Upgraded to ESPHome 2026.4.0, now my all d1-minis are not working

I just upgrade from 2026.3.0 to 2026.4.0. I can’t OTA update any of my D1-mini and if manual update using USB, that works, but still have issues connecting:

I get this warning when looking at the logs:
INFO ESPHome 2026.4.0
INFO Reading configuration /config/esphome/esp_panel2.yaml…
INFO Detected timezone ‘America/Chicago’
INFO Starting log output from esp_panel2.local using esphome API
INFO Successfully resolved esp_panel2.local in 0.009s
INFO Successfully connected to esp_panel2 @ 1.1.1.5 in 0.007s
WARNING Can’t connect to ESPHome API for esp_panel2 @ 1.1.1.5: esp_panel2 @ 1.1.1.5: The connection dropped immediately after encrypted hello; Try enabling encryption on the device or turning off encryption on the client (ESPHome Logs 2026.4.0) (EncryptionHelloAPIError)
INFO Trying to connect to esp_panel2 @ 1.1.1.5 in the background

I get this error when trying a OTA update
======================== [SUCCESS] Took 164.34 seconds ========================
INFO Build Info: config_hash=0x51e60dcd build_time_str=2026-04-18 12:48:05 -0500
INFO Successfully compiled program.
INFO Connecting to 1.1.1.5 port 8266…
INFO Connected to 1.1.1.5
INFO Uploading /data/build/esp_panel2/.pioenvs/esp_panel2/firmware.bin (556640 bytes)
INFO Compressed to 385369 bytes
ERROR Error receiving acknowledge chunk OK: timed out
WARNING Failed to upload to [‘1.1.1.5’]

If I attempt to OTA update the device, it will lock up and I have to reboot the d1 for it to work. It will then report into HA, but I’ve lost my OTA abilities. I reverted ESPHome back to 2026.2.3 and still have the same issue. No OTA, only usb.

Any ideas what is going on?

Turns out the update changed the way my ESP8266s communicate for OTA. I have my ESPHome devices in a different vlan than my Home Assistant. I had to turn off my firewalls certificate inspection for my ESP8266s. My ESP32 were not affected.