Digi (DGII) Stock Forecast & Price Target

Digi International is benefiting from a clear acceleration in recurring revenue, with ARR reaching $191 million, up 52% year over year, while revenue of $139 million and adjusted EPS of $0.75 both beat consensus in F3Q26. Margin expansion also supports the bullish view, as gross margin rose to 64.8% and adjusted EBITDA margin improved to 29.1%, reflecting stronger operating leverage, better expense efficiency, and a favorable mix shift across IoT Products & Services and IoT Solutions. Management’s FY26 guidance for $529 million to $533 million of revenue and $146.0 million to $147.5 million of adjusted EBITDA, alongside about 0.5x leverage and a $28 million cash balance, suggests disciplined growth with manageable balance-sheet risk.

Digi International is facing a fundamentally pressured outlook because its business depends on limited-source components, outsourced manufacturing, and carrier networks that it does not control, making it vulnerable to supply disruptions, pricing increases, and technical failures. Its reliance on acquisitions also creates integration risk, while substantial debt and covenant requirements add financial fragility that can constrain flexibility if operations weaken. Competitive intensity and products nearing the end of their life cycles further threaten revenue, market share, and gross margins, especially since the company generates most revenue from its IoT Products & Services segment in the United States.