Executive Summary

Q2 delivered record revenue of $1.022B (+5.8% reported, +3.2% organic) and adjusted EPS of $2.04, both above Wall Street consensus; GAAP EPS was $1.85 and adjusted operating margin held at 23.7% .
Americas non-residential led with high-single-digit organic growth; residential declined mid-single digits; electronics grew low double digits; segment adjusted margins expanded in both Americas (+50 bps to 29.9%) and International (+100 bps to 13.1%) .
Guidance raised: FY25 reported revenue growth to 6.5–7.5% (organic 3.5–4.5%) and adjusted EPS to $8.00–$8.15; tariff cost assumption cut to ~$40M with price actions expected to neutralize EPS impact .
Potential stock catalysts: first-ever >$1B quarterly revenue milestone, guidance raise, and accretive portfolio moves (ELATEC closed July 1; Gatewise acquired) that enhance electronics/software mix .

What Went Well and What Went Wrong

What Went Well
- “Quarterly revenue exceeded $1 billion for the first time in our company’s history” and “strong organic growth in our non-residential Americas business” .
- Segment margin expansion: Americas adjusted operating margin to 29.9% (+50 bps) and International to 13.1% (+100 bps), driven by mix, price/productivity and accretive acquisitions .
- Strategic M&A momentum and electronics innovation: completion of ELATEC acquisition and Gatewise SaaS deal; SimonsVoss launched “Fort Lox,” Allegion’s first battery-less electronic cylinder .
What Went Wrong
- Residential weakness persisted: Americas residential declined mid-single digits on continued high interest rates .
- Price/productivity net of inflation/investment was a headwind of $5.3M at the enterprise level; corporate expense increased (incentive comp), offsetting segment margin gains and keeping adjusted OI margin flat YoY at 23.7% .
- International organic revenue down 2.2% despite currency tailwind, reflecting mechanical portfolio pressure; volume headwinds cited .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025	Q2 2025 Consensus
Revenue ($USD Millions)	$965.6	$941.9	$1,022.0	$999.4*
GAAP Diluted EPS ($)	$1.77	$1.71	$1.85	$1.987*
Adjusted EPS ($)	$1.96	$1.86	$2.04	—
Operating Margin (%)	21.6%	20.9%	21.5%	—
Adjusted Operating Margin (%)	23.7%	22.7%	23.7%	—

Note: Values with asterisk retrieved from S&P Global.

Segment performance and margins:

Segment	Q2 2024 Revenue ($MM)	Q1 2025 Revenue ($MM)	Q2 2025 Revenue ($MM)	Q2 2024 Adj OI Margin	Q1 2025 Adj OI Margin	Q2 2025 Adj OI Margin
Americas	$770.7	$757.8	$821.5	29.4%	29.2%	29.9%
International	$194.9	$184.1	$200.5	12.1%	10.2%	13.1%

Key KPIs:

KPI	Q2 2024	Q1 2025	Q2 2025
Cash & Equivalents ($MM)	—	$494.5	$656.8
Total Debt ($MM)	—	$1,997.0	$2,067.2
YTD Available Cash Flow ($MM)	$176.0	$83.4	$275.4
Share Repurchase ($MM, Qtr)	—	~$40	~$40
Dividend per Share ($, Qtr)	—	$0.51	$0.51
Effective Tax Rate (GAAP, %)	17.8%	15.4%	20.3%
Adjusted Effective Tax Rate (%)	18.2%	16.1%	20.7%

Guidance Changes

Metric	Period	Previous Guidance (Apr 24)	Current Guidance (Jul 24)	Change
Reported Revenue Growth (%)	FY 2025	1%–3%	6.5%–7.5%	Raised
Organic Revenue Growth (%)	FY 2025	1.5%–3.5%	3.5%–4.5%	Raised
GAAP EPS ($)	FY 2025	$7.05–$7.25	$7.25–$7.40	Raised
Adjusted EPS ($)	FY 2025	$7.65–$7.85	$8.00–$8.15	Raised
Adjusted Effective Tax Rate (%)	FY 2025	~17%–18%	~17%–18%	Maintained
Tariff Costs ($MM)	FY 2025	~$80	~$40	Lowered
ACF (% of Adjusted Net Income)	FY 2025	85%–90%	85%–90%	Maintained
Avg Diluted Shares (MM)	FY 2025	~86.7	~86.5	Slightly Lower

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’24, Q1’25)	Current Period (Q2’25)	Trend
Tariffs & Pricing	FY25 tariff estimate $80M; price/surcharge actions; aim to neutralize at OI/EPS; ~1-month price-cost lag noted for Q2	Tariff estimate cut to ~$40M; surcharge revenue included (~25% in Q2, ~75% in H2); maintain EPS neutrality	Improving headwind magnitude; execution remains agile
Non-Res Americas Demand	Late-cycle resilience; healthy aftermarket; high-single-digit growth into Q1	High-single-digit organic growth continues; favorable mix supports margins	Durable strength
Residential Americas	Q4’24 resi grew HSD; Q1’25 softness expected after Q4 pull-forward	Declined MSD on rates/macro; focus on electronics innovation	Ongoing softness
Electronics Growth	Encode family, new UWB products (Sense Pro, Arrive) highlighted in Q1	Low double-digit electronics growth; SimonsVoss “Fort Lox” battery-less cylinder launch	Accelerating product innovation
FX & Transactional Effects	Tailwind in Mexico op costs discussed in Q1	Slight transactional FX tailwind again; FX also a driver in EPS guide raise	Supportive
M&A Strategy	Trimco, Lemaar, Next Door; pipeline active	ELATEC closed; Gatewise acquired; acquisitions accretive (International margins mid-20s for ELATEC)	Portfolio quality up, margin accretive
Specification Activity	Steady growth through 2024; internal leading indicator (non-linear)	Continued growth in specs supports outlook; no tariff-driven pull-forward detected	Positive pipeline signals

Management Commentary

“We’re excited to share strong second-quarter results… Quarterly revenue exceeded $1 billion for the first time… Allegion is driving strong organic growth in our non-residential Americas business, improving portfolio quality and margins in International, and complementing this with accretive acquisitions.” — John H. Stone, CEO .
“Adjusted EPS of $2.04 increased 4.1%… Segment margins expanded, offset by increased corporate expenses primarily for incentive compensation.” — Mike Wagnes, CFO .
“We now estimate approximately $40 million of tariff surcharge revenue… We continue to expect tariffs to be neutral at the EPS level.” — CEO remarks on outlook .
“Fort Lox is Allegion’s first battery-less electronic cylinder… an incredible evolution… expands applications and market segments we can serve.” — CEO on SimonsVoss electronics .
“Collectively, we expect these acquisitions to be accretive to 2026 adjusted EPS and increase the long-term growth potential of Allegion at attractive margins.” — CEO on M&A (Elitech/ELATEC, Gatewise, WeightWile) .

Q&A Highlights

No evidence of tariff-induced order pull-forward; non-res project demand “humming along”; surcharge revenue phasing: ~25% of $40M in Q2, ~75% in H2; EPS neutrality maintained .
Americas margin strength driven by favorable non-res mix; price/productivity covered inflation/investments; slight transactional FX tailwind (Mexico) .
Guide raise drivers: FX, acquisitions, and strong H1 operating performance; not back-end loaded .
International: organic roughly flat for FY; acquisitions accretive to margin rates (ELATEC mid-20s% margins) .
Residential demand shows elasticity limited; aftermarket and book-and-ship model remain healthy .

Estimates Context

Comparison to S&P Global consensus:

Metric	Q1 2025 Estimate	Q1 2025 Actual	Q2 2025 Estimate	Q2 2025 Actual	Q3 2025 Estimate	Q3 2025 Actual
Revenue ($MM)	920.8*	941.9	999.4*	1,022.0	1,050.2*	1,070.2
Primary EPS ($)	1.673*	1.86	1.987*	2.04	2.243*	2.30
EBITDA ($MM)	215.6*	226.4*	252.2*	251.6*	276.5*	270.6*

Note: Values with asterisk retrieved from S&P Global. Revenue/EPS actuals based on company filings.

Interpretation: Revenue and EPS beat consensus in Q2; Q1 also beat; Q3 subsequently beat, reinforcing estimate upward bias potential .

Key Takeaways for Investors

Q2 was a clean beat on revenue and adjusted EPS with strong non-residential momentum and broad-based margin resilience at the segment level .
Guidance reset higher on both top line and adjusted EPS, with tariff assumption reduced to ~$40M and surcharge revenue explicitly embedded, mitigating EPS risk in H2 .
Mix remains favorable (non-res > res), supporting Americas margin structure; electronics growth and accretive M&A (ELATEC, Gatewise) should enhance long-term margin and growth profile .
Watch the corporate cost line (incentive comp) and tax rate normalization after a discrete headwind in Q2; full-year adjusted tax rate remains 17–18% .
International organic still soft near term but margin trajectory improving; acquisitions and FX support FY EPS raise .
Near-term trading lens: bold narrative catalysts include the >$1B revenue milestone, raised guidance, and visible acquisition synergy road map; monitor tariff developments and residential demand sensitivity .
Medium-term thesis: late-cycle exposure, aftermarket strengths, electronics/software expansion, and disciplined capital allocation should sustain above-cycle margins and cash conversion (ACF 85–90% of adjusted NI) .

Additional Data References

Cash & Liquidity: YTD ACF $275.4M; Cash $656.8M; Total debt $2,067.2M .
Capital Returns: Q2 buybacks ~$40M; dividend $0.51/share .
Segment mix: Americas reported +6.6% (+4.5% organic); International +2.9% (-2.2% organic) .

Allegion plc (ALLE)·Q2 2025 Earnings Summary