Otis grew Q2 2026 sales 7% to $3.86B on 9% organic Service growth and 24% modernization growth, but adjusted EPS fell 4% to $1.01 as Service margins narrowed, and it cut full-year adjusted EPS guidance to $4.01-4.05.
Revenue
$3.9B
+7.3% YoY
Net income
$428M
+8.9% YoY
Diluted EPS
$1.12
+13.1% YoY
Operating margin
14.9%
Overview
Otis, the world's largest elevator and escalator company, grew second-quarter 2026 sales 7% to $3.86 billion. The growth came almost entirely from its Service business, which maintains, repairs and upgrades existing elevators. Sales of New Equipment, meaning elevators for new buildings, were flat. Profit went the other way. GAAP diluted EPS rose 13% to $1.12, but adjusted EPS fell 4% to $1.01, and Otis cut its full-year profit and cash-flow outlook.
The two EPS figures point in opposite directions because of one-off tax items. GAAP ("generally accepted accounting principles") EPS is the official figure. Adjusted EPS is management's version, which strips out restructuring costs and items it considers non-recurring. This quarter the GAAP number includes about $0.11 per share of one-time gains: $31 million of interest income tied to adjustments of tax reserves and to a 2024 German tax ruling, plus $20 million of non-recurring tax benefits. The 10-Q says the tax benefit mainly came from "the reduction in a deferred tax liability related to the mitigation of future repatriation costs." Last year's quarter went the opposite way, with $0.06 per share of restructuring and transformation charges ("UpLift" program costs and separation-related items) holding GAAP EPS down. So the 13% GAAP increase mostly reflects one-off items moving from a drag to a boost. The underlying business earned less per share than a year ago.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Net sales
$3,859M
$3,595M
+7.3% (organic +6%)
Operating profit (GAAP)
$575M
$547M
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"Organic" growth excludes currency swings and acquisitions, so it shows how much the existing business actually grew. A basis point (bp) is one hundredth of a percentage point. Operating margin is the share of sales left after running the business, before interest and tax.
Service: strong growth, lower margin
Service is about two-thirds of Otis's sales and nearly all of its profit. Organic sales rose 9%, which the press release says matches the fastest rate since Otis was spun off from United Technologies in 2020. By line of business:
Maintenance and repair (regular servicing contracts plus fixes when something breaks) grew 6% organically, and 8% on a reported basis. Management says maintenance growth is "accelerating."
Modernization (replacing major parts of an ageing elevator, such as its motor, controls or cab) grew 24% organically, and 26% on a reported basis. Modernization orders were up 9% at constant currency, and the modernization backlog of signed but unfinished work was up 24% (26% at constant currency). That backlog supports several more quarters of this revenue.
Segment operating profit still grew only $21 million, and $5 million of that came from favorable exchange rates. The margin fell 170 bps to 23.2% because costs grew faster than sales: cost of sales rose 14% and operating expenses 13%, against 11% sales growth. The 10-Q attributes this to "higher costs resulting from organizational initiatives, higher labor costs including the impact of ongoing costs to support operational execution and productivity, higher material costs, and mix." The mix effect matters here. Modernization is project work and earns less than recurring maintenance, so when modernization grows 24% and maintenance 6%, the segment's average margin falls even if nothing is going wrong. The labor and "organizational initiatives" costs are a choice: management says it widened its spending on service quality and pricing capabilities this year "to capitalize on strong repair and modernization demand." Whether that spending pays off is the main question for the second half.
New Equipment: China still shrinking, Americas growing
New Equipment sales were flat at $1.28 billion. The organic decline of 1% was better than the 3% decline for the first half as a whole. By region:
China: organic sales fell by a high-teens percentage. New Equipment orders in China also fell by a high-teens percentage.
EMEA (Europe, Middle East and Africa): sales down mid-single digits.
Americas: sales up about 10%, orders up by a low-teens percentage.
Total New Equipment orders fell 5% at constant currency, with orders in Asia Pacific (including China) down more than 20%. The New Equipment backlog was still 3% higher than a year earlier. Segment profit fell from $68 million to $40 million, a 3.1% margin. The 10-Q blames lower volume, "unfavorable price, regional and product mix" and higher costs from organizational initiatives. A price decline on flat sales suggests Otis has had to accept lower prices to win work in its weaker markets.
Below the operating line
Corporate costs rose. General corporate expenses and other items grew to $52 million from $34 million. The release lists "other corporate adjustments" as one reason adjusted operating profit fell $25 million.
Interest costs rose. Adjusted net interest expense, which excludes the one-off tax-related interest income, rose to $68 million from $57 million. Otis issued $700 million of new debt in May 2026 and $500 million in September 2025, and its average interest rate on long-term debt rose to 3.1% from 2.8%.
Buybacks helped. Otis repurchased $400 million of stock in the quarter (5.1 million shares) and $800 million in the first half. Diluted shares fell 3.1% to 383.5 million, which lifts earnings per share even when total profit does not grow. About $500 million remained under the $2.0 billion buyback authorization at June 30.
Debt rose. Total debt was $8.44 billion at June 30, up from $7.96 billion at the end of 2025. Cash fell to $813 million, so net debt rose to $7.62 billion. Total equity is negative ($-5.56 billion) because Otis has returned more cash to shareholders over time than it has kept in retained earnings. This is common at mature, cash-generative companies but leaves less financial cushion.
Acquisition. In April Otis paid $170 million for majority ownership of a French elevator maintenance and modernization company. This is part of the "acquisitions and divestitures" contribution of about 1 point to Service growth.
Cash flow
Operating cash flow was $267 million, up from $215 million, and free cash flow (operating cash flow minus capital spending) was $223 million, up from $179 million. For the first half, free cash flow was $603 million against $335 million a year earlier. The 10-Q says the improvement came from higher net income and working capital, meaning cash tied up in receivables and inventory.
Guidance cut
Otis kept its sales outlook but lowered its profit outlook (all adjusted figures):
2026 outlook
April (after Q1)
July (after Q2)
Net sales
$15.1–15.3B
$15.1–15.3B
Organic sales growth
Low to mid-single digits
Low to mid-single digits
Adjusted operating profit
~$2.5B (+$60–100M at actual FX)
~$2.4B (-$30M to flat at actual FX)
Adjusted EPS
$4.20–4.24
$4.01–4.05
Adjusted free cash flow
$1.60–1.65B
$1.50–1.55B
The sales outlook is unchanged and the profit outlook is about $100 million lower. Otis still expects the growth it planned for, but now expects each dollar of sales to earn less, mainly because of the Service cost increases and New Equipment pricing described above. Otis now expects adjusted operating profit to be flat to slightly lower in 2026, where in April it expected an increase. CEO Judy Marks called the new outlook "measured."
Takeaway: Demand for Otis's most valuable business is strong: organic Service growth of 9% matches its fastest since the 2020 spin-off, and the modernization backlog is up 24%. But adjusted EPS fell 4% and full-year profit guidance was cut by about $100 million on unchanged sales, because Service costs grew faster than Service sales and China kept pulling New Equipment down. The 13% GAAP EPS increase comes from one-off tax gains and should not be read as underlying growth.
Outlook
The backlog makes the second-half sales outlook credible. Modernization work already booked should keep Service growth near the high single digits, and a New Equipment decline of only 1% in Q2 (after -3% for the first half) suggests the drag is easing outside China. The risk is margin. The lowered guidance implies second-half adjusted operating profit of roughly $1.26 billion ($2.4 billion minus the first half's $1.137 billion), with full-year profit flat to slightly down on 7% sales growth, so management is not assuming a quick recovery in margins. The quarters ahead should show whether the extra Service spending on labor, service quality and pricing starts to raise Service margins again, or whether modernization mix and cost inflation keep holding them down. Leadership will also change. On September 15, 2026, Otis said Judy Marks will retire as Chair, CEO and President once a successor is appointed, expected in the first half of 2027, and will stay through July 31, 2027 at the latest. The Q3 2026 results, likely in late October, will be the first under that announced transition.