Well, yes you can't read that as a single number. You can either store the whole lot as a vector of digit characters:
digits_text = fileread('digits.txt');
Or convert that to a vector of numbers in the range 0-9:
digits_numeric = digits_text - '0';
Be aware that digits_numeric will use 4 times as much memory as digits_text to store exactly the same information.
You can also store the digits as 8-bit integers (for half the memory of digits_text) but that may hampers you depending on what you want to do with these digits afterwards.
digits_uint8 = uint8(digits_text) - '0';
