Raspberry Pi (LSE:RPI) has been on a one-way ticket higher in recent months. It’s up 168% in the past six months, and 73% in the past year. The stock was on my watchlist in Q1, and I bought it earlier this year. Even with the strong move, I think it’s up there as the best growth share prospect for the coming year. But why?
Developing as a business
Most people know Raspberry Pi for its tiny, affordable computers used by students and hobbyists. However, that perception is increasingly out of date. Today, the company’s products are embedded in small-scale computing applications in a wide variety of sectors, ranging from industrial automation systems through to medical devices. In many ways, Raspberry Pi has evolved from a teaching tool into a platform company for computing.
The company makes money primarily by selling single-board and related hardware. Importantly, customers building products around Raspberry Pi often remain within the ecosystem for years, creating recurring demand for replacement units. It has also been expanding its semiconductor business, which is one of the reasons why the stock has been tearing higher this year.
In all the right places
The latest annual results from late March showed that, “for the first time, semiconductor device volumes exceeded those of boards and modules, with 8.4 million semiconductor units sold”. This area of the market is super hot at the moment with AI applications, so it’s a great sign that the business is benefiting. It broadens its addressable market while also attracting UK investors seeking exposure to AI without buying US mega-cap tech stocks.
Another factor has been the financial momentum, leading investors to increase earnings expectations. Revenue popped 25% last year, with profit before tax up 63%. Management recently upgraded profit expectations, with first-half 2026 adjusted EBITDA expected to almost match what analysts previously expected for the entire year.
Keeping the party going
Despite the huge rally, I think there’s a credible case that the stock could continue to climb over the next year. For a start, Raspberry Pi is benefiting from the rise of Edge AI. While most investors focus on giant data centres and expensive AI chips, many AI applications will eventually run on local devices. This is where Raspberry Pi should really shine, as it can offer low-cost, energy-efficient hardware.
Further, industrial adoption remains in its early stages. Once a manufacturer designs a Raspberry Pi module into a product, switching costs can be meaningful. This should mean that revenue keeps growing, as new clients turn into larger repeat clients.
Finally, the company is still relatively small, with a market cap of £1.61bn. From my perspective, it can still rally further before it becomes too large and stunts growth.
Of course, investors should not ignore the risks. For example, management has already highlighted uncertainty regarding DRAM availability and costs, which could put pressure on profit margins. There is also the possibility that enthusiasm around AI-related demand proves temporary. But even with these concerns, I think it is definitely one of the best UK growth shares out there at the moment, and I believe investors could consider buying it.
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Jon Smith has no positions in the shares mentioned.
