Financial Analysis

Commitments and Contingencies Product Warranty and Indemnities We generally provide a limited warranty that our products are in compliance with applicable specifications existing at the time of delivery. Under our standard terms and conditions of sale, liability for certain failures of product during a stated warranty period is usually limited to repair or replacement of defective items or return of amounts paid for such items. Our warranty obligations are not material. We are party to a number of agreements in which we have agreed to defend, indemnify and hold harmless our customers and suppliers from damages and costs, which may arise from product defects as well as from any alleged infringement by our products of third-party patents, trademarks or other proprietary rights. We believe our internal development processes and other policies and practices limit our exposure related to such indemnities. Maximum potential future payments cannot be estimated because many of these agreements do not have a maximum stated liability. However, to date, we have not had to reimburse any of our customers or suppliers for any significant losses related to these indemnities. We have not recorded any liability for such indemnities. Contingencies From time to time, we may be involved in legal matters that arise in the normal course of business. Litigation in general, and intellectual property, employment and shareholder litigation in particular, can be expensive and disruptive to normal busin …

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Equity Plans As of May 29, 2026, 9.0 million shares of our common stock were available for future awards under our equity plans. Restricted Stock Awards and Restricted Stock Units Awards (Restricted Awards) Restricted Award activity was as follows: Three Months Ended Nine Months Ended May 29, 2026 May 30, 2025 May 29, 2026 May 30, 2025 Restricted awards granted 139 1,323 2,478 2,006 Weighted-average grant date fair value per share $ 21.47 $ 17.09 $ 20.88 $ 18.35 Aggregate vesting date fair value of shares vested $ 9,443 $ 6,091 $ 31,062 $ 25,768 As of May 29, 2026, total unrecognized compensation costs for unvested Restricted Awards were $84.7 million, which were expected to be recognized over a weighted-average period of 2 years, 8 months. Employee Stock Purchase Plan (ESPP) Under our ESPP, employees purchased 450 thousand shares of common stock for $7.2 million in the first nine months of 2026 and 529 thousand shares of common stock for $6.8 million in the first nine months of 2025, respectively. Stock-Based Compensation Expense Stock-based compensation expense for our continuing operations was as follows: Three Months Ended Nine Months Ended May 29, 2026 May 30, 2025 May 29, 2026 May 30, 2025 Stock-based compensation expense by caption: Cost of sales $ 1,411 $ 1,393 $ 4,319 $ 4,812 Research and development 1,612 1,531 4,742 4,818 Selling, general and administrative 6,973 7,327 16,134 23,732 $ 9,996 $ 10,251 $ 25,195 $ 33,362 Income tax benefits for stock-based awards were …

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Fair Value Measurements Fair Value Carrying Value Fair Value Carrying Value As of May 29, 2026 August 29, 2025 Assets: Derivative financial instruments $ $ $ 4,223 $ 4,223 Liabilities: 2030 Notes $ 428,252 $ 194,763 $ 224,048 $ 193,906 2029 Notes $ 389,729 $ 148,401 $ 197,363 $ 147,987 2026 Notes $ $ $ 25,713 $ 19,945 The deferred cash adjustment resulting from the divestiture of an 81% interest in Zilia Technologies Industria e Comercio de Componentes Eletronicos Ltda. (formerly SMART Modular Technologies do Brasil - Industria e Comercio de Componentes Ltda.) is accounted for as a derivative financial instrument and is revalued at the end of each reporting period. The assets fair value, as measured on a recurring basis, was based on Level 2 measurements, including market-based observable inputs of interest rates and credit-risk spreads. On March 30, 2026, this derivative financial instrument was derecognized as a result of the closing of the Stock Transfer Agreement. Refer to footnote section above Cash and Investments - Non-Marketable Equity Investments - Zilia Technologies. The fair values of our Convertible Senior Notes, as measured on a non-recurring basis, were determined based on Level 2 measurements, including the trading prices of the Convertible Senior Notes. …

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Intangible Assets and Goodwill Gross Amount Accumulated Amortization Gross Amount Accumulated Amortization As of May 29, 2026 August 29, 2025 Intangible assets: Technology $ 146,134 $ (101,766) $ 144,445 $ (83,375) Customer relationships 33,000 (16,720) 33,000 (13,602) Trademarks/trade names 15,789 (9,901) 15,786 (8,500) $ 194,923 $ (128,387) $ 193,231 $ (105,477) Goodwill by segment: Advanced Computing $ 131,175 $ 131,175 Integrated Memory 14,720 14,720 $ 145,895 $ 145,895 In the first nine months of 2026 and 2025, we capitalized $1.7 million and $1.3 million, respectively, for intangible assets with weighted-average useful lives of 18.6 years and 18.7 years, respectively. Amortization expense for intangible assets was $7.5 million and $22.9 million in the third quarter and first nine months of 2026, respectively, and $8.6 million and $27.6 million in the third quarter and first nine months of 2025, respectively. Amortization expense is expected to be $7.8 million for the remainder of 2026, $29.8 million for 2027, $10.1 million for 2028, $6.2 million for 2029, $5.5 million for 2030 and $7.1 million for 2031 and thereafter.

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Income Taxes Three Months Ended Nine Months Ended May 29, 2026 May 30, 2025 May 29, 2026 May 30, 2025 Income before taxes $ 53,698 $ 10,709 $ 114,509 $ 39,547 Income tax provision $ 7,515 $ 7,259 $ 23,730 $ 21,262 Effective tax rate 14.0 % 67.8 % 20.7 % 53.8 % Income taxes include a provision (benefit) for federal, state and foreign taxes based on the annual estimated effective tax rate applicable to us and our subsidiaries, adjusted for certain discrete items, which are fully recognized in the period they occur. We have determined our interim income tax provision (benefit) by applying the annual estimated effective income tax rate expected to be applicable for the full fiscal year to the income before taxes for jurisdictions which are subject to income tax. In determining the full year estimate, we do not include the impact of unusual and/or infrequent items, which may cause significant variations in the customary relationship between income tax provision and income before taxes. Accordingly, the interim effective tax rate may not be reflective of the annual estimated effective tax rate. Additionally, our income tax provision (benefit) is subject to volatility and could be impacted by changes in our geographic earnings, non-deductible share-based compensation and certain tax credits. The effective tax rate was 14.0% and 20.7% in the third quarter and first nine months of 2026, respectively, and was lower than the U.S. statutory tax rate of 21.0% primarily due to return-to-pr …

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Leases We have operating leases through which we utilize facilities, offices, and equipment in our manufacturing operations, research and development activities and selling, general and administrative functions. Sublease income was not significant in any period presented. The components of operating lease expense were as follows: Three Months Ended Nine Months Ended May 29, 2026 May 30, 2025 May 29, 2026 May 30, 2025 Fixed lease cost $ 2,778 $ 2,585 $ 8,572 $ 8,535 Variable lease cost 643 822 1,805 1,885 Short-term lease cost 362 466 1,216 1,379 $ 3,783 $ 3,873 $ 11,593 $ 11,799 Cash flows from operating activities included payments for operating leases of $4.4 million and $6.2 million in the first nine months of 2026 and 2025, respectively. As of May 29, 2026 and August 29, 2025, the weighted-average remaining lease term for our operating leases was 9.1 years and 9.0 years, respectively, and the weighted-average discount rate was 6.1% for both periods. Certain of our operating leases include one or more options to extend the lease term for periods from 2 years to 5 years. In determining the present value of our operating lease liabilities, we have assumed we will not extend any lease terms. As of May 29, 2026, minimum payments of lease liabilities were as follows: Remainder of 2026 $ 2,682 2027 10,103 2028 10,085 2029 9,874 2030 9,834 2031 and thereafter 43,936 86,514 Less imputed interest (20,987) Present value of total lease liabilities $ 65,527

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Debt As of May 29, 2026 August 29, 2025 2030 Notes 194,763 193,906 2029 Notes 148,401 147,987 2026 Notes 19,945 2025 Loans 100,000 100,000 443,164 461,838 Less current debt (148,401) (19,945) Long-term debt $ 294,763 $ 441,893 Credit Agreement On February 7, 2022, Penguin Solutions and SMART Modular Technologies, Inc. (collectively, the Borrowers) entered into a credit agreement, subsequently amended (the 2022 Amended Credit Agreement), with a syndicate of banks and Citizens Bank, N.A., as administrative agent that provided for a term loan credit facility (the Amended 2022 TLA) and a revolving credit facility (the 2022 Revolver), in each case, maturing on February 7, 2027. On June 24, 2025 (the Refinancing Closing Date), the Borrowers entered into a new Credit Agreement (the 2025 Credit Agreement) by and among the Borrowers, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and an issuing bank. The 2025 Credit Agreement provides for a revolving credit facility in an aggregate principal amount of $400.0 million (the 2025 Credit Facility and the revolving loans thereunder, the 2025 Loans), maturing on June 24, 2030. The 2025 Credit Agreement provides that up to $35.0 million of the 2025 Credit Facility is available for issuances of letters of credit. On the Refinancing Closing Date, we borrowed $100.0 million under the 2025 Credit Facility, and simultaneously applied such proceeds, together with $200.0 million cash on hand, to r …

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Recently Adopted Accounting Standards In September 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-07, Derivatives and Hedging and Revenue from Contracts with Customers , which refines the scope of the guidance on derivatives in Accounting Standards Codification (ASC) 815, Derivatives and Hedging , and clarifies the guidance on share-based payments from a customer in ASC 606, Revenue from Contracts with Customers . We adopted this standard at the beginning of the second quarter of fiscal 2026 on a prospective basis. ASU 2025-07 clarified the rules surrounding the scope exception under ASC 815. Upon adoption, we applied this guidance to a transaction involving our non-marketable equity investment in Celestial AI. Specifically, the right to receive contingent consideration in this transaction met the definition of a derivative and was evaluated in accordance with ASC 815. The adoption of this standard did not result in the recognition of any amounts in our consolidated financial statements presented. For further details regarding this transaction and the related contingent consideration, refer to footnote section below Cash and Investments - Non-Marketable Equity Investments - Celestial AI. Recently Issued Accounting Standards In September 2025, the FASB issued ASU 2025-06, IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350-40): Improvements to the Accounting for and Disclosure of Internal-Use Software , which re …

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Related Party Transactions From time to time, we may enter into an agreement with a related party in the ordinary course of business. These agreements are reviewed and approved or ratified by the Audit Committee of the Board pursuant to our related person transaction policy. We follow ASC 850, Related Party Disclosures , for the identification of related parties and disclosure of related party transactions, under which related parties are defined as members of our Board of Directors, affiliates of the Company, management and principal owners of our outstanding stock and members of their immediate families. Related parties also include any other person or entity with significant influence over our management or operations. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. We assess related parties each reporting period. On May 26, 2025, we entered into an agreement with SKT, a related party, under which we subsequently entered into statements of work to provide solutions to support SKTs AI data center infrastructure initiatives. SKT, through Astra AI Infra, a special purpose vehicle formed by SKT, holds more than 10% of the voting interest of the Company. Additionally, Min Yong Ha, an executive of SKT, is a member of our Board of Directors. For the three and nine months ended May 29, 2026, we recognized revenue of $0.8 million and $33.9 million, respectively, on the fulfillment of AI hard …

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Revenue and Customer Contract Balances Net Sales and Gross Billings We provide certain services on an agent basis, whereby we procure product, materials and services on behalf of our customers and then resell such product, materials or services to our customers. As a result, we recognize only the amount related to the agent component as revenue in our results of operations. The cost of products, materials and services invoiced to our customers under these arrangements, but not recognized as revenue or cost of sales in our results of operations, were as follows: Three Months Ended Nine Months Ended May 29, 2026 May 30, 2025 May 29, 2026 May 30, 2025 Cost of materials and services invoiced in connection with logistics services $ 742,397 $ 238,492 $ 1,333,169 $ 682,100 Customer Contract Balances As of May 29, 2026 August 29, 2025 Contract assets (1) $ 1,725 $ 1,929 Contract liabilities: (2) Deferred revenue $ 136,589 $ 89,943 Customer advances 56,216 21,525 $ 192,805 $ 111,468 (1) Contract assets are included in other current and noncurrent assets. (2) Contract liabilities are included in other current and noncurrent liabilities based on the timing of when our customers are expected to take control of the asset or receive the benefit of the service. Contract assets represent amounts recognized as revenue for which we do not have the unconditional right to consideration. Deferred revenue represents amounts received from customers in advance of satisfying performance obligations. …

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Segment and Other Information Segment information presented below is consistent with how our Chief Operating Decision Maker (CODM), the Chief Executive Officer, evaluates our results of operations to make decisions about allocating resources and assessing performance using segment net sales, cost of sales, operating expenses, and operating income (loss). The CODM is regularly provided this segment information to assess relative segment performance and allocate resources to the segment in the annual planning process. We have the following three business units, which are our reportable segments: Advanced Computing : Our Advanced Computing segment offers high-performance, high-availability, fault-tolerant computing platforms and services that span the continuum from core to edge to cloud. Our solutions are designed specifically for customers across multiple markets, including sovereign AI initiatives, hyperscale, neocloud, financial services, energy, government, education, healthcare and others. Integrated Memory : Our Integrated Memory segment provides high-performance and reliable integrated memory solutions through the design, development and manufacturing of specialty memory and storage solutions that resolve memory limitations arising within high-performance, high-availability computing solutions. These specialty products are tailored to meet customer-specific AI requirements across networking and communications, enterprise storage and computing, including server applicatio …

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Significant Accounting Policies Basis of Presentation U.S. Domestication : On June 30, 2025, we consummated the redomiciliation of the parent company of our corporate group, Penguin Solutions (Cayman), Inc., formerly known as Penguin Solutions, Inc., a Cayman Islands exempted company (Penguin Solutions Cayman), from the Cayman Islands to the State of Delaware in the United States, resulting in Penguin Solutions, Inc., a Delaware corporation (Penguin Solutions Delaware), becoming our publicly traded parent company (the U.S. Domestication). The U.S. Domestication was approved by the shareholders of Penguin Solutions Cayman and effected via a court-sanctioned scheme of arrangement under Cayman Islands law, pursuant to which each ordinary share of Penguin Solutions Cayman was exchanged for one share of common stock of Penguin Solutions Delaware, and each convertible preferred share of Penguin Solutions Cayman was exchanged for one share of convertible preferred stock of Penguin Solutions Delaware. The accompanying consolidated financial statements include the accounts of Penguin Solutions Cayman and its consolidated subsidiaries prior to the consummation of the U.S. Domestication, and the accounts of Penguin Solutions Delaware and its consolidated subsidiaries after the consummation of the U.S. Domestication. Unless stated otherwise or the context otherwise requires, references to Penguin Solutions, we, us, our, and the Company in the accompanying consolidated financial statement …

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Equity Penguin Solutions Stockholders Equity Common Stock Repurchase Authorization On April 4, 2022, our Board of Directors approved a $75.0 million stock repurchase authorization (the 2022 Authorization), under which we may repurchase our outstanding common stock from time to time through open market purchases, privately-negotiated transactions or otherwise. On each of January 8, 2024 and October 6, 2025, the Audit Committee of the Board of Directors approved additional $75.0 million stock repurchase authorizations (the 2024 Authorization and 2025 Authorization, respectively, and together, the Current Authorizations). The Current Authorizations, which consist solely of amounts approved pursuant to the 2024 Authorization and 2025 Authorization as all amounts under the 2022 Authorization have been utilized, have no expiration date but may be suspended or terminated by the Board of Directors at any time. In the first nine months of 2026 and 2025, we repurchased 2,929 thousand and 2,456 thousand shares of common stock for $55.7 million and $40.9 million, respectively, under the Current Authorizations. As of May 29, 2026, an aggregate of $55.8 million remained available for the repurchase of our common stock under the Current Authorizations. Certain of our agreements, including the 2025 Credit Agreement, the SKT Purchase Agreement and the CPS Delaware Certificate of Designation, contain restrictions that limit our ability to repurchase our common stock. Other Stock Repurchases Co …

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