Digi International (DGII) Benefited from Faster Than Expected Recurring Services Revenue

Core Insights - Conestoga Capital Advisors reported solid returns in US equities for 2025, with double-digit gains across major indices, despite underlying volatility and market leadership shifts [1] - The Small Cap Strategy returned -1.89% net-of-fees in Q4 2025, underperforming the Russell 2000 Growth Index's 1.22% return [1] Company Overview: Digi International Inc. (NASDAQ:DGII) - Digi International Inc. specializes in Internet of Things technology, focusing on connectivity products, services, and solutions [2][3] - As of February 18, 2026, Digi's stock closed at $49.64, with a one-month return of 13.59% and a 12-month increase of 41.67% [2] - The company has a market capitalization of $1.87 billion [2] Performance Highlights - Digi's stock performed well in Q4 2025, driven by faster-than-expected growth in recurring services revenue and improved margins due to a shift towards software and subscriptions [3] - Demand visibility in industrial and infrastructure markets, along with disciplined expense management, contributed to earnings upside [3] Investment Sentiment - Digi International Inc. was held by 16 hedge fund portfolios at the end of Q3 2025, an increase from 11 in the previous quarter [5] - Despite acknowledging Digi's potential, the company believes certain AI stocks present greater upside potential and lower downside risk [5]