Digi (DGII) Stock Forecast & Price Target

Digi International Inc. demonstrated a strong financial performance, with Annual Recurring Revenue (ARR) reaching $152 million, reflecting a 31% year-over-year growth, and a notable increase in IoT Solutions sales, which amounted to $32 million, up 23% year-over-year. The company's guidance for the first quarter of FY26 indicates an expected revenue of $114-118 million, an 11.7% increase year-over-year at the midpoint, alongside adjusted EBITDA and EPS projections ranging from $28.5-30.0 million and $0.53-0.57, respectively. Furthermore, Digi closed the fiscal year on a positive note, reporting fourth-quarter sales of $114.3 million, marking an 8.8% year-over-year increase and surpassing previous guidance, while also benefiting from strong demand across multiple product categories and market segments.

Digi International is facing a negative outlook primarily due to several fundamental challenges that impact its financial performance. The company is grappling with lower gross margins from module-oriented acquisitions compared to its recent average, compounded by impending product life cycle expirations that threaten sales and profitability. Additionally, persistent supply chain issues have led to high inventory levels and reduced near-term free cash flow, which, along with global tariffs, have pressured sales and margins, ultimately hindering growth prospects.