're able to discern, from commercial enterprise? And would love to just get a little context, if it's worth providing, on the degree that we've the NVIDIA and Dell relationship are actually contributing to some of these dynamics at an increased pace. Kash Shaikh: Sure, Ananda. So starting with the acceleration of the business, as I mentioned earlier, part of it is the increased visibility that we are seeing as well as the growth acceleration. We believe one of the competitive advantage we have is we are not a product company that is just providing the hardware and leaving at the doorstep of the customers, we actually worked with them much earlier in the cycle, get involved in their design based on the requirements they have, whether they are a large enterprise customer deploying an on-premise factory or a neo cloud provider and then work with them consultatively understanding their requirement to -- if it is a neo cloud provider, what is their SLAs, who are their customers, and how can we align the design to meet their requirements? So that consultative aspect and especially the fact that we've been doing it for more than 2 decades. That's an advantage. So our team was working with NVIDIA designing these clusters for more than a decade. So we have this advantage of understanding the architecture. The discussions are at the architecture level. We have the software, the ClusterWare that brings together all of these elements and makes it much more easier to build and manage these factories. And then end-to-end staying with them and helping them manage, as a part of our managed services, for them to get those outcomes when they are investing so much capital in these AI factories or data center is really a unique advantage as compared to the alternatives they have whether they go to product-only companies or services companies, there isn't a unique combination that we provide with our platform between the products we have and the services that we provide. So that's one of the advantage we are realizing is helping us. NVIDIA partnership is certainly helping us because we are -- we were recently nominated by NVIDIA as the AI Factory Specialized Partner. We are the -- one of the few handful of partners they have and this is really the experience working with them and all of the things our team is capable of between design, build, deploy, and manage helps us have that credibility. But again, when we get involved in these designs and we are having the white-boarding sessions with the customers to meet their requirement, that's a very unique, competitive advantage we have along with our products. So that's mainly for, obviously, AI infrastructure, which is accelerating. In the Memory business, one of the things we have done since we launched our AI factory platform strategy midway through the fiscal 2026, we've been focusing more on the data centers for 2 reasons: one is the fact that while memory demand is high, everywhere in other segments, including the consumer segments, we believe that demand may still be just a demand and supply dynamics and maybe cyclical however, the demand in the data center for memory is driven by AI, especially with the agentic AI workloads, which are automating the workflow and creating, really, the productivity for the enterprises, that is going to sustain much longer. And if anything, let's say, agentic AIs adopted in the enterprise is 10% because they are still getting the workflows defined and the tool is defined, for every 10% increase, that demand can double. And we continue to see that demand increasing for our memory products in the data center, so that positioning in the data center is another advantage, both in terms of increased demand as well as the durability of the demand for us. So combine that with these 2 tailwinds we have, Memory business position in the data center solving memory issues, providing the solutions for OEMs, and now increasingly, providing forward-looking data center solutions such as CXL memory expansion cards. Those memory expansion cards are primarily for inference workloads and [ they see ] this CXL business taking up very strongly. So the pipeline is increasing, bookings are increasing. So those newer solutions, data center-focus, inference-focus is another advantage for us as our differentiation and solving the inference challenges in the data center. So those are some of the things. In addition to that, one more thing we are seeing is in general, going back to AI infrastructure. Within the enterprises, they are primarily using Neo cloud-as-a-Service for the AI infrastructure. However, in some cases, they are considering on-prem, especially large enterprises because of the fact that at scale when they are using inference applications, cost becomes a challenge. With -- especially with inference workloads. At that point, while they are getting the productivity, they are not seeing the ROI for the dollars they are investing and they consider on-prem factories and then we get involved, and they are looking to address their cost challenge. And they are also considering the open-weight models because that's another way for them to make the economics better as they are moving from a cloud-based service to on-premise. So these are some of the trends where we have a very unique fit between our Memory business as well as AI infrastructure business that is driving the growth for these 2 businesses. Operator: Your next question comes from the line of Rustam Kanga with Citizens. Rustam Kanga: Great. And congrats on a memorable close to the year with continued momentum in the AI infrastructure-driven business. Kash, you stated that the memory growth was a function of both price and volume. I believe last quarter, you made an interesting point that if you were to count the backlog that you couldn't ship because of supply constraints that, that split would be closer to even or even lean more towards volume. So I'm just curious how much of that backlog has started to convert here? And then as you look ahead to next year, how are you thinking about that price versus volume mix in the Memory business, especially as you focus on new customers, primarily with data center solution use cases? Kash Shaikh: First of all, I want to give you the credit for remembering my comment. And you're right, that was what we observed last quarter, where the revenue was pretty strong record revenue for memory even though the backlog was as much as our revenue. Fortunately, we are seeing the same trend continue. So as much as we had another record quarter for memory, our backlog, if any, is much higher than the revenue that we recognized in this quarter. and the backlog now extend to at least 4 quarters, and it continues to strengthen, which is why we have the confidence to increase the outlook for the business. And it is, really, as I mentioned in the previous question that it's a function of data center-focused demand for our core Memory business as well as the new CXL-based products that we are developing had a very strong pipeline and demand because of inference taking off in the data centers. Operator: Your next question comes from the line of Matthew Calitri with Needham & Company. Matthew Calitri: Matt Calitri [ from ] Needham here. And great to see the strength to close the year here, including with some of those neo cloud wins you talked about. I'm wondering if you could give any more detail there on like when will these projects start and begin to like be recognized in the model and what the impact could be? And also, like, is there anything specific to point to as to why you had so much success closing deals in the quarter? Or just like more broadly, like why now is the moment for this neo cloud opportunity? Kash Shaikh: Yes. So we are not sharing that level of details in terms of which project when, but I can tell you at the high level, most of these projects that I shared have already started as in we are managing their data centers or building their data centers. And some of them, we are in the process of procurement. So if they are not future, they are already happening. In fact, we were working on these projects for several months, even though some of it has accelerated into the bookings recently. We were working on these neo cloud opportunities, along with other enterprise opportunities which is why I was referring to neo cloud as a growth opportunity for us in the previous earnings announcement even if we were not in a position to share the details now that we have started working with them, and we are managing these factories, in some cases, and we are seeing increased bookings. That's why we are sharing more details, and we will continue to share more details around these neo cloud deployments. But as I mentioned, one of the reason being the unique product market fit we have between the products we provide as well as our expertise in designing these AI factories or data centers, decade-long expertise, to be able to help them achieve their goals is it's a pretty unique competitive advantage we have in the market with these opportunities. Operator: Our next question comes from the line of Brian Chin with Stifel. Brian Chin: Congratulations on the results, and thanks for letting us ask a question. Maybe kind of 2 parters here. Given that record backlog commentary coming into the fiscal year and the growth guide for computing, roughly how much of your fiscal '27 advanced computing revenue outlook is already in backlog? And then the other part of this question is obviously, really strong flow-through in terms of the model and the EPS -- non-GAAP EPS guide for next year. But on that really kind of low OpEx increase year-to-year, are you investing enough in terms of head count, retention areas to maybe kind of improve bandwidth and utilization and go after more projects? With the revenue growth, it seems like you have a lot of coverage maybe to invest even more. Kash Shaikh: Right. So let me address your first question. We are not sharing the details of how much of our backlog is covering the revenue. However, I can tell you at the high-level, it's pretty strong, pretty strong backlog across both, memory as well as AI infrastructure. That's what we'd referred to a record backlog. And in terms of your question about operating expenses. So when we say the strong operating leverage, it is really a function of the efficient operating model we have. And when I say efficient operating model, to be specific, for example, for R&D, research and development, and our engineering. Predominantly 95-plus percent of our engineering is in India, low-cost location which gives us an advantage to scale much more cost effectively. We also have our memory engineering in Taiwan, another cost-effective location. So even as we scale, our cost is very efficient as compared to other companies who may not have as much of a cost-efficient model. And then our manufacturing is in Malaysia, all low-cost location even as the business scales, that's a fixed cost for us as we add that capacity and we have the capacity. So even if we add the capacity, the cost or the expenses don't increase linearly with that revenue. We are also using AI pretty extensively in -- across the company. So for almost 8 or 9 months, we've had a lot of productivity gains. As an example, 100% of our software engineers wherever they are, are using code generation for -- so AI for code generation, which is helping us scale beyond what we can do in a traditional model. We are using AI in pretty much every functions, including finance, legal, and that is helping us scale much more effectively. So between building this model and locations that are in cost-effective location and scaling in those areas as well as using AI, it is a pretty efficient model. But to answer your questions, for sure, we are investing in innovation, which is why we are winning more. The products I mentioned, ClusterWareAI the differentiation, helping us win more CXL for the memory products is another advantage, and we will continue to invest more. So while the dollars may not seem to increase the productivity as well as the scale is increasing, based on our efficient model driving the operating leverage, which allows us to continue to deliver more profitability. And if you look at our operating profit is a record of $90 million, was a record last quarter, almost $64 million. And we continue to expect that while we will drive profitable growth but based on a scalable model, efficient model we have created, we can increasingly invest in innovation, and we will even though the productivity will continue to increase for the company. Operator: There will be no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Penguin Solutions. The Motley Fool has a disclosure policy. Penguin Solutions (PENG) Q4 2026 Earnings Call Transcript was originally published by The Motley Fool

Penguin Solutions (PENG) just delivered a clear earnings surprise, with quarterly sales of US$566.69 million and net income of US$93.2 million, and raised its fiscal 2027 outlook backed by AI focused demand. That combination of an earnings beat, stronger guidance for next year, and a new CFO focused on scaling operations has turned Penguin Solutions into a fresh case study in how AI oriented hardware suppliers are being priced today. The share price reaction has been sharp, with Penguin Solutions up 13.08% on a 1 day share price return and 32.77% over 7 days. The earnings beat, higher 2027 outlook and new CFO appointment have reset expectations after a 10.79% decline over 90 days and a very strong 220.22% 1 year total shareholder return. Scan the AI hardware space for more Penguin Solutions style momentum with the hand picked 92 AI infrastructure stocks that are already seeing strong data center demand. Bulls see record AI driven results and a richer 2027 outlook as justification for Penguin Solutions' sprint. Bears point to a 220% 1 year return and recent volatility. Which case does the current valuation actually support? On the numbers in front of you, Penguin Solutions is trading at $72.61 against a widely followed fair value estimate of $74.29. This leaves only a slim narrative discount but still leans on a powerful AI and memory story to justify that gap. Accelerating adoption of AI and high-performance computing across major enterprise verticals (financial services, energy, biotech, federal, and neo-cloud providers) is driving robust demand for turnkey compute infrastructure, as evidenced by rising customer bookings and a diversified pipeline. This is likely to support sustained growth in revenue. See why 25 investors see Penguin Solutions as 2% undervalued. Result: Fair Value of $74.29 (UNDERVALUED) Still, the Penguin Solutions story can break if large project based deals are delayed or if tariff and manufacturing costs continue to pressure segment margins. Find out about the key risks to this Penguin Solutions narrative. The popular narrative has Penguin Solutions trading only 2% below a fair value of $74.29. The SWS DCF model paints a very different picture, with an estimated future cash flow value of $36.29. That points to the shares trading well above this cash flow driven mark and raises a simple question for you: Which story feels more reliable, near term AI momentum or long term cash generation? Look into how the SWS DCF model arrives at its fair value. Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Penguin Solutions for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 29 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. Mixed views on whether Penguin Solutions is priced for perfection or simply catching up to its AI story. If you want to move quickly and ground your own view in the underlying data, start by weighing the 4 key rewards and 2 important warning signs. If Penguin Solutions has sharpened your focus on where capital might work harder, do not stop here. Other opportunities are already competing for that next dollar. - Target steady compounding potential by scanning companies that pass quality and valuation filters through the 29 high quality undervalued stocks. - Strengthen your income stream by reviewing higher yielding opportunities using the 7 dividend fortresses. - Protect your downside first and hunt for resilient opportunities through the 31 resilient stocks with low risk scores. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include PENG. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]