One AI Stock We Like More Than NVDA

Everyone pictures AI living inside giant data centers.

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But the next wave is happening somewhere else entirely: out on factory floors, inside delivery trucks, across energy grids and medical devices. All of it needs to collect data, process it locally, and connect back to the network. That's edge AI, and it's a different opportunity than the one most investors are watching.

This company builds exactly that infrastructure. And it's in the middle of a transformation most of the market hasn't priced in yet. Here’s why our Zen Ratings system is currently flagging it as a Strong Buy.

And it’s a ticker you’ve probably never heard of…

Digi International (NASDAQ: DGII).

Let’s talk about what’s so great about it. 

From Hardware Sale to Recurring Revenue

For decades, Digi sold rugged routers and connectivity hardware the old-fashioned way: you bought the box, paid once, and that was the end of the revenue stream.

That model is being rebuilt. Digi is shifting toward subscription-style recurring revenue; the kind that shows up year after year, whether or not a customer buys new hardware. That shift typically comes with richer margins and a higher valuation multiple, if the market gives it credit.

The Particle Acquisition

The centerpiece of that transformation arrived in January 2026, when Digi acquired Particle Industries for $50 million.

Particle brings AI-ready, embedded edge devices coupled with wireless services and a cloud-based solution supporting over 240,000 developers across 14,000 companies. It's now been folded directly into Digi's offering under the Particle by Digi name.

The deal is expected to contribute $20 to $22 million in ARR and $13 to $14 million in revenue for fiscal 2026. This one acquisition meaningfully expanded Digi's recurring revenue base in a single move.

The Numbers Are Already Showing It

This isn't a thesis waiting on results. Q1 fiscal 2026 delivered revenue of $122 million, up 18% year-over-year, adjusted EBITDA up 23%, and ARR of $157 million, up 31% year-over-year … all record highs.

Management also reaffirmed full-year guidance of 23% ARR growth and 14-18% revenue growth, with a target of $200 million in ARR and adjusted EBITDA by fiscal 2028. CEO Ron Konezny described demand across key verticals as "improving and increasing," expressing confidence in the sustainability of the AI infrastructure buildout.

What Our Ratings Are Saying

Digi scores an A overall, a Strong Buy in our system, and the top-rated name in the B-rated communication equipment industry.

The standout grade is Momentum, which comes in at an A. Bs across Growth, Safety, and our AI-timeliness factor round out a fundamentally sound profile with a system-detected signal pointing toward continued outperformance.

The Cs in Value and Financials are worth keeping an eye on. The Value Grade means you're not getting this cheap … you're paying for the growth story, not picking it up at a discount. The Financials score likely reflects acquisition-related costs working through the balance sheet in the short term.

There’s one other category where DGII is also scoring a C. Click here to see the full Component Grade breakdown.

The Bottom Line

Digi International is turning a decades-old hardware business into a recurring-revenue platform built for the edge AI era … and the operating results already prove it's working. The market's reaction so far says it hasn't noticed.

[Add DGII to your watchlist] 

[See all top-rated Communication Equipment stocks]

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