Digi International (NASDAQ:DGII) reported what executives described as a “strong start” to fiscal 2026, driven by record quarterly revenue, expanding annualized recurring revenue (ARR), and higher profitability. Speaking on the company’s first-quarter earnings call, President and CEO Ron Konezny said performance was broad-based across product lines and end markets, while CFO Jamie Loch outlined updated full-year guidance that incorporates the January acquisition of Particle.
Record first-quarter results and ARR growth
Konezny said the company set several all-time quarterly records in fiscal first quarter 2026, including:
- Revenue: $122 million, up 18% year over year
- ARR: $157 million, up 31% year over year, marking the fifth consecutive quarter of double-digit ARR growth
- Adjusted EBITDA: $32 million, up 23% year over year
- Adjusted EBITDA margin: 25.8%, a quarterly record
- Cash generation: $36 million for the quarter
Integration progress: Jolt, SmartSense, and “SmartSense One”
Konezny said the integration of Jolt is progressing well. Digi has combined the SmartSense and Jolt organizations and offerings under a unified platform called SmartSense One. He said customers are responding positively to the combined platform and that the cross-selling opportunities the company anticipated are “materializing.”
In response to a question about Jolt synergies and integration, Loch said both field integration and back-office integration efforts are “proceeding right on target,” including coordination across sales teams as well as internal functions such as finance and HR. He added that Digi’s acquisition integration timeline is tracking as planned and that nothing has changed the company’s outlook.
Particle acquisition: expanding “embedded-as-a-service”
Digi also discussed its acquisition of Particle, announced on Jan. 27. Konezny described Particle as a leading IoT solution provider with “AI-ready” embedded edge devices, wireless services, and a cloud-based platform supporting more than 240,000 developers across 14,000 companies. He said the deal expands Digi’s edge-to-cloud capabilities and increases its addressable market in IoT device management.
According to management, Particle adds about $20 million in ARR and helps balance recurring revenue contributions across Digi’s two reporting segments. Particle will be integrated into Digi’s IoT products and services segment and will not be reported separately. Konezny said the OEM solutions business is now named Particle by Digi.
On customer traction, Konezny pointed to Particle’s enterprise user base, naming Jacuzzi, Goodyear, and Watsco among more than 150 enterprise customers.
Executives also discussed the strategic rationale for Particle in the context of how Digi sells solutions. Konezny said Digi’s prior solution model had largely focused on delivering enclosed devices with software, services, and connectivity—citing Opengear, cellular routers, and offerings such as SmartSense and Ventus. Particle, he said, increases Digi’s exposure to “embedded-as-a-service,” where Digi’s technology is embedded inside customers’ machines and sold as a service that includes device software, connectivity, cloud insights, and in some cases software updates for the customer’s device.
Asked whether Digi intends to prioritize Particle growth or profitability, Konezny said Digi’s focus is “profitable growth,” not “growth at all costs.” He added that Particle’s “born as a service” culture—covering processes, go-to-market motion, and pricing—was a key attraction, and that Digi plans to bring those capabilities into its OEM solutions organization.
Demand environment: vertical strength and data center momentum
On the demand environment, Konezny said Digi benefits from exposure to multiple verticals and is seeing strength in areas including mass transit, utilities, and retail digital signage. He also said Digi is having success in data centers, particularly through its Opengear product line.
When asked to compare conditions to the prior quarter, Konezny said demand trends are “improving and increasing,” while noting market attention on how long AI infrastructure buildout will last.
Guidance update, margin commentary, and supply-chain risks
Loch said Digi’s fiscal 2026 guidance reflects an updated operational outlook and includes the Particle acquisition. The company expects:
- ARR growth: 23%
- Revenue growth: 14% to 18%
- Adjusted EBITDA growth: 17% to 21%
Management quantified Particle’s expected contribution to the fiscal 2026 guide as approximately $20 million to $22 million in ARR, $13 million to $14 million in revenue, and $1 million to $2 million in adjusted EBITDA. After synergies, Digi expects Particle to contribute $5 million to fiscal 2027 adjusted EBITDA.
For the fiscal second quarter, Digi guided to revenue of $124 million to $128 million and adjusted EBITDA of $31.5 million to $33.0 million. Adjusted net income per diluted share is expected to be $0.56 to $0.59, assuming 38.8 million diluted shares.
Loch said a reporting change is new for fiscal 2026: the company is now including interest expense in adjusted net income per diluted share, and it has adjusted comparison periods accordingly. He said interest is expected to impact adjusted EPS by $0.05 to $0.06 in fiscal Q2, and that the impact of interest in fiscal Q1 was $0.06.
On gross margins, Loch said increasing ARR as a percentage of revenue should continue to support margin expansion over time, noting that results can vary quarter to quarter based on product mix. He characterized historical sequential expansion as roughly 10 to 15 basis points, with the expectation that the trend can continue “all else constant.”
Executives also outlined risks and uncertainties affecting the year. Konezny cited market volatility related to tariffs and commodity pricing, as well as “highly publicized memory challenges” tied to AI expansion. He said Digi’s priority is securing supply allocations for certain memory components (including DDR4, DDR5, and eMMC) used in newer products, while noting legacy products rely on older technology with less pressure. Konezny said Digi is working to qualify alternative suppliers and that pricing is typically a secondary issue, as the company seeks to avoid disrupting broader software and services relationships with customers.
Despite those uncertainties, Konezny reiterated confidence in Digi’s longer-term goals of reaching $200 million in ARR and $200 million in adjusted EBITDA by the end of fiscal 2028, adding that strategic acquisitions could accelerate the timeline.
About Digi International (NASDAQ:DGII)
Digi International Inc is a provider of Internet of Things (IoT) connectivity products and services designed to link devices to networks and applications securely. The company develops a broad range of networking hardware, including cellular and Ethernet routers, gateways, embedded modules and adaptors, as well as accessories and antennas. Digi’s solutions enable businesses to deploy remote monitoring, control and automation systems across diverse industries such as transportation, utilities, healthcare, retail and industrial manufacturing.
In addition to its physical devices, Digi offers cloud-based management software and professional services that simplify device configuration, monitoring and over-the-air updates.
