Goldman Sachs Assumes Penguin Solutions (PENG) Coverage with Buy Rating, $25 PT

Penguin Solutions Inc. (NASDAQ:PENG) is one of the best small cap tech stocks to invest in now. On January 13, Goldman Sachs assumed coverage of Penguin Solutions with a Buy rating and a revised price target of $25, which was brought down from $26. While acknowledging that the company’s FY2026 outlook appears noisy, the firm remains encouraged by the momentum of Penguin’s AI infrastructure within its core customer base.

In FQ1 2026, Penguin Solutions reported a revenue of $343 million, which was a 1% year-over-year increase achieved despite the absence of hyperscale hardware revenue. Growth was led by the Integrated Memory business, which surged 41% annually to $137 million due to the transition to DDR5 technology and AI computing demand, while Advanced Computing revenue rose 9% sequentially to $151 million.

Despite these gains, the company faced a 18% sequential decline in its Optimized LED business due to weak demand in China and large US OEM sectors. Management also highlighted challenges regarding the wind-down of the high-margin Penguin Edge business, which is expected to cease by the end of fiscal 2026, and a 9% decline in services net sales. Penguin Solutions now expects a stronger H2 of the year as it shifts focus toward enterprise and sovereign AI opportunities, leveraging partnerships with Dell, CDW, and Nvidia to diversify its customer base beyond traditional hyperscalers.

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Penguin Solutions Inc. (NASDAQ:PENG) designs, builds, deploys, and manages enterprise solutions worldwide. The company operates through three segments: Advanced Computing, Integrated Memory, and Optimized LED.

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Disclosure: None. This article is originally published at Insider Monkey.