Audinate (ASX: AD8) is set to acquire US-based cloud video platform Iris Studio for up to USD 28 million, comprising USD 20 million upfront in cash and USD 8 million in service contingent cash and scrip over three years. The transaction is expected to close mid-July 2025.

Why it matters: We view the acquisition as value-neutral and consistent with Audinate’s strategy to grow its nascent video networking and control segment. While Iris only launched its white-label platform in April 2025, it adds a skilled AV team and commercial agreements with 14 camera OEMs.

  • We see long-term potential for a push to platform-wide control interoperability across visual and audio. Iris’ browser-based camera control aligns with Dante Director, enabling remote camera troubleshooting, artificial intelligence-tracking and uniform controls, enhancing usability and productivity.
  • Iris will launch publicly in September 2025. While promising, it is too early to incorporate into our earnings forecasts. We expect capital expenditure to increase at a 13% CAGR to $50 million over the next decade as part of ongoing investments. We do not expect a step change in capex from the deal.

The bottom line: We maintain our $19 fair value estimate for narrow-moat Audinate. The small size of Iris and its early stage makes the acquisition immaterial to our valuation, but strategically sound. Shares screen as materially undervalued, trading 60% below our valuation.

  • We believe the market is overreacting to temporary headwinds as signs of deteriorating competitiveness or a saturated market. In our view, the slowdown reflects short-term inventory build-ups and strategic shift from hardware to software, and not a structural weakness.
  • The AV industry is early in its digital transition, particularly in video. We see video as a more uncertain opportunity than audio due to heavier data requirements in video delivery. Iris thus offers blue sky, with little downside risk, but not a near-term driver.

Iris studio acquisition is immaterial to our valuation for Audinate

We expect Audinate’s strategy to primarily focus on accelerating the secular transition toward digital audio networking. Secondarily, we expect Audinate to focus on building out its nascent business for digital video networking.

Audinate’s Dante protocol has become the world’s most widely used protocol for digital audio networking and boasts a more-than 12 times lead over its nearest competitor, Ravenna, in terms of the number of products enabled with the protocol. Given Dante’s dominant market share, we see little remaining upside for Audinate from gaining incremental market share from direct competitors in digital audio networking. However, we do expect Audinate to use its network effect, its existing customer relationships, and its scale on research and development to accelerate the AV industry’s transition toward digital audio networking. Specifically, we expect Audinate to continue creating new hardware and software solutions that unlock new device use cases and to continue developing new software solutions for AV professionals. We estimate Audinate has around 10% market share in audio devices, which leaves Audinate with a large and highly winnable market opportunity, as the industry digitizes. Additionally, we expect Audinate to gain significant pricing power, especially in its software segment, as its network effects continue to strengthen.

We also expect Audinate to continue developing its nascent digital video networking business, although we view this as a more uncertain and likely less profitable opportunity. Video networking has unique challenges compared with audio, primarily due to the larger data intensity inherent in video data delivery. Because of this, digitally networked video uses various compression technologies that are usually not compatible with each other and therefore hinders the establishment of network effects. However, we believe network effects from Dante’s audio solutions will help pull in AV professionals, who are already familiar with the Dante protocol, which in turn pulls in original equipment manufacturers, or OEMs.

Audinate bulls say

  • Audinate is the world’s most widely used protocol for digital audio networking and boasts a more-than 10 times lead over its nearest competitor. Audinate’s leadership position in audio is supported by network effects.
  • Audinate has a large and highly winnable market opportunity, as it helps digitize the AV industry, which is still in the early stages of digitizing.
  • Audinate’s entry into digital networking for video is showing exceptional growth and promise and may provide a second leg of growth comparable in size to audio.

Audinate bears say

  • The AV industry is still in the early stages of digitizing, meaning there is high uncertainty as to how large the market opportunity will ultimately be.
  • Audinate has only recently entered the digital networking market for video and may face significant established competition.
  • Audinate’s end markets are highly cyclical.

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