Otis (NYSE: OTIS) Service sales rise 8% but adjusted operating profit slips

Posted by Brenda Bartman on Oct 28th, 2026

What happened

Otis Worldwide Corporation (NYSE: OTIS) grew third quarter net sales 6% to $3.91 billion, while adjusted operating profit slipped $6 million. The company released the results on Oct. 28 and kept its full-year outlook broadly in place.

Service, the recurring maintenance and modernization business, drove the growth. Its net sales rose 8% to $2.62 billion, with organic growth of 7%. Organic maintenance and repair sales rose 4% and organic modernization sales rose 20%.

New Equipment net sales rose 3% to $1.30 billion. Growth in the Americas, EMEA and Asia Pacific was partly offset by a drop of more than 20% in China.

GAAP operating profit rose $34 million to $620 million, and GAAP earnings per share rose 14% to $1.08. The filing credits both mainly to the absence of prior-year UpLift transformation costs, separation-related adjustments and other one-time items. The gain comes from costs that dropped out of the comparison. Adjusted EPS was flat, as a lower share count and minority interest offset a higher tax rate, higher interest and unfavorable currency.

Key numbers

Metric	Latest	Change	Source
Q3 net sales	$3.91 billion	from $3.69 billion, +6%	SEC 8-K, Exhibit 99
Q3 Service net sales	$2.62 billion	from $2.43 billion, +8%	SEC 8-K, Exhibit 99
Service operating profit margin	24.2%	from 25.5%, -1.3 percentage points	SEC 8-K, Exhibit 99
Q3 adjusted operating profit	$626 million	from $632 million, -$6 million	SEC 8-K, Exhibit 99
New Equipment operating profit margin	3.2%	from 4.7%, -1.5 percentage points	SEC 8-K, Exhibit 99
Q3 GAAP diluted EPS	$1.08	from $0.95, +14%	SEC 8-K, Exhibit 99

Where Service margin stands

Service segment operating profit rose $12 million to $633 million. Its margin improved 100 basis points from the prior quarter to 24.2% but was down 130 basis points from 25.5% a year earlier. The filing cites higher labor cost, including ongoing strategic initiatives, and unfavorable mix. Higher volume, favorable pricing and employment-related cost reductions partly offset them.

OptimistFi's calculation shows how concentrated profit is. Service produced 93.8% of total segment operating profit of $675 million on 66.8% of net sales.

Forward indicators point the same way. Modernization orders rose 10% at constant currency, and modernization backlog rose 20%.

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Why it matters

OptimistFi has argued that Otis works only if maintenance and modernization economics keep offsetting a mature, cyclical new-equipment market and a levered balance sheet. The quarter gives mixed evidence on that view.

New Equipment segment operating profit fell $17 million to $42 million. Its margin dropped 150 basis points to 3.2%, mainly on unfavorable price and mix. New Equipment orders rose only 1% at constant currency, though backlog rose 4%.

Company-wide, adjusted operating margin of 16.0% was down 110 basis points from 17.1%. The filing links the decline to unfavorable segment performance, partly offset by segment mix. So far, Service growth has not lifted adjusted operating profit above last year's level.

Cash flow and the balance sheet

Third quarter operating cash flow was $337 million, down from $374 million a year earlier. Adjusted free cash flow fell to $272 million from the prior-year quarter's level. The filing says higher net income was offset by working capital.

Nine-month figures are stronger. Operating cash flow was $1.02 billion versus $779 million, and adjusted free cash flow was $834 million versus $766 million. The adjusted figure strips out $161 million of net refunds from German tax litigation, among other items.

Otis returned about $1.3 billion to shareholders in the period, roughly $800 million in repurchases and $500 million in dividends. Cash fell to $866 million from $1.10 billion at Dec. 31, 2025. Long-term debt rose to $7.05 billion from $6.90 billion. Short-term borrowings and current debt rose to $1.22 billion from $1.06 billion.

What's next

Otis kept its full-year outlook for net sales of $15.1 billion to $15.3 billion, adjusted EPS of $4.01 to $4.05 and adjusted free cash flow of $1.5 billion, against a prior range of $1.50 billion to $1.55 billion. Adjusted operating profit is expected at approximately $2.4 billion, down $15 million to $45 million at constant currency.

Nine-month adjusted EPS is $2.96. OptimistFi calculates the guidance implies fourth quarter adjusted EPS of $1.05 to $1.09, with the low end matching the third quarter. Otis's next quarterly report would strengthen the case if Service margin keeps rising and New Equipment margin stops falling. It would weaken the case if adjusted operating profit again falls short of the prior year.