Digi's New Module: A Bet on Security as the Future of IoT

MINNEAPOLIS, MN – July 01, 2026 – Digi International (NASDAQ: DGII) recently announced the global availability of its Digi ConnectCore 95 SMARC system-on-module (SOM), a move that signals a significant strategic shift in the embedded systems market. While new hardware launches are routine, this one stands apart. Digi is betting that the future of the Internet of Things (IoT) lies not in selling bare components, but in delivering comprehensive, secure, and managed solutions out of the box. By bundling advanced hardware with five years of integrated cloud services and a robust security framework, the company is directly addressing the escalating complexity, cost, and regulatory pressures facing device manufacturers today.

Built on the powerful NXP i.MX 95 processor, the module brings high-performance computing, on-device artificial intelligence, and next-generation Wi-Fi 6E connectivity to the edge. However, the real story for investors and executives is how Digi is packaging these capabilities. This launch is less about a single product and more about a strategic pivot to a service-oriented model designed to solve critical business problems, transforming a hardware sale into a long-term partnership.

A Proactive Answer to a New Regulatory Minefield

The landscape for manufacturers of any “product with digital elements” is being reshaped by formidable new regulations, most notably the European Union’s Cyber Resilience Act (CRA). With key deadlines fast approaching, the CRA mandates a seismic shift in responsibility. Manufacturers will be legally obligated to ensure cybersecurity throughout a product's entire lifecycle, not just at the point of sale. This includes requirements for “security by design,” providing a Software Bill of Materials (SBOM), managing vulnerabilities, and delivering free and timely security updates for at least five years.

For most Original Equipment Manufacturers (OEMs), meeting these demands represents a monumental challenge. It requires building and maintaining complex infrastructure for security monitoring, over-the-air (OTA) updates, and continuous compliance reporting—an endeavor that can add months of engineering effort and years of recurring maintenance costs. Failure to comply carries severe penalties, including fines up to €15 million or 2.5% of global turnover and the potential for product recalls.

This is the critical business problem Digi’s new offering is designed to solve. The ConnectCore 95 SMARC is positioned as “CRA-ready from day one.” It achieves this by integrating two key components directly into the module. First, the built-in Digi TrustFence security framework provides a hardware root of trust, secure boot, encrypted storage, and automated SBOM generation. Second, every module includes a five-year subscription to Digi ConnectCore Cloud Services, which handles OTA updates, fleet monitoring, and device provisioning. This bundled approach effectively offloads the undifferentiated heavy lifting of compliance from the OEM, allowing them to focus on their core product innovation while building on a pre-validated, secure foundation.

Beyond the Board: A New Standard for Embedded Systems

Digi’s strategy marks a stark departure from the traditional model in the competitive System-on-Module market. Historically, major players have focused on providing powerful “bare hardware” and the necessary software drivers (a Board Support Package, or BSP). The OEM was then responsible for the complex and costly task of integrating everything else: the operating system, security layers, cloud connectors, and lifecycle management tools.

With the ConnectCore 95, Digi is challenging this paradigm. By bundling hardware, security, and long-term cloud services into a single price, the company is offering cost predictability and dramatically reducing the total cost of ownership. This all-in-one model is designed to accelerate time-to-market by eliminating the months typically spent on piecemeal integration and validation. As one industry analyst noted, “OEMs are increasingly looking for partners who can reduce complexity, not just sell them a processor.”

This integrated approach could set a new benchmark for the industry, pushing competitors to move beyond component sales toward more holistic solutions. Andreas Burghart, Sr. Product Manager at Digi, framed the value proposition clearly in the company’s announcement. “It’s more than a SOM. It delivers compute and connectivity along with security and managed cloud services as regulations like the CRA raise the bar for manufacturers of connected products around the world,” he stated. “No trials, no additional cost, no separate contracts, no infrastructure to build.” This statement encapsulates a powerful go-to-market strategy aimed at simplifying the customer journey from design to long-term maintenance.

Powering the Intelligent Edge

While the integrated service model is the strategic centerpiece, the underlying hardware is formidable. The module leverages NXP’s i.MX 95 processor, which features up to six Arm Cortex-A55 cores and, most notably, an integrated NXP eIQ Neutron Neural Processing Unit (NPU). This NPU delivers up to 2 Tera Operations Per Second (TOPS) of AI performance directly on the device.

This on-device AI capability is critical for the next wave of innovation in Digi’s target markets of medical, industrial, and retail. It enables sophisticated machine learning applications—such as predictive maintenance in a factory, real-time patient monitoring in a hospital, or intelligent checkout systems in a store—to run with extremely low latency and without constant reliance on cloud connectivity. Furthermore, the module includes pre-certified tri-band Wi-Fi 6E, which operates in the less-congested 6 GHz band, providing the high-speed, reliable wireless connection essential for data-intensive and mission-critical applications. The “pre-certified” designation is a key benefit, saving OEMs from a costly and time-consuming RF design and certification process.

Digi also provides flexibility through multiple form factors. The new module is available in the open-standard SMARC 2.2 format, ensuring interoperability, as well as Digi’s own compact SMTplus form factor for space-constrained designs. This technical prowess, combined with a 10+ year product longevity commitment, ensures that OEMs are not only building on a powerful platform but also a stable one.

The Investor's View: A Strategic Shift to Integrated Services

From an investment perspective, the launch of the Digi ConnectCore 95 SMARC is more than a product release; it is a clear indicator of Digi International’s long-term strategy. The company is deliberately moving up the value chain from a hardware component supplier to an integrated solutions and services provider. This pivot has several attractive financial implications.

First, by bundling five years of cloud services, Digi is building a recurring revenue component directly into its hardware sales, creating stickier customer relationships and a more predictable financial model. Second, by solving the complex and costly problem of regulatory compliance, Digi is addressing a high-value pain point, which can support stronger margins compared to commoditized hardware. Finally, this strategy positions Digi as an essential partner in the high-growth IoT and edge AI markets, where security and lifecycle management are no longer optional features but fundamental requirements for doing business.