The Big Takeaway From Security Earnings Season: Electronic Access Keeps Winning

The first wave of Q1 2026 earnings calls from companies across the security industry's supply chain reveals a sector navigating genuine opportunity alongside real uncertainty.

Data center demand is reshaping priorities across the channel. The mechanical-to-electromechanical shift in access control is accelerating with no signs of slowing. Security services are under pressure in places, though the reasons vary significantly by company. And virtually every executive on every call cited tariffs and material inflation as a managed headwind rather than a crisis.

Here is what the numbers and the candid moments behind them are telling us.

The two dominant players in commercial access control — ASSA ABLOY and Allegion — reported first quarter results within days of each other, and the strategic takeaway from both is nearly identical: the shift from mechanical to electromechanical access control is accelerating, commercial nonresidential demand remains healthy, and residential continues to struggle.

At ASSA ABLOY, electromechanical products grew 6% organically across regional divisions in Q1 2026 — 7% when Global Technologies is included — outpacing the rest of the business for yet another quarter. CEO Nico Delvaux noted the trend is showing up strongly on the specification side as well, with double-digit electromechanical specification growth in EMEIA and high single digits in Oceania. At Allegion, CEO John Stone was equally consistent in calling electronics "a long-term growth driver" for the company, with Americas electronics revenue up mid-single digits in Q1 and expected to outgrow mechanical for the full year.

ASSA ABLOY's recurring SaaS revenue — sitting primarily within HID and Global Solutions — crossed 6% of total sales and was called out as the fastest-growing segment in the portfolio, a signal of where the company sees its long-term margin opportunity as hardware increasingly pulls software subscriptions behind it. Allegion is moving in the same direction but hasn't reached the same scale of recurring software revenue yet.

On the acquisition front, the two companies are taking notably different approaches. ASSA ABLOY closed its 400th acquisition since its founding, including Sennco, a U.S. provider of asset protection technology for retail security that directly complements its InVue offering. Allegion's headline deal was DCI, a West Coast manufacturer of hollow metal doors and frames — a strategic move to improve competitive positioning against local suppliers rather than an immediately accretive financial play. Allegion also authorized a new $500 million share repurchase program, signaling it sees its own stock as an attractive use of capital alongside bolt-on M&A.

Both companies are navigating the same tariff and inflation environment, and both are responding the same way — price increases. ASSA ABLOY said it expects to push pricing north of 2% for the full year to offset rising costs across steel, copper, zinc and aluminum. Allegion quantified its incremental headwind at approximately 1% of COGS from tariffs and other inflation and said it expects to offset that on a dollar basis through pricing and cost actions, though it stopped short of updating its organic growth guidance to reflect incremental price until those actions are formally announced to customers.

The one area of meaningful divergence is residential. Both companies are dealing with a soft market, but ASSA ABLOY's exposure runs deeper through its HHI business — Kwikset, Baldwin and National Hardware — where the company has eliminated nearly 1,800 positions over the past 18 months to bring costs in line with reduced demand. CEO Delvaux was blunt about the recovery timeline, pointing to a 12-month moving average for new single-family homes in the U.S. that is down 14% and saying a new build recovery "will not happen in the shorter term." Allegion's residential exposure is more limited, and Stone described the market as simply "treading water" on the aftermarket side while new build remains soft.

The message from both companies is consistent and encouraging: spec activity is strong, the pipeline favors electronic access, and the two companies supplying most of the hardware are investing and executing accordingly.

NAPCO

NAPCO Security Technologies reported solid fiscal Q3 2026 results, with total revenue up nearly 12% year-over-year to $49.2 million. Recurring service revenue grew 15.4% to $24.9 million, crossing the $100 million annualized run rate threshold for the first time. Equipment gross margins improved to 28.7%, up from 24.6% in the prior year period. Non-GAAP net income increased 36.9% to $13.9 million, or $0.39 per diluted share.

The headline news was a $16 million litigation settlement recorded in the quarter. Management was tight-lipped on details but said it was glad to have the distraction behind it. With $125 million in cash and no debt, the company said the payout creates no pressure on its dividend program.

On M&A, President and COO Kevin Buchel was notably direct. "We have a lot of bankers who are interested in working with us," he said. "We have a couple that particularly we're interested in, nothing imminent." He outlined the company's acquisition criteria plainly: "Got to be right. We're not going to just do one for the sake of doing it. It's got to check all the boxes — being accretive from day one, paying a fair multiple, utilizing our Dominican factory so we can get the leverage from the factory, wanted to stick in our lane. It has those things, we're interested. There's a couple that we've got our eye on, and we'll keep you posted as things develop."

On tariffs, CFO Andrew Vuono said the company's exposure runs "just under $2 million on an annual basis" at the current 10% rate, with the Dominican Republic manufacturing base limiting broader exposure. The company is pursuing a refund claim through the recently opened portal and said it does not expect tariff costs to increase from current levels.

Following are reports from other security vendors who may be just outside the locksmith industry’s radar but worth watching.

Johnson Controls: Johnson Controls addressed weakness in its security service business during its Q2 2026 earnings call, with CEO Joakim Weidemanis acknowledging the unit was down in the quarter — though no specific figures were provided. The trade-off in Q2 was deliberate: "We were down in security service in the quarter. Margin-wise, we were up. So we're just managing and finding a better balance between price and volume in that part of the business."

ADT: ADT is making its most assertive push ever into the do-it-yourself security market, launching ADT Blue — a new lower-cost product line designed to compete directly with DIY players that have been gaining ground in recent years. The line debuts on ADT's own website in late May before hitting Amazon this summer.

Api Group: APi Group is aggressively expanding its fire and life safety footprint, announcing three acquisitions totaling more than $1 billion in the first quarter alone. The company closed CertaSite in February — an inspection-first fire and life safety provider across the Midwest — and has agreements pending to acquire Ireland-based Wtech Fire Group and Canada's Onyx-Fire Protection Services.

Axon Enterprise: Axon Enterprise is making its most deliberate move yet into commercial security, and the vehicle is Fusus — the video intelligence platform the company acquired two years ago that aggregates disparate camera streams into a single unified interface. Originally positioned as a law enforcement tool, Fusus is now the bridge Axon is using to cross from public safety into enterprise security, and the results are starting to show up in meaningful ways.

Securitas: Securitas delivered its 21st consecutive quarter of operating margin improvement in Q1 2026, with adjusted operating margin reaching 7%. But the headline number that matters most for the company's long-term direction may be the acquisition of Liferaft, a Canadian provider of open-source threat intelligence that Securitas has been quietly working with for five years before pulling the trigger on a full acquisition.

Editor’s Note: This roundup is a culmination of reports from publicly available earnings call transcripts via Seeking Alpha, and AI played a role in writing this roundup.