Penguin Solutions, Inc. (PENG)·Q1 2025 Earnings Summary

Executive Summary

• Q1 FY25 delivered strong top-line and earnings: revenue grew 24.4% year over year to $341.1M, GAAP diluted EPS swung to $0.10 (from $(0.23)), and non-GAAP diluted EPS rose to $0.49 (from $0.24), led by 49% YoY growth in Advanced Computing; GAAP and non-GAAP gross margin declined YoY on mix toward hardware .
• Management affirmed full-year FY25 outlook initiated previously (15% ±5% YoY revenue growth; non-GAAP GM ~32% ±1%; non-GAAP OpEx ~$275M ±$15M; non-GAAP EPS ~$1.50 ±$0.20), signaling confidence after a strong start to the year .
• Mix shift: Advanced Computing represented ~52% of revenue; services revenue was ~$71M (Q1), supporting a recurring element to the model but diluting consolidated gross margin due to heavier hardware mix .
• Balance sheet remained robust with ~$394M cash and short-term investments at quarter-end, despite inventory build to support deployments; operating cash flow was $13.8M for Q1 .
• Catalysts: accelerating enterprise AI deployments, expanding ICE Clusterware capabilities, and partnerships (e.g., Dell, SK) underscore pipeline momentum; near-term stock reaction likely driven by confidence from affirmed guidance, Advanced Computing strength, and services traction versus concerns on gross margin compression .

What Went Well and What Went Wrong

• What Went Well

  • Advanced Computing revenue rose 49% YoY to $177.4M, highlighting strong AI infrastructure demand and Penguin’s execution in complex deployments .
  • Non-GAAP profitability improved materially YoY: non-GAAP operating income rose to $40.9M (from $26.7M) and non-GAAP EPS to $0.49 (from $0.24), reflecting operating discipline and scale .
  • CEO tone constructive on AI adoption: “49% year-over-year increase in Advanced Computing revenue… continued execution of our strategy to support customers navigating the complexities of AI infrastructure implementation… we are pleased to affirm our outlook for the full fiscal year” .

• What Went Wrong

  • Gross margin pressure: GAAP GM 28.7% (down ~150 bps YoY) and non-GAAP GM 30.8% (down ~250 bps YoY) due to higher hardware mix, partially offset by services/software .
  • Optimized LED segment revenue declined YoY to $67.0M (from $69.8M), though operating margins improved; LED remains a smaller, more cyclical contributor .
  • Working capital intensity increased: inventories rose to $247.0M (from $151.2M at FY24 year-end), and cash conversion cycle lengthened to 46 days (from 42 days in Q4), reflecting build to support deployments and mix dynamics .

Financial Results

Consolidated performance (YoY and sequential comparison)

Segment net sales

KPIs and balance sheet/cash flow

Guidance Changes

Note: Management explicitly “affirmed” the full-year FY25 outlook in Q1 commentary .

Earnings Call Themes & Trends

Note: The Q1 FY25 earnings call transcript was not available in the repository; themes below use Q1 press release/slides for “Current Period.” Prior-quarter narrative detail (Q-2, Q-1) not available from transcripts in this document set.

Management Commentary

• CEO framing on Q1 strength and AI execution: “49% year-over-year increase in Advanced Computing revenue… continued execution of our strategy to support customers navigating the complexities of AI infrastructure implementation… we are pleased to affirm our outlook for the full fiscal year.”
• Strategic focus areas highlighted in Q1 materials: expand ICE Clusterware capabilities (multi-tenant, workflow, controls), technology-agnostic approach across NVIDIA/AMD/Intel, partner for growth with Dell and SK to broaden customer TAM and accelerate enterprise AI deployments .

Q&A Highlights

• The Q1 FY25 earnings call transcript was not available in the document repository; therefore, detailed Q&A themes and any guidance clarifications from Q1 are unavailable to cite.

Estimates Context

• We attempted to retrieve S&P Global (Capital IQ) consensus for Q1 FY25 EPS and revenue to benchmark actuals versus Street; the data pull was unavailable due to API limits at query time. As a result, we cannot present “vs. consensus” comparisons for this quarter. If you’d like, we can refresh and add this section once access is restored.

Key Takeaways for Investors

• Advanced Computing growth is the core driver: +49% YoY in Q1 and now >50% of mix—positioning PENG as a beneficiary of accelerating enterprise AI deployment at scale .
• Profitability scaling despite GM compression: non-GAAP operating income and EPS improved significantly YoY, indicating operating leverage even as mix favors hardware; watch for mix normalization and services/software attach to support GM .
• Guidance affirmed early in FY25: Management maintained FY25 revenue growth (15% ±5%) and non-GAAP EPS ($1.50 ±$0.20), reinforcing confidence in pipeline and execution after a strong start .
• Working capital elevated to support deployments: inventory build and CCC uptick suggest continued deployment cadence; balance sheet liquidity (~$394M) provides flexibility .
• Segment lens: LED remains a manageable headwind on revenue YoY but improving margins; Memory steady with AI-related interest (CXL), while Advanced Computing remains the key swing factor .
• Near-term trading setup: Positive narrative (affirmed outlook, AC growth, services traction) balanced by GM pressure and WC intensity; incremental data points on AC bookings, services attach, and margins will likely drive stock reaction into subsequent quarters .

Appendix: Source Documents

• Q1 FY25 8-K (includes earnings press release, financials, reconciliations, outlook) .
• Q1 FY25 earnings slides (business review, strategic priorities, KPIs) –.

Notes

• Prior two quarters’ detailed transcripts were not present in the repository; sequential and YoY comparisons rely on the Q1 FY25 8-K tables and Q1 slides, which include prior-period figures where available .
• Wall Street consensus from S&P Global was unavailable at query time; we will update “vs. consensus” upon access restoration.