Penguin Solutions’ fourth quarter and full year results were met with a significant negative market reaction, reflecting concerns about topline performance and future visibility. While the company delivered year-over-year revenue growth and maintained operating margins, management attributed the underperformance to shifts in customer demand, particularly the winding down of its Penguin Edge business and reduced hardware sales to hyperscale customers. CEO Mark Adams acknowledged that these factors created a challenging environment, noting, “It wasn’t really a choice of should we stay in it strategically or not—it was two large customers that we’re winding down on a prior generation of a product and that they were not renewing.”

Is now the time to buy PENG? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are 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.

Our Top 5 Analyst Questions From Penguin Solutions’s Q3 Earnings Call

• Kevin Cassidy (Rosenblatt Securities) sought clarity on hyperscale hardware revenue and its outlook. CEO Mark Adams confirmed there will be no hardware revenue from these customers next year, though service relationships remain.
• Michael Ng (Goldman Sachs) asked about the Penguin Edge segment’s wind-down and its impact on growth. CFO Nate Olmstead explained the decision was driven by customer attrition, not strategy, and quantified the revenue headwind for advanced computing.
• Samik Chatterjee (JPMorgan) questioned the drivers behind memory segment growth and margin implications. Olmstead noted price increases affect revenue but not profit, as memory operates on a value-add basis, and most upside is tied to backlog rather than commodity pricing.
• Ananda Baruah (Loop Capital Markets) inquired about underlying growth rates after adjusting for business exits. Olmstead clarified that, excluding Penguin Edge and hyperscale hardware, implied growth would be around 20%.
• Matthew Calitri (Needham & Company) asked about differentiation in the memory business as market dynamics shift. Adams responded that Penguin’s advantage lies in system-level design and reliability, not commodity memory pricing.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the pace at which enterprise and government AI infrastructure projects progress from pipeline to bookings, (2) the success of the company’s customer diversification efforts—especially in non-hyperscale verticals, and (3) the rate at which next-generation memory products like CXL and OMA achieve commercial traction. Execution on operational discipline and margin management will also be critical markers.

Penguin Solutions currently trades at $22.45, down from $26.95 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free for active Edge members).

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