Penguin Solutions, Inc.

(Tabular amounts in thousands, except per share amounts)

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 statements (i) for periods prior to the consummation of the U.S. Domestication refer to Penguin Solutions Cayman and its consolidated subsidiaries and (ii) for periods at or after the consummation of the U.S. Domestication refer to Penguin Solutions Delaware and its consolidated subsidiaries.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) consistent in all material respects with those applied in our Annual Report on Form 10-K for the fiscal year ended August 29, 2025 (the “2025 Annual Report”) and the applicable rules and regulations of the SEC regarding interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of our management, the accompanying unaudited consolidated financial statements contain all necessary adjustments, consisting of a normal recurring nature, to fairly state the financial information set forth herein. These consolidated interim financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the 2025 Annual Report.

Fiscal Year: Our fiscal year is the 52- or 53-week period ending on the last Friday in August. Fiscal years 2026 and 2025 each contain 52 weeks. All period references are to our fiscal periods unless otherwise indicated.

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

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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, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Improvements to the Accounting for and Disclosure of Internal-Use Software, which replaces the previous stage-based model for capitalizing internal-use software development costs with a principles-based approach. Under the new guidance, capitalization begins when management authorizes and commits to funding a project and it is probable the project will be completed and used as intended. The ASU also incorporates website development guidance into ASC 350-40 and introduces the concept of “significant development uncertainty,” which, if present, would delay capitalization. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, including interim periods within those years, with early adoption permitted at the beginning of an annual period. The new guidance may be applied prospectively, retrospectively, or using a modified prospective approach. We are currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures, though we do not expect there to be a material impact.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 provides a practical expedient that all entities can use when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue from Contracts with Customers. Under this practical expedient, an entity is allowed to assume that the current conditions it has applied in determining credit loss allowances for current accounts receivable and current contract assets remain unchanged for the remaining life of those assets. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim reporting periods in those years. Entities that elect the practical expedient and, if applicable, make the accounting policy election are required to apply the amendments prospectively. We are currently evaluating the potential impact of adopting ASU 2025-05 on our consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosure (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this ASU require disclosure, in the notes to the financial statements, of specified information about certain costs and expenses, as well as a qualitative description of amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. This ASU also requires disclosure of the total amount of selling expenses and an entity’s definition of selling expenses. The amendments in this ASU are effective for us in 2028 for annual reporting and in 2029 for interim reporting, with early adoption permitted and may be applied prospectively or retrospectively. We do not expect ASU 2024-03 to have an impact on our financial position, results of operations and cash flows. We are currently evaluating the impact on our consolidated financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU are intended to increase transparency through improvements to annual disclosures primarily related to income tax rate reconciliation and income taxes paid. The amendments in this ASU are effective for us in 2026 for annual reporting and will be applied on a prospective basis. The changes to be implemented under the ASU will not impact the Company’s consolidated balance sheets, statements of operations, or cash flows. The primary impact will be the restructuring and expansion of the Income Taxes footnote in the Company's financial statements. We are evaluating the effects of this ASU on our income tax disclosures.

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Cash and Investments

As of May 29, 2026 and August 29, 2025, cash, cash equivalents, and restricted cash were as follows:

(1) As of May 29, 2026, restricted cash was $38.3 million, of which $38.0 million is included in other current assets and $0.3 million is included in other noncurrent assets on our consolidated balance sheet. The $38.0 million included in other current assets represents a customer advance under our logistics program and is restricted to use in inventory purchases for that customer. The $0.3 million classified as noncurrent restricted cash consists of funds held in connection with a surety bond.

Non-marketable Equity Investments

As of May 29, 2026 our non-marketable equity investments hadno carrying value. As of August 29, 2025, our non-marketable equity investments had a carrying value of $53.0 million. The non-marketable equity investments are accounted for under the measurement alternative at cost less impairment, if any, in accordance with ASC 321, Investments – Equity Securities. In the event an observable price change occurs in an orderly transaction for an identical or a similar investment, the carrying value of investments would be remeasured to fair value as of the date that the observable transaction occurred, with any resulting gains or losses recorded in net income.

Celestial AI

As of August 29, 2025, our non-marketable equity investments included preferred shares of Celestial AI, a privately held artificial intelligence company, with a carrying value of $5.2 million. On February 2, 2026, Marvell Technology, Inc. (“Marvell”) completed its acquisition of Celestial AI. In connection with the transaction, the Company’s equity interest in Celestial AI was canceled and converted into the right to receive merger consideration.

At closing, the Company received $10.5 million in cash and 281,834 shares of Marvell common stock with a fair value of $22.2 million based on the closing price of Marvell’s publicly traded common stock on the transaction date. The shares received were recorded at fair value as of the closing date.

The Company recognized a gain of $27.5 million, representing the excess of the fair value of the consideration received over the carrying value of the Celestial AI investment. This gain was recorded in other non-operating (income) expense in the Consolidated Statements of Operations.

On February 23, 2026, the Company sold all 281,834 shares of Marvell common stock in a single transaction for total proceeds of $21.7 million. The Company recognized a loss on the sale of $0.5 million, representing the difference between the sale proceeds and the carrying value of the shares at the time of sale. This loss was recorded in other non-operating (income) expense in the Consolidated Statements of Operations.

Under the terms of the merger agreement, the Company is eligible to receive additional consideration contingent upon Celestial AI achieving specific revenue-based milestones. The first milestone will be achieved if Celestial AI reaches cumulative revenue of at least $500.0 million by the end of Marvell’s fiscal 2029. Additional amounts will become receivable if cumulative revenue exceeds $500.0 million with the full earnout due if Celestial AI’s cumulative revenue exceeds $2 billion by the end of Marvell’s fiscal 2029. Any consideration earned will be received through the issuance of a variable number of shares of Marvell common stock, the quantity of which is determined based on the achievement of cumulative revenue milestones.

The right to receive this contingent consideration was evaluated under ASC 815, Derivatives and Hedging. While the arrangement meets the definition of a derivative instrument, it qualifies for the scope exception under ASC 815-10-15-59, because the dominant underlying is determined to be the cumulative revenue milestone targets. Accordingly, the arrangement is not accounted for as a derivative instrument. We elected, as an accounting policy,

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to recognize the contingent consideration portion of the arrangement when the consideration is determined to be realizable. Under this policy, no asset has been recognized as of May 29, 2026 for the milestone-based contingent consideration. We will recognize contingent consideration as income in the period in which achievement of the applicable milestone becomes probable and the amount is reasonably estimable (i.e., when realizable).

Zilia Technologies

On December 29, 2025, the Company entered into a certain Stock Transfer Agreement (the “Stock Transfer Agreement”), by and among the Company, Lexar Europe B.V., a company organized under the laws of the Netherlands (“Buyer”), Zilia Technologies Indústria e Comércio de Componentes Eletrônicos Ltda., a sociedade limitada governed by the laws of Brazil (“Zilia Technologies”), Shenzhen Longsys Electronics Co., Ltd., a company limited by shares governed by the laws of the People’s Republic of China (“Parent”), and Shanghai Intelligent Memory Semiconductor Co., Ltd., a limited liability company governed by the laws of the People’s Republic of China (“Parent Funding Entity”, together with Buyer and Parent, the “Parent Group Companies” and each a “Parent Group Company”).

Pursuant to the Stock Transfer Agreement, the Company sold its remaining equity interest in Zilia Technologies including rights to the derivative financial instrument referred to as the deferred cash adjustment originally provided for under the divestiture of the 81% interest in Zilia Technologies (formerly SMART Modular Technologies do Brasil - Indústria e Comércio de Componentes Ltda.) to the Buyer for a gross purchase price of $46.1 million (the “Transaction”). On March 30, 2026, the Transaction closed and cash proceeds of $39.6 million, net of withholding taxes of $6.5 million, were received. On March 30, 2026, the remaining equity interest had a carrying value of $37.8 million and the derivative financial instrument had a carrying value equal to its fair value of $4.4 million, which together amounted to $42.2 million. The Transaction resulted in a gain on the sale in the amount of $3.9 million (gross purchase price less the combined carrying value) and was reported under other non-operating (income) expense within the Consolidated Statement of Operations.

Other Non-Marketable Equity Investments

During the quarter ended November 28, 2025, the Company identified several significant qualitative impairment indicators related to one of its non-marketable equity investments. These indicators included substantial deterioration in the investee’s financial condition, liquidity position, and operating performance, as well as significant leadership and governance changes. Collectively, these factors raised substantial doubt regarding the Company’s ability to recover the carrying value of the investment.

In accordance with ASC 321, the Company evaluated the fair value of the investment, taking into consideration the investee’s financial condition, operational viability, and overall governance environment. Based on this assessment, the Company concluded that the fair value of the investment was effectively zero as of the reporting date.

As a result, the Company recognized a full impairment charge of $10.0 million during the quarter ended November 28, 2025. The impairment is recorded within Other non-operating (income) expense in the Consolidated Statements of Operations. Following the impairment, the carrying amount of the investment iszero.

The Company may have certain rights or claims in the event the investee pursues a formal restructuring or bankruptcy process. However, due to significant uncertainty regarding the recoverability of any amounts and the investee’s insolvency, no potential recoveries have been recognized as of the reporting date. The Company will continue to monitor developments and will recognize any future proceeds, if realized, in the period received within net income.

Accounts Receivable

We continue to maintain a trade receivable sales program that allows us to sell certain of our trade receivables up to $60.0 million, on a non-recourse basis to a third-party financial institution. As of May 29, 2026, there have beenno trade accounts receivable sold under this program.

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Inventories

As of May 29, 2026 and August 29, 2025,16% and 21%, respectively, of total inventories were owned and held under our logistics services program.

Property and Equipment

Depreciation expense for property and equipment was $4.9 million and $15.0 million in the third quarter and first nine months of 2026, respectively, and $5.0 million and $15.4 million in the third quarter and first nine months of 2025, respectively.

Intangible Assets and Goodwill

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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Accounts Payable and Accrued Expenses

(1)Included in accounts payable for property and equipment of $1.8 million and $1.7 million as of May 29, 2026 and August 29, 2025, respectively.

Debt

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 repay in full all borrowings and terminate all commitments under the 2022 Amended Credit Agreement. Immediately prior to the repayment and termination of the 2022 Amended Credit Agreement, we had $300.0 million of principal outstanding under the Amended 2022 TLA, with unamortized issuance costs of $1.8 million and the effective interest rate was 7.17%, andno amounts outstanding under the 2022 Revolver, with unamortized issuance costs of $1.5 million. Following the extinguishment of the 2022 Amended Credit Agreement, we recognized a loss on extinguishment of $2.9 million.

As of May 29, 2026, there was $100.0 million of principal amount outstanding under the 2025 Loans, and unamortized issuance costs were $3.1 million.

Convertible Senior Notes

The Convertible Senior Notes due 2026 (the “2026 Notes”) were senior unsecured obligations of the Company that matured on February 15, 2026. Per the terms of an indenture (the “2026 Indenture”) between the Company and U.S. Bank Trust Company National Association, as trustee, the Company elected to settle the principal

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portion of the 2026 Notes in cash and the excess conversion value in shares of the Company’s common stock. At maturity, the outstanding principal amount of $20.0 million was paid in cash with no excess conversion value.

Concurrently with the expiration of the 2026 Notes, the associated capped call transactions were settled pursuant to their terms and, as a result, the Company received approximately 13,000 shares of its common stock, which have been recorded as treasury stock.

The closing price of our common stock exceeded 130% of the conversion price for our Convertible Senior Notes due 2029 (the “2029 Notes”) for at least 20 trading days (whether or not consecutive) in the 30 consecutive trading days ended on May 29, 2026. As a result, the 2029 Notes are convertible by holders through August 28, 2026. Because the holders possess the unilateral right to demand conversion during the fiscal quarter ending August 28, 2026 and we are required to settle the principal amount of any converted notes in cash, the entire carrying value of the 2029 Notes is reflected as current debt on our Consolidated Balance Sheet as of May 29, 2026.

Upon receiving a notice of conversion, we are required to pay the principal amount in cash and have the option to settle any amount in excess of the principal amount in cash, shares of our common stock, or a combination thereof. If we elect to settle any part of the excess in cash, the settlement obligation becomes a derivative debt liability subject to mark-to-market accounting treatment based on the volume-weighted-average price of our common stock over a period of 40 consecutive trading days, beginning on, and including, the second trading day immediately after the Conversion Date (as defined in the 2029 Indenture) (“the Observation Period”). During the Observation Period, the derivative liability is remeasured to fair value at each reporting period and upon final settlement, with any subsequent changes in fair value recognized as a gain or loss in our Consolidated Statement of Operations.

Convertible Senior Notes Interest

Unamortized debt discount and issuance costs are amortized over the terms of our 2026 Notes, our 2029 Notes and our 2.00% Convertible Senior Notes due 2030 (the “2030 Notes,” and together with the 2026 Notes and the 2029 Notes, the “Convertible Senior Notes”) using the effective interest method. As of August 29, 2025 and up through the date of maturity, the effective interest rate for our 2026 Notes was 2.83%. As of May 29, 2026 and August 29, 2025, the effective interest rate for our 2029 Notes was 2.40%. As of May 29, 2026 and August 29, 2025, the effective interest rate for our 2030 Notes was 2.65%. Aggregate interest expense for our Convertible Senior Notes consisted of contractual stated interest and amortization of issuance costs and included the following:

Maturities of Debt

As of May 29, 2026, maturities of debt were as follows:

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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:

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:

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 business operations. Moreover, the results of complex legal proceedings are difficult to

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predict. We regularly review contingencies to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made.

Temporary Equity

Convertible Preferred Stock

On December 13, 2024, we closed the SKT Investment (as defined below). Pursuant to the terms of the Securities Purchase Agreement (the “SKT Purchase Agreement”) by and between Penguin Solutions and SK Telecom Co., Ltd. (“SKT”), we sold to Astra AI Infra LLC (“Astra AI Infra”), an affiliate of SKT,200,000 convertible preferred shares, par value $0.03 per share, of Penguin Solutions (the “Issued Cayman CPS”) at a price of $1,000 per share or an aggregate price of $200.0 million (the “SKT Investment”).

Additionally, on the closing date of the SKT Investment, we and Astra AI Infra entered into an Investor Agreement (the “Investor Agreement”), and the Certificate of Designation relating to the Issued Cayman CPS (the “CPS Certificate of Designation”) became effective. The Investor Agreement and the CPS Certificate of Designation provide for certain rights and restrictions relating to the SKT Investment, including but not limited to board representation rights, pro rata rights, registration rights and consent rights, and standstill provisions, disposition restrictions and voting obligations.

At the time of issuance, we evaluated the terms and conditions of the Issued Cayman CPS. Based on this evaluation, we determined that the Issued Cayman CPS did not contain redemption features that were outside the Company’s control and therefore initially classified the Issued Cayman CPS as permanent equity within the consolidated balance sheet.

On June 30, 2025, we completed the U.S. Domestication, at which time 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. In connection with the U.S. Domestication, Penguin Solutions Delaware executed and adopted a Certificate of Designation of Convertible Preferred Stock (the “CPS Delaware Certificate of Designation”) that sets forth the terms, rights and obligations of a series of 200,000 shares of preferred stock of Penguin Solutions Delaware, par value $0.03 per share, designated as convertible preferred stock (the “Issued CPS”). In connection with this event, we reassessed the classification of the Issued CPS.

The terms of the Issued CPS are substantially the same as those of the Issued Cayman CPS. However, the Cayman governing documents included protective provisions that set forth the Company's ability to solely control redemption features. These provisions are not explicitly included in the Company's amended and restated certificate of incorporation or the CPS Delaware Certificate of Designation. The Company evaluated the absence of these provisions in the Delaware governing documents and determined that the CPS should be classified as temporary equity beginning June 30, 2025. Accordingly, the Issued CPS was reclassified to temporary equity effective June 30, 2025.

In accordance with SEC guidance on redeemable equity securities, we reclassified the Issued CPS out of permanent equity at its fair value as of the date of the U.S. Domestication. The reclassification resulted in an adjustment to additional paid-in capital, representing the difference between the historical carrying amount and the fair value at the reclassification date. This adjustment had no impact on the Company’s net income, comprehensive income, or cash flows.

On June 30, 2025, we recorded $202.7 million of Issued CPS within temporary equity on the consolidated balance sheet. As of August 29, 2025 and May 29, 2026, we did not adjust the carrying values of the Issued CPS to the redemption values of such shares because a deemed liquidation event did not occur and the shares were not probable of becoming redeemable in the future as of the consolidated balance sheet date.

Amended and Restated Investor Agreement

On June 30, 2025, effective upon consummation of the U.S. Domestication, Penguin Solutions Delaware assumed the Investor Agreement from Penguin Solutions Cayman and Penguin Solutions Delaware and SKT amended and restated the Investor Agreement such that the rights and restrictions relating to SKT’s beneficial

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ownership of the Issued Cayman CPS in place prior to the U.S. Domestication apply in respect of SKT’s holdings of Issued CPS following consummation of the U.S. Domestication.

Delaware Certificate of Designation for Convertible Preferred Stock

On June 27, 2025, in connection with the U.S. Domestication, Penguin Solutions Delaware executed and adopted the CPS Delaware Certificate of Designation that sets forth the terms, rights and obligations of the Issued CPS. The principal attributes of the Issued Cayman CPS and the Issued CPS are substantially the same, subject to changes to give effect to requirements of Delaware law. Refer to the Certificate of Designation of Penguin Solutions, Inc., effective as of June 27, 2025, incorporated by reference as Exhibit 3.3 hereto, to the description of the Issued CPS contained in the description of the Registrant’s capital stock, filed as Exhibit 4.1 to the 2025 Annual Report, and to the information under the heading “Comparison of Rights of Cayman Islands Shareholders and Delaware Stockholders” in Penguin Solutions Cayman’s definitive proxy statement on Schedule 14A filed with the SEC on May 2, 2025.

Conversion

A holder of Issued CPS may convert such holder’s Issued CPS into common stock at any time, provided that the shares of Issued CPS may, at our option, automatically be converted into common stock on any date following the second anniversary of the closing of the SKT Investment upon which the volume-weighted average price of the common stock for anyfifteen consecutive trading day period equals or exceeds 150% of the then-applicable conversion price. The shares of Issued CPS are convertible into common stock at an initial conversion price of $32.81, subject to customary adjustment upon the occurrence of certain events (including share subdivision and consolidation, certain dividends and distributions, and any reclassification or share exchange).

Dividends

The shares of Issued CPS entitle the holder to receive dividends ofsix percent per annum, cumulative, and payable quarterly in-kind or in cash at our option, subject to certain conditions, including a stock issuance limitation. We declared and paid preferred cash dividends of $2.9 million and $9.1 million in the third quarter and first nine months of 2026, respectively, and $2.9 million and $5.1 million in the third quarter and first nine months of 2025, respectively. As of May 29, 2026, we accrued preferred dividends of $0.5 million.

Liquidation Preference

In case of a Liquidation Trigger Event (as defined in the CPS Delaware Certificate of Designation), each holder of Issued CPS will be entitled to receive, in preference to holders of common stock, the greater of (i) the original issue price plus accrued but unpaid dividends (whether or not declared) to the date of the applicable Liquidation Trigger Event to the extent such accrued but unpaid dividends are not compounded dividends as of such time and (ii) the amount such holder of Issued CPS would receive had such holder, immediately prior to such Liquidation Trigger Event, converted the shares of Issued CPS into shares of common stock. The liquidation preference associated with the Issued CPS was $1,000 per share at August 29, 2025.

Voting Rights

Except as specified under applicable law, each holder of Issued CPS will be entitled to vote or consent as a single class with the holders of common stock on all matters submitted for a vote of or consent by holders of common stock, such number of votes equal to the largest number of whole shares of common stock in which all Issued CPS held of record by such holder could then be converted.

Director Designation Rights

SKT (through Astra AI Infra) is entitled to nominateone director if the total number of directors of the Company iseleven or less, andtwo directors if the total number of directors of the Company istwelve or more, to be elected or appointed to the Board of Directors of the Company (any such director, an “Investor Designee”). The right to nominate an Investor Designee continues until such time as SKT and its subsidiaries and affiliates (including Astra AI Infra) beneficially own less than five percent of the common stock then issued and outstanding (calculated on a fully-diluted basis) directly or by holding Issued CPS.

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Company Redemption Rights

Holders of Issued CPS do not have pre-emptive, subscription, or redemption rights. We may repurchase the Issued CPS inone installment upon notice to the holders of Issued CPS, provided that no such notice shall be sent until at least five years after the date of the closing of the SKT Investment.

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

Common stock withheld as payment of withholding taxes and exercise prices in connection with the vesting or exercise of equity awards are treated as common stock repurchases. In the first nine months of 2026 and 2025, we repurchased 604 thousand and 484 thousand shares of common stock as payment of withholding taxes for $13.2 million and $8.3 million, respectively.

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component in first nine months of 2026 were as follows:

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Fair Value Measurements

The deferred cash adjustment resulting from the divestiture of an 81% interest in Zilia Technologies Indústria e Comércio de Componentes Eletrônicos Ltda. (formerly SMART Modular Technologies do Brasil - Indústria e Comércio de Componentes Ltda.) is accounted for as a derivative financial instrument and is revalued at the end of each reporting period. The asset’s 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.

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:

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.

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Stock-Based Compensation Expense

Stock-based compensation expense for our continuing operations was as follows:

Income tax benefits for stock-based awards were $1.8 million and $4.5 million in the third quarter and first nine months of 2026, respectively, and $1.4 million and $4.3 million in the third quarter and first nine months of 2025, respectively.

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:

Customer Contract Balances

(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. As of May 29, 2026, we expect to recognize revenue of $90.4 million of the balance of $136.6 million in the next 12 months and the remaining amount thereafter. In the first nine months of 2026, we recognized revenue of $72.2 million from satisfying performance obligations related to amounts included in deferred revenue as of August 29, 2025. In addition, as of May 29, 2026, other current liabilities included $10.6 million that is not included in the above remaining performance obligations. While this liability relates to amounts received from customers in

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connection with arrangements that are cancellable at the customer’s discretion, we have not had to refund any such amounts to our customers in the periods presented.

Customer advances, which are included in other current liabilities in the accompanying consolidated balance sheets, represent amounts received from customers for advance payments to secure product. In the first nine months of 2026, we recognized revenue of $20.5 million from satisfying performance obligations related to amounts included in customer advances as of August 29, 2025.

As of May 29, 2026 and August 29, 2025, other current liabilities included $13.9 million and $17.7 million, respectively, for estimates of consideration payable to customers, including estimates for pricing adjustments and returns.

Other Operating (Income) Expense

In recent periods, we executed plans that included the elimination of certain projects across our businesses, which resulted in workforce reductions. In connection therewith, we recorded restructuring charges of $6.8 million and $1.0 million in the first nine months of 2026 and 2025, respectively, consisting solely of employee severance costs and other benefits, reflected in Other Operating (Income) Expense in the Consolidated Statements of Operations. These charges were primarily concentrated in the period management defined, committed, and communicated the plan, and therefore, they were accrued and recorded in the respective period announced. We anticipate there will be additional restructuring activities in future quarters, for which we will record additional charges.

The following table summarizes the liabilities directly attributable to us that were recognized in the first nine months of 2026 under the plans discussed above:

The 2026 beginning restructuring liability balance was $1.1 million, of which $0.1 million remained outstanding as of May 29, 2026. The total unpaid balance as of May 29, 2026 was $0.6 million, and it is expected to be fully paid by the end of 2026.

Other Non-operating (Income) Expense

Income Taxes

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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-provision true-ups and certain tax credits, partially offset by cross border tax costs, state income taxes, and foreign withholding tax. The effective tax rate was 67.8% and 53.8% in the third quarter and first nine months of 2025, respectively, and differed from the U.S. statutory rate primarily due to losses generated in a jurisdiction where no tax benefit can be recognized, withholding taxes, state income taxes, and nondeductible compensation paid to officers, partially offset by research and development tax credits.

Determining the consolidated income tax provision (benefit), income tax liabilities and deferred tax assets and liabilities involves judgment. We calculate and provide for income taxes in each of the tax jurisdictions in which we operate, which involves estimating current tax exposures as well as making judgments regarding the recoverability of deferred tax assets in each jurisdiction. The estimates used could differ from actual results, which may have a significant impact on operating results in future periods.

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Earnings Per Share

We calculate basic earnings per common share (“EPS”) pursuant to the two-class method as a result of the issuance of the Issued CPS. The two-class method is an earnings allocation formula that determines EPS for common shares and participating securities according to dividend and participation rights in undistributed earnings. Under this method, all current period earnings, distributed and undistributed, are allocated to common stock and participating securities based on their respective rights to receive dividends. The Issued CPS is considered a participating security. The Issued CPS is not included in the computation of basic EPS in periods in which we have a net loss, as the Issued CPS is not contractually obligated to share in our net losses.

With respect to the Issued CPS, diluted EPS is calculated using the more dilutive of the two-class method or if-converted method. The two-class method uses net income available to common stockholders and assumes conversion of all potential shares other than the participating securities. The if-converted method uses net income and assumes conversion of all potential shares including the participating securities.

Dilutive potential common stock includes outstanding share options, unvested restricted share units, Convertible Senior Notes and Convertible Preferred Shares.

The following table summarizes the computation of basic and diluted EPS under the two-class or if-converted method in applicable periods, as well as the anti-dilutive shares excluded:

Upon any conversion of our Convertible Senior Notes, we will be required to pay cash in an amount at least equal to the principal portion and have the option to settle any amount in excess of the principal portion in cash and/or shares of common stock. As a result, only the amounts expected to be settled in excess of the principal portion are considered in calculating diluted earnings per share under the if-converted method.

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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 applications and other vertical markets. These products are marketed to original equipment manufacturers and to commercial and government customers. The Integrated Memory segment also offers SMART Supply Chain Services, which provides customized, integrated supply chain services to enable our customers to better manage supply chain planning and execution, reduce costs and increase productivity.

•Optimized LED: Our Optimized LED segment, under our Cree LED brand, offers a broad portfolio of application-optimized LEDs focused on improving lumen density, intensity, efficacy, optical control and/or reliability. Backed by expert design assistance and superior sales support, our LED products enable our customers to develop and market LED-based products for general lighting, video displays and specialty lighting applications.

Segments are determined based on sources of sales, types of customers and operating performance.

There are no differences between the accounting policies for our segment reporting and our consolidated results of operations. Operating expenses directly associated with the activities of a specific segment are charged to that segment. Certain other indirect operating income and expenses are generally allocated to segments based on their respective percentage of net sales. We do not identify (other than goodwill) or report internally our assets or allocate certain expenses and amortization, interest, other non-operating (income) expense or taxes to segments.

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Depreciation included in segment operating income was as follows:

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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 SKT’s 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 hardware solutions, installation services, and managed services. This included $18.3 million in cash deposits recorded as a contract liability at the beginning of 2026. As of May 29, 2026, we had a $1.3 million outstanding balance under accounts receivable associated with related parties.

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