ALLE · Q3 2025 Earnings

Bullish

Allegion

Reported October 23, 2025

30-second summary

30-second take: Revenue grew 10.7% YoY to $1.07B with adjusted EPS of $2.30, and Allegion raised FY2025 adjusted EPS for the second quarter running to $8.10–$8.20 (midpoint raised $0.075 to $8.15, from $8.075) and reported revenue growth to 7.0–8.0%. Organic growth of 5.9% reaccelerated from Q2's 3.2%, with Americas non-res spec activity still doing the work and International revenue +22.5% on acquisitions masking flattish organic. The story is no longer just non-res resilience — it's a programmatic M&A engine ($600M deployed YTD) compounding on a base that's growing organically faster than the FY guide implies.

Headline numbers

EPS

Q3 FY2025

$2.30

Revenue

Q3 FY2025

$1.07B

+10.7% YoY

Gross margin

Q3 FY2025

45.8%

Operating margin

Q3 FY2025

21.8%

Key financials

Q3 FY2025

Metric	Q3 FY2025	YoY	Q2 FY2025	QoQ
Revenue	$1.07B	+10.7%	$1.02B	+4.7%
EPS	$2.30	—	$2.04	+12.7%
Gross margin	45.8%	—	45.6%	+20bps
Operating margin	21.8%	—	21.5%	+30bps

Guidance

Allegion raised full-year 2025 non-GAAP EPS to $8.10–$8.20 and reported revenue growth to 7.0–8.0% while reaffirming 3.5–4.5% organic growth; cash flow conversion elevated to 85–95%.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

New guidance

Metric	Period	Guide	YoY
EPS (GAAP)	FY 2025	$7.45 to $7.55	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
EPS (non-GAAP)	FY 2025	$8.00 to $8.15	$8.10 to $8.20	+$0.10 to +$0.05 at midpoint; raised high end by $0.05, low end by $0.10	Raised
Revenue Growth (reported basis)	FY 2025	6.5% to 7.5%	7.0% to 8.0%	+0.5 percentage points on both low and high end; midpoint raised from 7.0% to 7.5%	Raised
Available Cash Flow Conversion	FY 2025	85% to 90% of adjusted net income	85% to 95% of adjusted net income	+5 percentage points at high end; midpoint raised from 87.5% to 90%	Raised
Adjusted Effective Tax Rate	FY 2025	17% to 18%	Withdrawn — no replacement	—	Withdrawn

Reaffirmed unchanged this quarter: Revenue Growth (organic basis) (3.5% to 4.5%)

Segment KPIs

Q3 FY2025

Segment	Q3 FY2025	YoY
Allegion Americas	$0.844B	+7.9%
Allegion International	$0.226B	+22.5%
Americas Organic Growth	6.4%	—
International Organic Growth	3.6%	—

Other KPIs

Q3 FY2025

Segment	Q3 FY2025
Organic Revenue Growth	5.9%
Adjusted Operating Margin	24.1%
Americas Adjusted Operating Margin	29.9%
International Adjusted Operating Margin	14.3%
Year-to-Date Available Cash Flow	$485.2M
Adjusted EBITDA Margin	25.7%

Management tone

Narrative arc: Q2 macro defensiveness → Q3 share-gain assertion → Q3 programmatic M&A engine.

Last quarter management framed tariffs as a $40M neutral pass-through and called it a relief from the original $80M drag. This quarter tariffs are no longer framed as a headwind at all — they're a recoverable revenue stream with stated carryover. From the call: "we expect approximately $40 million of surcharge revenue in the Americas related to tariff recovery, which does include the August 18th scope expansion for Section 232... you can expect us to continue to drive price to offset inflation." The shift from "we'll offset tariffs" to "we'll continue to price" is meaningful — pricing has become a permanent operating capability rather than a defensive response.

M&A framing has hardened from "integration muscle" (Q2) to a fully programmatic deployment posture. Three months ago management cited four closed deals; this quarter the YTD figure is ~$600M with UAP and Brassant added since Q2. The Q3 anchor: "Year to date, we have allocated approximately $600 million to acquiring businesses... since we spoke at Q2 earnings, Allegion has announced two more acquisitions." The compounding visible in International's +22.5% reported growth on flat organic is the financial manifestation of this shift — acquisitions are no longer optionality, they are the second engine.

The residential framing also evolved from "soft but stabilizing" (Q2) to a more honest acknowledgment that growth is product-driven, not demand-driven: "solid performance in Q3 was primarily driven by new electronic product launches... Residential markets, however, remain soft." Management is no longer waiting for rates to fix the residential business — they've reframed it as a product innovation story, which sets a lower bar for the next two quarters.

Cash flow tone shifted from in-line execution to outperformance. YTD available cash flow of $485.2M is +25.1% YoY, well ahead of revenue growth, and management widened the conversion guide to 85–95% from 85–90%. The Q2 brief noted cash conversion was reaffirmed flat; this quarter management is calling out "upside to our previous cash flow outlook." That's a clean tonal upgrade, not a marketing line.

Recurring themes management leaned on this quarter:

Americas non-residential resilience and spec activity growthElectronics segment as sustained double-digit growth driverAcquisition-driven growth with accretive deployment disciplinePrice realization offsetting inflation and tariffsStrong cash generation and balance sheet support for capital deploymentResidential market softness persistent but managed through product innovation

Risks management surfaced:

Residential markets remain softInternational markets have been sluggishDynamic input cost environment with tariffs continuingHigher corporate expenses relative to prior yearTax rate uncertainty (17-18% range)

Q&A highlights

Joe Ritchie · Goldman Sachs

Update on spec writing momentum across verticals (Office, multifamily, data center, schools) and how sentiment has changed quarter-over-quarter.

Spec activity accelerated through 2024 and continued growing year-to-date 2025. Allegiant spec riders have versatile expertise across multiple verticals. Spec activity broadly supports organic growth outlook for non-res Americas.

Spec activity accelerated in 2024 and continued growing year-to-date 2025Activity spans elementary schools, multifamily, data centersSupports organic growth outlook for non-res Americas

Joe Ritchie · Goldman Sachs

M&A pipeline strength and expected earnings accretion into 2026 from announced deals.

Pipeline remains strong in both Americas and International segments. Active in portfolio expansion (mechanical), electronics, and complementary software. Disciplined approach to acquisitions with focus on shareholder returns. Referenced appendix data for Q4 EPS benefit calculation and carryover impact for first two quarters of 2026.

Strong pipeline in both International and Americas segmentsActive acquisition categories: mechanical portfolio expansion, electronics, complementary softwareAcquisitions largely completed early July enabling carryover benefit calculation for 2026Full-year acquisition benefit provided in appendix

Joe O'Day · Wells Fargo

Customer conversations regarding macro uncertainty, sidelined activity, and conditions needed to activate additional private finance projects.

Non-res project activity performing well; some private finance came off sidelines in 2024. More favorable interest rate environment would continue to drive additional activation. Customer backlogs healthy, supporting organic growth confidence.

Non-res project activity 'humming along pretty well'Private finance activity increased in 2024Interest rate environment identified as swing factor for incremental activityCustomer backlogs healthy

Julian Mitchell · Barclays

Q3 adjusted operating margin trajectory (flattish year-on-year), Q4 margin expansion expectations, and corporate cost run-rate going into 2026.

Q3 segment margins showed good expansion; corporate costs in Q3 consistent with Q2, slightly elevated from prior year Q3 comp. Expecting full-year margin expansion including Q4. Corporate run-rate to be used as baseline for 2026. Mid-30s incremental margins achievable as long-term target.

Segment margins expanded in Q3Corporate costs Q3 consistent with Q2 run-rateExpecting margin expansion for full year and Q4Mid-30s incremental operating margins targeted long-term

Jess Sprague · Vertical Research

Integration status of recent acquisitions, margin entitlement of acquired assets, and average acquisition multiples paid across portfolio.

All acquisitions being integrated rapidly with synergies across the board. Acquisitions disciplined by strategy, geographic exposure, and markets where company has competitive advantage. Mechanical acquisitions at high single-digit EBITDA multiples; electronics/software at higher multiples reflecting growth expectations. ELITECH referenced as largest deal with details in press release.

All acquisitions being integrated rapidlyMechanical portfolio expansions: high single-digit EBITDA multiplesElectronics and software: higher multiples due to growth profileELITECH identified as largest acquisition with public disclosure available

Answers to last quarter's watch list

Americas non-res organic growth holding at mid-single digits. Americas organic growth came in at 6.4% in Q3, up from 4.5% in Q2. Spec activity was reaffirmed as accelerating and broad-based across verticals.

Resolved positively

Tariff surcharge realization vs. ~$40M FY estimate and customer elasticity. Management held the $40M surcharge estimate, including the August 18 Section 232 scope expansion, and explicitly said pricing will continue to offset inflation. No elasticity issues were flagged.

Resolved positively

International organic growth crossing back to positive. International organic flipped from -2.2% in Q2 to +3.6% in Q3. International margin also expanded 70bps YoY to 14.3%. However, management guided "roughly flat organic performance" in International for the balance of the year, so the crossover may not be linear.

Resolved positively

Americas adjusted op margin sustainability after Q2's 29.9%. Americas margin came in at 29.9% in Q3, +40bps YoY, with management citing volume leverage and favorable mix as accretive.

Resolved positively

M&A integration cadence and 2026 accretion sizing. Allegion announced UAP and Brassant since Q2 earnings, taking YTD deployment to ~$600M. Management pointed to an appendix table for full-year acquisition benefit and noted carryover into the first two quarters of 2026.

Resolved positively

What to watch into next quarter

Whether Q4 closes the year with organic growth at or above 5%, which would put FY organic at the high end of the reaffirmed 3.5–4.5% guide and force a Q1 2026 reset of the organic baseline higher.

2026 carryover EPS contribution from the UAP, Brassant, Elitech and other 2025 acquisitions — management pointed to ~2 points of revenue contribution; the EPS bridge will be the first hard 2026 anchor.

Americas adjusted operating margin — Q3's 29.9% (+40bps YoY) on volume leverage and mix; whether Q4 sustains the expansion or sees mix and price/cost normalize.

International organic — Q3's +3.6% needs to hold against management's own "roughly flat" full-year framing. Any softening in Q4 would suggest the Q3 print was acquisition-mix-aided rather than underlying demand.

Corporate cost run-rate — Q3 corporate was the offset to segment margin expansion at the enterprise line; the run-rate management flagged will set the 2026 starting point.

Sources

Allegion Q3 2025 press release, filed October 23 2025 — https://www.sec.gov/Archives/edgar/data/1579241/000157924125000041/exhibit991-pressreleasedat.htm

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