Digi International is evolving into a higher-margin IoT software platform, and ARR-led growth plus disciplined M&A support meaningful upside from current levels.
Overview
Digi International is a long-established Industrial IoT connectivity and software provider that serves OEMs, enterprise IT teams, and compliance-driven operators across industrial automation, utilities, medical equipment, retail logistics, and public transportation. The company operates through IoT Products & Services and IoT Solutions, combining hardware sales with recurring SaaS, compliance, and managed connectivity subscriptions. **The key investment story is Digi’s successful migration from a hardware-centric model to a software-enabled, recurring-revenue platform**, with ARR growing to $184 million in fiscal Q2 2026 and gross margin reaching a record 64.0%. Fiscal 2025 revenue was $430.2 million, and management raised fiscal 2026 guidance to approximately $516 million to $525 million, implying 20% to 22% growth, alongside adjusted EBITDA of roughly $133 million to $136 million. **Recent acquisitions of Jolt Software and Particle materially strengthen the company’s recurring revenue mix and cross-sell potential**, especially in compliance software and embedded-as-a-service. At around $72.15 per share, the report argues valuation remains attractive relative to the quality of revenue, cash conversion, and margin profile, with a probability-weighted 5-year value of $112.74. Near-term catalysts include Particle integration, continued ARR scaling, and Q3 FY26 results on August 5, 2026.