Core Insights - Goldman Sachs has initiated coverage of Penguin Solutions with a Buy rating and a revised price target of $25, down from $26, while noting the company's FY2026 outlook is uncertain but remains optimistic about its AI infrastructure momentum [1][4] Financial Performance - In FQ1 2026, Penguin Solutions reported revenue of $343 million, reflecting a 1% year-over-year increase, driven by a 41% annual surge in Integrated Memory business revenue to $137 million due to DDR5 technology and AI computing demand [2] - Advanced Computing revenue increased by 9% sequentially to $151 million [2] Challenges and Future Outlook - The company experienced an 18% sequential decline in its Optimized LED business due to weak demand in China and large US OEM sectors [3] - Management indicated challenges with the high-margin Penguin Edge business, which is expected to wind down by the end of fiscal 2026, alongside a 9% decline in services net sales [3] - Penguin Solutions anticipates a stronger second half of the year by focusing on enterprise and sovereign AI opportunities, leveraging partnerships with Dell, CDW, and Nvidia to diversify its customer base beyond traditional hyperscalers [3]