Penguin Solutions (PENG) Q2 2026 earnings summary

Executive summary

• Q2 FY26 net sales were $343 million, down 6% year-over-year, with strong Integrated Memory growth offset by declines in Advanced Computing and Optimized LED segments.

• Non-GAAP diluted EPS was $0.52, flat year-over-year; GAAP diluted EPS rose to $0.58 from $0.09.

• Leadership changes included a new CEO, Kash Shaikh, and the appointment of a Chief Product Officer with deep AI infrastructure experience.

• Completed U.S. Domestication, moving parent company from Cayman Islands to Delaware, effective June 30, 2025.

• Strong memory demand and new AI/HPC customer wins, including a Tier One financial institution, prompted an increase in full-year outlook.

Financial highlights

• Q2 net sales were $343 million, down 6% year-over-year; product net sales were $279 million and services net sales were $64 million.

• Non-GAAP gross margin was 31.2%, up 0.4 points year-over-year; GAAP gross margin was 27.3%, down 130 bps.

• Non-GAAP operating margin was 13.2%, down 0.2 points year-over-year; GAAP operating margin was 7.5%.

• Adjusted EBITDA for Q2 was $50.4 million; cash flow from operations was $54.9 million.

• Cash, cash equivalents, and short-term investments totaled $489 million at quarter end.

Outlook and guidance

• Full-year net sales growth outlook raised to 12% (±5%), with non-GAAP diluted EPS at $2.15 (±$0.15) and GAAP EPS at $1.30 (±$0.15).

• Non-GAAP gross margin outlook for the year is 28% ±0.5 points; GAAP gross margin expected at 26% ±0.5 points.

• Non-GAAP operating expenses expected at $250 million ±$5 million; GAAP operating expenses projected at $310 million.

• Advanced Computing net sales expected to decline 15%-25% year-over-year due to Penguin Edge wind down and no hyperscale hardware sales.

• Memory segment net sales expected to grow 65%-75% year-over-year, driven by favorable pricing and strong AI demand.