Otis Sales Rise 6% to $3.914 Billion in Third Quarter
Key Facts
Otis reported net sales of $3.914 billion in the third quarter of 2026, up 6% year over year, with comparable organic growth. Adjusted earnings per share came to $1.05, above analysts’ estimate of $1.01, while revenue reached $3.91 billion against an estimate of $3.85 billion, according to coverage data. But adjusted operating profit fell $6 million to $626 million, and its margin declined 110 basis points to 16.0%. The results came amid stronger performance in services, offset by pressure on margins and new equipment sales in China. The stock fell 2.41% in premarket trading on October 28, as investors focused on margin concerns despite results topping expectations.
The services segment accounted for $2.616 billion in sales, up 8% from the year-earlier period, while its organic sales rose 7%. This contributed to overall sales growth, while new equipment sales totaled $1.298 billion, up 3%. In China, new equipment sales fell more than 20%, limiting growth in that business. The results reflected differing performance across the business, with services growing faster than new equipment. Companywide, organic sales rose 6% in the quarter, in line with the increase in net sales.
Growth in services revenue did not translate into a year-over-year improvement in the segment’s margin; it fell 130 basis points to 24.2% compared with the third quarter of the prior year. But it improved 100 basis points from the second quarter, putting the sequential comparison on a different trajectory from the annual comparison. Chief Executive Judy Marks said the company’s actions had lifted the services margin to "more than 24%." She said services growth, investment in field team capabilities and AI-supported pricing underpin the company’s strategy in the business. Otis attributed the decline in adjusted operating profit and margin to segment performance and ongoing investment in services growth initiatives.
Earnings per share under GAAP came to $1.08, up 14% from the prior year, while adjusted earnings remained at $1.05. The comparison between the two measures shows different earnings trajectories: reported GAAP earnings rose, while adjusted earnings were unchanged year over year. Although quarterly adjusted earnings per share topped analyst consensus, the company’s annual outlook remained within a defined range. Otis kept its 2026 adjusted earnings-per-share estimate at between $4.01 and $4.05. It also maintained its annual net sales forecast at between $15.1 billion and $15.3 billion.
Sales growth extended through the first nine months of the year, with net sales rising 7% to $11.339 billion through September 30 and organic sales increasing 4%. Adjusted free cash flow for the same period was $834 million. In the third quarter, the company recorded operating cash flow of $337 million and adjusted free cash flow of $272 million. On the demand front, modernization orders rose 10% in constant currency, and the backlog increased 20% on both a reported and constant-currency basis. The company kept its 2026 sales and adjusted earnings-per-share forecasts as previously announced, leaving those figures as the basis for its guidance for the rest of the year.