AAOI vs DGII: Which Is the Better Buy in 2026?
Last updated August 2026
Short answer
AAOI is the larger of the two ($7.57B market cap): the incumbent the market prices for continued execution (19.77x forward earnings, beta 3.69). DGII is the smaller challenger ($2.63B), actually pricier on forward earnings (24.90x): more room to run, but more to prove. The real question is which set of drivers you believe, and whether owning one (or both) leaves you over-concentrated.
AAOI vs DGII: the tie-breaker metrics
Same yardstick, side by side (as of August 2026). Valuation lined up like this is most meaningful for two names in the same corner of the market, which these are. Figures are approximate; verify before investing.
| Metric | AAOI | DGII | What it tells you |
|---|---|---|---|
| Market cap | $7.57B | $2.63B | Size. The larger name is the incumbent; the smaller has more room to grow and more to prove. |
| Forward P/E | 19.77 | 24.90 | Valuation on next year's expected earnings, the same yardstick for both. Lower is cheaper for that growth; higher means the market is paying up. |
| Beta | 3.69 | 0.96 | Volatility vs the market. Above 1 swings harder than the index; below 1 is steadier. Higher beta means bigger drawdowns to hold through. |
| Price vs 52-week range | 35% of range | 85% of range | Where today's price sits between the 52-week low and high. Near the high is momentum with less margin of safety; near the low is out of favor or a discount, depending on why. |
| Price / book | 6.73 | 3.95 | How much you pay over book value. Very high can signal an asset-light, high-return business or a rich price. |
Reading it: AAOI is the cheaper of the two on forward earnings, but cheaper is not the same as better. Pair the valuation with growth (how far the forward P/E sits below the trailing P/E) and risk (beta) before you decide.
Before you buy: how AAOI and DGII affect your concentration
The metrics above tell you which is the marginally better business. The bigger risk for most people is not picking the slightly worse stock, it is over-concentrating. AAOI and DGII share themes, so owning both, or adding either to what you already hold, can quietly push a large share of your portfolio into one bet.
This is the part a generic comparison page cannot answer, because it depends on what you own. Connect your brokerage and Walnut shows your real, combined AAOI and DGII exposure, flags overlap with your existing positions, and tells you if adding one would tip you past a concentration you are comfortable with, read-only by default, with your login staying at your broker. Walnut is not an investment adviser.
What does Applied Optoelectronics (AAOI) do?
Applied Optoelectronics, Inc. designs and manufactures optical communications products across two main markets: data-center transceivers (including 400G, 800G, and emerging 1.6T modules used in AI and cloud networks) and cable television (CATV) equipment such as DOCSIS 4.0 amplifiers and lasers. The company is vertically integrated, producing many of its own lasers and optical subassemblies, and positions itself as a US-based alternative to Asian optical suppliers for hyperscale customers building AI infrastructure.
What does Digi International (DGII) do?
Digi International designs and sells cellular routers, gateways, embedded modules, and connectivity hardware, paired with software and managed services that keep IoT devices online and remotely managed. Its two reporting lines are IoT Products & Services (the embedded modules and networking hardware) and IoT Solutions (subscription offerings like SmartSense environmental monitoring, the Ventus managed network-as-a-service business, and the Jolt operations platform). Customers span industrial, retail, medical, transportation, and enterprise networking, where uptime and remote device management matter more than raw device cost.
AAOI vs DGII: how do they differ?
Both fit overlapping themes, but they are not interchangeable. The useful comparison is which set of drivers and risks you want exposure to.
- AAOI drivers: 800G and 1.6T data-center ramp; Hyperscale customer commitments.
- DGII drivers: Recurring-revenue mix shift; Margin and EBITDA expansion.
Which fits which kind of investor
A faster-growing, richer-valued name usually swings harder, so it suits a longer horizon and a higher tolerance for volatility; a steadier, more cash-generative business suits a more conservative or income-minded investor. The honest test is which set of risks you could hold through a drawdown: Customer concentration is severe: a small number of hyperscalers have historically driven the large majority of revenue, so a single procurement shift could sharply cut sales, as an earlier Amazon fallout showed. For DGII, hardware revenue is cyclical and sensitive to channel-partner inventory levels, which can cause quarterly revenue to swing in either direction.
AAOI or DGII: which should you pick?
Growth-minded investors who believe the theme has years to run tend to accept the richer multiple for more upside; value-minded investors lean toward the cheaper forward earnings and steadier profile. Pick AAOI if you believe its drivers more; DGII if you believe its. Many investors hold both, but since they share themes, that is a concentrated bet, not diversification. Decide deliberately and check overlap. For the full detail, see the AAOI and DGII guides.
AAOI vs DGII: the full fundamentals
AAOI. AAOI trades at a high price-to-sales multiple (well above the broader communications-equipment average), reflecting expectations for the AI-driven 800G and 1.6T ramp rather than current earnings. It is smaller than optical peers like Coherent, Lumentum, and Fabrinet, so its valuation is more sensitive to a few large orders and to shifts in hyperscaler spending.
DGII. At roughly ~$2.8B in market cap against ~$475M in trailing revenue, DGII trades near a mid-single-digit price-to-sales multiple, richer than a pure hardware maker but consistent with a business shifting toward recurring revenue. The premium leans heavily on continued ARR growth and margin expansion delivering the guided EBITDA. If subscription momentum stalls, the multiple has room to compress toward its more hardware-like history.
Headline figures (approximate, July 2026): AAOI shows revenue (ttm) ~$500-560 million, q1 2026 revenue ~$151 million (up ~51% YoY), 2026 revenue guidance ~$1.1 billion+, non-gaap gross margin ~29%; DGII shows revenue (ttm) ~$475M, revenue (fy2025) ~$431M, annualized recurring revenue ~$184M, adj. ebitda (fy2026 guide) ~$135M.
The bottom line: AAOI vs DGII
AAOI and DGII are related but distinct: same themes, different businesses and risks. Neither wins in the abstract; the right pick is whichever thesis you actually believe, sized so you are not over-concentrated in one theme. Walnut can show your combined AAOI and DGII exposure against your real portfolio. It is not an investment adviser.
Wondering how AAOI or DGII fits the portfolio you already own? Walnut is an AI investing app that connects your brokerage read-only and answers questions like that about your actual holdings: overlap, concentration, and how each position tracks the S&P 500. Compare the best AI portfolio analyzers or see the best AI investing apps in 2026.
Investing in Applied Optoelectronics with AI
Connect the broker you already use and ask Walnut's AI how AAOI fits what you actually hold: whether you own it already through a fund, what it would do to your concentration, and how it has tracked the S&P 500. Read-only by default, and you approve anything before it reaches your broker.
FAQ
What is the difference between AAOI and DGII?
+
Applied Optoelectronics, Inc. Digi International designs and sells cellular routers, gateways, embedded modules, and connectivity hardware, paired with software and managed services that keep IoT devices online and remotely managed. They show up together because they share investment themes, but they are different businesses, so the better fit depends on which thesis you are expressing.
Is AAOI or DGII the better stock?
+
Neither is universally better. AAOI is the larger incumbent; DGII is the smaller challenger and looks pricier on forward earnings. Walnut is informational, not investment advice. Compare what each does, the tie-breaker metrics above, and the risks, then decide which fits your thesis and what you already own.
Which is cheaper, AAOI or DGII?
+
On forward P/E (as of August 2026), AAOI trades at 19.77x and DGII at 24.90x, so AAOI is the cheaper of the two on next year's expected earnings. A lower multiple is not automatically the better buy: a richer valuation can be justified by faster growth, and a lower one can reflect real risk. Weigh the multiple against how fast each business is compounding.
Should you own both AAOI and DGII?
+
Because they share themes, owning both concentrates you in that theme. That can be intentional (a focused bet) or accidental (less diversification than it looks). Walnut can show your combined exposure across both, and whether adding either over-concentrates you, before you buy.
What are the risks of AAOI vs DGII?
+
AAOI: Customer concentration is severe: a small number of hyperscalers have historically driven the large majority of revenue, so a single procurement shift could sharply cut sales, as an earlier Amazon fallout showed. The company remains unprofitable at the net level with gross margins near 29%, and heavy capital spending plus a $250 million ATM equity program and convertible notes create meaningful dilution and balance-sheet risk. Competition from much larger and better-funded optical vendors, rapid technology transitions (400G to 800G to 1.6T), and the possibility that hyperscalers slow AI capex all add uncertainty. The stock is highly volatile and trades at a rich price-to-sales multiple that assumes flawless execution. DGII: Hardware revenue is cyclical and sensitive to channel-partner inventory levels, which can cause quarterly revenue to swing in either direction. The IoT connectivity space is crowded and fragmented, with larger and better-capitalized rivals competing on price and scale. Digi carries debt from past acquisitions, so higher-for-longer interest rates weigh on net income and limit flexibility. Much of the growth narrative depends on continued ARR gains, and any slowdown in subscription adds would undercut the margin-expansion case. As a smaller-cap name, the stock can be volatile and thinly followed relative to large-cap tech.
Walnut is informational, not investment advice. This page is descriptive and not a recommendation to buy or sell AAOI or DGII; figures are approximate and dated (as of August 2026). Verify current data before investing.