Penguin Solutions Q3 Earnings Beat, Raises Guidance

Penguin Solutions Q3 earnings on July 7, 2026, showed record third-quarter results, beating revenue and EPS estimates and prompting the company to raise its FY2026 sales and EPS guidance after management cited strong AI-driven demand.

Record Q3 Results and Operating Performance

Penguin Solutions, Inc. (NASDAQ: PENG) reported net sales of $478.7 million for the third quarter of fiscal 2026, ended May 29, a 48% increase year over year, according to its Form 10-Q. The company exceeded analyst consensus, which had forecast revenue of $421.4 million and non-GAAP diluted EPS of $0.56. Penguin Solutions posted non-GAAP diluted EPS of $0.84, up 79% from the prior year.

Operating results expanded significantly. Gross profit reached $133.2 million. GAAP operating income rose 417% year over year to $51 million, while non-GAAP operating income increased 67% to $64.4 million. GAAP net income was about $46.2 million, with GAAP diluted EPS of $0.68.

Raised FY2026 Guidance and AI-Driven Growth

On July 7, the company updated its full-year fiscal 2026 guidance in a Form 8-K and press release, now targeting net sales growth of 22% year over year, plus or minus 2 percentage points. It set GAAP diluted EPS guidance at $1.97, with a $0.05 range, and non-GAAP diluted EPS at $2.60, plus or minus $0.05. The non-GAAP gross-margin outlook rose to 28.5%, up 0.5 percentage points from prior guidance, reflecting favorable memory pricing in Q3. Non-GAAP operating expenses are forecast at $260 million, plus or minus $5 million, and the non-GAAP tax rate was lowered to 20% from 22%.

Management attributed the raised outlook to strong AI-related demand concentrated in Integrated Memory and AI Infrastructure, which accounted for 74% of Q3 net sales and grew 104% year over year. Sequentially, overall net sales increased 40% from the prior quarter, while non-GAAP operating income rose 42%.

The company is winding down its Penguin Edge business, with sales expected to essentially cease by the end of fiscal 2026. This wind-down reduces the companywide growth outlook by about 14 percentage points and by roughly 30 percentage points within the Advanced Computing segment. Penguin Solutions projects a non-GAAP diluted share count of about 56 million for the full year, with Q4 shares expected near 62 million due to potential dilution from convertible debt linked to higher share prices.

Management noted that while favorable memory pricing in Q3 supported margin assumptions, less favorable pricing in Q4 will likely pressure gross margins as the year closes.

“Given robust demand and disciplined execution, we are raising our full-year outlook for both net sales and EPS,” the company said in its press release.