Digi International’s shares are demonstrating considerable strength following the release of an outstanding quarterly report and a key strategic acquisition. The Internet of Things (IoT) specialist has significantly outperformed market expectations and is making deliberate progress in expanding its recurring revenue streams.
Strategic Acquisition to Enhance Market Position
A major development underpinning the company’s growth strategy is its acquisition of Jolt Software in a deal valued at approximately $145.5 million. This move is designed to strategically expand Digi’s SmartSense business division. The company anticipates realizing synergies that will contribute an additional $11 million to its adjusted EBITDA by the conclusion of 2026. This acquisition highlights a focused shift toward higher-margin services within the operational intelligence and compliance automation sectors, which is directly reflected in an upgraded 2025 outlook.
Third Quarter 2025 Results Exceed Forecasts
The market’s positive reaction is fueled by Digi’s powerful financial results for the third quarter of fiscal 2025. The corporation posted revenue of $108 million, representing a 2 percent year-over-year increase and surpassing analyst projections of $106.17 million. On a per-share basis, the adjusted profit climbed to $0.53, soundly beating the consensus estimate of $0.47.
A critical performance indicator, the Annual Recurring Revenue (ARR), surged by an impressive 30 percent to reach $30 million. Concurrently, Digi achieved a record adjusted EBITDA of $28 million, resulting in a record-high EBITDA margin of 25.6 percent. The firm also strengthened its balance sheet by reducing its debt load by $30 million and is now targeting a net cash position by the end of 2025.
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Revised Outlook and Analyst Sentiment
Incorporating the benefits of its recent strategic moves, Digi has issued an updated forecast for the full year 2025. The guidance now includes an anticipated 28 percent growth in recurring revenue, an approximate 1 percent increase in overall sales, and an expected 8 to 9 percent rise in EBITDA.
This optimistic trajectory is echoed by market experts. Currently, five Wall Street analysts collectively rate Digi International’s stock as a “Moderate Buy.” This consensus is comprised of three “Buy” recommendations and two “Hold” advisories. The average price target among these analysts is set at $38.75, suggesting a potential 11.6 percent upside from the recent price of $34.72. From a technical analysis perspective, both short-term and long-term moving averages are issuing bullish signals. The stock exhibited an average daily volatility of 2.58 percent over the previous week.
Profitable Growth Outpacing the Industry
Digi’s operational efficiency and profitable expansion are clearly demonstrated in its key metrics. The company’s Return on Equity (ROE) stood at 6.9 percent for the trailing twelve months. More notably, its net income has grown by 31 percent over the past five years, dramatically outperforming the industry average growth rate of 7.3 percent during the same period. This indicates a highly effective corporate strategy of reinvesting profits to fuel further expansion.
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