Third Fiscal Quarter 2026
Filed Aug 5, 2026Record Quarterly Revenue of $139M, Record End of Quarter ARR of $191M, Quarterly Cash Flow From Operations of $33M
Revenue increased 29%, ARR increased 52%, gross profit margin increased 130 basis points, operating margin increased 260 basis points, and the Company raised fiscal 2026 ARR growth, revenue growth, and Adjusted EBITDA growth outlooks.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Revenue, third fiscal quarterGAAP | $138,670 | – | 29% |
| Cost of sales, third fiscal quarterGAAP | 48,744 | – | – |
| Gross profit, third fiscal quarterGAAP | 89,926 | – | – |
| Gross profit margin, third fiscal quarterGAAP | 64.8% | – | an increase of 130 basis points |
| Sales and marketing expense, third fiscal quarterGAAP | 29,061 | – | – |
| Research and development expense, third fiscal quarterGAAP | 20,325 | – | – |
| General and administrative expense, third fiscal quarterGAAP | 17,645 | – | – |
| Operating expenses, third fiscal quarterGAAP | 67,031 | – | – |
| Operating income, third fiscal quarterGAAP | 22,895 | – | – |
| Operating margin, third fiscal quarterGAAP | 16.5% | – | an increase of 260 basis points |
| Other expense, net, third fiscal quarterGAAP | (1,637) | – | – |
| Income before income taxes, third fiscal quarterGAAP | 21,258 | – | – |
| Income tax provision, third fiscal quarterGAAP | 5,518 | – | – |
| Net income, third fiscal quarterGAAP | $15,740 | – | 54% |
| Net income per common share, basic, third fiscal quarterGAAP | $0.42 | – | – |
| Net income per common share, diluted, third fiscal quarterGAAP | $0.40 | – | 48% |
| Weighted average common shares, basic, third fiscal quarterGAAP | 37,776 | – | – |
| Weighted average common shares, diluted, third fiscal quarterGAAP | 38,919 | – | – |
| Adjusted net income, third fiscal quarternon-GAAP | $29,116 | – | 50% |
| Adjusted net income per diluted share, third fiscal quarternon-GAAP | $0.75 | – | 47% |
| Adjusted EBITDA, third fiscal quarternon-GAAP | $40,388 | – | 47% |
| Adjusted EBITDA Margin, third fiscal quarternon-GAAP | 29.1% | – | – |
| Annualized Recurring Revenue at quarter endother | $191 million | – | 52% |
| Revenue, nine months ended June 30GAAP | $391,875 | – | – |
| Gross profit, nine months ended June 30GAAP | 249,992 | – | – |
| Operating income, nine months ended June 30GAAP | 56,294 | – | – |
| Net income, nine months ended June 30GAAP | $38,754 | – | – |
| Net income per common share, diluted, nine months ended June 30GAAP | $1.00 | – | – |
| Adjusted net income, nine months ended June 30non-GAAP | $74,258 | – | – |
| Adjusted net income per diluted share, nine months ended June 30non-GAAP | $1.92 | – | – |
| Adjusted EBITDA, nine months ended June 30non-GAAP | $106,364 | – | – |
| Adjusted EBITDA Margin, nine months ended June 30non-GAAP | 27.1% | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| IoT Product & ServicesThe increase consisted of a $12.4 million increase in one-time sales and $7.4 million of recurring revenue growth, with no material impact from pricing. A significant majority of the increase was driven by organic growth from increased customer demand and supported by the Particle acquisition. ARR was $60 million, an increase of 100%, driven primarily by the acquisition of Particle and supported by subscription-base growth across remote management platforms, extended warranty offerings and technical support. | $100 million | – | 25% |
| IoT SolutionsThe increase consisted of an $8.9 million increase in recurring revenue and a $2.5 million increase in one-time sales, with the significant majority of both driven by the Jolt acquisition. ARR was $131 million, an increase of 36%, driven by the Jolt acquisition and growth in existing Solutions businesses. | $39 million | – | 41% |
Fourth Fiscal Quarter & Full Year Fiscal 2026 outlook
- RevenueFourth fiscal quarter: $138 million to $142 million; fiscal 2026: $529 million to $533 million, representing growth of 23-24% versus fiscal 2025
- NoteFiscal 2026 ARR growth of at least 27% versus fiscal 2025
- NoteFiscal 2026 Adjusted EBITDA of $146.0 million to $147.5 million, representing growth of 35-36% versus fiscal 2025
- NoteFourth fiscal quarter Adjusted EBITDA of $40.0 million to $41.5 million
- NoteFourth fiscal quarter adjusted net income per diluted share of $0.75 to $0.78 per diluted share, assuming a weighted average diluted share count of 39.1 million
- NoteExpected impact from interest between $0.02 and $0.03 per diluted share
- NoteTarget of $200 million in both ARR and Adjusted EBITDA within the targeted time horizon
What drove it
- A significant majority of IoT Product & Services revenue growth was driven by organic growth from increased customer demand and supported by the Particle acquisition.
- IoT Solutions recurring-revenue and one-time-sales increases were driven in significant majority by the Jolt acquisition.
- IoT Product & Services operating margin increased 160 basis points to 16.8% of revenue, primarily because heightened inventory-related costs in the prior year did not repeat and operating expense efficiencies improved as volume expanded faster than operating expenses.
- IoT Solutions operating margins increased 570 basis points to 15.7% because operating expense efficiencies improved as volume expanded faster than operating expenses.
- Third-quarter operating cash flow increased primarily because of a decrease in deferred income tax benefits related to accelerated utilization of tax assets caused by the One Big Beautiful Bill Act.
Concerns
- The Company cited an evolving global trade framework and rising component costs, most notably memory.
- The Company identified risks including longer-than-expected sales cycles, potential negative effects on product demand, supply-chain challenges, tariffs, cybersecurity, and the ability to realize synergies and operating benefits from the Jolt and Particle acquisitions.
- The Company had $109 million of outstanding debt at the end of the third quarter and intends to continue deleveraging its balance sheet.
What to watch
- Fourth fiscal quarter revenue guidance of $138 million to $142 million and Adjusted EBITDA guidance of $40.0 million to $41.5 million.
- Progress toward fiscal 2026 ARR growth of at least 27% versus fiscal 2025 and the stated $200 million ARR target.
- The contribution of Particle to IoT Product & Services recurring revenue and ARR, and of Jolt to IoT Solutions revenue and ARR.
- The effect of rising memory costs and the evolving global trade framework on pricing, supply-chain execution, and margins.
- Debt reduction while maintaining acquisitions as a top capital priority.
Balance sheet and cash flow
- Cash and cash equivalents as of June 30, 2026: $27,972; September 30, 2025: $21,902.
- Outstanding debt as of the end of the third quarter: $109 million. Debt net of cash and cash equivalents: $81 million.
- Long-term debt as of June 30, 2026: 108,130; September 30, 2025: 159,152.
- Accounts receivable, net as of June 30, 2026: 62,787; September 30, 2025: 63,453.
- Inventories as of June 30, 2026: 45,010; September 30, 2025: 38,911.
- Total assets as of June 30, 2026: $964,351; September 30, 2025: $922,646.
- Total liabilities as of June 30, 2026: 279,198; September 30, 2025: 286,569.
- Total stockholders’ equity as of June 30, 2026: 685,153; September 30, 2025: 636,077.
- Cash flow from operations in the third quarter of fiscal 2026: $33 million; third quarter of fiscal 2025: $24 million.
- Net cash provided by operating activities for the nine months ended June 30, 2026: $110,419; 2025: $79,958.
- Net cash used in investing activities for the nine months ended June 30, 2026: (50,568); 2025: (2,148).
- Net cash used in financing activities for the nine months ended June 30, 2026: (53,553); 2025: (85,291).
- Net increase (decrease) in cash and cash equivalents for the nine months ended June 30, 2026: 6,070; 2025: (7,406).
Analysis
Digi reported third fiscal quarter revenue of $138,670, up 29% from $107,514, alongside a 130-basis-point increase in gross profit margin to 64.8% and a 260-basis-point increase in operating margin to 16.5%. GAAP net income was $15,740, up 54%, and diluted EPS was $0.40, up 48%. On a non-GAAP basis, adjusted net income reached $29,116 and adjusted EBITDA reached $40,388, with Adjusted EBITDA Margin of 29.1% versus 25.6% in the prior-year quarter.
Both operating segments grew. IoT Product & Services reported $100 million of revenue, up 25%, with a $12.4 million increase in one-time sales and $7.4 million of recurring revenue growth. The Company attributed a significant majority of the increase to organic demand and support from Particle. IoT Solutions generated $39 million of revenue, up 41%, with Jolt driving the significant majority of both the $8.9 million recurring-revenue increase and the $2.5 million one-time-sales increase.
Recurring revenue and margins were central features of the release. Quarter-end ARR was $191 million, up 52%, including $60 million in IoT Product & Services ARR, up 100%, and $131 million in IoT Solutions ARR, up 36%. IoT Product & Services operating margin increased 160 basis points to 16.8%, while IoT Solutions operating margins increased 570 basis points to 15.7%. The Company cited non-recurrence of prior-year inventory-related costs in Product & Services and operating expense efficiencies in both segments.
Cash generation remained substantial, with third-quarter cash flow from operations of $33 million versus $24 million in the prior-year quarter. For the nine months ended June 30, net cash provided by operating activities was $110,419, while investing activities used (50,568) and financing activities used (53,553). Cash and cash equivalents were $27,972 at June 30, 2026, and the Company reported $109 million of outstanding debt, stating an intention to continue deleveraging while retaining acquisitions as a top capital priority.
Management raised fiscal 2026 outlook. It now anticipates ARR growth of at least 27%, revenue of $529 million to $533 million, and Adjusted EBITDA of $146.0 million to $147.5 million. Fourth-quarter guidance calls for revenue of $138 million to $142 million, Adjusted EBITDA of $40.0 million to $41.5 million, and adjusted net income per diluted share of $0.75 to $0.78 per diluted share. The guide is framed against durable demand for hardware-enabled software solutions, while the Company also noted rising component costs, most notably memory, and an evolving global trade framework.
Management, verbatim
Digi set new records for revenue, end of quarter ARR, and profit in our fiscal third quarter. Growth in ARR reflects achieving ROI for our customers through remote presence and control over their mission-critical and business-critical assets. Strong execution across the Company is creating operating leverage. Cash generation remained strong in the quarter, further strengthening our balance sheet and enhancing our acquisition flywheel.
Ron Konezny, President and CEO
Not in the filing
stated, not guessed- Prior-quarter revenue, income, EPS, ARR, segment revenue, margin, and cash-flow comparisons were not reported.
- Free cash flow was not reported.
- Share repurchases, dividends, and other capital-return amounts were not reported.
- Fourth fiscal quarter gross margin, operating expenses, tax rate, GAAP net income, and GAAP EPS guidance were not reported.
- Fiscal 2026 gross margin, operating expenses, tax rate, GAAP net income, and GAAP EPS guidance were not reported.
- A previous release outlook section was not provided, so formal actual-versus-prior-guidance comparisons are unavailable.
- Prior-year dollar values for ARR and segment ARR were not reported.
- Total debt beyond the stated outstanding debt and long-term debt line was not separately reported.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.