Penguin Solutions (PENG) Drops 23.7% After 2025 Guidance Cut and Major Business Exit—Is the Growth Story Intact?

• Earlier this week, Penguin Solutions, Inc. reported fourth-quarter and full-year 2025 results, highlighted by an earnings beat but a miss on revenue expectations, the announcement of a US$75 million share buyback, and softer-than-expected guidance for fiscal 2026 amid the wind-down of legacy operations.
• An important development is the company’s phase-out of its Penguin Edge business and the anticipated cessation of hyperscale hardware sales, which management indicated could create a significant headwind to overall sales growth in the coming year.
• We'll examine how the new revenue guidance and business transition are influencing Penguin Solutions' investment narrative and long-term outlook.

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Penguin Solutions Investment Narrative Recap

To be a shareholder in Penguin Solutions, you need to believe the company's pivot toward AI infrastructure, recurring services, and product innovation can offset the headwinds from winding down its Penguin Edge business and ending hyperscale hardware sales. The recent soft revenue guidance directly impacts the most important short-term catalyst, broader adoption of enterprise AI solutions, while also intensifying the risk around near-term revenue volatility as legacy revenues taper.

Of the company’s latest announcements, the new US$75 million share buyback stands out. While not a substitute for improved revenue visibility, the buyback signals management's confidence in the company's long-term prospects and capital position, but ultimately does not address the core risk of lumpiness from large project-based deals and customer concentration.

Yet, against the promise of recurring revenue, investors should be aware of the unpredictability created by high customer concentration and lumpy project schedules, which...

Read the full narrative on Penguin Solutions (it's free!)

Penguin Solutions is projected to generate $1.8 billion in revenue and $316.1 million in earnings by 2028. This outlook is based on an annual revenue growth rate of 10.4% and an increase in earnings of $331 million from the current earnings of -$14.9 million.

Uncover how Penguin Solutions' forecasts yield a $28.25 fair value, a 34% upside to its current price.

Exploring Other Perspectives

Simply Wall St Community members provided six fair value estimates for Penguin Solutions from US$27.10 to US$156.06. As company guidance points to potential volatility from customer timing and project-based deals, opinions in the market continue to diverge, consider several perspectives before making up your mind.

Explore 6 other fair value estimates on Penguin Solutions - why the stock might be worth just $27.10!

Build Your Own Penguin Solutions Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Penguin Solutions research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Penguin Solutions research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Penguin Solutions' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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