Otis Worldwide (OTIS) JPMorgan Industrials Conference 2026 summary

Service business performance and strategy

• Service business has shown consistent mid-single-digit growth with 50 basis points margin expansion per year, expected to continue due to market opportunities and modernization needs.

• Modernization revenues are growing double-digit, driven by a large installed base of aging units, with 9 million units globally in prime age for upgrades.

• Repair activities, the highest margin segment, are growing in all regions, with Q1 repair growth at approximately 10% and high single-digit growth guided for 2026.

• Pricing initiatives, including AI-driven micro-pricing, are being piloted in high-value markets, targeting a 4% price increase in 2024, up from 3% previously.

• Investments in hiring mechanics and organizational changes, including new COO and Chief Growth Officer roles, are aimed at supporting growth and operational excellence.

New Equipment and modernization trends

• New Equipment sales have declined, especially in China, impacting top-line by about $400 million annually in 2024 and 2025, but Americas show positive momentum with a growing backlog.

• Middle East geopolitical disruptions have temporarily delayed revenue recognition and increased logistics costs, but impacts are considered temporary and represent a small portion of revenues.

• Modernization is expected to grow low teens, with industrialized packages improving efficiency and margins nearing 10%, surpassing New Equipment margins.

• China’s government modernization subsidy program is expanding, with 2025 volume expected to be 15%-40% higher than last year, supporting rapid growth in the region.

• China’s modernization sales grew 80% last year and 100% in Q4, with expectations for continued demand even as subsidies eventually wind down.

Financial outlook and guidance

• Q1 EPS is expected to be down 3%-5% year-over-year due to calendarization of investments and Middle East disruptions, with a backloaded profit profile for the year.

• Full-year repair growth is projected at high single digits, with Q1 stronger due to easier comparisons.

• Service margin expansion is expected to be 10-20 basis points annually, lower than the historical 50 basis points, due to faster modernization growth and ongoing investments.

• Cash flow conversion reached 100% in 2024 and is expected to continue at this level in 2025 and 2026, supported by modernization growth and stable working capital patterns.

• FX and commodity headwinds are present but manageable, with tariffs potentially providing a $5-$10 million upside.