Digi (DGII) Stock Forecast & Price Target

Digi International is viewed positively because F3Q26 sales of $139 million and adjusted EPS of $0.75 both exceeded consensus, while FY26 guidance for $529 million to $533 million of sales and $2.70 implied adjusted EPS also came in above expectations. Strong demand trends support the thesis, with ARR up 27%+ year over year in guidance, recent ARR at $184 million, and IoT Products & Services and IoT Solutions both showing solid growth momentum. Margin and cash generation also improved, as gross margin reached 64.2%, EBITDA was $34 million, free cash flow was $41 million, and leverage remained modest at about 0.5x.

Digi International is pressured by several fundamental weaknesses, including dependence on limited-source components, third-party wireless networks, and acquisition-driven growth that can be difficult to source and integrate. Its substantial debt obligations and covenant requirements increase financial risk, while competition from better-resourced rivals may compress pricing and erode share, especially as some hardware products approach the end of their life cycles. These issues could disrupt operations, weaken customer relationships, and pressure sales and gross margins, making its IoT Products & Services-led revenue base more vulnerable despite its broad customer and geographic footprint.