Digi (DGII) Stock Forecast & Price Target

Digi International is benefiting from stronger-than-expected execution, with F3Q26 revenue of $139 million and adjusted EPS of $0.75 both above consensus, while gross margin expanded to 64.8% and adjusted EBITDA margin reached 29.1%, signaling meaningful operating leverage. The company’s core IoT Products & Services segment posted 25% growth to $100 million and its IoT Solutions segment rose 41% to $39 million, supported by recurring revenue gains, rising ARR of $191 million, and improving demand in datacenters, utilities, medical facilities, and mass transit. Management’s FY26 outlook for $529 million to $533 million in sales and $2.70 in adjusted EPS further reinforces confidence that Digi’s mix shift toward higher-quality recurring revenue and efficiency gains can sustain durable growth.

Digi International is challenged by valuation that remains demanding at 17.8x current EV/adj. EBITDA and 20.8x F2027E, leaving limited margin for execution missteps in a competitive IoT market. The business also faces material operational risks from supply chain disruptions, dependence on third-party wireless networks, and the possibility that end-of-life hardware products could pressure sales and gross margins. Its growth profile is further complicated by acquisition-driven expansion and substantial debt obligations with covenant requirements, which could constrain flexibility if integration or demand weakens.