Penguin Solutions Reports Strong Q1 Earnings, Stock Drops
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 09 2025
0mins
Should l Buy PENG?
Source: Business Insider
Penguin Solutions Inc's stock fell by 14.71% after crossing below the 5-day SMA, despite the Nasdaq-100 showing slight gains of 0.09% and the S&P 500 declining by 0.33%.
The decline comes amid a strong earnings report where Penguin Solutions reported Q1 revenue of $343 million, exceeding expectations, and non-GAAP earnings per share of $0.49, surpassing the anticipated $0.44. This strong performance indicates robust profitability and growth potential, yet the stock's drop suggests sector rotation as investors may be reallocating their portfolios despite the positive earnings results.
This movement highlights the complexities of market dynamics, where even strong financial results can lead to stock price declines due to broader market trends or shifts in investor sentiment.
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Analyst Views on PENG
Wall Street analysts forecast PENG stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for PENG is 26.00 USD with a low forecast of 23.00 USD and a high forecast of 30.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
3 Analyst Rating
3 Buy
0 Hold
0 Sell
Strong Buy
Current: 17.440
Low
23.00
Averages
26.00
High
30.00
Current: 17.440
Low
23.00
Averages
26.00
High
30.00
About PENG
Penguin Solutions, Inc. is an end-to-end technology company. The Company’s Advanced Computing segment, under its Penguin Computing and Stratus brands, offers specialized platform solutions and services for artificial intelligence, high-performance computing, machine learning, advanced modeling and the Internet of things that span the continuum of edge, core and cloud. Its Integrated Memory segment, under its SMART Modular Technologies brand, provides high-performance and reliable integrated memory solutions through the design, development and advanced packaging of leading-edge to extended lifecycle products. Its Optimized LED segment, under its Cree LED brand, offers a broad portfolio of application-optimized LEDs focused on improving lumen density, intensity, efficacy, optical control and/or reliability. The Company’s LED products enable its customers to develop and market LED-based products for general lighting, video displays and specialty lighting applications.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Penguin Solutions Announces Executive Transition
- Executive Retirement: Penguin Solutions announced the retirement of CEO Mark Adams effective February 2, 2026, while he will remain as an advisor for nine months to ensure a smooth transition during this period.
- New CEO Appointment: The board appointed technology veteran Kash Shaikh as the new CEO and director, expected to bring fresh strategic insights and leadership to drive the company's future growth.
- Performance Outlook: Penguin Solutions projects a 6% net sales growth and $2 EPS guidance for fiscal 2026, reflecting a strengthened outlook for its memory business, indicating the company's competitive position in the market.
- Market Reaction: Despite a recent sell-off, analysts remain bullish on Penguin Solutions' prospects, believing the company is poised for valuation increases in the future, which may attract more investor interest.
See More
Goldman Sachs Initiates Buy Rating on Penguin Solutions
- Goldman Sachs Rating Change: On January 13, Goldman Sachs initiated coverage of Penguin Solutions (NASDAQ:PENG) with a Buy rating and a revised price target of $25, down from $26, expressing optimism about the company's AI infrastructure growth despite a noisy FY2026 outlook.
- Earnings Highlights: In FQ1 2026, Penguin Solutions reported revenue of $343 million, a 1% year-over-year increase, driven by a 41% surge in Integrated Memory business to $137 million due to the transition to DDR5 technology and AI computing demand, indicating strong market traction.
- Business Challenges: Despite revenue growth, the Optimized LED business faced an 18% sequential decline due to weak demand in China and large US OEM sectors, alongside a 9% decline in services net sales, with management expressing concerns over the wind-down of the high-margin Penguin Edge business expected to cease by the end of FY2026.
- Future Outlook: The company anticipates a stronger second half of the year, shifting focus toward enterprise and sovereign AI opportunities, leveraging partnerships with Dell, CDW, and Nvidia to diversify its customer base beyond traditional hyperscalers.
See More
Cree LED Settles Patent Dispute with Blizzard Lighting, Secures IP Rights
- Patent Settlement: Cree LED and Blizzard Lighting have reached a settlement to resolve a patent infringement dispute involving Cree LED's patents on LED components, ensuring mutual benefits and reducing potential legal risks.
- Limited License Granted: As part of the settlement, Cree LED has granted Blizzard a limited license to certain LED component patents, which not only allows Blizzard to legally utilize the technology but also fosters a collaborative relationship between the two companies.
- Commitment to IP Protection: Cree LED reaffirms its strong commitment to protecting intellectual property by actively monitoring the global market to prevent unauthorized use of its patented technologies, thereby maintaining its leadership in LED display technology.
- Industry Leadership: With over 35 years of innovation, Cree LED offers industry-leading technology and solutions in high power and mid-power lighting, horticulture, specialty lighting, and video screens, ensuring supply chain continuity and product quality.
See More
Penguin Solutions' CXL NV-CMM E3.S 2T Memory Module Achieves Compliance Testing
- Compliance Success: Penguin Solutions' SMART CXL NV-CMM E3.S 2T non-volatile memory module has successfully passed CXL compliance testing, reinforcing the company's leadership in advanced memory technology and enhancing customer trust in its products.
- System Acceleration: Utilizing the CXL 2.0 standard, the module offers low latency and high bandwidth persistent storage, optimized for accelerating AI and machine learning workloads, thereby improving model training efficiency and accuracy to meet data center high-performance computing demands.
- Data Center Applications: The SMART CXL NV-CMM E3.S 2T module is specifically designed for data centers, supporting computational storage and network acceleration, ensuring efficient data processing and storage, further solidifying Penguin Solutions' competitive edge in the high-performance computing market.
- Long-term Commitment: VP Andy Mills stated that the success of this compliance testing underscores Penguin Solutions' commitment to delivering high-quality, interoperable memory solutions that meet the evolving needs of customers and drive advancements in integrated memory technology.
See More
Cree LED Launches New L2 Solutions Portfolio, Streamlining LED PCBA Procurement
- Market Demand Response: Cree LED's new L2 Solutions portfolio offers both standard and custom fully-populated LED PC board assemblies, addressing top-tier suppliers' need for a complete solution, thereby enhancing its competitive edge in the lighting market.
- Supply Chain Stability: Leveraging its global manufacturing network, Cree LED ensures supply stability and has the flexibility to adjust production based on customer demand, which not only boosts customer trust but also increases market share.
- Low Barrier Procurement: Standard L2 PCBAs will be stocked through existing distribution networks with no minimum order quantities, making high-quality assemblies easily accessible for manufacturers of all sizes, thus expanding the customer base.
- Customization Service Advantage: For high-volume orders, Cree LED offers custom L2 products with greater design flexibility and engineering support, drawing on its successful XLamp® and J Series platforms, further solidifying its leadership position among global manufacturers.
See More
Goldman Restarts Coverage on IT Hardware Firms, HP Target Cut to $21
- Rating Adjustments: Goldman restarted coverage on Dell Technologies (DELL), Hewlett Packard Enterprise (HPE), TD Synnex (SNX), and Penguin Solutions (PENG) with Buy ratings, while HP (HPQ) saw its price target cut to $21, indicating a cautious outlook on its future performance.
- Market Outlook: Analysts expect IT hardware demand to face challenges in 2026; while AI infrastructure demand remains strong, traditional PC and server markets may struggle due to high costs and weak demand, impacting overall industry performance.
- Investment Recommendations: Goldman advises investors to buy Dell Technologies (DELL) and Hewlett Packard Enterprise (HPE), with Dell seen as an AI-driven earnings grower and HPE showing attractive business transformation potential, while also recommending NetApp (NTAP) for its high-margin cloud service returns.
- Industry Dynamics: Despite underperformance in IT hardware stocks in 2025, Goldman believes there are selective investment opportunities in 2026, particularly as investors focus on AI demand sustainability and cost pressures, suggesting a patient approach for potential returns.
See More
Penguin Solutions Announces Executive Transition
- Executive Retirement: Penguin Solutions announced the retirement of CEO Mark Adams effective February 2, 2026, while he will remain as an advisor for nine months to ensure a smooth transition during this period.
- New CEO Appointment: The board appointed technology veteran Kash Shaikh as the new CEO and director, expected to bring fresh strategic insights and leadership to drive the company's future growth.
- Performance Outlook: Penguin Solutions projects a 6% net sales growth and $2 EPS guidance for fiscal 2026, reflecting a strengthened outlook for its memory business, indicating the company's competitive position in the market.
- Market Reaction: Despite a recent sell-off, analysts remain bullish on Penguin Solutions' prospects, believing the company is poised for valuation increases in the future, which may attract more investor interest.
See More
Goldman Sachs Initiates Buy Rating on Penguin Solutions
- Goldman Sachs Rating Change: On January 13, Goldman Sachs initiated coverage of Penguin Solutions (NASDAQ:PENG) with a Buy rating and a revised price target of $25, down from $26, expressing optimism about the company's AI infrastructure growth despite a noisy FY2026 outlook.
- Earnings Highlights: In FQ1 2026, Penguin Solutions reported revenue of $343 million, a 1% year-over-year increase, driven by a 41% surge in Integrated Memory business to $137 million due to the transition to DDR5 technology and AI computing demand, indicating strong market traction.
- Business Challenges: Despite revenue growth, the Optimized LED business faced an 18% sequential decline due to weak demand in China and large US OEM sectors, alongside a 9% decline in services net sales, with management expressing concerns over the wind-down of the high-margin Penguin Edge business expected to cease by the end of FY2026.
- Future Outlook: The company anticipates a stronger second half of the year, shifting focus toward enterprise and sovereign AI opportunities, leveraging partnerships with Dell, CDW, and Nvidia to diversify its customer base beyond traditional hyperscalers.
See More
Cree LED Settles Patent Dispute with Blizzard Lighting, Secures IP Rights
- Patent Settlement: Cree LED and Blizzard Lighting have reached a settlement to resolve a patent infringement dispute involving Cree LED's patents on LED components, ensuring mutual benefits and reducing potential legal risks.
- Limited License Granted: As part of the settlement, Cree LED has granted Blizzard a limited license to certain LED component patents, which not only allows Blizzard to legally utilize the technology but also fosters a collaborative relationship between the two companies.
- Commitment to IP Protection: Cree LED reaffirms its strong commitment to protecting intellectual property by actively monitoring the global market to prevent unauthorized use of its patented technologies, thereby maintaining its leadership in LED display technology.
- Industry Leadership: With over 35 years of innovation, Cree LED offers industry-leading technology and solutions in high power and mid-power lighting, horticulture, specialty lighting, and video screens, ensuring supply chain continuity and product quality.
See More
Penguin Solutions' CXL NV-CMM E3.S 2T Memory Module Achieves Compliance Testing
- Compliance Success: Penguin Solutions' SMART CXL NV-CMM E3.S 2T non-volatile memory module has successfully passed CXL compliance testing, reinforcing the company's leadership in advanced memory technology and enhancing customer trust in its products.
- System Acceleration: Utilizing the CXL 2.0 standard, the module offers low latency and high bandwidth persistent storage, optimized for accelerating AI and machine learning workloads, thereby improving model training efficiency and accuracy to meet data center high-performance computing demands.
- Data Center Applications: The SMART CXL NV-CMM E3.S 2T module is specifically designed for data centers, supporting computational storage and network acceleration, ensuring efficient data processing and storage, further solidifying Penguin Solutions' competitive edge in the high-performance computing market.
- Long-term Commitment: VP Andy Mills stated that the success of this compliance testing underscores Penguin Solutions' commitment to delivering high-quality, interoperable memory solutions that meet the evolving needs of customers and drive advancements in integrated memory technology.
See More
Cree LED Launches New L2 Solutions Portfolio, Streamlining LED PCBA Procurement
- Market Demand Response: Cree LED's new L2 Solutions portfolio offers both standard and custom fully-populated LED PC board assemblies, addressing top-tier suppliers' need for a complete solution, thereby enhancing its competitive edge in the lighting market.
- Supply Chain Stability: Leveraging its global manufacturing network, Cree LED ensures supply stability and has the flexibility to adjust production based on customer demand, which not only boosts customer trust but also increases market share.
- Low Barrier Procurement: Standard L2 PCBAs will be stocked through existing distribution networks with no minimum order quantities, making high-quality assemblies easily accessible for manufacturers of all sizes, thus expanding the customer base.
- Customization Service Advantage: For high-volume orders, Cree LED offers custom L2 products with greater design flexibility and engineering support, drawing on its successful XLamp® and J Series platforms, further solidifying its leadership position among global manufacturers.
See More
Goldman Restarts Coverage on IT Hardware Firms, HP Target Cut to $21
- Rating Adjustments: Goldman restarted coverage on Dell Technologies (DELL), Hewlett Packard Enterprise (HPE), TD Synnex (SNX), and Penguin Solutions (PENG) with Buy ratings, while HP (HPQ) saw its price target cut to $21, indicating a cautious outlook on its future performance.
- Market Outlook: Analysts expect IT hardware demand to face challenges in 2026; while AI infrastructure demand remains strong, traditional PC and server markets may struggle due to high costs and weak demand, impacting overall industry performance.
- Investment Recommendations: Goldman advises investors to buy Dell Technologies (DELL) and Hewlett Packard Enterprise (HPE), with Dell seen as an AI-driven earnings grower and HPE showing attractive business transformation potential, while also recommending NetApp (NTAP) for its high-margin cloud service returns.
- Industry Dynamics: Despite underperformance in IT hardware stocks in 2025, Goldman believes there are selective investment opportunities in 2026, particularly as investors focus on AI demand sustainability and cost pressures, suggesting a patient approach for potential returns.
See More
