Digi Raises Outlook as Revenue Growth Accelerates
Adjusted EBITDA reached a record $40 million, rising 47% from a year earlier.
The internet-of-things connectivity provider Digi International Inc. (DGII) posted record quarterly revenue as growth accelerated to 29% in its fiscal third quarter.
Revenue growth quickened from 25% in the preceding quarter and 18% in the first quarter, while gross margin expanded 130 basis points from a year earlier to 64.8%. Operating margin rose 260 basis points to 16.5%, extending a broader improvement in profitability.
Revenue reached $139 million, up from $108 million a year earlier and $131 million in the preceding quarter. Net income increased 54% to $16 million, while diluted earnings rose to $0.40 a share from $0.27. Adjusted earnings climbed 47% to $0.75 a share.
IoT Product & Services revenue rose 25% to $100 million, led by increases of $12.4 million in one-time sales and $7.4 million in recurring revenue. The segment's annual recurring revenue doubled to $60 million, primarily because of the Particle acquisition, with growth in the subscription base also contributing. Its operating margin expanded to 16.8% as prior-year inventory costs did not repeat and revenue outpaced operating-expense growth.
IoT Solutions revenue increased 41% to $39 million, with Jolt accounting for most of the gains in recurring revenue and one-time sales. Solutions ARR grew 36% to $131 million, while operating margin jumped 570 basis points to 15.7% as the business gained operating-expense leverage.
Digi raised its fiscal 2026 revenue outlook to $529 million to $533 million, representing growth of 23% to 24%, from its previous forecast of 20% to 22%. The company now expects ARR growth of at least 27% and adjusted EBITDA of $146.0 million to $147.5 million, up 35% to 36%. For the fourth quarter, Digi expects revenue of $138 million to $142 million and adjusted EBITDA of $40.0 million to $41.5 million.
Operating cash flow rose to $33 million from $24 million a year earlier, while net debt fell $30 million during the quarter to $81 million as outstanding borrowings declined. The lower debt load left Digi entering its final fiscal quarter with expanding margins and a higher full-year forecast.