Recurring revenue and AI tools are lifting Digi higher
- Q3 fiscal 2026 revenue rose 29% year over year to $139 million.
- Annualized recurring revenue, or ARR, reached a record $191 million.
- Digi launched DANI, a new artificial intelligence network tool.
- Jolt and Particle acquisitions are hitting targets and driving growth.
- The main test is whether high demand continues when supply chain urgency fades.
The pivot is speeding up with AI
Digi is moving from mostly selling connected devices once to selling hardware, software, and services that repeat over time. That plan looked even stronger in Q3 fiscal 2026. Revenue grew 29% year over year to a record $139 million, and ARR, which means annualized recurring revenue, reached a record $191 million.
The company is close to its $200 million ARR target well ahead of the original 2028 timeline. Management also confirmed that the recent Jolt and Particle acquisitions are hitting their targets. This successful integration removes a major worry for investors.
Digi is expanding its software tools. It recently launched DANI, a natural language artificial intelligence tool that lets users talk to their network equipment. This could drive future subscriptions and keep customers locked into the Digi platform.
The bear case has shifted. With integration risks fading, the worry is whether Digi can keep attaching so many solutions to its products if supply chain urgency cools down. The stock also has a price question, so good execution may already be partly expected.
Hardware today, subscriptions tomorrow
Digi makes money in two main ways. It sells IoT products, such as embedded modules, routers, and other connectivity gear. It also sells software and services that help customers manage connected devices, monitor sites, and run operations.
The better part of the model is recurring revenue. A customer that uses SmartSense, Ventus, Digi Remote Manager, Jolt, or Particle may keep paying for software, cloud tools, and managed service support. That can make revenue more predictable than one-time hardware orders.
The weak point is that Digi still depends on product demand, supply chains, and customer budgets. If customers delay projects or use up extra inventory, hardware sales can slow. If the newer software assets do not grow on their own, the recurring revenue story may look less strong than the headline ARR growth suggests.
The tools Digi sells
IoT Products & Services
This is the larger segment. It sells connectivity products and related services for customers that need devices linked to networks and cloud systems.
SmartSense by Digi
SmartSense is a monitoring and operations solution inside IoT Solutions. It supports the push toward recurring software and service revenue.
Ventus
Ventus provides managed connectivity offerings. It is one of the recurring revenue engines named in filings.
Digi Remote Manager
Digi Remote Manager helps customers manage connected devices from a central cloud system. It ties hardware customers closer to the software layer.
Jolt Software
Jolt adds task management, workforce management, and labeling tools. Digi bought Jolt in fiscal 2025.
Particle
Particle adds an edge-to-cloud IoT application platform. Digi bought Particle in January 2026 to strengthen OEM solutions.
DANI
Digi Artificial Network Intelligence is a new natural language AI tool. It lets users interact with their network equipment.
Two segments, one shift
The mix is from Q2 fiscal 2026 revenue. IoT Products & Services is still the larger business, while IoT Solutions is the main recurring revenue driver.
What could break the story
Fading supply chain urgency
Medium impact · Medium oddsCurrent growth has been helped by customers feeling urgency around supply chains and data center builds. If that urgency fades, solution attach rates and overall revenue could slow down.
Organic growth is hard to see
Medium impact · Medium oddsDigi reported strong segment growth, but acquisitions helped both segments. Investors need proof that the core business is improving without relying only on bought revenue.
AI adoption and regulation
Medium impact · Low oddsThe company is adding artificial intelligence features like DANI to its products. This brings new risks around responsible use, customer trust, and changing rules that could increase costs.
Cloud security failure
High impact · Low oddsDigi is selling more cloud-based tools and managed services. That makes customer trust central to the model. A breach or service failure could hurt renewals and new sales.
Distributor concentration
Medium impact · Medium oddsDigi disclosed that one distributor customer was 13% of consolidated revenue in fiscal 2025. A change in that customer's buying pattern could show up quickly in reported revenue.
In one breath
What does Digi International do?
Digi sells hardware, software, and services that connect machines, sensors, and remote sites to networks and cloud systems. Its goal is to make more money from recurring software and service fees over time.
Why does ARR matter for DGII?
ARR means annualized recurring revenue. For Digi, it shows how much of the business is tied to repeat software and service payments instead of one-time hardware sales.
What is DANI?
DANI stands for Digi Artificial Network Intelligence. It is a new natural language tool that lets customers interact directly with their network equipment.
Is Digi still a hardware company?
Yes, hardware is still a large part of Digi because IoT Products & Services remains the largest segment. But the strategy is to attach more software and services to that hardware base.
