Semiconductor maker Penguin Solutions (NASDAQ:PENG) reported Q4 CY2025 results exceeding the market’s revenue expectations, but sales were flat year on year at $343.1 million. Its non-GAAP profit of $0.49 per share was 10.6% above analysts’ consensus estimates.
Is now the time to buy Penguin Solutions? Find out by accessing our full research report, it’s free for active Edge members.
Penguin Solutions (PENG) Q4 CY2025 Highlights:
- Revenue: $343.1 million vs analyst estimates of $339.1 million (flat year on year, 1.2% beat)
- Adjusted EPS: $0.49 vs analyst estimates of $0.44 (10.6% beat)
- Adjusted EBITDA: $45.24 million vs analyst estimates of $43.21 million (13.2% margin, 4.7% beat)
- Management reiterated its full-year Adjusted EPS guidance of $2 at the midpoint
- Operating Margin: 5.7%, in line with the same quarter last year
- Free Cash Flow Margin: 8.2%, up from 3.5% in the same quarter last year
- Inventory Days Outstanding: 79, down from 96 in the previous quarter
- Market Capitalization: $1.11 billion
“In Q1 we expanded our pipeline and made progress on our strategic priorities, while delivering solid operating results,” said Mark Adams, CEO of Penguin Solutions.
Company Overview
Based in the US, Penguin Solutions (NASDAQ:PENG) is a diversified semiconductor company offering memory, digital, and LED products.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Penguin Solutions’s 3.7% annualized revenue growth over the last five years was mediocre. This was below our standard for the semiconductor sector and is a tough starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Penguin Solutions’s recent performance shows its demand has slowed as its annualized revenue growth of 1.8% over the last two years was below its five-year trend. 
This quarter, Penguin Solutions’s $343.1 million of revenue was flat year on year but beat Wall Street’s estimates by 1.2%.
Looking ahead, sell-side analysts expect revenue to grow 13.3% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and implies its newer products and services will fuel better top-line performance.
The 1999 book Gorilla Game predicted Microsoft and Apple would dominate tech before it happened. Its thesis? Identify the platform winners early. Today, enterprise software companies embedding generative AI are becoming the new gorillas. a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Penguin Solutions’s DIO came in at 79, which is 6 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.
Key Takeaways from Penguin Solutions’s Q4 Results
We were impressed by Penguin Solutions’s strong improvement in inventory levels. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 4.4% to $22.54 immediately following the results.
Sure, Penguin Solutions had a solid quarter, but if we look at the bigger picture, is this stock a buy? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.