Digi International Inc (NASDAQ:DGII) Surpasses Q4 Estimates, Stock Jumps on Strong Outlook

Digi International Inc (NASDAQ:DGII) reported financial results for its fourth fiscal quarter that surpassed analyst expectations, a performance that has been met with a significant positive reaction in after-hours trading.

Quarterly Performance Versus Estimates

The IoT connectivity specialist posted a strong finish to its fiscal year 2025, delivering both revenue and profit that exceeded market forecasts.

• Revenue: The company reported Q4 revenue of $114.3 million, beating analyst estimates of $112.5 million.
• Adjusted Earnings Per Share (EPS): Digi reported non-GAAP EPS of $0.56, solidly above the consensus estimate of $0.52.

This top-and-bottom-line beat demonstrates the company's ability to navigate market challenges while converting sales into profit efficiently. The market's immediate response was decidedly positive, with the stock rising over 13% in after-hours trading following the announcement.

Full Year and Segment Overview

For the full fiscal year 2025, Digi International reported revenue of $430 million, a slight increase of 1% compared to the prior year. More notably, the company showed significant improvement in profitability on an annual basis.

• Net Income: Full-year net income saw a substantial increase of 81%, reaching $41 million.
• Adjusted EBITDA: This metric grew 11% to $108 million for the year.

The company's performance was driven by its two main segments. The IoT Solutions segment showed particularly strong growth, with revenue increasing 23% in the quarter and 13% for the full year, largely fueled by the acquisition of Jolt Software and growth in its SmartSense and Ventus platforms. The IoT Products & Services segment saw a more modest 4% revenue increase for the quarter.

Strategic Focus and Future Outlook

A key highlight from the earnings report was the robust growth in Annual Recurring Revenue (ARR), which reached $152 million at quarter end—a 31% year-over-year increase. This now represents approximately 35% of the company's total revenue, signaling a strategic shift toward more predictable, subscription-based income streams.

Looking ahead, management provided guidance for the first quarter of fiscal 2026 that appears optimistic relative to current analyst projections.

• Q1 2026 Revenue Guidance: $114 million to $118 million (analyst consensus: $116.9 million)
• Full-Year 2026 Revenue Guidance: 10-15% growth, implying a range of $473 million to $495 million (analyst consensus: $467.1 million)

The company also outlined a longer-term ambition to grow its ARR and Adjusted EBITDA to $200 million within the next three years, underscoring a continued strategic focus on high-margin, recurring revenue businesses.

Market Reaction and Investor Sentiment

The double-digit surge in after-hours trading suggests investors are rewarding the company for its earnings beat and confident outlook. The strong performance in high-value metrics like ARR and the raised guidance for the coming year appear to have outweighed any concerns about the company's increased debt load following the Jolt acquisition. The market's reaction positions the stock to potentially recover from its recent negative performance over the past month.

For a detailed look at historical earnings, future estimates, and analyst projections for Digi International, you can review the earnings and estimates page.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, financial analysis, or a recommendation to buy or sell any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.