What Security Industry Earnings Season Is Telling Us

Access Control's Two Giants Send the Same Message: Electronics Are Winning

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.

For security integrators selling into commercial construction, 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.

Johnson Controls Reports Security Service Softness Amid Deliberate Repricing

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.

Weidemanis attributed the decline to an intentional strategic rebalancing, saying the company had been "digging into our security business as a service business deeper" and found that "over the years, the balance between price and volume probably hasn't been appropriately managed." He characterized security service as the least differentiated part of JCI's service portfolio, contrasting it directly with Applied HVAC, which he described as "the most differentiated."

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."

On the question of potential asset sales — which analysts pressed on following outside reports — Weidemanis declined to confirm or deny any specific transactions. "No one ever has the perfect portfolio at any one point in time," he said, adding that different parts of the portfolio "play different roles — some playing more offense, some being more defense players contributing very, very nicely to profitability and cash flow." He closed the door on specifics: "We continue to review our portfolio with the goal of strengthening shareholder value, and we'll keep you posted as we make progress on that."

ADT Moves Into DIY Market, Wrestles With Subscriber Losses

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.

CEO Jim DeVries acknowledged the company has been slow to this market, but said the timing is now right: "Historically, because of some contractual obligations that we had with some of our suppliers, we were limited in how assertive we could be in this market. Now that those contracts have been renegotiated, the economics are different for us today and give us a little more elbow room." Chief Business Officer Omar Khan was more blunt about what ADT had been doing wrong: "For too long, we as ADT have ceded this market where we feel like we have a strong right to play and to win."

The ADT Blue hardware and software was built from scratch specifically for DIY customers — how they buy, how they activate and how they interact with the technology. The longer-term play is conversion: get DIY customers in the door at lower price points, then migrate them to professionally installed systems where margins are significantly higher. Khan said ADT Blue will eventually incorporate Origin AI sensing technology — a Wi-Fi-based ambient intelligence platform ADT acquired in February — to differentiate itself from commodity camera-only competitors.

ADT lost ground on new subscriber additions in Q1, and the reasons are worth unpacking. The company added 161,000 gross subscribers, down year-over-year, and DeVries didn't sugarcoat it: "I would have liked to have seen stronger adds for the quarter." The culprits: one unnamed dealer underperformed significantly; ADT sold off its multifamily business last October, eliminating roughly 200,000 subscribers from its base; a co-marketing arrangement with State Farm is no longer generating adds; ADT deliberately tightened its credit standards, turning away customers it previously would have accepted; and the company pulled back spending on high-cost lead generation channels, cutting third-party affiliate fees by $100 per installation. DeVries estimated more than half the shortfall versus last year was a conscious choice, not a demand problem.

ADT is routing customer service calls and chats through AI before a human ever gets involved, and the numbers are moving quickly. In the first quarter, 45% of chat interactions were resolved by AI without a human. By the end of April, that number was 60%. On the phone side, 16% of calls were fully contained by AI in Q1 — meaning no human needed — and that jumped to 25% by end of April. CFO Jeff Likosar said the savings are already significant: "It's in the millions, many millions, even tens of millions if I count the benefit of reducing the quantity of truck rolls." ADT is using AI to handle routine customer service so its human staff can focus on situations that actually require a person — emergencies, complex technical issues and the like.

APi Group Goes on $1 Billion Acquisition Spree in Fire and Life Safety

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. Wtech adds fire sprinkler and suppression capabilities across Europe; Onyx establishes a stronger position in Canada, which CEO Russ Becker specifically called out as "an attractive fire and life safety and electronic security market."

Each acquisition is at a different stage of the inspection-first journey APi has been on for several years. Becker described CertaSite as essentially already there — roughly 95% inspection and service revenue. Onyx he placed at roughly the same stage as APi itself. Wtech he characterized as more traditional, with heavier project revenue and significant runway to build out recurring inspection and service work.

On top of the three larger deals, APi completed four additional bolt-on acquisitions in Q1 and expects to deploy approximately $250 million more in bolt-on M&A through the rest of the year, including opportunities in international markets and elevator and escalator services.

Becker was candid about what differentiates APi in a competitive acquisition market, saying the company specifically targets family-owned businesses looking for a permanent home rather than a financial exit: "We're looking for sellers who are really interested in finding the forever home for their people. If all they're interested in is finding the highest price, then they should sell their business to a private equity-backed firm." He said Wtech's CEO, in front of his own leadership team, called APi "our forever home" after the deal was struck.

Data centers are fueling demand but APi is deliberately not over-relying on them. Becker said the sector will represent roughly 10% to 11% of revenue by year end, but was explicit: "We are not over-indexing on the data center space." He described growth as broad-based across advanced manufacturing, healthcare, higher education and critical infrastructure as well.

NAPCO Security Technologies Posts Strong Q3, Settles Litigation, Eyes Acquisitions

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.

Axon Pushes Into Commercial Security With Fusus at the Center

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.

The biggest signal is a $40 million deal closed in April with one of the world's largest telecom providers — one of the first three or four names you'd think of, according to President Josh Isner, who declined to be more specific. The deployment centers on Fusus, and Isner described the core problem it solves directly: "All of these businesses have dozens of thousands, hundreds of thousands, and in some cases, millions of video streams around the world. And as they brought those online, a lot of times, they've siloed across different systems, and they don't have a really unified user experience. So we're able to come in with Fusus and bring everything in together in one place." Axon Body Mini and Axon Outpost, the company's license plate reader, are also part of the deal.

Outpost is worth watching separately. Isner said the product is actively displacing incumbent license plate reader systems, calling out concrete performance advantages: "Relative to incumbents in the space, our product is outperforming them in terms of lane coverage, plate reads, performance in bad weather." He added simply: "It's cheaper." The data privacy story is becoming an equally powerful competitive weapon. CEO Patrick Smith described a scenario playing out with customers who discovered their incumbent vendor's data practices: "We didn't realize our license plate reads were being shared with a federal agency that frankly, not popular with our constituents." Axon's counter-pitch is straightforward, in Smith's words: "It's your data, we don't have any right title or interest to it."

The enterprise security push extends to physical infrastructure protection. Axon's Dedrone counter-drone platform, originally built for law enforcement, is now being sold directly into commercial markets. Isner said the company "is in conversations with many of the largest infrastructure providers to protect their ever-growing portfolio of sites and data centers," with Dedrone bookings up 500% year-over-year across all customer segments.

The through-line connecting all of this is Fusus. In law enforcement, it pulls together body camera feeds, license plate readers, 911 alerts and drone video onto one map. In enterprise, it does the same with existing corporate camera infrastructure. CTO Jeff Kunins put it plainly: Fusus is "a socket to let them get more value out of the investments they've already made in these other cameras." For security integrators watching Axon's trajectory, that framing is significant — Axon isn't asking enterprises to rip and replace their existing camera infrastructure. It's positioning Fusus as the intelligence layer on top of whatever is already there.

Securitas Bets on Intelligence as Technology Transition Drives Margin Improvement

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.

CEO Magnus Ahlqvist described the strategic intent plainly: "We are able to leverage and to scale that unique competence across our large client base." The goal is to move Securitas beyond physical presence and technology installation toward what Ahlqvist calls being "intelligence-led" — helping clients with "dynamic management on the risks and the threats that they are facing in their business." Liferaft is currently breakeven, growing at nearly 30% organically, with Ahlqvist describing the profitability posture as deliberate: "Essentially breakeven today, but that's also very much based on reinvesting everything in continued growth, which I think is the right approach." The company's Capital Markets Day in London on June 16 is expected to flesh out what the intelligence-led model looks like in practice.

The technology and solutions business grew 4% in Q1, below management's expectations, with North America dragging on results. The culprit was unusual: "I have not mentioned any winter storms in the past as a CEO of the company. But here, we had 3." The storms prevented technicians from reaching client sites and created productivity ripple effects in subsequent weeks. The underlying demand picture, however, remains intact. "When I look at the order intake, it is really positive development in Q1 compared to the same period last year. Back order also had a very positive development." Ahlqvist expressed confidence in a Q2 recovery. A separate headwind came from the loss of a large Pinkerton temporary contract, which hit North America guarding growth as well.

The transition from traditional guarding to technology and solutions remains the core financial story at Securitas. Ibero-America was the standout this quarter with technology and solutions growing 12% organically. The company's active portfolio management program in Europe — a multi-year drag on organic growth as the company exited unprofitable contracts — is expected to conclude in Q2. Ahlqvist was candid about what that milestone means: "It will feel really, really good to wrap that up as a project in the second quarter." After that, the focus shifts fully toward profitable growth.