Penguin Solutions (PENG) Q3 FY26 earnings call: guidance and Q&A

How much of the raised Memory guidance is due to pricing versus new products like CXL, and what hyperscale products are being shipped, contributing to the preliminary FY27 outlook?

The higher Memory outlook considers both volumes and pricing, with CXL being a growing but smaller part of the data center-focused products. Hyperscale shipments are memory modules for data center products, but this is not a significant piece of the FY27 growth, consistent with the FY26 run rate.

“So at the high level, for our Memory business, the higher outlook takes into consideration both the volumes as well as the pricing. And this is for the overall business. CXL is a part of our business. It's a new product line that is growing, but it is a part of the business versus majority of the business is the data center focused products.”

asked by Katherine Campagna · answered by Kash Shaikh

What are the guardrails for Advanced Computing growth in FY27, given the preliminary 30% total company growth?

Advanced Computing growth could be in the mid-teens for FY27. This growth will primarily come from the non-hyperscale AI infrastructure business, offsetting the ongoing impact from the wind-down of the Edge business and the transition away from Meta.

“But I would say for Advanced Computing, probably mid-teens, something like that be kind of the starting point. Of course, we're still -- we still have some of the impact year-over-year from the wind down of the Edge business and kind of the transition away from Meta, but a lot of that would have been lead. So what you're starting to see next year in Advanced Computing is more of the growth coming through from the non-hyperscale AI infrastructure business?”

asked by Brian Chin · answered by Nate Olmstead

How much of a swing factor is the extended order-to-revenue cycle in Advanced Computing for FY27, and is the company being conservative in its anticipation of component scarcity?

Bookings for the AI infrastructure business within Advanced Computing are expected to convert to revenues in the first half of FY27, with a consistent 3 to 6-month lag from bookings to revenue, providing a clear advantage for the upcoming year.

“I think the perspective from the overall business, if you look at our Advanced Computing, especially in non-hyperscale AI infrastructure business, some of the advantage we are going to have going into the next year is the bookings for, let's say, AI infrastructure business will deliver the revenues or the net sales going into the first half.”

asked by Brian Chin · answered by Kash Shaikh

What is the engagement from a services capability perspective for Advanced Solutions' broadening customer base, especially with agentic usage? And how is the memory business adapting as it becomes more strategic?

Services are a strategic advantage for AI infrastructure, offering full system integration, design, build, deploy, and manage services, sometimes for 3-5 years. The memory business is strategically focusing on data centers, where demand is rapidly increasing due to agentic AI.

“So for our AI infrastructure business within Advanced Computing, services is a strategic advantage for us. So as opposed to alternatives where customers may procure hardware and then they have to stitch it together. The value we provide to our customers, we provide full system integration of both our products as well as other products that would include the full AI factories or AI data centers for those customers, including design, build, deploy and manage.”

asked by Ananda Baruah · answered by Kash Shaikh

What is the relationship between customer uptake and services adoption for ClusterWare's AI factory operations agent, and is there potential for further monetization?

The AI agent differentiates services by automating infrastructure deployment and monitoring, adding value. It also creates opportunities to increase software revenues by enabling customers to manage existing data centers or AI factories with ClusterWareAI, realizing efficiencies they might not get with traditional deployments.

“So the AI agent that we introduced is a first agent, is the family of the agents. And the way to think about it is obviously helping our services differentiate in terms of providing a software that can create automation for both monitoring -- deployment and monitoring of the infrastructure so that further provides them the value through our services and we discuss services and advantage for our customers when we provide both product and services.”

asked by Rustam Kanga · answered by Kash Shaikh

Did the company observe any changes in memory pricing and supply trends over the last quarter, how much of the Q3 performance was pricing-driven, and are enterprise customers resisting higher prices?

Demand for memory continues to increase, and while prices are rising and may stabilize, the overall demand, including both backlog and shipped revenue, is growing, and the backlog is expanding.

“So the demand continues to increase. So while the prices are going up, and it may stabilize at some point, but we see increased demand. And it is, as we discussed earlier, is a combination of -- if you look at the total demand between the backlog and the revenue that we were able to ship the demand is increasing and our backlog is increasing.”

asked by Matthew Calitri · answered by Kash Shaikh

Has the guidance philosophy changed with the CFO transition, and what is the update on the CFO search and desired qualities for a successor?

There is no change in operating model or strategy due to the CFO transition. Aaron Johnson is serving as interim CFO, ensuring continuity. A formal search is underway for a permanent CFO, considering both internal and external candidates, with a focus on continued disciplined execution and commitment delivery.

“So first of all, no change in our operating model or our strategy as a result of the transition. We have a very strong finance team and accounting team. And we are fortunate to have Aaron Johnson be our interim CFO, while we look for the permanent CFO and he's been with the company and he's been with Nate and been working with me. So that provides the continuity to the business, and we are doing a formal search with an executive search firm where we are looking at both internal and external candidates.”

asked by Matthew Calitri · answered by Kash Shaikh