Financial Analysis

"Contingent Liabilities Except as otherwise noted, while we are unable to predict the final outcome, based on information currently available, we do not believe that resolution of any of the following matters will have a material adverse effect upon our competitive position, results of operations, cash flows or financial condition. In addition to the specific amounts noted below, where we have recorded loss contingency accruals for the below and other matters, the amounts in aggregate are not material. Legal costs generally are expensed when incurred. Legal Proceedings. German Tax Litigation In the third quarter of 2024, Otis prevailed in a German tax litigation case stemming from the 1998 reorganization of the Company's operations in Germany. As a result of winning the case, the Company expects to receive total refunds of prepaid tax, prepaid interest, overpayment interest, and court fees of approximately 313 million net of tax (approximately $356 million) as of June 30, 2026. The Company began receiving refunds during 2025 and anticipates the refund process to continue through 2026. The recoveries related to this matter are allocated between RTX and the Company pursuant to the terms of the TMA with our former parent, UTC, by way of indemnification payments. The Company has established an indemnity payable to RTX, which is intended to cover RTXs tax and interest payable to the Internal Revenue Service (""IRS""). The Company and RTX disagree about both the scope of the indemn …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

Borrowings and Lines of Credit Short-term borrowings consisted of the following: (dollars in millions) June 30, 2026 December 31, 2025 Commercial paper $ $ Other borrowings 210 215 Total short-term borrowings $ 210 $ 215 Commercial Paper and Other Borrowings. As of June 30, 2026, there were no borrowings outstanding under the Company's $1.5 billion commercial paper programs. We use our commercial paper borrowings for general corporate purposes including to finance acquisitions, pay dividends, repurchase shares and for debt refinancing. The need for commercial paper borrowings may arise if the use of domestic cash for general corporate purposes exceeds the sum of domestic cash generation and foreign cash repatriated to the U.S. Other borrowings primarily consist of borrowings for the purchase of the outstanding shares of Otis Electric Elevator Company Limited from the noncontrolling shareholder in 2025. Long-term debt. As of June 30, 2026, we had a revolving credit agreement with various banks providing for a $1.5 billion unsecured, unsubordinated five-year revolving credit facility, maturing August 8, 2030. As of June 30, 2026, there were no borrowings under the revolving credit agreement. The undrawn portion of the revolving credit agreement serves as a backstop for the issuance of commercial paper. On March 16, 2026, the Company repaid the Japanese Yen denominated 0.370% notes due in 2026, upon maturity, using cash on hand. On May 7, 2026, we issued $700 million unsecured, …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

"Fair Value Measurements Valuation Techniques . Our marketable securities include investments that are traded in active markets, either domestically or internationally, and are measured at fair value using closing stock prices from active markets. The fair value gains or losses related to our marketable securities are recorded through net income. Our derivative assets and liabilities include foreign exchange and commodity contracts that are measured at fair value using internal and third party models based on observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties' credit risks. As of June 30, 2026, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk. Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties' credit risks. Due to their short-term nature, the carrying value approximated fair value for the current portion of the Companys financial instruments not carried at fair value. The fair value of receivables, including customer financing notes receivable, net, that were issued long-term are based on the discounted values of their related cash flows at interest rates reflecting the attributes of the counterparties, including geographic location. Customer-specific risk, including credit risk, is already considered in the carrying value of those receivables. Our long-term debt, as descri …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

"Income Taxes The decrease in the effective tax rate for the quarter and six months ended June 30, 2026, compared to the same periods in 2025, is primarily due to the reduction in a deferred tax liability related to the mitigation of future repatriation costs recorded in the quarter ended June 30, 2026. In addition, the decrease in the effective tax rate for the six months ended June 30, 2026, is due to the absence of the impact of the increase in our estimated nondeductible TMA indemnity obligation payable to RTX recorded in the quarter ended March 31, 2025. Otis conducts business globally and, as a result, Otis or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the ordinary course of business, Otis could be subject to examination by taxing authorities throughout the world, including such major jurisdictions as Austria, Belgium, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, Mexico, Netherlands, Portugal, South Korea, Spain, Switzerland, the United Kingdom and the U.S. With a few exceptions, Otis is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2016. A subsidiary of Otis lost a tax litigation case in Belgium in 2023 and decided not to appeal. Otis may receive the assessment for tax and interest within the next 12 months. The associated tax and interest have been fully reserved. See Note 15, ""Contingent …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

"Accounting Pronouncements In July 2025, the FASB issued Accounting Standards Update (""ASU"") 2025-05, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide a practical expedient when developing reasonable and supportable forecasts as part of estimating expected credit losses, allowing entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments in ASU 2025-05 are effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. We adopted this ASU on January 1, 2026 and elected to utilize the practical expedient. The adoption of the ASU and the election of the practical expedient did not have a material impact on our Condensed Consolidated Financial Statements. In November 2024, the FASB issued ASU 2024-03, Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . The amendments in this update require disclosure, in the notes to financial statements, on disaggregated information about specific categories underlying certain income statement expense line items that are considered relevant, including the purchase of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in ASU 2024-03 are effective for fi …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

"Employee Benefit Plans Pension and Postretirement Plans. The Company sponsors both funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit plans, and defined contribution plans. Contributions to our plans were as follows: Quarter Ended June 30, Six Months Ended June 30, (dollars in millions) 2026 2025 2026 2025 Defined benefit plans $ 10 $ 9 $ 21 $ 27 Defined contribution plans 19 17 41 38 Multi-employer pension and postretirement plans 44 42 83 81 The following table illustrates the components of net periodic benefit cost for the Company's defined benefit pension plans: Quarter Ended June 30, Six Months Ended June 30, (dollars in millions) 2026 2025 2026 2025 Service cost $ 9 $ 9 $ 18 $ 17 Interest cost 10 8 19 16 Expected return on plan assets (9) (8) (18) (17) Recognized actuarial net loss 1 1 1 Total net periodic benefit cost $ 11 $ 9 $ 20 $ 17 Postretirement Benefit Plans. The Company sponsors postretirement benefit plans that provide health benefits to eligible retirees. The postretirement plans are unfunded. The net periodic benefit cost was less than $1 million for the quarters and six months ended June 30, 2026 and 2025. Stock-based Compensation. The Company adopted the 2020 Long-Term Incentive Plan (the ""Plan"") effective April 3, 2020. As of June 30, 2026, approximately 16 million shares remain available for awards under the Plan. The Company measures the cost of all share-based awards, including stock options, at fair va …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

"Restructuring and Transformation Costs We initiate restructuring actions to keep our cost structure competitive. Charges generally arise from severance related to workforce reductions, and to a lesser degree, facility exit and lease termination costs associated with the consolidation of office and manufacturing operations. Due to the size, nature and frequency of these discrete actions, they are fundamentally different from the Company's ongoing productivity initiatives. During the quarters and six months ended June 30, 2026 and 2025, we recorded restructuring costs for new and ongoing restructuring actions, including UpLift actions, as follows: Quarter Ended June 30, 2026 Quarter Ended June 30, 2025 (dollars in millions) UpLift Other Total UpLift Other Total Cost of products and services sold $ $ 3 $ 3 $ (2) $ 6 $ 4 Selling, general and administrative 8 8 27 6 33 Total $ $ 11 $ 11 $ 25 $ 12 $ 37 Six Months Ended June 30, 2026 Six Months Ended June 30, 2025 (dollars in millions) UpLift Other Total UpLift Other Total Cost of products and services sold $ $ 6 $ 6 $ 7 $ 21 $ 28 Selling, general and administrative 12 12 38 14 52 Total $ $ 18 $ 18 $ 45 $ 35 $ 80 Restructuring costs incurred and expected, unless otherwise indicated, are related approximately 30% to New Equipment and 70% to Service. UpLift Restructuring Actions and Transformation Costs. In 2023, we announced UpLift to transform our operating model. UpLift includes, among other aspects, the standardization of our pro …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

"Revenue Recognition We account for revenue in accordance with Accounting Standards Codification (""ASC"") Topic 606: Revenue from Contracts with Customers. Contract Assets and Liabilities. Contract assets reflect revenue recognized in advance of customer billing. Contract liabilities are recognized when a customer pays consideration, or we have an unconditional right to receive consideration, in advance of the satisfaction of performance obligations under the contract. We receive payments from customers based on the terms established in our contracts, which are payments in advance of performing work, progress payments as we perform contract work over time, or in some cases, payments upon completion of work. Total Contract assets and Contract liabilities as of June 30, 2026 and December 31, 2025 are as follows: (dollars in millions) June 30, 2026 December 31, 2025 Contract assets, current $ 824 $ 699 Total contract assets 824 699 Contract liabilities, current (3,023) (2,611) Contract liabilities, non-current (included within Other long-term liabilities) (26) (29) Total contract liabilities (3,049) (2,640) Net contract liabilities $ (2,225) $ (1,941) Contract assets increased by $125 million during the six months ended June 30, 2026, as a result of the progression and timing of billing on customer contracts. Contract liabilities increased by $409 million during the six months ended June 30, 2026 primarily due to the timing of billings on customer contracts in excess of revenue …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

"Segment Financial Data Our operations are classified into two operating segments: New Equipment and Service. Through the New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators as well as escalators and moving walkways to customers in the residential, commercial and infrastructure projects. The Service segment provides maintenance and repair services for both our products and those of other manufacturers, and provides modernization services to upgrade elevators and escalators. The operating segments are generally based on the management structure of the Company, as well as how management allocates resources, assesses performance and makes strategic and operational decisions. Segment Information. Otis discloses segment operating profit as its measure of segment performance, reconciled to Net income before income taxes. Segment operating profit excludes certain expenses and income that are not allocated to segments (as described below in ""Corporate and Unallocated""). Otis' Chief Operating Decision Maker (""CODM"") is the Company's Chief Executive Officer. The CODM assesses the performance of each operating segment and allocates resources to those segments based on net sales and segment operating profit. The CODM compares segment operating profit results to prior periods and forecasted amounts to assess performance and to make decisions regarding the allocation of capital and other investments. Discrete asset information …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"Stock Preferred Stock. There are 125 million shares of $0.01 par value Preferred Stock authorized, of which none were issued as of June 30, 2026 and December 31, 2025. Common Stock. There are 2.0 billion shares of $0.01 par value Common Stock authorized. As of June 30, 2026 and December 31, 2025, 439.9 million and 439.4 million shares of Common Stock were issued, respectively, which includes 59.2 million and 49.6 million shares of treasury stock, respectively. Treasury Stock. As of June 30, 2026, the Company was authorized by the Board of Directors of Otis to purchase up to $2.0 billion of Common Stock under a share repurchase program, of which $500 million was remaining at such time. During the quarter and six months ended June 30, 2026, the Company repurchased 5.1 million and 9.6 million shares, respectively, for $400 million and $800 million, respectively, compared to 3.2 million and 5.8 million shares, respectively, in the same periods of 2025 for $300 million and $553 million, respectively. Share repurchases in excess of issuances are subject to a 1% excise tax, which is included as part of the cost basis of the shares acquired in Treasury Stock on the Condensed Consolidated Balance Sheets, as well as within financing activities in the Condensed Consolidated Statements of Cash Flows when paid. The Company's share repurchase program does not obligate it to acquire any specific number of shares. Under this program, shares may be purchased in the open market, in privately …

StockholdersEquityNoteDisclosureTextBlock · excerpt; the full note is in the filing