Why Digi International Stock Is Back In Focus After Fresh Earnings

Digi International (DGII) is on investors' radar after reporting third quarter 2026 results and updating its outlook. The company posted higher revenue, net income and earnings per share for both the quarter and nine month period.

The company reported third quarter revenue of US$138.67 million compared with US$107.51 million a year earlier. Net income for the quarter was US$15.74 million versus US$10.24 million, with basic earnings per share from continuing operations of US$0.42 compared with US$0.28.

On a diluted basis, earnings per share from continuing operations were US$0.40 compared with US$0.27 a year ago. For many investors, these figures provide a more detailed look at how Digi International stock is tracking against earlier expectations and how profitability trends compare with recent periods.

The earnings release and raised full year 2026 revenue guidance have coincided with a sharp shift in sentiment, with Digi International’s share price return of 91.73% year to date and a 1 year total shareholder return of 154.62% pointing to strong momentum over both shorter and longer periods.

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Digi International now appears to be a stronger business than it was a year ago, yet the share price has risen even faster. The next question is whether that recent surge already reflects the value on offer.

Most Popular Narrative: 14.6% Overvalued

The most followed narrative currently points to a fair value of $72.20 for Digi International compared with the last close of $82.75, which implies a premium based on those assumptions.

The accelerating transition of customers to Digi's subscription-based and recurring revenue solutions, including higher attach rates on IoT products such as cellular routers and infrastructure management devices, points to ongoing double-digit annual recurring revenue (ARR) growth and improved profit margins, boosting both revenue stability and long-term earnings.

Want to see what kind of earnings trajectory and margin profile that recurring revenue shift is built on? The narrative leans on ambitious growth, richer profitability and a future valuation multiple that assumes continued execution.

The fair value estimate in that narrative uses an 8.70% discount rate and blends expected revenue growth, margin expansion and earnings per share targets into a single figure. It also rests on a specific view of how far Digi International can scale subscription revenue against a backdrop of more moderate overall revenue growth and a higher projected P/E in a few years time.

Result: Fair Value of $72.20 (OVERVALUED)

However, Digi International’s story could change quickly if recurring revenue growth slows, or if regional demand softness in areas like APAC and Europe persists.

Next Steps

With sentiment mixed between the recent share price run and questions about valuation, this is a good time to review the data yourself and weigh both the upside potential and the key concerns. To see the balance of risks and rewards that other investors are focused on, start with the 2 key rewards and 1 important warning sign.

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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.