NASDAQ:DGII

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Digi International Falls 15.6% After Hours as Fiscal 2027 Outlook Disappoints Despite Record Q4

Digi International (NASDAQ: DGII) shares fell about 15.6% in after-hours trading despite record fourth-quarter revenue and strong earnings growth, as investors appeared to focus on a softer near-term outlook.

Fourth-quarter revenue increased 25% year over year to a record $143 million. Net income rose 50% to $15 million, while adjusted net income increased 53% to $30 million. Adjusted EPS climbed 47% to $0.78 and adjusted EBITDA rose 43% to $42 million.

Annualized recurring revenue reached a record $197 million, up 30%. For the full fiscal year, revenue increased 24% to $535 million, adjusted EBITDA rose 37% to $148 million and adjusted EPS increased 38% to $2.70.

Both operating segments delivered strong growth. IoT Products & Services Q4 revenue increased 28% to $105 million, while IoT Solutions revenue rose 20% to $38 million. Operating margins expanded in both businesses.

For fiscal 2027, Digi expects revenue growth of 10%-15%, ARR growth of at least 15% and adjusted EBITDA growth of 12.5%-17.5%. However, first-quarter revenue is projected at $140-$144 million, roughly flat to slightly lower sequentially, while adjusted EPS is expected at $0.71-$0.75 versus $0.78 in Q4.

Digi also plans to acquire Disruptive Technologies for $130 million in cash, funded through its revolving credit facility, subject to regulatory approval.

The 15.6% after-hours decline appears to reflect expectations for slower growth and sequentially lower earnings entering fiscal 2027, rather than weakness in the reported quarter, which delivered record revenue, ARR and strong margin expansion.
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Author
European Investor 11-12-26