Digi International’s Q3 2026: ARR Rises, Margins Expand as Jolt and Particle Boost the Growth Engine

By a seasoned finance writer • August 5, 2026

Overview at a glance

The Digi International Inc. ticker DGII reported a robust third fiscal quarter for 2026, with revenue of $139 million—up 29% year over year—and EPS of $0.40 per diluted share, up 48%. Adjusted net income came in at $29 million (adjusted EPS $0.75, +47%), and adjusted EBITDA was $40 million, up 47%. The company also highlighted margin expansion: gross margin at 64.8% (+130 basis points) and operating margin at 16.5% (+260 bps). End-quarter ARR reached $191 million, a 52% year-over-year increase. Note: the release does not provide a formal revenue forecast or a disclosed EPS consensus, so readers should watch for how estimates evolve alongside guidance.

Accompanying the results is the contribution from recent acquisitions—Jolt Software (full-quarter inclusion) and Particle Industries (post-January 2026 acquisition) — which Digi frames as the engine behind both the ARR growth and the margin expansion. The press release emphasizes a “flywheel” effect from acquisitions and a continued push toward a recurring-revenue model.

Key metrics in the quarter

Revenue: $139 million, up 29% YoY.
Gross margin: 64.8%, up 130 basis points.
Operating margin: 16.5%, up 260 basis points.
Net income: $16 million, up 54% YoY.
EPS (diluted): $0.40, up 48% YoY.
Adjusted net income: $29 million, up 50% YoY; Adjusted diluted EPS: $0.75, up 47%.
Adjusted EBITDA: $40 million, up 47%.
ARR: $191 million at quarter end, up 52% YoY.
Notes: Fiscal 2026 results include Jolt for the full quarter and Particle after January 2026; Fiscal 2025 results include Jolt after its August acquisition and do not include Particle.

Takeaways: what it portends for Digi and peers

The headline numbers reinforce a narrative Digi has been shaping for several quarters: blend of inorganic growth and an evolving product mix is lifting recurring revenue and enabling meaningful margin expansion. The ARR metric, in particular, signals customer stickiness and a stronger revenue base that should be more resilient to cyclic headwinds. In a sector where IoT platforms and remote asset management are increasingly mission-critical, Digi’s model—pulling in high-margin hardware/services with an expanding software layer—maps well to a long-tail growth thesis for the space.

On the execution front, the acquisitions appear to be feeding the top line while contributing to profitability—an important distinction in a market that often sees growth come with margin compression. The equity story here hinges on integration discipline: can Jolt and Particle be productized and cross-sold effectively, and can the company sustain its margin uplift as megatrends like remote monitoring and asset intelligence scale?

One gap to monitor is guidance. The release does not publish an EPS consensus or a formal revenue forecast, which means investors will rely on future updates to calibrate expectations versus analysts’ models. In the meantime, the absence of a hard forecast leaves Digi’s stock to be priced more on execution momentum and ARR trajectory than on a single forward-looking number. Whether this creates an earnings surprise later depends on how much incremental revenue and cost leverage the acquisitions actually unlock.

What to watch next, for Digi and the sector

For Digi, the next milestones look like sustained ARR acceleration, gross-margin discipline, and the ability to convert adjusted EBITDA gains into free cash flow that can fund additional bolt-ons without diluting value. For sector peers—IoT hardware and software players—the message is that growth can be meaningful without sacrificing margins if acquisitions are integrated with a clear commercial plan and a scalable go-to-market strategy. If Digi maintains this cadence, it could help set a benchmark for how to balance top-line expansion with profitability in a durable, recurring-revenue framework.

Non-GAAP disclosures and disclosures practice

The release notes that reconciliations of non-GAAP measures to their GAAP analogs appear at the end of the release, alongside updates to the calculation of adjusted net income and adjusted net income per share. Readers should compare these figures with peers who may present different adjustments to understand the underlying operating performance.