diff --git a/build_tools/ci/cpu_comparison/run.py b/build_tools/ci/cpu_comparison/run.py
index 1259f032e..6346024d1 100755
--- a/build_tools/ci/cpu_comparison/run.py
+++ b/build_tools/ci/cpu_comparison/run.py
@@ -1439,15 +1439,103 @@ def __init__(self):
             )
         )
 
+        performance_tests = [
+            {
+                "M": 512,
+                "N": 512,
+                "K": 4096,
+                "use_ukernel": False,
+                "peano_opt_level": 2,
+                "outline": False,
+            },
+            {
+                "M": 512,
+                "N": 512,
+                "K": 4096,
+                "use_ukernel": False,
+                "peano_opt_level": 2,
+                "outline": True,
+            },
+            {
+                "M": 512,
+                "N": 512,
+                "K": 4096,
+                "use_ukernel": False,
+                "peano_opt_level": 3,
+                "outline": False,
+            },
+            {
+                "M": 512,
+                "N": 512,
+                "K": 4096,
+                "use_ukernel": False,
+                "peano_opt_level": 3,
+                "outline": True,
+            },
+            {
+                "M": 512,
+                "N": 512,
+                "K": 4096,
+                "use_ukernel": True,
+                "peano_opt_level": 3,
+                "outline": True,
+            },
+            {
+                "M": 512,
+                "N": 4096,
+                "K": 512,
+                "use_ukernel": False,
+                "peano_opt_level": 3,
+                "outline": True,
+            },
+            {
+                "M": 512,
+                "N": 4096,
+                "K": 512,
+                "use_ukernel": True,
+                "peano_opt_level": 3,
+                "outline": True,
+            },
+            {
+                "M": 4096,
+                "N": 512,
+                "K": 512,
+                "use_ukernel": False,
+                "peano_opt_level": 3,
+                "outline": True,
+            },
+            {
+                "M": 4096,
+                "N": 512,
+                "K": 512,
+                "use_ukernel": True,
+                "peano_opt_level": 3,
+                "outline": True,
+            },
+        ]
+
         # Some bf16 Performance tests:
-        for M, N, K, use_ukernel in [
-            (512, 512, 4096, False),
-            (512, 512, 4096, True),
-            (512, 4096, 512, False),
-            (512, 4096, 512, True),
-            (4096, 512, 512, False),
-            (4096, 512, 512, True),
-        ]:
+        for test in performance_tests:
+            M = test["M"]
+            N = test["N"]
+            K = test["K"]
+            use_ukernel = test["use_ukernel"]
+            peano_opt_level = test["peano_opt_level"]
+            outline = test["outline"]
+
+            outlining_string = "--iree-amdaie-enable-function-outlining=" + str(
+                int(outline)
+            )
+            peano_opt_level_string = f'"-O{peano_opt_level}"'
+            aie_compilation_flags = [
+                outlining_string,
+                f"--iree-amd-aie-additional-peano-opt-flags={peano_opt_level_string}",
+            ]
+
+            name_suffix = "O" + str(peano_opt_level)
+            if outline:
+                name_suffix += "_outline"
+
             self.register(
                 Matmul(
                     M,
@@ -1457,8 +1545,12 @@ def __init__(self):
                     "f32",
                     use_ukernel=use_ukernel,
                     n_repeats=2,
+                    aie_compilation_flags=aie_compilation_flags,
+                    name_suffix=name_suffix,
+                    additional_labels=["PerformanceCorrectness"],
                 )
             )
+
             self.register(
                 MatmulBenchmark(
                     M,
@@ -1470,6 +1562,8 @@ def __init__(self):
                     use_ukernel=use_ukernel,
                     n_repeats=5,
                     n_kernel_runs=100,
+                    aie_compilation_flags=aie_compilation_flags,
+                    name_suffix=name_suffix,
                 )
             )
 
diff --git a/compiler/plugins/target/AMD-AIE/iree-amd-aie/Target/AIETarget.h b/compiler/plugins/target/AMD-AIE/iree-amd-aie/Target/AIETarget.h
index 2bbc679a6..7ec51fad6 100644
--- a/compiler/plugins/target/AMD-AIE/iree-amd-aie/Target/AIETarget.h
+++ b/compiler/plugins/target/AMD-AIE/iree-amd-aie/Target/AIETarget.h
@@ -56,7 +56,7 @@ struct AMDAIEOptions {
   bool enableVectorizationPasses{true};
   bool enableCoalescingLoops{false};
   bool enableCollapsingUnitDims{false};
-  bool enableFunctionOutlining{false};
+  bool enableFunctionOutlining{true};
   bool insertLoopAroundCoreBlock{false};
   bool matmulElementwiseFusion{false};
   AMDAIEDevice AMDAIETargetDevice{AMDAIEDevice::npu1_4col};
diff --git a/compiler/plugins/target/AMD-AIE/iree-amd-aie/Target/XCLBinGen.cpp b/compiler/plugins/target/AMD-AIE/iree-amd-aie/Target/XCLBinGen.cpp
index b44d977c8..45967a2a8 100644
--- a/compiler/plugins/target/AMD-AIE/iree-amd-aie/Target/XCLBinGen.cpp
+++ b/compiler/plugins/target/AMD-AIE/iree-amd-aie/Target/XCLBinGen.cpp
@@ -92,7 +92,7 @@ FailureOr<std::vector<std::string>> makePeanoOptArgs(
       // Extend the max limit of the search depth in BasicAA
       "-basic-aa-max-lookup-search-depth=10",
       //
-      "-O2",
+      "-O3",
       //
       "--inline-threshold=10",
       // missing from libc
diff --git a/compiler/plugins/target/AMD-AIE/iree-amd-aie/Transforms/test/disable_linalg_function_outlining.mlir b/compiler/plugins/target/AMD-AIE/iree-amd-aie/Transforms/test/disable_linalg_function_outlining.mlir
index 277eef0e5..d95869a75 100644
--- a/compiler/plugins/target/AMD-AIE/iree-amd-aie/Transforms/test/disable_linalg_function_outlining.mlir
+++ b/compiler/plugins/target/AMD-AIE/iree-amd-aie/Transforms/test/disable_linalg_function_outlining.mlir
@@ -1,14 +1,13 @@
 // This test demonstrates enabling / disabling function outlining in the default
-// pipeline (note that below the pipeline is not specified explicitly with
-// the flag --iree-amdaie-tile-pipeline). We check 3 paths:
+// pipeline. We check 3 paths:
 //
 // 1) Explicitly disabling linalg function outlining with
-//             --iree-amdaie-enable-function-outlining=0
+//              --iree-amdaie-enable-function-outlining=0
 //
 // 2) Explicitly enabling linalg function outlining with
-//             --iree-amdaie-enable-function-outlining=1
+//              --iree-amdaie-enable-function-outlining=1
 //
-// 3) Not specifying the flag at all, which should use the default value (0).
+// 3) Not specifying the flag at all, which should use the default value (1).
 
 
 // 1) Explicitly disabled:
@@ -36,4 +35,4 @@ func.func @matmul(%lhs: tensor<64x64xbf16>,
 
 // CHECK-DISABLED-NOT: func.call
 // CHECK-ENABLED:      func.call
-// CHECK-DEFAULT-NOT:  func.call
+// CHECK-DEFAULT:      func.call