Shares of Penguin Solutions, Inc. (PENG) tumbled 5.85% in pre-market trading on Wednesday following the release of its third-quarter fiscal 2025 financial results. The AI company's performance fell short of expectations, particularly in its key Advanced Computing segment, raising concerns among investors.

Penguin Solutions reported net sales of $324.25 million for the quarter, missing analyst projections of $328.81 million. The company's Advanced Computing segment, which represents its largest revenue source, saw a significant decline with sales dropping to $132.5 million from $145 million in the prior-year period. Despite beating earnings expectations with adjusted earnings per share of $0.47 compared to the anticipated $0.33, the revenue miss and weak performance in its core business overshadowed the positive aspects of the report.

Chief Financial Officer Nate Olmstead cited supply chain constraints and a challenging macroeconomic environment as key factors impacting the company's performance. These issues are creating longer lead times for certain components, affecting Penguin's ability to ramp up existing and new customer projects. Despite raising its full-year adjusted earnings guidance to $1.80 per share (plus or minus $0.05), up from the previous $1.60 (plus or minus $0.10), investors seem to be focusing on the near-term challenges facing the company. The stock's sharp decline in pre-market trading suggests that market participants are particularly concerned about the revenue miss and the outlook for the Advanced Computing segment.