Penguin Solutions Inc (NASDAQ:PENG) stock plunges 15.30% (As on October 8, 11:14:06 AM UTC-4, Source: Google Finance) after the company reported fourth quarter revenue that fell short of analyst expectations, despite posting better-than-expected earnings. The company’s Advanced Computing segment, which is critical to its AI infrastructure strategy, generated $138.3 million in revenue during the quarter, down from $149.4 million in the year-ago period, while the Integrated Memory segment saw strong growth to $132.2 million from $95.8 million a year earlier. Further, the Advanced Computing segment, which represents 47% of total FY25 revenue, showed strong growth with non-hyperscaler customers, where HPC/AI revenue increased by 75%. This segment benefited from completing the design, build, and deployment of Haien (South Korea’s Sovereign AI initiative) and launching several new AI projects.

PENG in the fourth quarter of FY 25 has reported the adjusted earnings per share of $0.43, beating the analysts’ estimates for the adjusted earnings per share of $0.30. The company had reported the adjusted revenue growth of 9 percent to $337.9 million in the fourth quarter of FY 25, missing the analysts’ estimates for revenue of $339 million.

Additionally, cash, cash equivalents, and short-term investments were $454 million at the end of Q4, with net debt at $16 million. The company repaid a $300 million term loan using $200 million in cash plus a $100 million drawdown from a new revolver. The company repurchased 16,000 shares for approximately $296,000 in Q4, and the Board authorized a $75 million increase in the stock repurchase program

Looking ahead to fiscal year 2026, Penguin Solutions provided a more conservative outlook compared to its FY25 performance. The company expects revenue growth of approximately 6% year-over-year (plus or minus 10%) and non-GAAP diluted EPS of $2.00 (plus or minus $0.25) below the consensus estimate of $2.12. The outlook assumes the wind-down of the Penguin Edge business and zero hardware sales to hyperscale customers, resulting in a 14 percentage point unfavorable impact to total company net sales growth. Segment outlooks include Advanced Computing net sales change between minus 15% and plus 15% year-over-year, Memory net sales growth between 10% and 20% year-over-year, and LED net sales change between minus 5% and plus 5% year-over-year. The non-GAAP gross margin outlook for the full year is 29.5%, plus or minus 1 percentage point.  Management explained that the wider net sales growth range for FY ’26 reflects a stronger pipeline of AI compute opportunities but expects higher sales volumes in the second half of the year.