Penguin Solutions, Inc.

Previous wording

Our fiscal year is the 52- or 53-week period ending on the last Friday in August. Fiscal years 2025, 2024 and 2023 contained 52, 53 and 52 weeks, respectively. All period references are to our fiscal periods unless otherwise indicated. All financial information for our subsidiaries in Brazil is included in our consolidated financial statements on a one-month lag because their fiscal years ended on July 31 of each year. In connection with the completion of the divestiture of an 81% interest in SMART Brazil, we ceased consolidating the operations of SMART Brazil in our financial statements as of the November 29, 2023 disposal date. As a result, financial information for the first quarter of 2024 includes the four-month period for the SMART Brazil operations from August 1, 2023 to November 29, 2023. All tabular amounts are in thousands.

Current wording

Our fiscal year is the 52- or 53-week period ending on the last Friday in August. Fiscal years 2026, 2025 and 2024 contained 52, 52 and 53 weeks, respectively. All period references are to our fiscal periods unless otherwise indicated.

Previous wording

On November 29, 2023, we completed the divestiture of an 81% interest in SMART Brazil to Lexar Europe B.V., an affiliate of Shenzhen Longsys Electronics Co. Ltd.

Current wording

On November 29, 2023, we completed the divestiture of an 81% interest in SMART Brazil to Lexar Europe B.V., an affiliate of Shenzhen Longsys Electronics Co. Ltd. On March 30, 2026, we sold our remaining 19% interest in SMART Brazil, subsequently renamed Zilia Technologies, completing our divestiture of the business.

Previous wording

Macro-Economic Demand Factors. Our business segments each have their own unique set of demand factors. Our Advanced Computing business is driven by demand for our HPC and AI products, as well as traditional workload optimization and efficiency applications. We expect increased AI adoption and broader implementation by enterprises within but not limited to verticals such as financial services, energy, government and education, as well as increased sovereign AI adoption, as organizations seek scalable infrastructure solutions, though the extent and timing of such adoption and implementation may vary and may affect our results of operations. Demand in our Integrated Memory segment is driven by end-market demand from OEMs for customer-specific solutions in vertical markets such as industrial, government, networking, HPC and enterprise storage, as well as emerging demand for higher density and greater bandwidth solutions for AI deployments, and we anticipate growing demand for higher performance and reliability memory solutions, such as our CXL family of products, to support both traditional use cases and increasingly complex AI applications, although there can be no assurance that such demand will materialize as expected or at all. Finally, demand for our Optimized LED products is derived from targeted end-market applications, such as general high-power and mid-power lighting and specialty lighting, including video display and horticulture applications. However, broader macro-economic trends, including global conflicts impacting international relations, recessionary indicators, high inflation rates, uncertainty and costs associated with trade policies and tariffs, and interest rates, can adversely affect all three segments concurrently.

Current wording

Demand in our Integrated Memory segment is driven by end-market demand from OEMs for customer-specific solutions in vertical markets such as industrial, government, networking, HPC and enterprise storage, as well as emerging demand for higher density and greater bandwidth solutions for AI deployments, and we anticipate growing demand for higher performance and reliability memory solutions, such as our CXL family of products, to support both traditional use cases and increasingly complex AI applications, although there can be no assurance that such demand will materialize as expected or at all. Finally, demand for our Optimized LED products is derived from targeted end-market applications, such as general high-power and mid-power lighting and specialty lighting,

Previous wording

Shifts in the Mix and Timing of Our Revenue. Shifts in the mix of revenue from our operating segments, and in the timing of revenue, which can vary significantly from period to period, have impacted and can continue to impact our business and results of operations, including gross and operating margins. For example, our Advanced Computing segment has shown solid growth, but is subject to variability in its sales and margin profile from period to period due to factors such as the following: recognition of revenue sometimes being tied to customer decisions as to the completion of delivery and system go-live events; certain sales being affected by the timing of customer deployments and shipments or customer budget considerations; changes in customer spending on our products and services (including as a result of the macro-economic demand factors discussed above); the impact of customer churn rates (including discounting and churn of significant customers from whom we derive a significant percentage of our revenue); discontinuation of certain of our products from time to time; shifts in our customer mix, including expected trends with respect to growth in demand from non-hyperscaler customers for HPC and AI solutions; and margin being driven by the proportion of higher margin software and managed services within our Advanced Computing sales. Our resource commitments and planning for each segment are relatively fixed in the short term, and as such, variability in expected revenue mix may have direct implications for our operating income and margins. Additionally, our revenue and margins will be negatively impacted by the winding down of our Penguin Edge business, which we expect to wind down and discontinue by approximately the end of calendar 2025. The comparability of our results of operations against prior periods will also be affected following the wind down of our Penguin Edge business.

Current wording

Shifts in the Mix and Timing of Our Net Sales: Shifts in the mix of net sales from our operating segments, and in the timing of net sales, which can vary significantly from period to period, have impacted and can continue to impact our business and results of operations, including gross and operating margins. For example, our Advanced Computing segment is subject to variability in its sales and margin profile from period to period due to factors such as the following: recognition of revenue sometimes being tied to customer decisions as to the completion of delivery and system go-live events; certain sales being affected by the timing of customer deployments and shipments or customer budget considerations; changes in customer spending on our products and services (including as a result of macro-economic demand factors); the impact of customer churn rates (including discounting and churn of significant customers from whom we derive a significant percentage of our net sales); discontinuation of certain of our products from time to time; shifts in our customer mix, including expected trends with respect to growth in demand from non-hyperscaler customers for AI and HPC solutions; and margin being driven by the proportion of higher margin software and managed services within our Advanced Computing sales. Within our Advanced Computing segment, our “AI infrastructure business” refers to customer engagements focused on AI workloads, including designing, building, deploying, and managing AI infrastructure hardware, software, and services. When we refer to our non-hyperscale AI infrastructure business, we are referring to our AI infrastructure business excluding sales to hyperscaler customers. Our AI infrastructure business has been transitioning from a hyperscaler concentration toward a more diversified non-hyperscaler customer base across neocloud, enterprise, and sovereign AI. This transition contributed to strong revenue growth in the second half of 2026, though the pace and timing of new customer deployments may create variability in net sales from period to period. Additionally, our net sales and margins have been negatively impacted by the winding down of our Penguin Edge business, which was completed in the fourth quarter of fiscal 2026. The comparability of our results of operations against prior periods will also be affected following the wind down of our Penguin Edge business. Our resource commitments and planning for each segment are relatively fixed in the short term, and as such, variability in expected net sales mix may have direct implications for our operating income and margins. Our Integrated Memory business historically has gross margins which are lower than the Company average and if net sales from this business grow faster than net sales for the Company overall, it may negatively impact total Company gross margins. In 2026, higher memory pricing increased Integrated Memory gross margin, and a decline in memory pricing would reverse tha…

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Previous wording

Our Ability to Identify, Complete and Successfully Integrate Acquisitions. A substantial portion of our growth over the last several years has been driven by acquisitions, and we intend to continue to use corporate development as an engine for growth. Within our existing segments, we plan to pursue acquisitions to expand features and functionality, expand into adjacent businesses and grow our customer base and geographic footprint. From time to time, we may seek to expand our addressable market by entering new business segments where we identify a business opportunity at scale with a path to being accretive to our overall operations in the near term. If we are unable to identify and complete attractive acquisitions and successfully integrate such businesses, we may not be successful in growing our revenue and/or expanding our margins. Any acquisitions we do complete may require us to incur debt or raise capital through equity financings or may subject us to unforeseen liabilities or costs, or operational challenges, that in turn impede our ability to realize the expected returns on our investment.

Current wording

Our Ability to Identify, Complete and Successfully Integrate Acquisitions: A substantial portion of our growth over the last several years has been driven by acquisitions, and we intend to continue to use corporate development as an engine for growth. Within our existing segments, we plan to pursue acquisitions to expand features and functionality, expand into adjacent businesses and grow our customer base and geographic footprint. From time to time, we may seek to expand our addressable market by entering new business segments where, as we did with our Cree LED and Stratus Technologies acquisitions, we identify a business opportunity at scale with a path to being accretive to our overall operations in the near term. If we are unable to identify and complete attractive acquisitions and successfully integrate such businesses, we may not be successful in growing our net sales and/or expanding our margins. Any acquisitions we do complete may require us to incur debt or raise capital through equity financings or may subject us to unforeseen liabilities or costs, or operational challenges, that in turn impede our ability to realize the expected returns on our investment.

Previous wording

Disruptions in Our Supply Chain May Adversely Affect Our Businesses. We depend on third-party suppliers for key components of our products as well as certain raw materials, such as commodity DRAM components from offshore foundries that we use in our specialty memory products, third-party wafers that we use in our memory and LED businesses and HPC and AI components for our Advanced Computing business; the costs of such components and raw materials may fluctuate from time to time due to market conditions. In our memory and LED businesses, we have adopted a “Fab-Light” business model to reduce our capital expenditures and operating expenses, while affording greater flexibility in adapting to shifts in demand and other market trends. Our Fab-Light

Current wording

Disruptions in Our Supply Chain May Adversely Affect Our Businesses: We depend on third-party suppliers for key components of our products as well as certain raw materials, such as commodity DRAM components from offshore foundries that we use in our specialty memory products, third-party wafers that we use in our memory and LED businesses and AI and HPC components for our Advanced Computing business; the costs of such components and raw materials may fluctuate from time to time due to market conditions. In our memory and LED businesses, we have adopted a “Fab-Light” business model to reduce our capital expenditures and operating expenses, while affording greater flexibility in adapting to shifts in demand and other market trends. However, our reliance on third-party manufacturers exposes us to risk of supply chain disruption and lost business. For example, constrained memory supply may affect our ability to meet demand in our Integrated Memory business on a timely basis or at all, and the global semiconductor shortage, particularly during its peak, has adversely affected our results of operations. In addition, in our Advanced Computing business, where we source components from third parties, the high demand for and limited supply of AI components globally, as well as any delays in the production of such components, continues to affect our sourcing of these components and the timing of deployments. In particular, we continue to experience extended lead times for certain components that are

Previous wording

business model contributed to margin expansion in our overall business. However, our reliance on third-party manufacturers exposes us to risk of supply chain disruption and lost business. For example, the global semiconductor shortage, particularly during its peak, has adversely affected our results of operations. In addition, in our Advanced Computing business, where we source components from third parties, the high demand for and limited supply of AI components globally, as well as any delays in the production of such components, continues to affect our sourcing of these components and the timing of deployments. In particular, we continue to experience extended lead times for certain components that are incorporated into our overall solutions, which impacts how quickly we are able to ramp existing and new customer projects and may negatively affect gross margins due to changes in shipment timing and product mix. If such disruptions worsen or are prolonged, or if there is meaningful disruption in our supply arrangement with any of our third-party suppliers, our results of operations and financial condition may continue to be adversely affected.

Current wording

incorporated into our overall solutions, which impacts how quickly we are able to ramp existing and new customer projects and may negatively affect gross margins due to changes in shipment timing and product mix. If such disruptions worsen or are prolonged, or if there is meaningful disruption in our supply arrangement with any of our third-party suppliers, our results of operations and financial condition may continue to be adversely affected.

Previous wording

Net sales increased by $198.0 million, or 16.9%, in 2025 compared to the prior year, primarily due to higher sales from our Advanced Computing and Integrated Memory business segment. Advanced Computing net sales increased by $93.9 million, or 16.9%, compared to the same period in the prior year, primarily due to higher hardware sales driven by increased demand for AI solutions and HPC. Integrated Memory net sales increased by $107.8 million, or 30.3%, compared to the same period in the prior year, primarily due to higher sales volumes of flash and DRAM products stemming from improved market demand. Optimized LED net sales decreased by $3.7 million, or 1.4%, compared to the same period in the prior year, primarily due to lower direct sales across China and Europe.

Current wording

Net sales increased by $198.0 million, or 16.9%, in 2025 compared to the prior year, primarily due to higher sales from our Advanced Computing and Integrated Memory business segments. Advanced Computing net sales increased by $93.9 million, or 16.9%, compared to the same period in the prior year, primarily due to higher hardware sales driven by increased demand for AI solutions and HPC. Integrated Memory net sales increased by $107.8 million, or 30.3%, compared to the same period in the prior year, primarily due to higher sales volumes of flash and DRAM products stemming from improved market demand. Optimized LED net sales decreased by $3.7

Previous wording

Cost of sales increased by $144.5 million, or 17.4%, in 2025 compared to the prior year, primarily due to our Advanced Computing and Integrated Memory segments having increased products sales for the year. Cost of sales decreased by $196.1 million, or 19.1%, in 2024 compared to the prior year, primarily due to our Advanced Computing and Integrated Memory segments, which had lower material and production costs from lower sales, as well as lower personnel-related expenses mainly driven by cost reduction efforts.

Current wording

Cost of sales increased by $278.0 million, or 28.5%, in 2026 compared to the prior year, primarily driven by strong growth for our Integrated Memory segment. Cost of sales increased by $144.5 million, or 17.4%, in 2025 compared to the prior year, primarily due to our Advanced Computing and Integrated Memory segments having increased product sales for the year.

Previous wording

Gross margin decreased to 28.8% in 2025 compared to 29.1% in 2024 primarily due to unfavorable mix from higher product revenue in our Advanced Computing segment and a higher mix of Integrated Memory sales. Gross margin increased to 29.1% in 2024 compared to 28.8% in 2023 primarily due to favorable mix from higher service revenue in our Advanced Computing segment.

Current wording

Gross margin decreased to 27.7% in 2026 compared to 28.8% in 2025 primarily attributable to the wind down of our Penguin Edge business under our Advanced Computing segment, along with a shift in the overall mix of sales across all our business units. Gross margin decreased to 28.8% in 2025 compared to 29.1% in 2024 primarily due to unfavorable mix from higher product revenue in our Advanced Computing segment and a higher mix of Integrated Memory sales.

Previous wording

Below is a table of our operating income, measured on a non-GAAP basis, which Penguin Solutions management uses to supplement Penguin Solutions’ financial results under GAAP to analyze its operations and make decisions as to future operational plans, and which management believes provides supplemental information that is useful to investors in analyzing and assessing our past and future operating performance. These non-GAAP measures exclude certain items, such as stock-based compensation expense; amortization of acquisition-related intangible assets (consisting of amortization of developed technology, customer relationships, trademarks/trade names and backlog acquired in connection with business combinations); acquisition-related inventory adjustments; diligence, acquisition and integration expense; restructuring charges; impairment of goodwill; changes in the fair value of contingent consideration; redomiciliation costs; and other infrequent or unusual items. While amortization of acquisition-related intangible assets is excluded, the revenues from acquired companies is reflected in our non-GAAP measures and these intangible assets contribute to revenue generation. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Segment and Other Information.”

Current wording

Below is a table of our operating income, measured on a non-GAAP basis, which Penguin Solutions management uses to supplement Penguin Solutions’ financial results under GAAP to analyze its operations and make decisions as to future operational plans, and which management believes provides supplemental information that is useful to investors in analyzing and assessing our past and future operating performance. These non-GAAP measures exclude certain items, such as stock-based compensation expense; amortization of acquisition-related intangible assets (consisting of amortization of developed technology, customer relationships, trademarks/trade names and backlog acquired in connection with business combinations); diligence, acquisition and integration expense; restructuring charges; impairment of goodwill; redomiciliation costs; and other infrequent or unusual items. While amortization of acquisition-related intangible assets is excluded, the revenues from acquired companies is reflected in our non-GAAP measures and these intangible assets contribute to revenue generation. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Segment and Other Information.”

Previous wording

Advanced Computing operating income increased by $19.7 million, or 20.7%, in 2025 compared to the prior year primarily due to increased net sales driven by increased demand for AI solutions, as well as lower subcontract services, partially offset by increased operating expenses, mainly driven by increased personnel-related expenses stemming from bonus achievement. Advanced Computing operating income decreased by $15.7 million, or 14.1%, in 2024 compared to the prior year primarily due to lower sales from our Penguin Computing business, partially offset by lower operating expenses, mainly driven by personnel-related expenses due to lower headcount and lower subcontract services.

Current wording

driven by increased demand for AI solutions, as well as lower subcontract services, partially offset by increased operating expenses, mainly driven by increased personnel-related expenses stemming from bonus achievement.

Previous wording

Integrated Memory operating income increased by $21.2 million, or 94.7%, in 2025 compared to the prior year primarily due to increased net revenue, partially offset by increased operating expenses, mainly driven by

Current wording

Integrated Memory operating income on a non-GAAP basis increased by $141.3 million, or 323.8%, in 2026 compared to the prior year primarily attributable to increased net sales driven by strong momentum across DRAM and Flash, as accelerating AI-driven demand supported higher pricing and increased volumes. Integrated Memory operating income on a non-GAAP basis increased by $21.2 million, or 94.7%, in 2025 compared to the prior year primarily due to increased net revenue, partially offset by increased operating expenses, mainly driven by increased personnel costs stemming from bonus achievement.

Previous wording

Optimized LED operating income increased by $6.5 million, or 252.7%, in 2025 primarily due to higher gross profit, stemming from a more favorable product mix. Optimized LED operating loss improved by $7.4 million, or 153.0%, in 2024 primarily due to higher revenue from increased demand, better factory leverage and product mix and lower personnel-related expenses due to headcount reductions.

Current wording

Optimized LED operating income on a non-GAAP basis increased by $8.7 million, or 96.7%, in 2026 primarily attributable to lower personnel-related expenses resulting from headcount reductions, together with improved gross profit driven by a more favorable product mix and tariff recoveries. Optimized LED operating income on a non-GAAP basis increased by $6.5 million, or 252.7%, in 2025 primarily due to higher gross profit, stemming from a more favorable product mix.

Previous wording

Research and development expense decreased by $9.0 million, or 10.0%, in 2024 compared to the prior year, primarily due to lower personnel-related expenses mainly driven by headcount reductions, as well as lower subcontract services mainly driven by Advanced Computing.

Current wording

Selling, general and administrative expense decreased by $17.8 million, or 7.5%, in 2026 compared to the prior year, primarily due to lower personnel-related expenses mainly driven by headcount reductions as well as lower subcontract services following the completion of our U.S. Domestication in 2025.

Previous wording

Selling, general and administrative expense increased by $4.3 million, or 1.8%, in 2025 compared to the prior year, primarily due to higher personnel-related expenses stemming from increased bonus achievement as a result of Company performance, partially offset by decreased professional services driven by increased cost in the

Current wording

Selling, general and administrative expense increased by $4.3 million, or 1.8%, in 2025 compared to the prior year, primarily due to higher personnel-related expenses stemming from increased bonus achievement as a result of Company performance, partially offset by decreased professional services driven by increased cost in theprior year due to the SMART Brazil divestiture referenced above.

Previous wording

In the second quarter of 2023, we initiated a plan pursuant to which we intend to wind down manufacturing and discontinue the sale of certain products offered through our Penguin Edge business by approximately the end of calendar 2025. In connection therewith and with the preparation of the financial statements included in this Annual Report, we assessed goodwill associated with our Penguin Edge business within our Advanced Computing segment and concluded it is now fully impaired. As a result, we recorded impairment charges of $16.1 million and $19.1 million in 2025 and 2023, respectively, to impair the carrying value of Penguin Edge goodwill. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Intangible Assets and Goodwill.”

Current wording

In the second quarter of 2023, we initiated a plan to wind down manufacturing and discontinue the sale of certain products offered through our Penguin Edge business, which we completed in the fourth quarter of 2026. In connection therewith and with the preparation of the financial statements included in this Annual Report, we assessed goodwill associated with our Penguin Edge business within our Advanced Computing segment and concluded it is fully impaired. As a result, we recorded impairment charges of $16.1 million in 2025, to impair the carrying value of Penguin Edge goodwill. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Intangible Assets and Goodwill.”

Previous wording

Other operating expense in 2025, 2024, and 2023 included restructuring charges of$2.1 million, $7.1 million, and$7.0 million, respectively, primarily for employee severance costs and other benefits resulting from workforce reductions, the elimination of certain projects across our businesses and other costs associated with the wind down of our Penguin Edge business. We anticipate that such activities will continue into future quarters and anticipate recording additional restructuring charges.

Current wording

Other operating expense in 2026, 2025, and 2024 included restructuring charges of $11.2 million, $2.1 million, and$7.1 million, respectively, primarily for employee severance costs and other benefits resulting from workforce reductions, the elimination of certain projects across our businesses and other costs associated with the wind down of our Penguin Edge business. We anticipate that such activities will continue into future quarters and anticipate recording additional restructuring charges.

Previous wording

Net interest expense decreased by $21.1 million, or 74.3%, in 2025 compared to the prior year, primarily due to principal payments made on the Amended 2022 TLA (as defined below) during the last half of fiscal 2024 along with the full repayment in the last quarter of fiscal 2025. Net interest expense decreased by $8.0 million, or 22.1%, in 2024 compared to the prior year, primarily due to higher interest income resulting from higher cash and investment balances, partially offset by higher interest expense from the Amended 2022 TLA.

Current wording

expense decreased by $21.1 million, or 74.3%, in 2025 compared to the prior year, primarily due to principal payments made on the Amended 2022 TLA during the second half of fiscal 2024 along with the full repayment in the fourth quarter of fiscal 2025.

Previous wording

Other non-operating (income) expense in 2025, 2024 and 2023 included losses of $2.9 million, $22.8 million, and $15.9 million, respectively, from the extinguishment or prepayment of debt. Other non-operating (income) expense in 2024 also included net gains of $0.2 million from the disposition of assets. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt.”

Current wording

Other non-operating (income) expense in 2026 included expense associated with the induced conversion of the 2029 and 2030 Notes of $33.2 million and a $10.0 million impairment expense on a non-marketable equity investment, partially offset by a net gain of $30.9 million from the disposition of equity investments. Other non-operating (income) expense in 2025 and 2024 included losses of $2.9 million, and $22.8 million, respectively, from the extinguishment or prepayment of debt. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Cash and Investments, and Debt.”

Previous wording

Our provision for income taxes increased by $9.4 million, or 89.0%, in 2025 compared to 2024 primarily due to an increase in profit before tax in jurisdictions subject to income tax. Our provision for income taxes increased by $59.8 million, or 121.6%, in 2024 compared to 2023 primarily due to the tax benefit on the release of the U.S. federal and state valuation allowance in 2023, partially offset by tax addbacks for nondeductible goodwill impairment and additional uncertain tax positions recorded in 2023.

Current wording

Our provision for income taxes decreased by $53.9 million, or 268.8%, in 2026 compared to 2025 primarily due to the release of a valuation allowance. Our provision for income taxes increased by $9.4 million, or 89.0%, in 2025 compared to 2024 primarily due to an increase in profit before tax in jurisdictions subject to income tax.

Previous wording

We have operations in Malaysia, where we have tax incentive arrangements for our pioneer status activities and our global supply chain business. The statutory tax rate for Malaysia is 24%. This Malaysia arrangement for the pioneer status activities is scheduled to expire in August 2028 and is subject to certain conditions, with which we have fully complied in 2025, 2024, and 2023. This Malaysia arrangement for the global supply chain activities is scheduled to expire in August 2028 and is subject to certain conditions, with which we have partially complied in 2025 and 2024 and fully complied in 2023. The impact of partial compliance is reflected within the 2025 and 2024 income tax provisions. Our effective income tax rate in the future may be higher depending on a combination of our overall and jurisdictional profitability, the general expectation that future tax holidays may have tax rates greater than our prior approved tax holidays, and the impact of the Organisation for Economic Co-operation and Development's Pillar Two Model rules which aims to implement a global minimum tax of 15%. For additional information, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Income Taxes.”

Current wording

We have operations in Malaysia, where we have tax incentive arrangements for our pioneer status activities and our global supply chain business. The statutory tax rate in Malaysia is 24%. The Malaysia tax incentive arrangement for our pioneer status activities, which was originally scheduled to expire in August 2028, was renegotiated and extended through August 2031. The arrangement is subject to certain conditions, with which we have fully complied in 2026, 2025 and 2024. The Malaysia tax incentive arrangement for our global supply chain activities was amended in fiscal year 2025 and is also scheduled to expire in August 2031. The amended arrangement applies retroactively to the 2024 and 2025 tax years, and we have satisfied the applicable conditions for 2026, 2025 and 2024. The impact of the amended arrangement, including its retroactive application, has been reflected in our 2026 income tax provision. Our effective income tax rate in the future may be higher depending on a combination of our overall and jurisdictional profitability, our ability to continue to satisfy the conditions associated with our tax incentive arrangements, the tax rates applicable to future tax incentive arrangements, and the impact of the Organisation for Economic Co-operation and Development's Pillar Two Model Rules, which provide for a global minimum tax rate of 15%. For additional information, see “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Income Taxes.”

Previous wording

Net Income (Loss) From Discontinued Operations

Current wording

Net Loss From Discontinued Operations

Previous wording

As discussed above, we have presented the results of SMART Brazil as discontinued operations in our consolidated statements of operations for all periods presented. As of August 25, 2023, SMART Brazil was classified as held for sale. Accordingly, in 2023 we evaluated the carrying value of the net assets of SMART Brazil (including $206.3 million recognized within stockholder’s equity related to the cumulative translation adjustment from SMART Brazil), estimated costs to sell and expected proceeds and concluded the net assets were impaired. As a result, we recognized an impairment charge of $153.0 million in 2023 to write down the carrying value of the net assets of SMART Brazil. In addition, we concluded that the outside basis of SMART Brazil inclusive of any withholding taxes should be recognized upon the classification as held for sale as of August 25, 2023. Accordingly, we recognized withholding taxes on the expected capital gain and deferred tax liabilities of $28.6 million in 2023. In the first quarter of 2024, we completed the divestiture, and in connection therewith, recognized an additional loss of $8.9 million. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”

Current wording

As discussed above, we have presented the results of SMART Brazil as discontinued operations in our consolidated statements of operations for all periods presented. In the first quarter of 2024, we completed the divestiture, and in connection therewith, recognized an additional loss of $8.9 million. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”

Previous wording

As of August 29, 2025, we had cash, cash equivalents and short-term investments of$453.8 million, of which$315.5 million was held by subsidiaries outside of the United States. Our principal uses of cash and capital resources have been acquisitions, debt service requirements, capital expenditures, investments in working capital, research and development expenditures, and other operating expenses. We expect that future capital expenditures will focus on expansion of our research and development activities, manufacturing equipment upgrades, acquisitions and IT infrastructure and software upgrades. Cash and cash equivalents generally consist of funds held in demand deposit accounts, money market funds and time deposits. We do not acquire investments for trading or speculative purposes.

Current wording

As of August 28, 2026, we had cash and cash equivalents of $647.2 million, of which $332.5 million was held by subsidiaries outside of the United States. Our principal uses of cash and capital resources have been debt service requirements, investments in working capital, acquisitions, repurchases of our common stock, capital expenditures, research and development expenditures, and other operating expenses. We expect that future capital expenditures will focus on expansion of our research and development activities, manufacturing equipment upgrades, acquisitions and IT infrastructure and software upgrades. Cash and cash equivalents generally consist of funds held in demand deposit accounts, money market funds and time deposits. We do not acquire investments for trading or speculative purposes.

Previous wording

We may from time to time seek additional equity or debt financing. Any future equity or debt financing may be dilutive to our existing investors and may include debt service requirements and financial and other restrictive covenants that may constrain our operations and growth strategies. In the event that we seek additional financing, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional

Current wording

We may from time to time seek additional equity or debt financing. Any future equity or debt financing may be dilutive to our existing investors and may include debt service requirements and financial and other restrictive covenants that may constrain our operations and growth strategies. In the event that we seek additional financing, we may not be able to raise such financing on terms acceptable to us, or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued product innovation, we may not be able to compete successfully, which would harm our business, operations and financial condition.

Previous wording

We expect that our existing cash and cash equivalents, short-term investments, borrowings available under our credit facilities and cash generated by operating activities will be sufficient to fund our operations for at least the next 12 months.

Current wording

We expect that our existing cash and cash equivalents, borrowings available under our credit facilities, and cash generated by operating activities will be sufficient to fund our operations for at least the next 12 months.

Previous wording

Under the 2025 Credit Agreement, 2025 Loans bear interest at a rate per annum equal to either, at the Borrowers’ option, Term Secured Overnight Financing Rate (“Term SOFR”) rate or a base rate, in each case plus an applicable margin based on the Total Leverage Ratio (as defined in the 2025 Credit Agreement) and ranges from 1.25% to 3.00% per annum with respect to Term SOFR borrowings and from 0.25% to 2.00% per annum with respect to base rate borrowings. In addition, we are required to pay a quarterly unused commitment fee at an initial rate of 0.25%, which may increase up to a rate of 0.35% based on certain Total Leverage Ratio levels specified in the 2025 Credit Agreement.

Current wording

Under the 2025 Credit Agreement, 2025 Loans bear interest at a rate per annum equal to either, at the Borrowers’ option, Term Secured Overnight Financing Rate (“Term SOFR”) rate or a base rate, in each case plus an applicable margin based on the Total Leverage Ratio (as defined in the 2025 Credit Agreement) and ranges from 1.25% to 3.00% per annum with respect to Term SOFR borrowings and from 0.25% to 2.00% per annum with respect to base rate borrowings. In addition, we are required to pay a quarterly unused commitment fee at an initial rate of 0.25%, which may increase up to a rate of 0.35% based on certain Total Leverage Ratio levels

Previous wording

On August 6, 2024 and August 14, 2024, we issued $175.0 million and $25.0 million aggregate principal amount, respectively, of our 2.00% Convertible Senior Notes due 2030 (collectively, the “2030 Notes,” and together with the 2026 Notes and the 2029 Notes, the “Convertible Senior Notes”) pursuant to, and governed by, an indenture (the “2030 Indenture”), dated August 6, 2024, between us and U.S. Bank Trust Company, National Association, as trustee. The 2030 Notes will mature on August 15, 2030, unless earlier converted, redeemed or repurchased. As of August 29, 2025, $200.0 million in aggregate principal amount of 2030 Notes were outstanding.

Current wording

On August 6, 2024 and August 14, 2024, we issued $175.0 million and $25.0 million aggregate principal amount, respectively, of our 2030 Notes pursuant to, and governed by, an indenture (the “2030 Indenture”), dated August 6, 2024, between us and U.S. Bank Trust Company, National Association, as trustee. The 2030 Notes will mature on August 15, 2030, unless earlier converted, redeemed or repurchased. As of August 28, 2026, $40.0 million in aggregate principal amount of 2030 Notes were outstanding.

Previous wording

In February 2023, we issued $150.0 million in aggregate principal amount of 2.00% Convertible Senior Notes due 2029 (the “2029 Notes”) pursuant to an indenture (the “2029 Indenture”), dated as of January 23, 2023, between the Company and U.S. Bank Trust Company, National Association, as trustee. The 2029 Notes will mature on February 1, 2029, unless earlier converted, redeemed or repurchased. As of August 29, 2025, $150.0 million in aggregate principal amount of 2029 Notes were outstanding.

Current wording

In February 2023, we issued $150.0 million in aggregate principal amount of our 2029 Notes pursuant to an indenture (the “2029 Indenture”), dated as of January 23, 2023, between the Company and U.S. Bank Trust Company, National Association, as trustee. The 2029 Notes will mature on February 1, 2029, unless earlier converted, redeemed or repurchased. As of August 28, 2026, $14.5 million in aggregate principal amount of 2029 Notes were outstanding.

Previous wording

In February 2020, we issued $250.0 million in aggregate principal amount of 2.25% Convertible Senior Notes due 2026 (the “2026 Notes”) pursuant to an indenture (the “2026 Indenture”) between the Company and U.S. Bank Trust Company National Association, as trustee. The 2026 Notes will mature on February 15, 2026, unless earlier converted, redeemed or repurchased.

Current wording

In February 2020, we issued $250.0 million in aggregate principal amount of 2.25% Convertible Senior Notes due 2026 (the “2026 Notes”) pursuant to an indenture (the “2026 Indenture”) between the Company and U.S. Bank Trust Company National Association, as trustee.

Previous wording

On January 18, 2023, we exchanged $150.0 million principal amount of 2026 Notes for $150.0 million principal amount of new 2029 Notes (as defined below). On August 6, 2024, we repurchased $80.0 million aggregate principal amount of our 2026 Notes for $100.6 million cash (including payment for accrued interest) in privately-negotiated transactions. See “Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Debt - Convertible Senior Notes - Repurchase of Convertible Senior Notes” in this 2025 Annual Report. As of August 29, 2025, $20.0 million in aggregate principal amount of 2026 Notes were outstanding.

Current wording

On January 18, 2023, we exchanged $150.0 million principal amount of 2026 Notes for $150.0 million principal amount of new 2029 Notes. On August 6, 2024, we repurchased $80.0 million aggregate principal amount of our 2026 Notes for $100.6 million cash (including payment for accrued interest) in privately-negotiated transactions. See “Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes – Repurchase of Convertible Senior Notes” in this Annual Report.

Previous wording

For additional details of the terms of our Convertible Senior Notes, refer to “PART II - Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Debt - Convertible Senior Notes” in this 2025 Annual Report.

Current wording

For additional details of the terms of our Convertible Senior Notes, refer to “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Debt – Convertible Senior Notes” in this Annual Report.

Previous wording

In connection with our Convertible Senior Notes, we have entered into privately-negotiated capped call transactions, which are intended to reduce the effect of potential dilution upon conversion of our Convertible Senior Notes. The capped calls provide for our receipt of cash or shares, at our election, from counterparties if the trading price of our common stock is above the strike price on the expiration date. For additional information on our capped call transactions, refer to “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Capped Calls” in this 2025 Annual Report.

Current wording

In connection with our Convertible Senior Notes, we have entered into privately-negotiated capped call transactions, which are intended to reduce the effect of potential dilution upon conversion of our Convertible Senior Notes. The capped calls provide for our receipt of cash or shares, at our election, from counterparties if the trading price of our common stock is above the strike price on the expiration date. For additional information on our capped call transactions, refer to “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Equity – Capped Calls” in this Annual Report.

Previous wording

In November 2023, we completed the divestiture of SMART Brazil. In connection with the divestiture, we sold an 81% interest and retained a 19% interest in SMART Brazil. At the closing of the transaction, we received cash of $143.0 million, net of tax, from the sale. In addition, we received a deferred payment of $24.3 million (net of $4.2 million withholding tax) in May 2025. Refer to “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil.”

Current wording

In November 2023, we completed the divestiture of SMART Brazil. In connection with the divestiture, we sold an 81% interest and retained a 19% interest in SMART Brazil. At the closing of the transaction, we received cash of $143.0 million, net of tax, from the sale. In addition, we received a deferred payment of $24.3 million (net of $4.2 million withholding tax) in May 2025. On March 30, 2026, we sold our retained interest, including our rights to the deferred cash adjustment, and received cash proceeds of $39.6 million, net of $6.5 million of withholding taxes. Refer to “PART II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Divestiture of SMART Brazil” and “– Cash and Investments – Non-marketable Equity Investments – Zilia Technologies.”

Previous wording

On June 27, 2025, 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 the Issued CPS, which principal attributes remain substantially the same as prior to the U.S. Domestication, with changes to give effect to requirements of Delaware law. The shares of Issued CPS are convertible into shares of common stock of Penguin Solutions at an initial conversion price of $32.81 per ordinary share, subject to adjustment upon the occurrence of certain events, have an initial liquidation preference of 1x and are only be redeemable at our option, subject to certain conditions. The holder of Issued CPS may convert such holder’s Issued CPS into shares of common stock at any time, provided that the Issued CPS may, at our option, automatically be converted into shares of common stock on any date following the second anniversary of the closing upon certain conditions. The Issued CPS entitle the holder to receive dividends of six percent per annum, cumulative, and payable quarterly in-kind or in cash at our option. Shares of Issued CPS are not redeemable upon or repurchased upon the election of the holders of Issued CPS. Refer to the CPS Delaware Certificate of Designation filed as Exhibit 3.3 hereto, and to the section entitled “Comparison of Rights of Cayman Islands Shareholders and Delaware Stockholders” contained in Penguin Solutions Cayman’s definitive proxy statement on Schedule 14A filed with the SEC on May 2, 2025.

Current wording

liquidation preference of 1x and are only redeemable at our option, subject to certain conditions. The holder of Issued CPS may convert such holder’s Issued CPS into shares of common stock at any time, provided that the Issued CPS may, at our option, automatically be converted into shares of common stock on any date following the second anniversary of the closing upon certain conditions. The Issued CPS entitles the holder to receive dividends of six percent per annum, cumulative, and payable quarterly in-kind or in cash at our option. Shares of Issued CPS are not redeemable upon or repurchased upon the election of the holders of Issued CPS. Refer to the CPS Delaware Certificate of Designation filed as Exhibit 3.3 hereto, and to the section entitled “Comparison of Rights of Cayman Islands Shareholders and Delaware Stockholders” contained in Penguin Solutions Cayman’s definitive proxy statement on Schedule 14A filed with the SEC on May 2, 2025.

Previous wording

Operating Activities: Cash flows from operating activities reflects net income, adjusted for certain non-cash items, including depreciation and amortization expense, stock-based compensation, changes in the fair value of contingent consideration, gains and losses from investing or financing activities and from the effects of changes in operating assets and liabilities.

Current wording

Operating Activities: Cash flows from operating activities reflects net income, adjusted for certain non-cash items, including depreciation and amortization expense, stock-based compensation, impairment charges, gains and losses from investing or financing activities and from the effects of changes in operating assets and liabilities.

Previous wording

Net cash provided by operating activities from continuing operations in 2025 was $113.2 million, comprised primarily of net income of $28.8 million, adjusted for non-cash items of $103.5 million. Oper ating cash flows were negatively affected by a $19.1 million net change in our operating assets and liabilities, primarily from the effects of an increase of $101.6 million of inventories primarily to support future demand across both Advanced Computing and Integrated Memory and an increase of $56.2 million in accounts receivable primarily due to timing of cash receipts, partially offset by an increase of $131.0 million in accounts payable and accrued expenses and other liabilities primarily due to higher accounts payable related to the timing of purchases from suppliers and an increase in deferred revenue from customer services, along with a decrease of $7.7 million in other assets.

Current wording

Net cash used for operating activities from continuing operations in 2026 was $151.9 million, comprised primarily of net income of $185.8 million, adjusted for non-cash items of $36.3 million. Oper ating cash flows were negatively affected by a $374.0 million net change in our operating assets and liabilities, primarily from the effects of an increase of $493.6 million of inventories primarily to support future demand and an increase of $488.4 million in accounts receivable primarily driven by increased Integrated Memory sales, partially offset by an increase of $607.0 million in accounts payable and accrued expenses and other liabilities primarily due to higher accounts payable related to the increase and timing of purchases from suppliers and an increase in deferred revenue from customer services.

Previous wording

Net cash provided by operating activities from continuing operations in 2024 was $105.5 million, comprised primarily of net loss of $41.8 million, adjusted for non-cash items of $121.6 million. Operating cash flows were favorably affected by a $25.7 million net change in our operating assets and liabilities, primarily from the effects of an increase of $54.3 million in accounts payable and accrued expenses and other liabilities and a decrease of $23.8 million inventories, partially offset by an increase of accounts receivable of $32.5 million and the payment of $29.0 million of contingent consideration, which related to our 2023 acquisition of Stratus Technologies. The increase in accounts payable and accrued expenses and other liabilities was primarily due to timing of payments, as well as higher deferred revenue resulting from amounts received from customers in advance of satisfying performance obligations.

Current wording

Net cash provided by operating activities from continuing operations in 2024 was $105.5 million, comprised primarily of net loss of $41.8 million, adjusted for non-cash items of $121.6 million. Operating cash flows were favorably affected by a $25.7 million net change in our operating assets and liabilities, primarily from the effects of an increase of$54.3 million in accounts payable and accrued expenses and other liabilities and a decrease of $23.8 million inventories, partially offset by an increase of accounts receivable of$32.5 million and the payment of$29.0 million of contingent consideration, which related to our 2023 acquisition of Stratus Technologies. The increase in accounts payable and accrued expenses and other liabilities was primarily due to timing of payments, as well as higher deferred revenue resulting from amounts received from customers in advance of satisfying performance obligations.

Previous wording

Investing Activities: Net cash used for investing activities from continuing operations in 2025 consisted primarily of$9.0 million used for capital expenditures and deposits on equipment, partially offset by net sales of marketable investment securities of $7.3 million.

Current wording

Net cash used for investing activities from continuing operations in 2025 consisted primarily of $9.0 million used for capital expenditures and deposits on equipment, partially offset by net maturities of marketable investment securities of $7.3 million.