Otis Q3 Sales Rise 6% as Service Growth Offsets Margin Pressure

Otis Worldwide Corp. (NYSE: OTIS) reported 6% organic sales growth for the third quarter of 2026, supported by continued Service momentum and a return to growth in New Equipment. Profitability remained under pressure, however, as weakness in New Equipment and higher Service investment contributed to a 110-basis-point contraction in the company’s adjusted operating margin.

Net sales rose 6% year over year to $3.91 billion from $3.69 billion. GAAP operating profit increased to $620 million from $586 million, while adjusted operating profit slipped to $626 million from $632 million. Excluding a $3 million foreign-exchange headwind, adjusted operating profit declined by $3 million at constant currency.

Adjusted operating margin fell to 16.0% from 17.1%. GAAP diluted earnings per share increased to $1.08 from $0.95, while adjusted EPS was unchanged at $1.05. Lower taxes and a reduced share count supported per-share results, offsetting foreign-exchange pressure and otherwise roughly flat operational drivers.

Service growth led by modernization

Service organic sales increased 7%, including 4% growth in maintenance and repair and 20% growth in modernization. Reported Service sales rose 8% to $2.62 billion.

Service operating profit increased to $633 million from $621 million, or by $20 million at constant currency. Volume and pricing supported the result, while labor costs, investments, productivity initiatives and business mix affected profitability. The segment’s operating margin declined 130 basis points year over year to 24.2%, though it improved by 100 basis points sequentially.

Modernization demand remained a key source of growth. Third-quarter modernization orders increased 10% at constant currency, while modernization backlog rose 20%. Otis said it was continuing to roll out human-led, AI-enabled tools and capabilities while maintaining Service quality at target levels.

New Equipment grows despite China weakness

New Equipment organic sales increased 3%, reversing the year-to-date decline in the segment. Organic sales rose 13% in the Americas and 6% in Europe, the Middle East and Africa. Asia declined 8%, with high-single-digit growth in Asia Pacific offset by a drop of more than 20% in China.

Reported New Equipment sales increased 3% to $1.30 billion, but segment operating profit fell 29% to $42 million. At constant currency, operating profit declined by $22 million. The segment’s operating margin contracted 150 basis points to 3.2%, reflecting pressure from volume and price and mix, partly offset by productivity.

New Equipment orders increased 1% at constant currency, including growth of 11% in the Americas and 1% in EMEA, while Asia orders fell 6%. Excluding China, global New Equipment orders rose 5%. New Equipment backlog increased 4% at constant currency, or 8% excluding China.

Otis’ total remaining performance obligation was $19.5 billion at constant currency, up from $18.7 billion a year earlier but slightly below $19.7 billion in the second quarter.

2026 outlook

Otis expects 2026 net sales of $15.1 billion to $15.3 billion and organic sales growth in the low- to mid-single digits. Management projects Service organic sales growth in the mid- to high-single digits, while New Equipment organic sales are expected to range from a low-single-digit decline to flat.

The company forecasts adjusted EPS of $4.01 to $4.05 and adjusted free cash flow of about $1.5 billion. Adjusted operating profit at constant currency is expected to decline by $15 million to $45 million, while at actual currency it is projected to range from a decline of as much as $30 million to roughly flat.

Third-quarter adjusted free cash flow was $272 million, down from $337 million a year earlier. For the first nine months, adjusted free cash flow increased 9% to $834 million. Otis now expects about $40 million of UpLift and other restructuring expense for the full year, compared with its prior estimate of approximately $80 million.

For the first nine months of 2026, net sales rose 7% to $11.34 billion, including 4% organic growth. Adjusted operating profit declined to $1.76 billion from $1.80 billion, and adjusted operating margin contracted 150 basis points to 15.5%. Adjusted EPS fell to $2.96 from $3.02, while GAAP diluted EPS increased to $3.07 from $2.55.

The company’s outlook remains subject to several uncertainties identified in the presentation, including construction demand, China market conditions, inflation and commodity costs, foreign-exchange movements, supplier disruptions, labor inflation, geopolitical tensions and tariffs. Otis also cited execution risks associated with restructuring, outsourcing, digital tools and new technologies, including its ability to realize the anticipated benefits of the UpLift program.