Digi International (DGII) has just posted Q2 2026 results with revenue of US$130.7 million and basic EPS of US$0.30, alongside trailing 12 month revenue of US$475.1 million and EPS of US$1.16 that frame the quarter in a broader earnings run rate. Over recent quarters the company has seen revenue move from US$104.5 million in Q2 2025 to US$130.7 million in Q2 2026, while quarterly basic EPS has ranged from US$0.27 to US$0.31 across that period as earnings and margins adjust around a trailing 12 month net income of US$43.2 million. Taken together, these numbers point to a business where profitability and margins are central to how investors will read this latest update.

See our full analysis for Digi International.

With the headline figures in place, the next step is to see how this earnings print lines up with the widely held narratives about Digi International's growth, quality, and risk profile.

TTM margins at 9.1% as earnings growth cools

• On a trailing 12 month basis, net profit margin is 9.1% compared with 10.1% a year earlier, while one year earnings growth of 2.6% sits well below the 28.9% per year average over five years.
• Consensus narrative highlights a shift toward higher margin recurring revenue and secure edge solutions, and the margin figures show a mixed picture:
  • ARR now represents about 30% of trailing 12 month revenue. However, the move from a 10.1% to 9.1% net margin indicates that the transition has not yet translated into higher overall profitability.
  • Five year earnings growth of 28.9% per year paired with just 2.6% over the last year suggests the move toward subscription models may still be in a bedding in phase for headline margins.

Revenue up to US$130.7m, ARR still doing the heavy lifting

• Quarterly revenue has moved from US$104.5 million in Q2 2025 to US$130.7 million in Q2 2026, while trailing 12 month revenue stands at US$475.1 million.
• Bulls argue that recurring revenue and IoT demand can support robust growth, and the current numbers speak to both the opportunity and the work ahead:
  • Revenue growth is reported to be forecast at about 9.7% per year, which is slower than an 11.4% per year US market figure, so bullish expectations rely heavily on ARR growing faster than overall sales.
  • Bullish forecasts see revenue reaching US$589.4 million and earnings of US$77.4 million by 2029, yet the latest 12 month revenue of US$475.1 million and net income of US$43.2 million show that step up still needs to be earned through consistent execution.

On these numbers, bulls are focusing on whether ARR growth can turn today’s steady topline into the earnings ramp they are expecting, not just this quarter’s beat or miss. 🐂 Digi International Bull Case

54x P/E and DCF fair value of US$70.06 set a high bar

• The stock is trading on a trailing P/E of 54x, compared with a US Communications industry average of 36x and a peer average of 79.1x, while the current share price of US$62.03 sits below a DCF fair value of US$70.06 and an analyst price target of US$65.17.
• Bears question whether earnings can justify that multiple, and the current profitability metrics give them some support as well as some pushback:
  • Net margins at 9.1% over the last year, down from 10.1%, feed into the cautious view that higher compliance, security and supply chain costs could keep pressure on profitability at a time when the valuation is already above the industry P/E.
  • At the same time, trailing earnings growth of 28.9% per year over five years and forecasts for similar earnings growth of about 28.83% per year challenge the idea that the business is structurally capped, which is why the DCF fair value of US$70.06 still sits above today’s US$62.03 share price.

If you are weighing that 54x P/E against the margin trend, skeptics would say this is exactly where any slip in profitability matters most for the story. 🐻 Digi International Bear Case

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Digi International on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

With both risks and rewards in play, are you comfortable relying only on headline figures, or do you want to check the details yourself and decide how the story stacks up for your portfolio using the 3 key rewards and 1 important warning sign.

See What Else Is Out There

The combination of a 54x P/E, easing net margins and slower recent earnings growth shows that investors are paying a premium for a stock with cooling momentum.

If that mix of high expectations and softer profit trends feels uncomfortably tight, you might want to shift focus toward 51 high quality undervalued stocks that pair more modest valuations with stronger support from current fundamentals.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.