Executive Summary

Q2 FY25 delivered broad-based strength: revenue $365.519M (+28% y/y; +7.2% q/q) and non-GAAP EPS $0.52, both above consensus; GAAP EPS was $0.09 as non-GAAP outperformance was offset by amortization, redomiciliation costs, and a $6.1M goodwill impairment . Consensus revenue $344.66M and EPS $0.382 were exceeded meaningfully*.
Mix favored Advanced Computing (55% of revenue; +42% y/y) with Memory +26% y/y and LED flat; non-GAAP gross margin was 30.8% (down 70 bps y/y) on higher hardware mix, while non-GAAP operating margin expanded 410 bps y/y to 13.4% on scale and opex discipline .
FY25 outlook raised at the midpoint: revenue growth to 17% ±3% (from 15% ±5%) and non-GAAP EPS to ~$1.60 ±$0.10 (from $1.50 ±$0.20); however, non-GAAP gross margin trimmed to 31% ±1% (from 32% ±1%) reflecting stronger hardware/memory mix .
Setup: management flagged first-half-weighted results due to completion of a large AC order in Q2; catalysts include expanding AI enterprise deployments, Dell channel leverage, and SK partnerships; watch GM trajectory and H2 linearity given component lead times and LED tariffs .

What Went Well and What Went Wrong

What Went Well
- Advanced Computing strength and new logos drove outperformance: AC revenue $200.157M (+42% y/y) with three new logos across tech/telecom/media/federal; CEO: “Our results reinforce our capabilities in managing the complexity of AI… we are raising the midpoint of our revenue outlook” .
- Operating leverage: non-GAAP operating income $49.090M (+85% y/y) and margin 13.4% (+410 bps y/y), with opex down sequentially and as % of sales; adjusted EBITDA $53.708M (+61% y/y) .
- Strategic progress: ICE Clusterware added multi-tenancy and AIM optimization; Dell can now sell Penguin AI software/services; deepening SK relationships; “expanding our go to market breadth by… channel partnerships” .
What Went Wrong
- Gross margin compression: non-GAAP GM 30.8% (-70 bps y/y) on higher AC hardware mix; GAAP GM 28.6% (-20 bps y/y) .
- H2 visibility/mix risk: management expects second-half revenues and profits below 1H due to a large AC order that shipped in 1H and component lead times; vertical contribution to shift beyond hyperscaler into federal/financial/energy .
- Non-GAAP to GAAP gap widened: Q2 included $6.079M goodwill impairment and redomiciliation costs, depressing GAAP EPS to $0.09 despite strong non-GAAP $0.52 .

Financial Results

Headline metrics (actuals vs prior periods and consensus where available)

Metric	Q2 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$284.821	$341.102	$365.519
Revenue Consensus ($USD Millions)	$285.091*	$319.992*	$344.660*
GAAP Diluted EPS ($)	$(0.26)	$0.10	$0.09
Non-GAAP Diluted EPS ($)	$0.27	$0.49	$0.52
EPS Consensus ($, Primary)	$0.252*	$0.391*	$0.382*
GAAP Gross Margin (%)	28.8%	28.7%	28.6%
Non-GAAP Gross Margin (%)	31.5%	30.8%	30.8%
Non-GAAP Operating Income ($USD Millions)	$26.514	$40.918	$49.090
Non-GAAP Operating Margin (%)	9.3%	12.0%	13.4%

Values marked with * retrieved from S&P Global.

Segment net sales ($USD Millions)

Segment	Q2 2024	Q1 2025	Q2 2025
Advanced Computing	$141.405	$177.426	$200.157
Integrated Memory	$83.297	$96.706	$105.260
Optimized LED	$60.119	$66.970	$60.102
Total	$284.821	$341.102	$365.519

KPIs and balance sheet/cash flow highlights

KPI	Q2 2024	Q2 2025
Days Sales Outstanding (days)	42	50
Days of Inventory (days)	54	37
Days Payables Outstanding (days)	46	44
Cash & Short-term Investments ($USD Millions)	—	$647.005
Deferred Revenue, current ($USD Millions)	—	$121.646
Cash from Ops, quarter ($USD Millions)	$(21.917)	$72.877
Adjusted EBITDA, quarter ($USD Millions)	$33.383	$53.708

Notes: Cash & ST investments equals cash/cash equivalents plus ST investments at Q2 end; prior-year figures not disclosed in-call for all lines .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales Growth (y/y)	FY25	15% ±5%	17% ±3%	Raised
Non-GAAP Gross Margin	FY25	32% ±1%	31% ±1%	Lowered
Non-GAAP Operating Expenses	FY25	$275M ±$15M	$265M ±$5M	Lowered (improved)
Non-GAAP Diluted EPS	FY25	~$1.50 ±$0.20	~$1.60 ±$0.10	Raised
Non-GAAP Tax Rate	FY25	28% (normalized)	28% (normalized)	Maintained
Non-GAAP Diluted Shares	FY25	56.3M	~55M	Lowered
Commentary	FY25	Full-year framework adopted	First-half weighted; AC order shipped in 1H	—

Earnings Call Themes & Trends

Topic	Q-2 (Q4 FY24)	Q-1 (Q1 FY25)	Current (Q2 FY25)	Trend
AI/Technology initiatives	— (not available in tools)	Strategy to support AI infra; AC +49% y/y; affirmed FY25 outlook	ICE Clusterware multi-tenancy & AIM optimization; AI enterprise deployments “early stages of growth”	Expanding software/services and deployments
Segment mix/GM	—	Non-GAAP GM 30.8%; opex discipline	Non-GAAP GM 30.8% on higher AC hardware mix; opex down seq; op margin +410 bps y/y	Margin stable q/q; mix pressure vs y/y
Supply chain/lead times	—	—	Extended component lead times in AC/LED impacting ramp timing	Ongoing constraint
Tariffs/Macro	—	—	Higher LED tariffs embedded; design in NC, partners in Taiwan; China test/assembly facility; monitoring policy	Managed but headwind risk
Go-to-market/Partnerships	—	—	Dell channel selling Penguin AI software/services; SK Telecom/Sk hynix collaborations	Broadening reach
Redomiciliation	—	—	Plan to move domicile to U.S.; goal to simplify/align structure	Proceeding

Management Commentary

CEO on AI adoption and outlook: “Our results reinforce our capabilities in managing the complexity of AI… Given our strong start to the fiscal year, we are raising the midpoint of our revenue outlook for the full year.”
CEO on enterprise AI cycle: “We are seeing signs that we have entered the early stages of growth in corporate build outs at scale and are excited for what lies ahead.”
CFO on margin/mix: “Non-GAAP gross margin… 30.8%, down 0.7 percentage points year over year, driven primarily by a higher mix of advanced computing hardware revenue… partially offset by improved margins in memory and LED.”
CEO on partnerships: “Penguin's AI software and managed services are now being able to be sold by Dell's worldwide sales force… we have also expanded our Origin AI offerings to include Dell servers.”
CFO on FY25 cadence: “We expect that second half revenues and profits will be lower than the first half… included in our higher overall outlook for the year.”

Q&A Highlights

Vertical mix in 2H: Less hyperscaler-driven; expect contributions from federal, financial, energy and other verticals; cautious given order lumpiness and deployment revenue recognition .
Tariffs and footprint: LED design in NC, manufacturing with partners in Taiwan, assembly/test in Huizhou; higher tariffs embedded in numbers; AC and memory primarily built in U.S. with supplementary operations in Newark/Malaysia .
Backlog/visibility: Management avoids specific booking coverage disclosure; plans conservatively given supply constraints and revenue recognition timing .
SK Telecom/Sk hynix: Ongoing dialogues on AI data center infra and memory market coverage; no new announcements but direction favorable .
Neo/Tier-2 cloud opportunity: Power-constrained data center landscape creating openings for smaller CSPs; Penguin’s design–build–deploy–manage model fills capability gaps, driving pipeline .
Redomiciliation: Move to U.S. aims to align operational footprint and simplify structure; not primarily about federal contracts access .
Deferred revenue: Increase relates to services renewals; typical terms around one year with some up to ~3 years .

Estimates Context

Q2 FY25 vs consensus: Revenue $365.519M vs $344.660M*, a beat of ~$20.86M; Primary EPS $0.52 vs $0.382*, a beat of ~$0.14. Mix-driven GM headwind offset by volume and opex control supported the EPS beat .
Q1 FY25 vs consensus: Revenue $341.102M vs $319.992M*, beat of ~$21.11M; Primary EPS $0.49 vs $0.391*, beat of ~$0.10 .
FY25 context: Company raised non-GAAP EPS outlook to ~$1.60 ±$0.10 vs current consensus ~$1.84*, implying the sell-side may need to recalibrate margin mix and 2H cadence assumptions toward management’s first-half-weighted profile .
Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

Beat-and-raise quarter: Material top- and bottom-line beats vs Street, with FY25 revenue and EPS guidance raised; near-term setup supported by AC strength and services growth .
Watch the mix: Non-GAAP GM held flat q/q but is below last year due to higher AC hardware and faster Memory growth; sustained op leverage suggests EPS sensitivity more to volume/opex than to modest GM moves .
Cadence matters: Management explicitly guides to a first-half-weighted year as a large AC order completed in Q2; traders should expect softer 2H quarterly prints even as FY targets rise .
Channel and partnerships as catalysts: Dell channel activation and SK relationships expand reach and could accelerate bookings conversion, particularly in enterprise and “neo cloud” CSPs .
Balance sheet improved: Cash and ST investments ~$647M, deferred revenue up, CFFO inflected to $72.9M in Q2; net debt low, providing flexibility for growth initiatives and working capital .
Risk checks: Component lead times, LED tariffs, and deployment-based revenue recognition create timing risk; margin mix likely tied to AC hardware intensity in near term .
Medium-term thesis: Penguin’s hardware–software–services stack and AI cluster expertise (ICE Clusterware, AIM) position it to monetize enterprise AI buildouts across multiple verticals; sustained operating discipline suggests continued EPS scaling as opex grows slower than revenue .

Additional notes on sources:

We read the full Q2 FY25 8-K and attached press release, the full Q2 FY25 earnings call transcript, and Q1 FY25 8-K press release. We searched for other Q2 press releases and did not find separate filings beyond the 8-K exhibit – – –.

Penguin Solutions, Inc. (PENG)·Q2 2025 Earnings Summary