Penguin Solutions (NASDAQ: $PENG), an end-to-end infrastructure solutions company that specializes in high-performance computing and AI, with services ranging from edge, core, and cloud, released its second quarter results on Wednesday after markets closed. Here is a deep dive into those results.
Penguin Solutions Q2 Fiscal 2025 Results
For the second quarter of fiscal year 2025, Penguin Solutions reported revenue of $366 million, a 28.3% YoY increase, beating estimates of $346.11 million. Adjusted EPS came in at $0.52, compared to $0.27 the previous year, and above estimates of $0.35.
The company reported a non-GAAP gross margin of 30.8%, a 70-basis point dip from the previous year, while non-GAAP net income came in at $33.84 million compared to $14.14 million last year.
Segment Performance
Penguin Solutions’ best-performing segment was Advanced Computing, which saw a 41.55% YoY increase in revenue to $200.15 million. The integrated Memory segment saw a 26.37% YoY increase in revenue to $105.26 million, while the Optimized LED segment saw a 0.03% YoY decline in revenue to $60.1 million.
Guidance
Penguin Solutions upgraded its full-year guidance for revenue to a 17% YoY increase to $1.40 billion, up from the previous forecast of 15% growth and above estimates of $1.37 billion. It expects a non-GAAP EPS of $1.60 at the midpoint, above estimates of $1.58. It expects $265 million in operating expenses for the full year, down from the previous forecast of $275 million.
Comments From The Leadership Team
Commenting on the results, CEO Mark Adams stated that they were “seeing signs that we have entered the early stages of growth in corporate build outs at scale.” He highlighted their expertise in the deployment of large-scale complex data center clusters, stating that the foundation for their success was their “twenty-five plus year history.”
Penguin Solutions (PENG) Market Performance
Following the earnings and revenue dip in Q2, PENG stock dipped 1.41% in early morning trading, most likely driven by the latest tariff announcement, to $17.80 as of 9:42 AM EDT. Overall, the stock market has taken a tumble following the tariff announcements, with the S&P 500 diving 3.30% in early morning trading to 5,480.44 points as of 9:45 AM EDT.
Over the past six months, PENG shares have dipped 12.12%, while year to date, the stock is down 5.94%. Over the past 12 months, PENG is down 31%. Its Wednesday closing price of $18.05 is below its 50 and 200-day moving averages of $19.55 and $19.94, respectively.
Analysts give the stock an overall strong buy rating. They forecast an average price target of $25.50, which is a 41.27% upside based on Wednesday’s closing price. The analysts give a wide range of target prices, with a high of $30 and a low of $20.
Should You Add Penguin Solutions to Your Portfolio In 2025?
In the medium term, Penguin solutions could face some major headwinds that include the negative impact of tariffs, market saturations in the AI infrastructure sector, and macroeconomic pressures like inflation.
Additionally, potential supply chain disruptions are a source of concern for the company. However, the company is a great entry point into the budding AI industry. Backed by years of experience and management’s ability to scale, PENG could potentially be a hidden gem for those seeking serious exposure to the AI sector at a low entry point.
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