Penguin Solutions Earnings Beat Estimates. Why the Stock Has Dropped 16%.

Penguin Solutions issued fiscal 2026 guidance that signaled slowing growth compared to the prior year. (Dreamstime)

Key Points

• Penguin Solutions’ shares fell after forecasting fiscal 2026 sales growth of approximately 6%, below 10% analyst expectations.
• The company’s fiscal fourth-quarter revenue grew 9% to $337.9 million, missing the $342.1 million consensus estimate.
• Penguin Solutions reported a profit of $9.4 million in the quarter, a turnaround from a $24.5 million loss in the prior year.

Shares of Penguin Solutions slumped on Wednesday as the maker of artificial-intelligence computing infrastructure issued a weaker-than-expected outlook that signaled slowing growth in the current fiscal year.

While the company swung to a profit in the fiscal fourth quarter, its guidance disappointed. Management guided for sales growth of about 6%, plus or minus 10%, for fiscal 2026. This compares to 17% growth in the prior year, and comes in below the roughly 10% growth analysts had expected.

The guidance is meant to reflect “a more backend-loaded year” and “reflect a broader set of potential outcomes,” Nathan Olmstead, the company’s senior vice president and chief financial officer, said on the earnings call.

“While we entered this year with a stronger pipeline of AI compute opportunities than last year, we expect our sales volumes to be higher in the second half of the year than in the first half,” Olmstead said. The outlook assumes that revenue tied to bookings in the first half of the year will materialize in the second half, he added.

Shares sank 16% to $22.26 on Wednesday. The benchmark S&P 500 and tech-heavy Nasdaq Composite were up 0.4% and 0.7%, respectively.

Otherwise, the report was mixed. Penguin Solutions swung to a profit of $9.4 million in the quarter, from a loss of $24.5 million in the same period last year. Adjusted earnings of 43 cents a share came in ahead of the 37 cents a share analysts had anticipated. Although revenue grew 9% to $337.9 million in the quarter, it missed the $342.1 million consensus estimate among analysts tracked by FactSet.

Stifel analysts noted that Penguin’s decision to discontinue hardware sales to a “large historical hyperscaler customer,” likely Meta Platforms, contributed to softness in the guidance.

The company is also winding down its Penguin Edge business, which is part of its Advanced Computing segment. Management indicated on the earnings call that sales from Penguin Edge products are expected to “essentially cease” at the end of the calendar year, a development that was factored into the outlook.

Stripping out these items, Penguin’s Advanced Computing segment would grow around 40% in fiscal 2026, Stifel asserted, “reflecting strength across a more diverse customer pipeline.” The firm reiterated a Buy rating on Penguin Solutions while trimming its price target on the stock to $27 from $31.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com