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What changed in Otis Worldwide's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Otis Worldwide's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+295 added−287 removedSource: 10-K (2026-02-05) vs 10-K (2025-02-04)

Top changes in Otis Worldwide's 2025 10-K

295 paragraphs added · 287 removed · 239 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

49 edited+20 added−16 removed47 unchanged
Biggest changeSuch risks, uncertainties and other factors include, without limitation: • the effect of economic conditions in the industries and markets in which Otis and its businesses operate and any changes therein, including financial market conditions, fluctuations in commodity prices, and other inflationary pressures, interest rates and foreign currency exchange rates, levels of end market demand in construction, pandemic health issues, natural disasters, whether as a result of climate change or otherwise, and the financial condition of Otis’ customers and suppliers; • the effect of changes in political conditions in the U.S., including in connection with the new administration's policies and priorities, or otherwise, and other countries in which Otis and its businesses operate, including the effects of the conflict between Russia and Ukraine, the conflicts in the Middle East, and tensions between the U.S. and China, on general market conditions, commodity costs, global trade policies and related sanctions, export controls and tariffs, and currency exchange rates in the near term and beyond; • challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; • future levels of indebtedness, capital spending and research and development spending; • future availability of credit and factors that may affect such availability or costs thereof, including credit market conditions and Otis’ capital structure; • the timing and scope of future repurchases of Otis’ common stock ("Common Stock"), which may be suspended at any time due to various factors, including market conditions and the level of other investing activities and uses of cash; • fluctuations in prices and delays and disruption in delivery of materials and services from suppliers, whether as a result of changes in general economic conditions, geopolitical conflicts or otherwise; • cost reduction or containment actions, restructuring or transformation costs and related savings and other consequences thereof, including with respect to UpLift and related impacts of reorganization and outsourcing activities and change management; • new business and investment opportunities; • the outcome of legal proceedings, investigations and other contingencies; • pension plan assumptions and future contributions; • the impact of the negotiation of collective bargaining agreements and labor disputes, labor actions, including strikes or work stoppages, and labor inflation in the markets in which Otis and its businesses operate globally; • the effect of changes in tax, environmental, regulatory (including among other things import/export, tariffs, and climate change or other ESG related legal and regulatory changes) and other laws and regulations in the U.S., including in connection with the new administration's policies and priorities, and other countries in which Otis and its businesses operate; • the ability of Otis to retain and hire key personnel; • the scope, nature, impact or timing of acquisition and divestiture activity, the integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs; • the determination by the Internal Revenue Service (the "IRS") and other tax authorities that the distribution or certain related transactions in connection with the Separation should be treated as taxable transactions; and 9 Table of Contents • our obligations and our disputes that have or may hereafter arise under the agreements we entered into with RTX and Carrier in connection with the Separation.
Biggest changeSuch risks, uncertainties and other factors include, without limitation: • the effect of economic conditions in the industries and markets in which Otis and its businesses operate and any changes therein, including financial market conditions, fluctuations in commodity prices, and other inflationary pressures, interest rates and foreign currency exchange rates, levels of end market demand in construction, pandemic health issues, natural disasters, whether as a result of climate change or otherwise, and the financial condition of Otis’ customers and suppliers; • the effect of changes in political conditions in the U.S. and in other countries in which Otis and its businesses operate, including tensions between the U.S. and China and geopolitical conflicts, including the ongoing conflict between Russia and Ukraine and instability in the Middle East, on general market conditions, commodity costs, global trade policies and related sanctions, export controls and tariffs, and currency exchange rates in the near term and beyond; • challenges in the development, production, delivery, support, employee adoption, performance and realization of the anticipated benefits of advanced technologies and new products and services; • future levels of indebtedness, capital spending and research and development spending; • future availability of credit and factors that may affect such availability or costs thereof, including credit market conditions and Otis’ capital structure; • the timing and scope of future repurchases of Common Stock, which may be suspended at any time due to various factors, including market conditions and the level of other investing activities and uses of cash; • fluctuations in prices and delays and disruptions in delivery of materials and services from suppliers, whether as a result of changes in general economic conditions, geopolitical conflicts or otherwise; • cost reduction or containment actions, restructuring or transformation costs and related savings and other consequences thereof, including with respect to UpLift and our China business and related impacts of reorganization, change management and outsourcing activities, as applicable; • new business and investment opportunities and the realization of anticipated benefits , including meeting customer expectations and maintaining our competitiveness; • the outcome of legal proceedings, investigations and other contingencies; • pension plan assumptions and future contributions; • the impact of the negotiation of collective bargaining agreements and labor disputes, labor actions, including strikes or work stoppages, and labor inflation in the markets in which Otis and its businesses operate globally; • the effect of changes in laws, regulations and enforcement priorities in the U.S. and other countries in which Otis and its businesses operate; • the ability of Otis to retain and hire key personnel; • the scope, nature, impact or timing of acquisition and divestiture activity, the integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs; • the determination by the Internal Revenue Service (the "IRS") and other tax authorities that the distribution or certain related transactions in connection with the Separation should be treated as taxable transactions; and • our obligations and disputes that have or may hereafter arise under the agreements we entered into with RTX and Carrier in connection with the Separation. 9 Table of Contents These and other factors are more fully discussed in the "Business", "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" sections and elsewhere in this Form 10-K and may cause actual results to differ materially from those expressed or implied in the forward-looking statements.
The Gen360 elevator frees hoistway space to accommodate larger cabins and features a new electronic architecture, with many mechanical components replaced by electronic components that, when combined with our service, increase reliability and reduce the potential for entrapments.
Gen360 The Gen360 elevator frees hoistway space to accommodate larger cabins and features a new electronic architecture, with many mechanical components replaced by electronic components that, when combined with our service, increase reliability and reduce the potential for entrapments.
SkyRise High-Rise For taller, high-rise buildings, the SkyRise advanced elevator platform combines cutting-edge technologies and precision engineering to deliver solutions for residential, commercial and mixed-use skyscrapers. Escalators and Moving Walkways In addition t o elevator solutions, we also offer escalators and moving walkways. With a range of finishes and aesthetics, Otis escalators integrate easily with any building design.
SkyRise For taller, high-rise buildings, the SkyRise advanced elevator platform combines cutting-edge technologies and precision engineering to deliver solutions for residential, commercial and mixed-use skyscrapers. Escalators and Moving Walkways In addition t o elevator solutions, we also offer escalators and moving walkways. With a range of finishes and aesthetics, Otis escalators integrate easily with any building design.
Otis China is a joint venture established in 1998 for the purpose of manufacturing, installing and servicing elevators, escalators and related equipment. We are a majority owner of Otis China, and Tianjin Tai Kang Investment Co. Ltd. is our joint venture partner.
Otis China is a joint venture established in 1998 for the purpose of manufacturing, installing and servicing elevators, escalators and related equipment. We are the majority owner of Otis China, and Tianjin Tai Kang Investment Co. Ltd. is our joint venture partner.
Item 1. Business Our Company Otis is t he world’s leading elevator and escalator manufacturing, installation and service company. We serve customers in ov er 200 countries and territories around t he world. Otis has global scale and local focus, with more than 1,400 branc hes and offices, and a direct physical presence in more than 70 co untries.
Item 1. Business Our Company Otis is t he world’s leading elevator and escalator manufacturing, installation, service and modernization company. We serve customers in ov er 200 countries and territories around t he world. Otis has global scale and local focus, with more than 1,400 branc hes and offices, and a direct physical presence in more than 70 co untries.
The Company may not be able to compete effectively on all of these fronts and with all of its competitors, and the failure to do so could have a material adverse effect on its sales and profit margins. For further discussion of risks related to the competitive environment of our business, see Item 1A in this Form 10-K.
The Company may not be able to compete effectively on all of these fronts and with all of its competitors, and the failure to do so could have a material adverse effect on our sales and profit margins and reputation. For further discussion of risks related to the competitive environment of our business, see Item 1A in this Form 10-K.
We have a maintenance portfolio of approximately 2.4 million units globally, which includes Otis equipment manufactured and sold by us, as well as equipment from other original equipment manufacturers. Through our network of service sales personnel, we sell our services directly to customers in all significant elevator and escalator verticals around the world.
We have a maintenance portfolio of approximately 2.5 million units globally, which includes Otis equipment manufactured and sold by us, as well as equipment from other original equipment manufacturers. Through our network of service sales personnel, we sell our services directly to customers in all significant elevator and escalator verticals around the world.
We coordinate our R&D efforts globally through an operating model that sets global and local priorities based on customer and segment needs. We have 11 R&D centers and 17 factories around the world, including major locations in China, India, Japan, France, Germany, Spain and the United States.
We coordinate our R&D efforts globally through an operating model that sets global and local priorities based on customer and segment needs. We have 11 R&D centers and 16 factories around the world, including major locations in China, India, Japan, France, Germany, Spain and the United States.
Digital Technology initiatives Otis offers a range of technologies for improving the passenger experience and we have been using technology to monitor elevator performance remotely for decades. As of December 31, 2024, approximately 1.0 million units of our global portfolio, including units under the warranty period, are connected.
Digital Technology initiatives Otis offers a range of technologies for improving the passenger experience and we have been using technology to monitor elevator performance remotely for decades. As of December 31, 2025, approximately 1.1 million units of our global portfolio, including units under the warranty period, are connected.
In 2025, we expect to continue to innovate and expand our digital ecosystem and suite of digital solutions for both our existing service portfolio customers and for new equipment shipments from our factories.
In 2026, we expect to continue to innovate and expand our digital ecosystem and suite of digital solutions for both our existing service portfolio customers and for new equipment shipments from our factories.
We have 1,300 engi neers globally, with increasing focus on digital initiatives, software, design of the user interface and the user experience. We maintain a portfolio of patents, trademarks, copyrights, trade secrets, licenses and franchises related to the Otis business to protect our R&D investments in products and services.
We have 1,300 engine ers globally, with increasing focus on digital initiatives, software, design of the user interface and the user experience. We maintain a portfolio of patents, trademarks, copyrights, trade secrets, licenses and franchises related to the Otis business to protect our R&D investments in products and services.
We have developed a range of elevator and escalator solutions to meet the varying needs and objectives of our diverse customers, primarily centered around the following elevator platforms: Gen2 , Gen3 , Gen360 and SkyRise . Our primary elevator and escalator solutions are described below. 1 Table of Contents Gen2 Historically, Gen2 is our principal low-and mid-rise elevator solution.
We have developed a range of elevator and escalator solutions to meet the varying needs and objectives of our diverse customers, primarily centered around the following elevator platforms: Gen2 , Gen3 , Gen360 and SkyRise . Our primary elevator and escalator solutions are described below. 1 Table of Contents Gen2 Gen2 has been our principal low-and mid-rise elevator solution.
Our mechanics receive extensive training to service and install equipment safely. This training consists of live, virtual, and on-the-job modules with experienced mechanics. We also offer various programs to build leadership and functional capabilities and provide development initiatives through our colleague-led ERGs.
Our mechanics receive extensive training to service and install equipment safely. This training consists of live, virtual, and on-the-job modules with experienced mechanics. We also offer various programs to build leadership and functional capabilities and provide development initiatives through our colleague-led Business Resource Groups (BRGs).
For further discussion of risks related to environmental matters and other government regulations, see in this Form 10-K Item 1A, Item 7 and "Note 2: Summary of Significant Accounting Policies" and "Note 21: Contingent Liabilities" in Item 8 in this Form 10-K.
For further discussion of risks related to international trade compliance, environmental matters and other government regulations, see in this Form 10-K Item 1A, Item 7 and "Note 2: Summary of Significant Accounting Policies" and "Note 20: Contingent Liabilities" in Item 8 in this Form 10-K.
We also seek to promote a culture where stop work authority can be freely exercised without the fear of retribution or retaliation, and a learning culture to enhance the quality and delivery of safety and technical training. Health and Safety is one of the four focus areas of our ESG goals.
We also seek to promote a culture where stop work authority can be freely exercised without the fear of retribution or retaliation, and a learning culture to enhance the quality and delivery of safety and technical training. Health and Safety is one of the four focus areas of our sustainability and responsibility projects and programs .
Our success in both our New Equipment and Service segments depends upon our ability to develop and market our products, services and solutions, as well as our ability to provide the people, technologies, facilities, equipment and financial capacity needed to deliver those products and services with maximum efficien cy.
Our success in both our New Equipment and Service segments depends upon our ability to develop and market our products, services and solutions, as well as our ability to provide the people, technologies, facilities, equipment and financial capacity needed to deliver those products and services with maximum efficien cy and at quality levels expected by our customers.
Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, dividends, share repurchases, tax rates, R&D spend, restructuring or transformation actions (including UpLift and related reorganization and outsourcing activities), credit ratings, net indebtedness and other measures of financial performance or potential future plans, strategies or transactions, or statements that relate to climate change and our intent to achieve certain ESG targets or goals, including operational impacts and costs associated therewith, and other statements that are not historical facts.
Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, dividends, share repurchases, tax rates, R&D spend, restructuring or transformation actions (including UpLift and related reorganization and outsourcing activities and such actions with respect to our business in China), credit ratings, net indebtedness and other measures of financial performance or potential future plans, strategies or transactions, or statements that relate to climate change and our intent to achieve certain sustainability targets or other corporate responsibility initiatives, including operational impacts and costs associated therewith, and other statements that are not historical facts.
Our international operations represented appro ximately 70% of our net sales for 2024. New Equipment Through our New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators, as well as escalators and moving walkways for residential, commercial and infrastructure projects.
Our international operations represented approximately 71% of our net sales for 2025. New Equipment Through our New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators, as well as escalators and moving walkways for residential, commercial and infrastructure projects.
Otis Electric, a subsidiary of Otis China, is a joint venture established in 1997 for the purpose of manufacturing, installing and servicing elevators, escalators and related equipment. Otis China owns a controlling equity stake in Otis Electric. Otis China’s partner in Otis Electric is Xizi Elevator Group Co. Competition We operate in a highly competitive industry.
Otis Electric, a subsidiary of Otis China, is a joint venture established in 1997 for the purpose of manufacturing, installing and servicing elevators, escalators and related equipment. Otis China owns a controlling equity stake in Otis Electric. Otis China’s partner in Otis Electric was Xizi Elevator Group Co.
The following description of our busin ess should be read in conjunction with Item 7 in this Form 10-K, including the information contained therein under the heading "Business Overview." Description of Business by Segment Our Company is organized into two segments, New Equipment and Service, which, for 2024, contributed 38% and 62% of our net sales, and 13% and 87% of our segment operating profit, respectively.
The following description of our busin ess should be read in conjunction with Item 7 in this Form 10-K, including the information contained therein under the heading "Business Overview." Description of Business by Segment Our Company is organized into two segments, New Equipment and Service, which, for 2025, contributed 35% and 65% of our net sales, and 9% and 91% of our segment operating profit, respectively.
We seek to manage commodity price risk through locking and hedging strategies, as well as passing the increases onto our customers through pricing. See Item 1A in this Form 10-K for risks associated with raw material and supply chain. Environmental, Social and Governance ("ESG") Otis has an integrated approach to ESG.
We seek to manage commodity price risk through locking and hedging strategies, as well as passing the increases onto our customers through pricing. See Item 1A in this Form 10-K for risks associated with raw material and supply chain.
For 2024 , research and development ("R&D") expense wa s $152 million and 1.1% as a percentage of net sales. In addition to R&D expense, we made investments in digital and strategic initiatives of $53 million , which in combination with R&D expense was 1.4% as a percentage of net sales.
For 2025 , research and development ("R&D") expense wa s $152 million and 1.1% as a percentage of net sales. In addition to R&D expense, we made investments in digital and strategic initiatives of $45 million, w hich in combination with R&D expense w as 1.4% a s a percentage of net sales.
We rely on approximate ly 450 key suppliers for our manufacturing supply chain. 5 Table of Contents Components and systems necessary to effectively complete our New Equipment projects, as well as to satisfy our maintenance and repair obligations, are often available from two or more sources within the industry.
These include product and non-product suppliers, as well as subcontractors. We rely on approximate ly 400 key suppliers for our manufacturing supply chain. Components and systems necessary to effectively complete our New Equipment projects, as well as to satisfy our maintenance and repair obligations, are often available from two or more sources within the industry.
See the "Environmental, Social and Governance ("ESG")" section of this Form 10-K above for more information regarding our ESG goals. We are focused on our colleagues' mental and physical well-being. We provide employee assistance plan benefits to all of our colleagues worldwide. We also offer flexible work arrangements to many salaried colleagues.
See the "S ustainability and Responsibility " section of this Form 10-K above for more information regarding our sustainability-related strategies and actions. We are focused on our colleagues' mental and physical well-being. We provide employee assistance plan benefits to all of our colleagues worldwide. We also offer flexible work arrangements to many salaried colleagues.
Our largest joint ventures are located in China with the remainder of our joint ventures and non-wholly owned subsidiaries located in various other countries. We operate in China through two principal joint ventures: Otis Elevator (China) Investment Company Limited ("Otis China") and Otis Electric Elevator Company Limited ("Otis Electric").
Our largest joint venture is located in China with the remainder of our joint ventures and non-wholly owned subsidiaries located in various other countries. Prior to October 2025, we operated in China through two principal joint ventures: Otis Elevator (China) Investment Company Limited ("Otis China") and Otis Electric Elevator Company Limited ("Otis Electric").
Similar to most other electro-mechanical equipment, elevators and escalators are subject to wear and tear, which over time erodes equipment functionality. As elevator equipment ages, we work with customers to help renew or refresh their elevators with modernization solutions that enhance equipment operation, improve building functionality and contribute to more sustainable building systems.
Similar to most other electro-mechanical equipment, elevators and escalators are subject to wear and tear over time, which can erode equipment functionality. As equipment ages, we work with customers to help renew and refresh their elevators and escalators through modernization solutions that enhance operational performance, improve overall building functionality, and support more sustainable building systems.
We currently own approximatel y 5,300 pa tents issued in various jurisdictions, and we have approximatel y 1,400 patent applications pending globally. We filed approximately 800 patent applications in the last three years. Our patents are primarily filed in Europe, the United States and Asia.
We currently own approximately 4,600 patents issued in various jurisdictions, and we have approximately 1,300 patent applications pending globally. We filed approximately 900 patent applications in the last three years. Our patents are primarily filed in Europe, the United States and Asia.
We also provide customers with repair services to address equipment and component wear and tear, as well as breakdowns. We seek to grow our maintenance portfolio through conversion of newly installed units into maintenance contracts, through prospecting and winning units already in service from customers using another service provider and through acquisitions.
We seek to grow our maintenance portfolio through conversion of newly installed units into maintenance contracts, through prospecting and winning units already in service from customers using another service provider and through acquisitions.
In addition, we have also experienced lower New Equipment net sales in the fourth quarter in China, due to a national holiday that occurs during the first week of October which may impact the relative mix of net sales within the quarter.
In addition, we have also experienced lower New Equipment net sales in the fourth quarter in China, due to a national holiday that occurs during the first week of October which may impact the relative mix of net sales within the quarter. 5 Table of Contents Raw Materials and Supplies Due to the global and distributed nature of our operations, we partner with a diverse network of several thousand suppliers globally.
With optional 360-degree cameras in the hoistway, Otis service teams can visually confirm, fine-tune, diagnose and solve many issues remotely without stopping the elevator. The Otis ONE IoT solution adds a network of sensors for real-time status updates.
With optional 360-degree cameras in the hoistway, Otis service teams can visually confirm, fine-tune, diagnose and solve many issues remotely without stopping the elevator. Otis ONE is our IoT solution that connects elevators to the cloud for real-time monitoring, predictive maintenance, and enhanced, transparent communication.
We seek others’ ideas, encourage innovation and empower our colleagues through various learning and development programs that are aligned with our business strategy and are designed to contribute to our broader success such as our "Employee Scholar Program", a company-sponsored education program that allows colleagues to expand their skills through degree or certification programs.
When seeking candidates or promoting Otis colleagues, we focus on matching the best talent to open roles in support of our organizational model and business needs, thereby driving value for our company and its stakeholders. 7 Table of Contents We seek others’ ideas, encourage innovation and empower our colleagues through various learning and development programs that are aligned with our business strategy and are designed to contribute to our broader success such as our "Employee Scholar Program", a company-sponsored education program that allows colleagues to expand their skills through degree or certification programs.
Our commitment to fostering an inclusive workplace strengthens employee engagement and supports the retention of top talent. Colleague Engagement We believe that engaged colleagues deliver better service to our customers. We measure engagement by periodically conducting colleague surveys.
We also track our colleagues’ satisfaction through colleague engagement surveys to anticipate attrition, as discussed further below. Our commitment to building and fostering a sense of belonging and an inclusive workplace strengthens employee engagement and supports the retention of top talent. Colleague Engagement We believe that engaged colleagues deliver better service to our customers.
Out side of the U.S., our colleagues are represented by workers' councils or statutory labor unions as may be customary or required in those jurisdictions . While we strive to maintain good relationships with our employee representative bodies, our business may be adversely affected by work stoppages, union negotiations, labor disputes and other matters associated with our labor force.
While we strive to maintain good relationships with our employee representative bodies, our business may be adversely affected by work stoppages, union negotiations, labor disputes and other matters associated with our labor force.
We also provide regular health and safety training to our field professionals. We follow local labor laws that address maximum working hours. We empower all of our colleagues and subcontractors with stop work authority if they perceive an unsafe condition or behavior that may cause injury.
We empower all of our colleagues and subcontractors with stop work authority if they perceive an unsafe condition or behavior that may cause injury.
Our services include inspections, preventive maintenance offerings and other customized maintenance offerings tailored to meet customer needs. A basic maintenance contract provides for inspection consistent with local regulatory needs. We offer incremental, tiered maintenance and service offerings, with varying levels of coverage up to and including comprehensive component replacement coverage.
We support our customers with our network of service parts centers and repair centers. 2 Table of Contents Our services include inspections, preventive maintenance offerings and other customized maintenance offerings tailored to meet customer needs. A basic maintenance contract provides for inspection consistent with local regulatory needs.
Our mechanics are critical to our ability to deliver a high level of service to our customers. Our OTISLINE operations provide personalized customer support 24/7. They receive customer service requests and assign and dispatch field technicians, as necessary, to respond to service requests. We support our customers with our network of service parts centers and repair centers.
Our OTISLINE operations provide personalized customer support 24/7. They receive customer service requests and assign and dispatch field technicians, as necessary, to respond to service requests.
The results, which are reported to our Board of Directors and management, help us assess how our colleagues feel about working for us. We use the survey results to develop action plans to address areas of concern. The engagement survey, which anonymizes the data, covers topics such as safety, ethics, belonging, quality, company prospects, inclusion, empowerment, accountability and managerial effectiveness.
We measure engagement by conducting annual colleague engagement surveys. The results, which are reported to our Board of Directors and management, help us assess how our colleagues feel about working for us. We use the survey results to develop action plans to address areas of concern.
Our progress towards our ESG goals was included as a performance multiplier in determining payouts under our 2024 executive short-term incentive plan. 6 Table of Contents There have been no, and we do not expect there to be in the near term, material impacts on our business, financial condition or results of operations as a result of compliance with legislation or regulatory rules regarding climate change, from the known physical effects of climate change or as a result of implementing our ESG initiatives.
There have been no, and we do not expect there to be in the near term, material impacts on our business, financial condition or results of operations as a result of compliance with legislation or regulatory rules regarding climate change, from the known physical effects of climate change, as a result of implementing our sustainability-related initiatives or from transitional risks such as increased regulations or customer shifting preferences toward low carbon products, as determined under our climate scenarios analysis.
Human Capital As of December 31, 2024, our global workforce consists of 72,000 colleagues (including 44,000 field professionals), with 45% in Asia, 34% in Europe, the Middle East and Africa ("EMEA") and 21% in the Americas. Approximately 64% of our U.S. workforce is covered by a collective bargaining agreement.
For a discussion of risks associated with sustainability-related matters, see Item 1A in this Form 10-K. Human Capital As of December 31, 2025, our global workforce consists of approximately 72,000 colleagues (including approximately 45,000 field professionals), with 45% in Asia, 34% in Europe, the Middle East and Africa ("EMEA") and 21% in the Americas.
Compensation and Benefits Our colleagues are vital to our success, and we offer pay and benefits designed to attract, retain and motivate our colleagues and align their compensation with both individual and our overall performance. We follow local labor laws that address minimum wages, insurance coverage of work-related accidents, severance pay and other employment provisions, including overtime and sick pay.
We offer fair employment conditions and follow local labor laws that address minimum wages, insurance coverage of work-related accidents, severance pay and other employment provisions, including overtime and sick pay.
We believe our global presence, local relationships and proven track record in executing complex elevator and escalator solutions contribute to our iconic brand, reputation and competitive position in the industry. 4 Table of Contents We believe our business strategies allow us to: • Sustain New Equipment growth; • Accelerate Service portfolio growth; • Deliver modernization value; • Advance the digitalization of Otis; and • Focus and empower the organization.
We believe our business strategies allow us to: • Sustain New Equipment growth; • Accelerate Service portfolio growth; • Deliver modernization value; • Advance the digitalization of Otis; and • Focus and empower the organization.
We have incurred and will likely continue to incur liabilities under various government statutes and regulations for the cleanup of pollutants previously released into the environment.
In addition, our operations are subject to and affected by environmental regulations promulgated by federal, state and local authorities in the United States and regulatory authorities with jurisdiction over our foreign operations. We have incurred and will likely continue to incur liabilities under various government statutes and regulations for the cleanup of pollutants previously released into the environment.
Certain types of customers, such as those owning or operating large properties or portfolios of properties, tend to execute long-term maintenance agreements. 2 Table of Contents We provide our Service offerings to our customers through a global network of 36,000 Service mechanics operating ou t of more than 1,400 bra nches and offices typically located in close proximity to concentrations of customers.
We provide our Service offerings to our customers through a global network of 37,000 Se rvice mechanics operating ou t of more than 1,400 bra nches and offices typically located in close proximity to concentrations of customers. Our mechanics are critical to our ability to deliver a high level of service to our customers.
There are several factors that determine competitiveness in the industry, including local codes and compliance requirements, customer preferences, price, reputation, delivery and execution, product quality, equipment performance, reliability and long-term service and product support.
These independent service providers have an aggregate portfolio of about 50% of service units, but account for a smaller percentage of the service business when measured by value because of the types of units and level of maintenance covered by these providers. 4 Table of Contents There are several factors that determine competitiveness in the industry, including local codes and compliance requirements, customer preferences, price, reputation, delivery and execution, product quality, equipment performance, reliability and long-term service and product support.
Hiring, Training, Development and Retention We position ourselves to attract and retain the best talent in the market and interact meaningfully in the global communities where we live and work. We aim to be both an equal opportunity employer of choice and a place where our colleagues feel safe, welcomed and heard.
Hiring, Training, Development and Retention We position ourselves to attract and retain the best talent in the market and interact meaningfully in the global communities where we live and work. We perform strategic talent outreach to expand our applicant pool and ensure access to top-qualified candidates.
Our Environment & Impact goals are as follows: • Near-term science-based greenhouse gas ("GHG") reduction targets: ▪ Reduce absolute scope 1 and 2 GHG emissions 55% by 2033 from 2021 base year (with the target boundary including biogenic land-related emissions and removals from bioenergy feedstocks) ▪ Reduce absolute scope 3 GHG emissions from purchased goods and services, business travel, and use of sold products 33% by 2033 from 2021 base year • Source 100% of factory electricity from renewable energy by 2030 • Achieve 100% factory eligibility for zero-waste-to-landfill certification by 2025 • Complete ISO 14001 certification for all factories by 2025 (goal completed four years early in 2021) In April 2024, the Science Based Target Initiative ("SBTi") validated our near-term science-based GHG reduction targets.
Our SBTs are: (i) reduce absolute scope 1 and 2 greenhouse gas emissions 55% by 2033 from 2021 base year (the target boundary includes biogenic land-related emissions and removals from bioenergy feedstocks) and (ii) reduce absolute scope 3 greenhouse gas emissions from purchased goods and services, business travel, and use of sold products 33% by 2033 from 2021 base year.
We work closely with our customers to renew these contracts as appropriate.
We work closely with our customers to renew these contracts as appropriate. Certain types of customers, such as those owning or operating large properties or portfolios of properties, tend to execute long-term maintenance agreements.
We closely monitor local legislation and government policies in the locations in which we operate. In addition, our operations are subject to and affected by environmental regulations promulgated by federal, state and local authorities in the United States and regulatory authorities with jurisdiction over our foreign operations.
We closely monitor local legislation and government policies in the locations in which we operate.
Modernization offerings can range from relatively simple upgrades of interior finishes and aesthetics to complex upgrades of larger components and sub-systems. Our GEN3 MOD Plus modernization offering for residential, commercial, hospitality, medical or industrial buildings includes built-in connectivity to our Otis ONE IoT digital platform.
Modernization offerings range from relatively simple upgrades of interior finishes and aesthetics to complex upgrades of larger components and sub-systems, including the machine, ropes or belts, safety systems and the entire car or escalator.
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In 2023, we introduced the new Gen3 Core elevator in North America, which was designed specifically for low-rise buildings, bringing passengers connectivity, style, and comfort. The Gen3 Core helps minimize energy consumption, material usage and installation costs. Gen360 Initially launched in Europe, we expanded the Gen360 platform into China in 2023.
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We offer incremental, tiered maintenance and service offerings, with varying levels of coverage up to and including comprehensive component replacement coverage. We also provide customers with repair services to address equipment and component wear and tear, as well as breakdowns.
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These independent service providers have an aggregate portfolio of about 50% of service units, but account for a smaller percentage of the service business when measured by value because of the types of units and level of maintenance covered by these providers.
Added
In October 2025, we purchased all of the outstanding shares of the noncontrolling shareholder of Otis Electric. Otis Electric is now 100% owned by Otis China and one of its subsidiaries. See "Note 1: Business Overview" in Item 8 in this Form 10-K for further details regarding this transaction. Competition We operate in a highly competitive industry.
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Raw Materials and Supplies Due to the global and distributed nature of our operations, we partner with a diverse network of several thousand suppliers globally. These include product and non-product suppliers, as well as subcontractors.
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We believe our global presence, local relationships and proven track record in executing complex elevator and escalator solutions contribute to our iconic brand, reputation and competitive position in the industry.
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Our four ESG pillars of Health & Safety, Environment & Impact, People & Communities and Governance & Accountability are embedded in our business strategy and align with our Otis Absolutes of Safety, Ethics and Quality. We are committed to the health and safety of our colleagues and the riding public.
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Sustainability and Responsibility At Otis, sustainability and responsibility are strategically woven into each of our core business functions in support of our vision and our commitment to living our Otis mission as a world-class, customer-centric, service-oriented company.
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We are committed to managing our impact on the environment, aligning our products and services with our stakeholders’ expectations and aspirations. We proactively engage in the communities where we live and work. We focus on attracting, developing and retaining the best talent on the market. See "Human Capital" below for additional information regarding certain initiatives related to our colleagues.
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Together with our Otis Absolutes of Safety, Ethics and Quality and our Leading at Otis Behaviors, our projects and programs under our four pillars of Health & Safety, Governance & Accountability, Environment & Impact and People & Communities advance our five strategic objectives – of sustaining New Equipment growth, accelerating our Service portfolio growth, delivering modernization value, and focusing and empowering our organization while advancing digitalization – to create value for our stakeholders and the broader communities where we live and work.
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In 2021, we became a signatory to the U.N. Global Compact and published our thirteen ESG goals and aligned them with the U.N. Sustainable Development Goals.
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We are committed to the health and safety of our colleagues and the riding public. We are committed to environmental sustainability as a business strategy, advancing digitalization and leveraging smart technology to create products and services that meet customer expectations. We proactively engage in the communities where we live and work.
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Our new science-based targets replace our GHG target of 50% reduction in scope 1 and 2 GHG emissions by 2030 from 2019 base year. Our climate transition plan is based on the implementation of major initiatives focused on energy management and operational efficiency across our factories, real estate and fleet.
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We position ourselves to attract, develop and retain the best talent in the market. See "Human Capital" below for additional information regarding certain initiatives related to our Otis colleagues. In April 2024, the Science Based Target Initiative ("SBTi") validated our near-term science-based greenhouse gas emissions reduction targets (SBTs).
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In June 2024, we published our third annual ESG report on our ESG activities, metrics and progress towards our goals in accordance with the Global Reporting Initiative Standards, as well as in alignment with the Sustainability Accounting Standards Board guidelines and the Task Force on Climate-related Financial Disclosures.
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Our climate strategy is designed to build resiliency and strengthen the operational efficiency of our business and supply chain.
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We also engaged third parties for limited assurance covering certain Health & Safety, Environment & Impact, and People & Community metrics discussed in the ESG report. In the Fall 2024, we conducted our initial double materiality assessment in accordance with the European Corporate Sustainability Reporting Directive.
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It is based on our climate scenario analysis under the Task Force on Climate-related Financial Disclosures (TCFD), near-term SBTs and the implementation of major initiatives in the near-term, medium-term and long-term focused on energy management and operational efficiency across our factories, real estate portfolio and fleet, real estate portfolio climate resilience, product sustainability through the advancement of digitalization and innovation and responsible climate resilient sourcing.
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Our ESG goals and ESG reports can be found in the Investor section of our corporate website (http://www.otis.com) under the heading "ESG", which we update from time to time. Our ESG goals, our ESG reports and our corporate website are not incorporated by reference into this Form 10-K. The Company has developed an ESG governance model that supports our goals.
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In June 2025, we published our fourth annual voluntary report describing our sustainability-related strategies, programs, and actions in alignment with our business strategies, and providing performance data and metrics under our four pillars.
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Our Board of Directors and its committees engage in extensive review and oversight of ESG-related topics. The Company's ESG Council, composed of senior leaders representing multiple functions within the Company, monitors our performance towards our ESG goals and addresses impacts and opportunities related to climate change, as well as those related to all other ESG programs.
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It was drafted in accordance with the Global Reporting Initiative Standards, the Sustainability Accounting Standards Board guidelines for the Resource Transformation sector (with Electrical and Electronic Equipment and Industrial Machinery and Goods as subsectors, when applicable), and the TCFD recommendations.
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The ESG Council reports regularly to our CEO on our ESG progress and actions.
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We also engaged third parties for limited or reasonable assurance assessment of certain of our health and safety and environmental metrics under our voluntary reporting. This annual report – now called "Connect & Thrive" can be found on our company website (http://www.otis.com) under the heading "Sustainability & Responsibility", which we update from time to time.
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Increased regulation and other climate change concerns, however, could subject us to additional costs and restrictions, and we are not able to predict how such regulations or concerns would affect our business, operations or financial results. For a discussion of risks associated with ESG matters, see Item 1A in this Form 10-K.
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Neither our Connect & Thrive report nor our company website are incorporated by reference into this Form 10-K. 6 Table of Contents Underscoring the integration of sustainability and responsibility into our core business operations Otis has enhanced its sustainability-related governance model by further rooting sustainability within each business function.
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We partner with universities and nonprofit organizations and use our Employee Resource Groups ("ERGs") to broaden our hiring pool to meet our hiring needs.
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Functional leads are responsible for sustainability-related topics within their respective functions, with direct oversight by the CEO and, ultimately, the Board of Directors (including the Nominations and Governance Committee). These functional leaders are supported by functional committees and workstreams that oversee sustainability-related strategies at the functional level.
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Our ERGs’ missions aim at fostering an inclusive work environment through engagement that positively impacts business outcomes. 7 Table of Contents We track our colleagues’ voluntary attrition rate to help us assess our workplace initiatives. We also track our colleagues’ satisfaction through colleague surveys to anticipate attrition, as discussed further below.
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These groups collaborate with subject matter experts across their functions to develop and implement sustainable-related strategies that align with our vision.
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These and other factors are more fully discussed in the "Business", "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" sections and elsewhere in this Form 10-K and may cause actual results to differ materially from those expressed or implied in the forward-looking statements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur ability to realize the anticipated benefits of our technological advancements, such as the development and execution of advanced digital technologies for the benefit of our New Equipment or Service segment or the development of new products depends on a variety of factors, including meeting development, production, certification and regulatory approval schedules; execution of internal and external performance plans; availability of supplier and internally produced parts and materials; performance of suppliers and subcontractors; hiring and training of qualified personnel; achieving cost and production efficiencies; validation of innovative technologies; and customer interest in new technologies and products and acceptance of products we manufacture or that incorporate technologies we develop.
Biggest changeOur ability to realize the anticipated benefits of our technological advancements, such as the development and execution of advanced technologies, including artificial intelligence ("AI"), for the benefit of our New Equipment or Service segment or the development of new products depends on a variety of factors, including meeting development, production, certification and regulatory approval schedules; execution of internal and external performance plans; availability of supplier and internally produced parts and materials; performance of suppliers and subcontractors; hiring and training of qualified personnel; employee adoption of new technologies; achieving cost and production efficiencies; validation of innovative technologies; our ability to maintain new products at the Service levels and costs anticipated; and customer interest in new technologies and products and acceptance of products we manufacture or that incorporate technologies we develop. 12 Table of Contents Our research and development efforts may not result in innovative products or services that incorporate new technologies for our New Equipment and Service segments, or products or services being developed on a timely basis or that meet the needs of our customers as effectively as competitive offerings.
Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could negatively affect our business, results of operations and financial condition. 19 Table of Contents Risks Related to the Separation In connection with the Separation, each of RTX, Otis and Carrier agreed to indemnify the other parties for certain liabilities.
Alternatively, if a court were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could negatively affect our business, results of operations and financial condition. 20 Table of Contents Risks Related to the Separation In connection with the Separation, each of RTX, Otis and Carrier agreed to indemnify the other parties for certain liabilities.
For this purpose, any acquisitions of RTX or Otis shares within the period beginning two years before the distribution of Common Stock pursuant to the Separation and ending two years after such distribution are presumed to be part of such a plan, although RTX or Otis may be able to rebut that presumption (including by qualifying for one or more safe harbors under applicable Treasury Regulations). 20 Table of Contents In addition, in connection with and prior to the Separation, UTC and its subsidiaries completed various internal reorganization transactions.
For this purpose, any acquisitions of RTX or Otis shares within the period beginning two years before the distribution of Common Stock pursuant to the Separation and ending two years after such distribution are presumed to be part of such a plan, although RTX or Otis may be able to rebut that presumption (including by qualifying for one or more safe harbors under applicable Treasury Regulations). 21 Table of Contents In addition, in connection with and prior to the Separation, UTC and its subsidiaries completed various internal reorganization transactions.
We compete with other companies both within and outside of our industry for talented personnel in a highly competitive labor market, and we may lose key personnel or fail to attract other skilled personnel and incur additional labor costs.
We compete with other companies both within and outside of our industry for talented personnel in a highly competitive labor market, and we may lose key personnel or fail to attract sufficient skilled personnel and incur additional labor costs.
As a result, we could be subject to criminal and civil penalties, disgorgement, changes or enhancements to our compliance measures that could increase our costs, decrease our access to certain sales channels, personnel changes or other remedial actions. 15 Table of Contents Moreover, we are subject to antitrust and anti-collusion laws, including mandatory supply laws and bidding regulations, in various jurisdictions throughout the world.
As a result, we could be subject to criminal and civil penalties, disgorgement, changes or enhancements to our compliance measures that could increase our costs, decrease our access to certain sales channels, personnel changes or other remedial actions. 16 Table of Contents Moreover, we are subject to antitrust and anti-collusion laws, including mandatory supply laws and bidding regulations, in various jurisdictions throughout the world.
Risks associated with these actions and other workforce management issues include unfavorable political responses, unforeseen delays in the implementation of anticipated workforce reductions, additional unexpected costs, challenges in change management, adverse effects on employee morale and capacity, and the failure to meet operational targets due to the loss of employees or work stoppages, any of which may impair our ability to achieve anticipated cost reductions, otherwise harm our business or have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Risks associated with these actions and other workforce management issues include unfavorable political responses, unforeseen delays in the implementation of anticipated workforce reductions, additional unexpected costs, challenges in change management, adverse effects on employee morale and capacity, and the failure to meet operational targets due to the loss of employees or work stoppages or transitioning work to third parties, any of which may impair our ability to achieve anticipated cost reductions, otherwise harm our business or have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Furthermore, continuation of the conflicts could give rise to disruptions to our or our business partners’ global technology 11 Table of Contents infrastructure, including through cyberattack or cyber-intrusion; adverse changes in international trade policies and relations; regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Furthermore, continuation of the conflicts could give rise to disruptions to our or our business partners’ global technology infrastructure, including through cyberattack or cyber-intrusion; adverse changes in international trade policies and relations; regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Violations of the FCPA, antitrust or other anti-corruption or anti-collusion laws, or allegations of such violations, could disrupt our operations, cause reputational harm, involve significant management distraction and result in a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Violations of the FCPA, antitrust or other anti-corruption or anti-collusion laws, government contract laws, or allegations of such violations, could disrupt our operations, cause reputational harm, involve significant management distraction and result in a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
If our ESG practices do not meet evolving regulations, investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment, supplier, or business partner could be negatively impacted, or could result in litigation. We may also be subject to penalties for non-compliance under applicable laws.
If our sustainability and responsibility practices do not meet evolving regulations, investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment, supplier, or business partner could be negatively impacted, or could result in litigation. We may also be subject to penalties for non-compliance under applicable laws.
China is currently the largest end market for sales of new equipment in our industry, with our New Equipment net sales in China representing approximately one fourth of our global New Equipment net sales and over half of our global New Equipment unit volume and a growing part of our Service segment.
China is currently the largest end market for sales of new equipment in our industry, with our New Equipment net sales in China representing approximately one fifth of our global New Equipment net sales and over half of our global New Equipment unit volume and a growing part of our Service segment.
Such attacks could disrupt our business operations, our systems or those of third parties, and could impact the ability of our products to work as intended. We and some of our third-party suppliers have experienced cyber-based attacks, and, due to the evolving threat landscape, may continue to experience 17 Table of Contents them going forward, potentially with more frequency.
Such attacks could disrupt our business operations, our systems or those of third parties, and could impact the ability of our products to work as intended. We and some of our third-party suppliers have experienced cyber-based attacks, and, due to the evolving threat landscape, may continue to experience them going forward, potentially with more frequency.
Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions, including levels of consumer and business confidence, commodity prices, raw material and energy costs, supply chain issues, trade policies, tariffs and trade barriers, foreign currency exchange rates, interest rates, labor costs, levels of government spending and deficits, actual or anticipated default on sovereign debt, political conditions, including in connection with the new administration's policies and priorities in the U.S. or otherwise, regulatory changes and other challenges that could affect the global economy.
Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions, including levels of consumer and business confidence, commodity prices, raw material and energy costs, supply chain issues, trade policies (including tariffs and trade barriers), foreign currency exchange rates, interest rates, labor costs, levels of government spending and deficits, actual or anticipated default on sovereign debt, political conditions in the U.S. or otherwise, regulatory changes and other challenges that could affect the global economy.
We design, manufacture, install and service products that incorporate advanced technologies; the introduction of new products and technologies involves risks, and we may not realize the degree or timing of benefits initially anticipated. We seek to grow our business through the design, development, production, sale and support of innovative products that incorporate advanced technologies.
We design, manufacture, install and service products that incorporate advanced technologies; the introduction of new products and technologies, including artificial intelligence, involves risks, and we may not realize the degree or timing of benefits initially anticipated. We seek to grow our business through the design, development, production, sale and support of innovative products that incorporate advanced technologies.
Examples of such risks include: (1) the availability and cost of low- or non-carbon-based energy sources and technologies, (2) third-party coordination and alignment over which we do not have control and may be unpredictable, (3) evolving regulatory requirements affecting ESG standards or disclosures, (4) the availability of suppliers that can meet our sustainability, inclusion and other standards, and (5) our ability to recruit, develop, and retain talent in our labor markets.
Examples of such risks include: (1) the availability and cost of low- or non-carbon-based energy sources and technologies, (2) third-party coordination and alignment over which we do not have control and which may be unpredictable, (3) evolving regulatory requirements affecting sustainability or responsibility related standards or disclosures, (4) the availability of suppliers that can meet our sustainability-related standards, and (5) our ability to recruit, develop, and retain talent in our labor markets.
Our international operations subject us to risk as our results of operations may be adversely affected by changes in local and regional economic conditions, such as fluctuations in exchange rates and changes in credit conditions. We conduct our business on a global basis, with approxim ate ly 70% of our 2024 n et sales derived from international operations.
Our international operations subject us to risk as our results of operations may be adversely affected by changes in local and regional economic conditions, such as fluctuations in exchange rates and changes in credit conditions. We conduct our business on a global basis, with approxim ate ly 71% of our 2025 n et sales derived from international operations.
While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition. Our international operations subject us to risks associated with geopolitical conflicts. Our international sales and operations are subject to risks associated with geopolitical conflicts.
While these factors and their impact are difficult to predict, any one or more of them could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition. 11 Table of Contents Our international operations subject us to risks associated with geopolitical conflicts.
Accordingly, fluctuations in exchange rates have given and may continue to give rise to gains or losses when financial statements of non-U.S. operating units are translated 10 Table of Contents into U.S. dollars.
Accordingly, fluctuations in exchange rates have given and may continue to give rise to gains or losses when financial statements of non-U.S. operating units are translated into U.S. dollars.
We rely on a combination of patents, trademarks, copyrights, trade secrets, nondisclosure agreements, customer and supplier agreements, license agreements, non-compete agreements, information technology security systems, internal controls and compliance systems and other measures to protect our intellectual property.
We rely on a combination of patents, trademarks, copyrights, trade secrets, nondisclosure agreements, customer and supplier agreements, license agreements, restrictive covenants, information technology security systems, internal controls and compliance systems and other measures to protect our intellectual property.
Existing insurance coverage may not provide protection for all of the costs that may arise from such events. The impacts of these unexpected events are difficult to predict, but could result in higher costs or delays in our operations and adversely affect our financial performance.
Existing insurance coverage may not provide protection for all of the costs that may arise from such events. The impacts of these unexpected events are difficult to predict, but could result in higher costs or delays in our operations and/or adversely affect economic conditions in the regions where we operate and our financial performance.
If these conflicts continue for a significant time or further expand to other countries and depending on the ultimate outcomes of these conflicts, which remain uncertain, they or new geopolitical conflicts could have additional adverse effects on macroeconomic conditions, including but not limited to, increased costs, constraints on the availability of commodities, supply chain disruptions and decreased business spending.
If current geopolitical conflicts expand to other countries and depending on the ultimate outcomes of these conflicts, which remain uncertain, they or new geopolitical conflicts could have additional adverse effects on macroeconomic conditions, including but not limited to, increased costs, constraints on the availability of commodities, supply chain disruptions and decreased business spending.
In order to operate more efficiently and cost effectively, we have and may continue to adjust employment, optimize our footprint or undertake other restructuring or transformation activities, including in connection with UpLift and related outsourcing activities and change management. These activities are complex and may involve or require significant changes to our operations.
In order to operate more efficiently and cost effectively, we have and may continue to adjust employment, optimize our footprint or undertake other restructuring or transformation activities, including in connection with UpLift and our China business, and related reorganization, transformation and outsourcing activities, as applicable. These activities are complex and may involve or require significant changes to our operations.
In addition, standards for tracking and reporting on ESG matters have not been harmonized and continue to evolve.
In addition, standards for tracking and reporting on sustainability-related matters have not been harmonized and continue to evolve.
Additionally, we may not realize the degree or timing of benefits we anticipate when we first enter into a transaction, including as a result of current and proposed changes to U.S. and foreign regulatory approval processes and requirements in connection with an acquisition or divestiture.
Additionally, we may not realize the degree or timing of benefits we anticipate when we first enter into a transaction, including as a result of current and proposed changes to U.S. and foreign regulatory approval processes and requirements in connection with an acquisition or divestiture. Any of the foregoing could adversely affect our business and results of operations.
Our processes and controls for reporting of ESG matters may not always comply with evolving and disparate standards for identifying, measuring, and reporting ESG metrics globally, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our performance metrics, goals or reported progress in achieving such goals and increased compliance costs and risks.
Our processes and controls for reporting of sustainability and responsibility matters have been enhanced but may not always comply with evolving and disparate standards for identifying, measuring, and reporting metrics globally, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our performance metrics, climate-related targets or reported progress in achieving such targets and increased compliance costs and risks.
Despite meaningful measures that we undertake to seek to ensure lawful conduct, which include training and internal controls, we may not always be able to prevent our employees, partners, joint ventures, agents or distributors from violating the FCPA or other anti-corruption laws.
Despite meaningful measures that we undertake to seek to ensure lawful conduct, which include training and internal controls, we may not always be able to prevent our employees, partners, joint ventures, agents or distributors from violating the FCPA or other anti-corruption laws. Changes in these laws or their interpretation, administration and/or enforcement may also occur over time.
Though we have implemented policies, controls and other measures to prevent collusion or anti-competitive behavior, our controls may not always be effective in preventing our employees, partners, joint ventures, agents or distributors from violating antitrust or anti-collusion laws.
Though we have implemented policies, controls and other measures to prevent collusion or anti-competitive behavior, our controls may not always be effective in preventing our employees, partners, joint ventures, agents or distributors from violating antitrust or anti-collusion laws. Additionally, we provide products and services to government entities. Government contract laws and regulations impose certain risks.
The implementation of more restrictive trade policies, including the imposition of further tariffs in connection with the new administration in the U.S. and retaliatory tariffs in response thereto, or the renegotiation of existing trade agreements with the U.S. or countries where we sell large quantities of products and services, procure materials incorporated into our products, manufacture products or recruit and employ employees (see discussion on China below), could have a material adverse effect on our business, results of operations and financial condition, including our ability to r ecruit and retain employees or deploy certain employees to the geographies where their skills are best utilized.
The implementation of more restrictive trade policies, including tariffs and retaliatory actions in response thereto, or the renegotiation of existing trade agreements with the U.S. or countries where we sell large quantities of products and services, procure materials incorporated into our products, manufacture products or recruit and employ employees (see discussion on China below), could have a material adverse effect on our business, results of operations and financial condition.
Furthermore, as is the case in many countries where we operate, the legal and regulatory changes in China, could impose significant requirements unique to China in order to maintain access to Chinese markets and negatively impact our overall financial performance. Our international operations subject us to risks associated with emerging markets.
Furthermore, as is the case in many countries where we operate, China could impose additional regulatory and legal requirements, including requirements that could increase costs in China and/or restrict access to Chinese markets, which could negatively impact our overall financial performance. Our international operations subject us to risks associated with emerging markets.
Our debt levels and related debt service obligations could have negative consequences; we may need additional debt or equity financing in the future to meet our capital needs, and such financing may not be available on favorable terms, if at all, due to changes in global capital markets, our financial performance or outlook or our credit ratings and may be dilutive to existing shareholders.
Any such losses, failures or increased costs could have material adverse effects on our results of operations, financial condition and cash flows. 13 Table of Contents Our debt levels and related debt service obligations could have negative consequences; we may need additional debt or equity financing in the future to meet our capital needs, and such financing may not be available on favorable terms, if at all, due to changes in global capital markets, our financial performance or outlook or our credit ratings and may be dilutive to existing shareholders.
Our international sales and operations are also sensitive to changes in foreign nations’ priorities, including government budgets, as well as to political and economic instability. International transactions may involve increased financial and legal risks due to differing legal systems and customs in foreign countries.
International transactions also involve increased financial and legal risks due to differing legal systems and customs in foreign countries, which could result in increased costs, risk of fines or penalties as well as reputational harm. Our international sales and operations are also sensitive to changes in foreign nations’ priorities, including government budgets, as well as to political and economic instability.
Additionally, limitations on the ability of our customers and suppliers to access credit at interest rates and on terms that are acceptable to them could lead to customer and supplier defaults and cancellations of existing orders, limit or prevent customers from being able to finance purchases of our products and services in the future, and cause delays in the delivery of key products from suppliers.
Additionally, limitations on the ability of our customers and suppliers to access credit at interest rates and on terms that are acceptable to them could lead to customer and supplier defaults and cancellations of existing orders, limit or prevent customers from being able to finance purchases of our products and services in the future, and cause delays in the delivery of key products from suppliers. 10 Table of Contents Our international operations subject us to risks associated with government policies on international trade and investments and risks in general and particularly in China.
As of December 31, 2024, we had $8.3 billion o utstanding long-term debt.
As of December 31, 2025, we had $7.7 billion o utstanding long-term debt.
In addition, our business may be impacted by disruptions to our own or third-party information technology ("IT") infrastructure, which could result from (among other causes) cyberattacks on or failures of such infrastructure or compromises to its physical security, as well as from damaging weather or other acts of nature.
Failure to implement and deploy new systems or replacement systems on the schedules anticipated, could materially adversely affect our operating results. 18 Table of Contents In addition, our business may be impacted by disruptions to our own or third-party information technology ("IT") infrastructure, which could result from (among other causes) cyberattacks on or failures of such infrastructure or compromises to its physical security, as well as from damaging weather or other acts of nature.
Changes to market and economic conditions in China, including credit conditions for our customers, or an escalation of trade conflicts between the U.S. and China, have recently impacted and may continue to impact our ability to maintain New Equipment net sales in China at rates consistent with prior years.
Changes to market and economic conditions in China, including credit conditions for our customers, have recently impacted and may continue to impact our ability to maintain New Equipment net sales in China at rates consistent with prior years as well as future growth of our Service segment.
Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or services, or in the solvency of our customers, suppliers or distributors or other significantly unfavorable changes in economic conditions. 13 Table of Contents We have an investment-grade credit rating from each of Moody’s Investors Service, Inc. and Standard & Poor’s.
Our ability to issue debt or enter into other financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products or services, or in the solvency of our customers, suppliers or distributors or other significantly unfavorable changes in economic conditions.
Our existing information systems may become obsolete, requiring us to transition our systems to a new platform. Such a transition would be time-consuming, costly and damaging to our competitive position, and could require additional management resources. Failure to implement and deploy new systems or replacement systems on the schedules anticipated, could materially adversely affect our operating results.
Our existing information systems may become obsolete, requiring us to transition our systems to a new platform. Such a transition would be time-consuming, costly and damaging to our competitive position, and could require additional management resources.
Changes in laws or regulations could result in higher expenses or changes to business operations that could impact our ability to sell our products and services or sell them at expected profit levels. Uncertainty relating to those laws or regulations may also affect how we operate, structure our investments and enforce our rights.
Changes in laws or regulations could result in higher expenses or changes to business operations that could impact our ability to sell our products and services or sell them at expected profit levels.
In addition, U.S. foreign policy may restrict or prohibit business dealings with certain individuals, entities or countries; changes in these prohibitions can happen suddenly and could result in a material adverse effect on our operations. For a description of current material legal proceedings, see "Note 21: Contingent Liabilities" in Item 8 of this Form 10-K.
In addition, U.S. foreign policy may restrict or prohibit business dealings with certain individuals, entities or countries; changes in these prohibitions can happen suddenly and could result in a material adverse effect on our operations. See discussion of other risks associated with our international business, including changes in trade policies, discussed above and elsewhere in this Form 10-K.
Our contracts are typically awarded on a competitive basis. Our quotations and bids are based upon, among other items, the cost to provide the products and services.
We operate in a competitive environment and our profitability depends on our ability to accurately estimate the costs and timing of providing our products and services. Our contracts are typically awarded on a competitive basis. Our quotations and bids are based upon, among other items, the cost to provide the products and services.
Our joint ventures may experience labor strikes, diminished liquidity or credit unavailability, weak demand for products, delays in the launch of new products or other difficulties in their businesses.
A significant downturn or deterioration in the business or financial condition of a joint venture partner could affect our results of operations in a particular period. Our joint ventures may experience labor strikes, diminished liquidity or credit unavailability, weak demand for products, delays in the launch of new products or other difficulties in their businesses.
The ongoing conflicts between Russia and Ukraine and in the Middle East have resulted in worldwide geopolitical and macroeconomic uncertainty, and we cannot predict how the conflicts will evolve or the timing thereof.
Our international sales and operations are subject to risks associated with geopolitical conflicts, including the ongoing conflicts between Russia and Ukraine and instability in the Middle East. Geopolitical conflicts, including threats related thereto, have resulted in worldwide geopolitical and macroeconomic uncertainty, and we cannot predict how conflicts will evolve or the timing thereof.
Failure of foreign jurisdictions to protect our intellectual property rights, an inability to effectively enforce such rights in foreign jurisdictions, or the imposition of foreign jurisdiction investment or sourcing restrictions or requirements could result in loss of valuable proprietary information and could impact our competitive position and financial results.
Failure of foreign jurisdictions to protect our intellectual property rights, an inability to effectively enforce such rights in foreign jurisdictions, or the imposition of foreign jurisdiction investment or sourcing restrictions or requirements could result in loss of valuable proprietary information and could impact our competitive position and financial results. 19 Table of Contents Risks Related to Our Common Stock Anti-takeover provisions could enable our Board of Directors to resist a takeover attempt by a third party and limit the power of our shareholders.
We or our customers, suppliers or subcontractors may encounter difficulties in developing and producing new products and services, and may not realize the degree or timing of benefits initially anticipated or may otherwise suffer significant adverse financial consequences. Due to the design complexity of our products, we may experience delays in completing the development and introduction of new products.
In addition, the markets for our products or services, or products that incorporate our technologies, may not develop or grow as we anticipate. We or our suppliers or subcontractors may encounter difficulties in developing and producing new products and services, and may not realize the degree or timing of benefits initially anticipated or may otherwise suffer significant adverse financial consequences.
The occurrence of one or more unexpected events, including war (see discussion below regarding ongoing conflicts), acts of terrorism or violence, civil unrest, fires, tornadoes, hurricanes, earthquakes, floods and other forms of severe weather, whether as a result of climate change or otherwise, in the United States or in other countries in which we operate or in which our suppliers are located could adversely affect our operations and financial performance.
The occurrence of one or more unexpected events, including war (see discussion below regarding ongoing conflicts), acts of terrorism or violence, civil unrest, pandemics, fires, tornadoes, hurricanes, earthquakes, floods and other forms of natural disasters or severe weather, whether as a result of climate change or otherwise, in the United States or in other countries in which we operate or in which our suppliers are located could result in physical damage to and complete or partial closure of one or more of our manufacturing facilities or temporary or long-term disruption in the supply of component products from some of our suppliers, disruption and delay in the transport of our products to customers or limit our access to building sites to install our products or perform our services.
Government enforcement actions, including due to geopolitical concerns, and violations of data privacy and cybersecurity laws could be costly or interrupt our business operations. Any of the foregoing factors could result in reputational damage or civil or governmental proceedings, which could result in a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Any of the foregoing factors could result in reputational damage or civil or governmental proceedings and/or substantial monetary damages or fines, which could result in a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
The possibility also exists that our competitors might develop new technology or offerings that might cause our existing technology and offerings to become obsolete, which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition. 12 Table of Contents We operate in a competitive environment and our profitability depends on our ability to accurately estimate the costs and timing of providing our products and services.
If we are unable to successfully develop and timely introduce new products, services and technologies, our competitors may develop competing technologies that gain market acceptance in advance of or instead of our products or services that might cause our existing technology and offerings to become obsolete, which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Additional tax expense or additional tax exposures could affect our future profitability. We are subject to income taxes in the United States and various international jurisdictions.
There can be no assurance that any particular joint venture or non-wholly owned subsidiary will be beneficial to us. 15 Table of Contents Additional tax expense or additional tax exposures could affect our future profitability. We are subject to income taxes in the United States and various international jurisdictions.
Any delays could result in increased development costs or divert resources from other projects. If we are unable to successfully develop and timely introduce new products, services and technologies, our competitors may develop competing technologies that gain market acceptance in advance of or instead of our products or services.
Due to the design complexity of our products, we may experience delays in completing the development and introduction of new products. Any delays could result in increased development costs or divert resources from other projects.
The reduction or elimination of our cash dividend or share repurchase program could adversely affect the market price of Common Stock. Although our share repurchase program is intended to enhance long-term shareholder value, changes in laws or regulations related thereto or short-term stock price fluctuations could reduce the program's effectiveness.
Although our share repurchase program is intended to enhance long-term shareholder value, changes in laws or regulations related thereto or short-term stock price fluctuations could reduce the program's effectiveness. 14 Table of Contents We engage in acquisitions and divestitures, and may encounter difficulties integrating acquired businesses with, or disposing of businesses from, our current operations; therefore, we may not realize the anticipated benefits of these acquisitions and divestitures.
See "Business Overview" and "Results of Operations – Income Taxes" in Item 7 and "Note 2: Significant Accounting Policies" and "Note 15: Income Taxes" in Item 8 in this Form 10-K, for further discussion on income taxes and related contingencies. 18 Table of Contents Risks Related to Our Common Stock Anti-takeover provisions could enable our Board of Directors to resist a takeover attempt by a third party and limit the power of our shareholders.
See "Business Overview" and "Results of Operations – Income Taxes" in Item 7 and "Note 2: Summary of Significant Accounting Policies" and "Note 14: Income Taxes" in Item 8 in this Form 10-K, for further discussion on income taxes and related contingencies. Our defined benefit pension plans are subject to financial market risk that could adversely affect our results.
In certain regions, we operate our business through joint venture relationships or non-wholly owned subsidiaries, including: Otis Electric Elevator Company Limited and Otis Elevator (China) Investment Limited in China. A significant downturn or deterioration in the business or financial condition of a joint venture partner could affect our results of operations in a particular period.
We are party to joint ventures which may not be successful and may expose us to special risks and restrictions. In certain regions, we operate our business through joint venture relationships or non-wholly owned subsidiaries, including Otis Elevator (China) Investment Limited in China.
See "Note 12: Employee Benefit Plans" in Item 8 of this Form 10-K for further discussion on pension plans and related obligations and contingencies. 16 Table of Contents Information security, data privacy and identity protection may require significant resources and present certain risks to our business, reputation and financial condition.
See "Note 11: Employee Benefit Plans" in Item 8 of this Form 10-K for further discussion on pension plans and related obligations and contingencies. We are subject to litigation, product safety and other legal and compliance risks. We are subject to a variety of litigation, legal and compliance risks.
In addition, our failure or perceived failure to pursue or fulfill our goals, targets, and objectives within the timelines we announce, or at all, could have similar negative impacts. Our defined benefit pension plans are subject to financial market risk that could adversely affect our results.
In addition, our failure or perceived failure to pursue or fulfill our climate-related targets within the timelines we announce, or at all, could have similar negative impacts. 17 Table of Contents Information security, data privacy and identity protection may require significant resources and present certain risks to our business, reputation and financial condition.
These goal statements reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our ability to achieve any goal or objective, including with respect to ESG initiatives, is subject to numerous risks, many of which are outside of our control.
Our ability to deliver on our sustainability and responsibility initiatives is subject to numerous risks, many of which are outside of our control.
Removed
Natural disasters, pandemics, equipment failures, prolonged power outages or other unexpected events could result in physical damage to and complete or partial closure of one or more of our manufacturing facilities or temporary or long-term disruption in the supply of component products from some local, national and international suppliers, disruption and delay in the transport of our products to customers or limit our access building sites and to install our products or perform our services.
Added
These impacts may include hindering our ability to r ecruit and retain employees or deploy certain employees to the geographies where their skills are best utilized, increased costs for our customers, declining consumer confidence, significant inflation and diminished economic expectations, which could ultimately reduce demand for our products.
Removed
Our international operations subject us to risks associated with government policies on international trade and investments and risks associated with China.
Added
While we take steps to mitigate or avoid these increased costs, disruptions and legal risks due to changes in trade policies, our ability to do so may be limited by operational and supply chain constraints, especially in the short term.
Removed
See Item 7 "Business Overview" in this Form 10-K for more information regarding the sale of our business in Russia.
Added
In addition, our ability to recover cost increases and maintain profitability levels through price adjustments may be limited by competitive pressures, customer acceptance, and contractual limitations.
Removed
Our research and development efforts may not result in innovative products or services that incorporate new technologies for our New Equipment and Service segments, or products or services being developed on a timely basis or that meet the needs of our customers as effectively as competitive offerings.
Added
Tariff actions by the U.S. and retaliatory actions by other countries have caused, and may in the future cause, significant disruption and volatility in the financial markets, which could adversely affect the availability, terms and cost of capital, including with respect to refinancing our existing debt, and which in turn could reduce our cash flows and harm our business.
Removed
In addition, the markets for our products or services, or products that incorporate our technologies, may not develop or grow as we anticipate.
Added
Additionally, the escalation of trade conflicts between the U.S. and China could further impact economic conditions in the U.S. and China.
Removed
Any such losses, failures or increased costs could have material adverse effects on our results of operations, financial condition and cash flows.
Added
Further, as we integrate emerging and rapidly evolving technologies, including AI, into our products and services, we face evolving risks related to safety, data governance, regulatory compliance and intellectual property and may not be able to anticipate or identify vulnerabilities, design flaws or security threats resulting from the use of such technology and develop adequate protection measures, which could lead to unintended consequences and significantly impact our business, reputation, and financial results.
Removed
We engage in acquisitions and divestitures, and may encounter difficulties integrating acquired businesses with, or disposing of businesses from, our current operations; therefore, we may not realize the anticipated benefits of these acquisitions and divestitures. We seek to grow through strategic acquisitions in addition to internal growth.
Added
We have an investment-grade credit rating from each of Moody’s Investors Service, Inc. and Standard & Poor’s.
Removed
Any of the foregoing could adversely affect our business and results of operations. 14 Table of Contents We are party to joint ventures which may not be successful and may expose us to special risks and restrictions.
Added
The reduction or elimination of our cash dividend or share repurchase program could adversely affect the market price of Common Stock.
Removed
There can be no assurance that any particular joint venture or non-wholly owned subsidiary will be beneficial to us. We are subject to litigation, product safety and other legal and compliance risks. We are subject to a variety of litigation, legal and compliance risks.
Added
We seek to grow through strategic acquisitions, including of the interests in certain ventures and entities which we do not already wholly own, in addition to internal growth.
Removed
We are impacted by evolving stakeholder interest in public company performance, disclosure, and goal-setting with respect to ESG matters. We have increased reporting of our ESG programs and performance, as required by applicable law and voluntarily, and have established and announced goals and other objectives related to ESG matters.
Added
Uncertainty relating to those laws or regulations may also affect how we operate, structure our investments, structure our contracts and comply with the terms of these contracts and/or enforce our rights thereunder.
Removed
Any such indemnity obligations could be material. Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our financial condition and results of operations. In connection with the Separation, our former parent UTC undertook several corporate reorganization transactions involving its subsidiaries, which, including the Separation of Otis, may be subject to various fraudulent conveyance and transfer laws.
Added
If violations of law are found, they could result in civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business. Each of these factors could negatively impact our business, results of operations, financial condition, and reputation.
Removed
If, under these laws, a court were to determine that, at the time of the Separation, any entity involved in these reorganization transactions or the Separation: (1) was insolvent, was rendered insolvent by reason of the Separation, or had remaining assets constituting unreasonably small capital, and (2) received less than fair consideration in connection with the reorganization; or intended to incur, or believed it would incur, debts beyond its ability to pay these debts as they matured, then the court could void the Separation, in whole or in part, as a fraudulent conveyance or transfer.
Added
For a description of current material legal proceedings, see "Note 20: Contingent Liabilities" in Item 8 of this Form 10-K. We are impacted by evolving stakeholder interest in sustainability and responsibility matters. We report on our sustainability and responsibility projects and programs, as required by applicable law and voluntarily.
Removed
The court could then require our shareholders to return to RTX some or all of the shares of the Common Stock issued in the distribution, or require RTX or Otis, as the case may be, to fund liabilities of the other company for the benefit of creditors.
Added
Our strategies reflect our focus on projects and programs that tie to business performance allowing us to adapt to evolving market needs and pursue new opportunities in alignment with our business strategies. Nonetheless, there is no certainty that these projects and programs will deliver the desired outcomes.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeSuch contractual undertakings include requirements to comply with administrative, technical and physical safeguards to satisfy the requirements for certification under ISO 27001, to provide notification of cyber incidents involving our systems or data and an agreement to be subject to cybersecurity audits, which we conduct as appropriate. 22 Table of Contents While Otis has not experienced a material cybersecurity incident to date, see Item 1A in this Form 10-K for more information regarding cybersecurity-related risks that could materially affect our business strategy, results of operations, or financial condition, under the headings "Information security, data privacy and identity protection may require significant resources and present certain risks to our business, reputation and financial condition", "Our business and financial performance depend on continued substantial investment in information technology infrastructure, which may not yield anticipated benefits, and may be adversely affected by cyberattacks on information technology infrastructure and products and other business disruptions" and "We depend on our intellectual property, and have access to certain intellectual property and information of our customers, suppliers and distributors; infringement or failure to protect our intellectual property could adversely affect our future growth and success".
Biggest changeWhile Otis has not experienced a material cybersecurity incident to date, see Item 1A in this Form 10-K for more information regarding cybersecurity-related risks that could materially affect our business strategy, results of operations, or financial condition, under the headings "Information security, data privacy and identity protection may require significant resources and present certain risks to our business, reputation and financial condition", "Our business and financial performance depend on continued substantial investment in information technology infrastructure, which may not yield anticipated benefits, and may be adversely affected by cyberattacks on information technology infrastructure and products and other business disruptions" and "We depend on our intellectual property, and have access to certain intellectual property and information of our customers, suppliers and distributors; infringement or failure to protect our intellectual property could adversely affect our future growth and success".
We have implemented several cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage material risks from cybersecurity threats, and to protect against, detect and respond to cybersecurity incidents (as defined in Item 106(a) of Regulation S-K), including, among others, the following: • established a global Security Operations Center to support visibility to cybersecurity incidents in real time; • require all salaried Otis colleagues to complete an annual cybersecurity training program where specific threats and scenarios are highlighted based on our analysis of current risks to the organization; • conduct regular phishing email simulations for employees and contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats; • maintain a robust Cybersecurity Incident Response Plan, which provides a framework for handling cybersecurity incidents based on, among other factors, the potential severity of the incident and facilitates cross-functional coordination across Otis; • periodically run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; • maintain cybersecurity insurance and regularly review our policy and levels of coverage based on current risks; • monitor emerging data protection and cybersecurity laws, and implement changes to our processes, systems and offerings designed to comply, and through policy, practice and contract (as applicable) require employees, as well as third parties who provide services on our behalf, to treat customer information and data with care; • conduct several cyber-specific internal audits per year; and • engage consultants and other third parties in connection with our cybersecurity practices.
Additionally, cybersecurity functional groups incorporate external research and intelligence gathering to keep the organization informed of new and evolving cyber risks. 22 Table of Contents We have implemented several cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage material risks from cybersecurity threats, and to protect against, detect and respond to cybersecurity incidents (as defined in Item 106(a) of Regulation S-K), including, among others, the following: • established a global Security Operations Center to support visibility to cybersecurity incidents in real time; • require all salaried Otis colleagues to complete an annual cybersecurity training program where specific threats and scenarios are highlighted based on our analysis of current risks to the organization; • conduct regular phishing email simulations for employees and contractors with access to corporate email systems to enhance awareness and responsiveness to such possible threats; • maintain a robust Cybersecurity Incident Response Plan, which provides a framework for handling cybersecurity incidents based on, among other factors, the potential severity of the incident and facilitates cross-functional coordination across Otis; • periodically run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; • maintain cybersecurity insurance and regularly review our policy and levels of coverage based on current risks; • monitor emerging data protection and cybersecurity laws, and implement changes to our processes, systems and offerings designed to comply, and through policy, practice and contract (as applicable) require employees, as well as third parties who provide services on our behalf, to treat customer information and data with care; • conduct several cyber-specific internal audits per year; and • engage consultants and other third parties in connection with our cybersecurity practices.
Several members of our Board hold a CERT Certificate in Cybersecurity Oversight issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University, and two members of our Audit Committee attended a continuing education class related to cybersecurity through the National Association of Corporate Directors ("NACD") in 2023.
Several members of our Board hold a CERT Certificate in Cybersecurity Oversight issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University, and two members of our Audit Committee attended a continuing education class related to AI governance and strategy through the National Association of Corporate Directors ("NACD") in 2025.
Our Chief Digital Officer ("CDO") and Chief Information Security Officer ("CISO") regularly brief the Audit Committee and other members of the Board on the Otis Cybersecurity Program and cyber-threat landscape, including four times in 2024.
Our Chief Digital Officer ("CDO") and Chief Information Security Officer ("CISO") briefed the Audit Committee and other members of the Board on the Otis Cybersecurity Program, the cyber-threat landscape and cyber-resiliency two times in 2025.
These committees are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan.
These committees are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan. 23 Table of Contents Members of our Board also received briefings on risks associated with AI, data protection (including data privacy laws), our incident response plan and our IT infrastructure in 2025.
Our enterprise risk management ("ERM") process considers cybersecurity threat risks alongside other company risks as part of our overall risk assessment process. Additionally, cybersecurity functional groups incorporate external research and intelligence gathering to keep the organization informed of new and evolving cyber risks.
Our enterprise risk management ("ERM") process considers cybersecurity threat risks alongside other company risks as part of our overall risk assessment process.
Removed
Members of our Board also received briefings on risks associated with quantum computing, artificial intelligence, data protection (including data privacy laws), our incident response plan and our IT infrastructure in 2024.
Added
Such contractual undertakings include requirements to comply with administrative, technical and physical safeguards to satisfy the requirements for certification under ISO 27001, to provide notification of cyber incidents involving our systems or data and an agreement to be subject to cybersecurity audits, which we conduct as appropriate.
Added
In addition, the Audit Committee participated in a simulated cybersecurity incident tabletop exercise in 2025.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe operate more tha n 1,400 branches and offices, 11 R&D center s and 17 manufacturing facilities globally. Our principal manufacturing facilities are located across Brazil, China, Japan, France, India, Korea, Spain, and the United States, of which 14 are owned. Our principal R&D centers are located in China, India, Japan, France, Germany, Spain and the United States.
Biggest changeWe operate more than 1,400 branches and offices, 11 R&D centers and 16 manufacturing facilities globally. Our principal manufacturing facilities are located across Brazil, China, Japan, France, India, Korea, Spain, and the United States, of which 13 are owned. Our principal R&D centers are located in China, France, Germany, India, Japan, Spain and the United States.
Our fixed assets as of December 31, 2024 include manufacturing facilities and non-manufacturing facilities, such as warehouses, and a substantial quantity of machinery and equipment, most of which are general purpose machinery and equipment using special jigs, tools and fixtures and in many instances having automatic control features and special adaptations.
Our fixed assets as of December 31, 2025 include manufacturing facilities and non-manufacturing facilities, such as warehouses, and a substantial quantity of machinery and equipment, most of which are general purpose machinery and equipment using special jigs, tools and fixtures and in many instances having automatic control features and special adaptations.
The facilities, warehouses, machinery and equipment in use as of December 31, 2024 are substantially in good operating condition.
The facilities, warehouses, machinery and equipment in use as of December 31, 2025 are substantially in good operating condition.
Item 2. Properties We have a direct physical presence in more than 70 countries with an overall property portfolio comprising approximately 14 million square feet of space. We have approximately 2,300 facilities, of which approximately 46%, 41% and 13% of which are located in EMEA, Asia and the Americas, respectivel y.
Item 2. Properties We have a direct physical presence in more than 70 countries with an overall property portfolio comprising approximately 13 million square feet of space. We have approximately 2,300 facilities, of which approximately 47%, 40% and 13% are located in EMEA, Asia and the Americas, respectively.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeComparison of Cumulative Total Return — Table April 3, 2020 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Otis $ 100 $ 144 $ 188 $ 172 $ 199 $ 209 S&P 500 Index 100 153 197 161 203 254 S&P 500 Industrials Sector Index 100 160 193 183 216 253 Comparison of Cumulative Total Return — Graph 24 Table of Contents Issuer Purchases of Equity Securities The following table provides information about our purchases during the quarter ended December 31, 2024 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act. 2024 Total Number of Shares Purchased (thousands) Average Price Paid per Share (1) Total Number of Shares Purchased as Part of a Publicly Announced Program (thousands) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (dollars in millions) October 1 — October 31 129 $ 98.57 129 $ 387 November 1 — November 30 1,863 100.52 1,863 $ 200 December 1 — December 31 — — — $ 200 Total 1,992 $ 100.40 1,992 (1) Average price paid per share includes any broker commissions associated with the repurchases.
Biggest changeComparison of Cumulative Total Return — Table December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 Otis $ 100 $ 130 $ 119 $ 138 $ 145 $ 139 S&P 500 Index 100 129 105 133 166 196 S&P 500 Industrials Sector Index 100 121 114 135 159 190 Comparison of Cumulative Total Return — Graph 25 Table of Contents Issuer Purchases of Equity Securities The following table provides information about our purchases during the quarter ended December 31, 2025 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act. 2025 Total Number of Shares Purchased (thousands) Average Price Paid per Share (1) Total Number of Shares Purchased as Part of a Publicly Announced Program (thousands) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (dollars in millions) October 1 — October 31 — $ — — $ 1,300 November 1 — November 30 — — — $ 1,300 December 1 — December 31 — — — $ 1,300 Total — $ — — (1) Average price paid per share includes any broker commissions associated with the repurchases.
The graph and table assume that $100.00 was invested on April 3, 2020 in each of our Common Stock, the S&P 500 Index and the S&P 500 Industrials Sector Index, and that any dividends were reinvested.
The graph and table assume that $100.00 was invested on December 31, 2020 in each of our Common Stock, the S&P 500 Index and the S&P 500 Industrials Sector Index, and that any dividends were reinvested.
Stock Performance Graph The following table and graph illustrate the total return from April 3, 2020 (date of Separation) through December 31, 2024, fo r (1) our Common Stock, (2) the Standard and Poor's (the "S&P") 500 Index, and (3) the S&P 500 Industrials Sector Index.
Stock Performance Graph The following table and graph illustrate the total return from December 31, 2020 through December 31, 2025, fo r (1) our Common Stock, (2) the Standard and Poor's (the "S&P") 500 Index, and (3) the S&P 500 Industrials Sector Index.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Common Stock is listed on the New York Stock Exchange under the symbol "OTIS". There were approximately 18,100 registered shareholders as of January 21, 2025.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Common Stock is listed on the New York Stock Exchange under the symbol "OTIS". There were approximately 16,800 registered shareholders as of January 22, 2026.
On December 1, 2022, our Board of Directors approved a share repurchase program for up to $2.0 billion of Common Stock. As of December 31, 2024, the maximum dollar value of shares that may yet be purchased under this current program was approximately $200 million.
On January 16, 2025, our Board of Directors revoked any remaining share repurchase authority under the prior share repurchase program and approved a new share repurchase program for up to $2.0 billion of Common Stock. As of December 31, 2025, the maximum dollar value of shares that may yet be purchased under this current program was approximately $1.3 billion.
Removed
On January 16, 2025, our Board of Directors revoked any remaining share repurchase authority under the prior share repurchase program and approved a new share repurchase program for up to $2.0 billion of Common Stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeNet income attributable to Otis Worldwide Corporation increased in 2023 compared to 2022, due to higher operating profit (including the unfavorable impact of foreign exchange rates), lower noncontrolling interest in subsidiaries' earnings, and a lower effective tax rate. 33 Table of Contents Segment Review Summary performance for our operating segments for 2024, 2023 and 2022 was as follows: Net Sales Operating Profit Operating Profit Margin (dollars in millions) 2024 2023 2022 2024 2023 2022 2024 2023 2022 New Equipment $ 5,367 $ 5,812 $ 5,778 $ 329 $ 381 $ 381 6.1 % 6.6 % 6.6 % Service 8,894 8,397 7,801 2,185 2,014 1,832 24.6 % 24.0 % 23.5 % Total segment 14,261 14,209 13,579 2,514 2,395 2,213 17.6 % 16.9 % 16.3 % Corporate and Unallocated General corporate expenses and other — — — 158 126 87 UpLift restructuring — — — 31 25 — Other restructuring — — — 40 42 60 UpLift transformation costs — — — 65 16 — Separation-related reserve adjustment — — — 177 — — Russia operations — — 106 — — 5 Russia sale and conflict-related charges — — — — — 28 Litigation-related settlement costs — — — 18 — — Held for sale impairment — — — 18 — — Other, net — — — (1) — — Total $ 14,261 $ 14,209 $ 13,685 $ 2,008 $ 2,186 $ 2,033 14.1 % 15.4 % 14.9 % New Equipment The New Equipment segment designs, manufactures, sells and installs a wide range of passenger and freight elevators, as well as escalators and moving walkways in residential and commercial buildings and infrastructure projects.
Biggest changeNet income attributable to Otis Worldwide Corporation increased in 2024 compared to 2023, due to a lower effective tax rate and lower interest expense, partially offset by lower operating profit (including the unfavorable impact of foreign exchange rates). 34 Table of Contents Segment Review Summary performance for our operating segments for 2025, 2024 and 2023 was as follows: Net Sales Operating Profit Operating Profit Margin (dollars in millions) 2025 2024 2023 2025 2024 2023 2025 2024 2023 New Equipment $ 4,989 $ 5,367 $ 5,812 $ 240 $ 329 $ 381 4.8% 6.1 % 6.6 % Service 9,442 8,894 8,397 2,374 2,185 2,014 25.1% 24.6 % 24.0 % Total segment 14,431 14,261 14,209 2,614 2,514 2,395 18.1 % 17.6 % 16.9 % Corporate and Unallocated General corporate expenses and other — — — 180 158 126 UpLift restructuring — — — 76 31 25 Other restructuring — — — 54 40 42 UpLift transformation costs — — — 69 65 16 Separation-related reserve adjustment — — — 70 177 — Litigation-related settlement costs — — — 21 18 — Held for sale impairment — — — 10 18 — Other, net — — — 1 (1) — Total $ 14,431 $ 14,261 $ 14,209 $ 2,133 $ 2,008 $ 2,186 14.8 % 14.1 % 15.4 % New Equipment The New Equipment segment designs, manufactures, sells and installs a wide range of passenger and freight elevators, as well as escalators and moving walkways in residential and commercial buildings and infrastructure projects.
Additionally, pursuant to the Tax Matters Agreement ("TMA") with RTX Corporation ("RTX", our former parent), the Company recorded indemnification expense of $194 million for amounts due to RTX resulting from the outcome of the German tax litigation. This expense is included in Other expense (income), net in the Consolidated Statements of Operations for 2024.
Additionally, pursuant to the Tax Matters Agreement ("TMA") with RTX Corporation ("RTX", our former parent), the Company recorded indemnification expense of $194 million for amounts due to RTX resulting from the outcome of the German tax litigation. This expense is included in Other income (expense), net in the Consolidated Statements of Operations for 2024.
Net income of $1.7 billion includes approximately $185 million of income taxes benefits and approximately $200 million of interest income, partially offset by $194 million of indemnification expense resulting from the outcome of the German tax litigation during the third quarter of 2024, none of which resulted in cash flow activity during 2024.
Net income of $1.7 billion includes approximately $185 million of income tax benefits and approximately $200 million of interest income, partially offset by $194 million of indemnification expense resulting from the outcome of the German tax litigation during the third quarter of 2024, none of which resulted in cash flow activity during 2024.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations BUSINESS OVERVIEW We are the world’s leading elevator and escalator manufacturing, installation and service company. Our Company is organized into two segments, New Equipment and Service.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations BUSINESS OVERVIEW We are the world’s leading elevator and escalator manufacturing, installation, service and modernization company. Our Company is organized into two segments, New Equipment and Service.
Although we believe that the arrangements in place as of December 31, 2024 permit us to finance our operations on acceptable terms and conditions, our access to, and the availability of, financing on acceptable terms and conditions in the future could be impacted by many factors, including (1) our credit ratings or absence of a credit rating, (2) the liquidity of the overall capital markets and (3) the current state of the economy, including tighter credit conditions.
Although we believe that the arrangements in place as of December 31, 2025 permit us to finance our operations on acceptable terms and conditions, our access to, and the availability of, financing on acceptable terms and conditions in the future could be impacted by many factors, including (1) our credit ratings or absence of a credit rating, (2) the liquidity of the overall capital markets and (3) the current state of the economy, including tighter credit conditions.
We have determined there are three reporting units within each business segment. 44 Table of Contents In accordance with Accounting Standards Codification ("ASC") 350, Intangibles – Goodwill and Other , we initially perform a qualitative assessment (commonly known as "step zero") to determine whether further impairment testing is necessary before performing the two-step test.
We have determined there are three reporting units within each business segment. 45 Table of Contents In accordance with Accounting Standards Codification ("ASC") 350, Intangibles – Goodwill and Other , we initially perform a qualitative assessment (commonly known as "step zero") to determine whether further impairment testing is necessary before performing the two-step test.
The following tables set forth the summarized financial information as of and for the years ended December 31, 2024 and 2023 of each of OWC and Highland on a standalone basis, which does not include the consolidated impact of the assets, liabilities, and financial results of their subsidiaries except as noted on the tables below, nor does it include any impact of intercompany eliminations as there were no intercompany transactions between OWC and Highland.
The following tables set forth the summarized financial information as of and for the years ended December 31, 2025 and 2024 of each of OWC and Highland on a standalone basis, which does not include the consolidated impact of the assets, liabilities, and financial results of their subsidiaries except as noted on the tables below, nor does it include any impact of intercompany eliminations as there were no intercompany transactions between OWC and Highland.
"Note 2: Summary of Significant Accounting Policies" in Item 8 in this Form 10-K describes the significant accounting policies used in preparation of the Consolidated Financial Statements.
"Note 2: Summary of Significant Accounting Policies" to the Consolidated Financial Statements in Item 8 in this Form 10-K describes the significant accounting policies used in preparation of the Consolidated Financial Statements.
Circumstances that could cause the contingent obligations and liabilities arising from these arrangements to come to fruition include changes in the underlying transaction, non-performance under a contract or deterioration in the financial condition of the guaranteed party. Otis' contractual obligations and commitments as of December 31, 2024 are discussed below.
Circumstances that could cause the contingent obligations and liabilities arising from these arrangements to come to fruition include changes in the underlying transaction, non-performance under a contract or deterioration in the financial condition of the guaranteed party. Otis' contractual obligations and commitments as of December 31, 2025 are discussed below.
Contract costs included in the calculation are comprised of labor, materials, subcontractors’ costs or other direct costs and indirect costs, which include indirect labor costs. 43 Table of Contents The long-term nature of the contracts, the complexity of the products and the scale of the projects can affect our ability to estimate costs precisely.
Contract costs included in the calculation are comprised of labor, materials, subcontractors’ costs or other direct costs and indirect costs, which include indirect labor costs. 44 Table of Contents The long-term nature of the contracts, the complexity of the products and the scale of the projects can affect our ability to estimate costs precisely.
The primary drivers of the outflow were the repurchases of our Common Stock of $1.0 billion, dividends paid on our Common Stock and to noncontrolling shareholders of $606 million and $94 million, respectively, and acquisitions of noncontrolling interest shares of $75 million, including approximately $70 million for our subsidiary in Japan.
The primary drivers of the outflow were the repurchases of our Common Stock of $1.0 billion, dividends paid on our Common Stock and to noncontrolling shareholders of $606 million and $94 million, respectively, and acquisition of noncontrolling interest shares of $75 million, including approximately $70 million for our subsidiary in Japan.
We completed the annual goodwill impairment test for all of our reporting units as of July 1, 2024 and d etermined that no adjustment to goodwill was necessary as the fair value of each reporting unit was in excess of the carrying value of each reporting unit.
We completed the annual goodwill impairment test for all of our reporting units as of July 1, 2025 and d etermined that no adjustment to goodwill was necessary as the fair value of each reporting unit was in excess of the carrying value of each reporting unit.
Pension expense is also sensitive to changes in the expected long-term rate of asset return. An increase or decrease of 25 basis points in the expected long-term rate of asset return would have decreased or increased 2024 pension expense by approximately $2 million.
Pension expense is also sensitive to changes in the expected long-term rate of asset return. An increase or decrease of 25 basis points in the expected long-term rate of asset return would have decreased or increased 2025 pension expense by approximately $2 million.
For additional discussion of the restructuring and UpLift transformation costs, see "Note 16: Restructuring and Transformation Costs" to the Consolidated Financial Statements in Item 8 in this Form 10-K. 37 Table of Contents LIQUIDITY AND FINANCIAL CONDITION We expect to fund our ongoing operating, investing and financing requirements mainly through cash flows from operations, available liquidity through cash on hand and available bank lines of credit and access to the capital markets.
For additional discussion of the restructuring and UpLift transformation costs, see "Note 15: Restructuring and Transformation Costs" to the Consolidated Financial Statements in Item 8 in this Form 10-K. 38 Table of Contents LIQUIDITY AND FINANCIAL CONDITION We expect to fund our ongoing operating, investing and financing requirements mainly through cash flows from operations, available liquidity through cash on hand and available bank lines of credit and access to the capital markets.
Other Income (Expense), Net (dollars in millions) 2024 2023 2022 Other income (expense), net $ (236) $ 21 $ 26 Other income (expense), net primarily includes the impact of changes in the fair value and settlement of derivatives, gains or losses on sale of businesses and fixed assets, earnings from equity method investments, fair value changes on equity securities, impairments, UpLift transformation costs, non-recurring Separation-related adjustments and certain other operating items.
Other Income (Expense), Net (dollars in millions) 2025 2024 2023 Other income (expense), net $ (106) $ (236) $ 21 Other income (expense), net primarily includes the impact of changes in the fair value and settlement of derivatives, gains or losses on sale of businesses and fixed assets, earnings from equity method investments, fair value changes on equity securities, impairments, UpLift transformation costs, non-recurring Separation-related adjustments and certain other operating items.
We also incurred $65 million and $16 million of UpLift transformation costs in 2024 and 2023, respectively, which are primarily for consultants, third-party service providers and personnel focused on designing and implementing a centralized service delivery model that supports our new organizational structure, including the standardization of our supply chain and digital technology procurement.
We also incurred $69 million and $65 million of UpLift transformation costs in 2025 and 2024, respectively, which are primarily for consultants, third-party service providers and personnel focused on designing and implementing a centralized service delivery model that supports our new organizational structure, including the standardization of our supply chain and digital technology procurement.
Modifications are recognized as a cumulative catch-up or treated as a separate accounting contract if the modification adds distinct goods or services and the modification is priced at its stand-alone selling price. See "Note 2: Summary of Significant Accounting Policies" in Item 8 in this Form 10-K.
Modifications are recognized as a cumulative catch-up or treated as a separate accounting contract if the modification adds distinct goods or services and the modification is priced at its stand-alone selling price. See "Note 2: Summary of Significant Accounting Policies" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
Refer to "Note 9: Borrowings and Lines of Credit" in Item 8 in this Form 10-K for additional information. Highland is a wholly-owned, indirect consolidated subsidiary of OWC. OWC is incorporated under the laws of Delaware.
Refer to "Note 8: Borrowings and Lines of Credit" to the Consolidated Financial Statements in Item 8 in this Form 10-K for additional information. Highland is a wholly-owned, indirect consolidated subsidiary of OWC. OWC is incorporated under the laws of Delaware.
For additional discussion of the Separation-related adjustments, litigation-related settlement costs, held for sale impairment and Russia, see "Note 22: Segment Financial Data" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
For additional discussion of the Separation-related adjustments, Litigation-related settlement costs, and Held for sale impairment, see "Note 21: Segment Financial Data" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
The Company generated approximately $70 million of pre-tax savings in 2024, including run-rate savings of approximately $120 million, driven by our simplified operating structure, optimized organizational spans and layers, and reduced digital technology costs. These savings are primarily reflected in Selling, general and administrative expenses.
The Company generated approximately $70 million of pre-tax savings in each of 2025 and 2024, including run-rate savings of approximately $200 million and $120 million, respectively, driven by our simplified operating structure, optimized organizational spans and layers, and reduced digital technology costs. These savings are primarily reflected in Selling, general and administrative expenses.
Although we have operations in the Middle East and transport products through the Red Sea, we currently do not expect the recent conflicts in that region to have a material impact on our business. 27 Table of Contents We cannot predict how the events described above will evolve.
Although we have operations in the Middle East and transport products through the Red Sea, we currently do not expect the recent conflicts in that region to have a material impact on our business. We cannot predict how the events described above will evolve.
The amount of such restricted cash was $21 million and $6 million as of December 31, 2024 and 2023, respectively. From time-to-time we may need to access the capital markets to obtain financing. We may incur indebtedness or issue equity as needed.
The amount of such restricted cash was $9 million and $21 million as of December 31, 2025 and 2024, respectively. From time-to-time we may need to access the capital markets to obtain financing. We may incur indebtedness or issue equity as needed.
Contingent Liabilities Otis is party to litigation related to a n umber of matters as described in "Note 21: Contingent Liabilities" in Item 8 in this Form 10-K. In particular, they may include risks associated with contractual, regulatory and other matters, which may arise in the ordinary course of business.
Contingent Liabilities Otis is party to litigation related to a n umber of matters as described in "Note 20: Contingent Liabilities" to the Consolidated Financial Statements in Item 8 in this Form 10-K. In particular, they may include risks associated with contractual, regulatory and other matters, which may arise in the ordinary course of business.
In the following table, we show the sensitivity of our pension plan liabilities to a 25 basis point change in the discount rates for benefit obligations, as of December 31, 2024: (dollars in millions) Increase in Discount Rate of 25 bps Decrease in Discount Rate of 25 bps Projected benefit obligation $ (22) $ 23 The impact on the net periodic pension (benefit) cost, the accumulated postretirement benefit obligation and the net periodic postretirement (benefit) cost is each less than $1 million.
In the following table, we show the sensitivity of our pension plan liabilities to a 25 basis point change in the discount rates for benefit obligations, as of December 31, 2025: (dollars in millions) Increase in Discount Rate of 25 bps Decrease in Discount Rate of 25 bps Projected benefit obligation $ (22) $ 24 The impact on the net periodic pension (benefit) cost, the accumulated postretirement benefit obligation and the net periodic postretirement (benefit) cost is each $1 million or less.
These macroeconomic trends could continue to impact our business, including impacts to overall financial performance in 2025, as a result of the following, among other things: • Customer demand impacting our new equipment, maintenance and repair, and modernization businesses; • Customer liquidity constraints and related credit reserve; • Cancellations or delays of customer orders; and • Supplier liquidity, as well as supplier and raw material capacity constraints, delays and related costs.
These macroeconomic trends could continue to impact our business, including impacts to overall financial performance in 2026 , as a result of the following, among other things: • Higher costs of products and services due to tariffs; • Customer demand impacting our new equipment, maintenance and repair, and modernization businesses; • Customer liquidity constraints and related credit reserve; • Cancellations or delays of customer orders; and • Supplier liquidity, as well as supplier and raw material capacity constraints, delays and related costs.
Research and Development (dollars in millions) 2024 2023 2022 Research and development $ 152 $ 144 $ 150 Percentage of Net sales 1.1 % 1.0 % 1.1 % Research and development was relatively flat in 2024 compared to 2023 and 2022.
Research and Development (dollars in millions) 2025 2024 2023 Research and development $ 152 $ 152 $ 144 Percentage of Net sales 1.1 % 1.1 % 1.0 % Research and development was relatively flat in 2025 compared to 2024 and 2023.
We continue to closely monitor the economic environment and may undertake further restructuring actions to keep our cost structure aligned with the demands of the prevailing market conditions. 30 Table of Contents UpLift restructuring costs were $31 million and $25 million in 2024 and 2023, respectively.
We continue to closely monitor the economic environment and may undertake further restructuring actions to keep our cost structure aligned with the demands of the prevailing market conditions. 31 Table of Contents UpLift restructuring costs were $76 million and $31 million in 2025 and 2024, respectively.
See "Note 12: Employee Benefit Plans" in Item 8 in this Form 10-K for further discussion. 45 Table of Contents Off-Balance Sheet Arrangements and Contractual Obligations We extend a variety of financial guarantees to third parties in support of our business. We also have obligations arising from environmental, health and safety, tax and employment matters.
See "Note 11: Employee Benefit Plans" to the Consolidated Financial Statements in Item 8 in this Form 10-K for further discussion. 46 Table of Contents Off-Balance Sheet Arrangements and Contractual Obligations We extend a variety of financial guarantees to third parties in support of our business. We also have obligations arising from environmental, health and safety, tax and employment matters.
For additional discussion of the Separation-related adjustments, litigation-related settlement c osts and held fo r sale impairment, see "Note 22: Segment Financial Data" in Item 8 in this Form 10-K.
For additional discussion of the Separation-related adjustments, Litigation-related settlement c osts and Held fo r sale impairment, see "Note 21: Segment Financial Data" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
For other restructuring actions, we generally expect to achieve annual recurring savings within the two-year period subsequent to initiating the actions, including $45 million for the 2024 actions and $42 million for the 2023 actions, split evenly in Cost of Products and Services Sold and in Selling, general and administrative expenses.
For other restructuring actions, we generally expect to achieve annual recurring savings within the two-year period subsequent to initiating the actions, including $33 million for the 2025 actions and $27 million for the 2024 actions, split evenly in Cost of Products and Services Sold and in Selling, general and administrative expenses.
Increased regulation and other climate change concerns, however, could subject us to additional costs and restrictions, and we are not able to predict how su ch regulations or concerns would affect our business, operations or financial results. For a discussion of risks associated with ESG matters, see Item 1A in this Form 10-K.
Other climate change concerns, however, could subject us to additional costs and restrictions, and we are not able to predict how such regulations or concerns would affect our business, operations or financial results. For a discussion of risks associated with sustainability-related matters, see Item 1A in this Form 10-K.
Income Taxes The future tax benefit arising from deductible temporary differences and tax carryforwards was $576 million and $618 million as of December 31, 2024 and 2023, respectively.
Income Taxes The future tax benefit arising from deductible temporary differences and tax carryforwards was $687 million and $576 million as of December 31, 2025 and 2024, respectively.
Selling, general and administrative expenses as a percentage of Net sales decreased 30 basis points in 2024 compared to 2023, and increased 40 basis points in 2023 compared to 2022.
Selling, general and administrative expenses as a percentage of Net sales increased 70 basis points in 2025 compared to 2024, and decreased 30 basis points in 2024 compared to 2023.
The decrease in net cash used in investing activities in 2024 compared to 2023 was primarily driven by the net cash receipts from the settlement of derivative instruments in 2024 compared to net cash payments in 2023 partially offset by acquisitions of businesses and intangible assets.
The decrease in net cash used in investing activities in 2024 compared to 2023 was primarily driven by the net cash receipts from the settlement of derivative instruments in 2024 compared to net cash payments in 2023, partially offset by acquisition of businesses and intangible assets. During 2025, net cash used in investing activities was $406 million.
The 2023 and 2022 effective tax rates are higher than the statutory U.S. rate primarily due to higher international tax rates as compared to the lower U.S. federal statutory rate.
The 2023 effective tax rate is higher than the statutory U.S. rate primarily due to higher international tax rates as compared to the lower U.S. federal statutory rate.
In the following table, we show the timing of payments of total purchase obligations as of December 31, 2024: Payments Due by Period (dollars in millions) Total 2025 2026-2027 2028-2029 Thereafter Purchase obligations $ 1,606 $ 1,062 $ 477 $ 67 $ — Other Long-term Liabilities Other long-term liabilities in the table below includes obligations related to product, service and warranty policies, estimated remediation costs and contractual indemnities, and are included in Other long-term liabilities on the "Consolidated Balance Sheets" in Item 8 of this Form 10-K.
In the following table, we show the timing of payments of total purchase obligations as of December 31, 2025: Payments Due by Period (dollars in millions) Total 2026 2027-2028 2029-2030 Thereafter Purchase obligations $ 1,427 $ 645 $ 706 $ 76 $ — Other Long-term Liabilities Other long-term liabilities in the table below includes obligations related to product, service and warranty policies, estimated remediation costs and contractual indemnities, and are included in Other long-term liabilities on the "Consolidated Balance Sheets" to the Consolidated Financial Statements in Item 8 of this Form 10-K.
For additional discussion of UpLift transformation costs, see "Note 16: Restructuring and Transformation Costs" in Item 8 in this Form 10-K. 31 Table of Contents Interest Expense (Income), Net (dollars in millions) 2024 2023 2022 Interest expense (income), net $ (31) $ 150 $ 143 Interest expens e (income), net primarily relates to interest expense on our external debt, offset by interest income earned on cash balances and short-term investments, and also includes interest related to tax matters.
For additional discussion of UpLift transformation costs, see "Note 15: Restructuring and Transformation Costs" to the Consolidated Financial Statements in Item 8 in this Form 10-K. 32 Table of Contents Interest Expense (Income), Net (dollars in millions) 2025 2024 2023 Interest expense (income), net $ 196 $ (31) $ 150 Interest expens e (income), net primarily relates to interest expense on our external debt, offset by interest income earned on cash balances and short-term investments, and also includes interest related to tax matters.
Gross margin percentage increased 90 basis points in 2023 compared to 2022 , due to the benefit from favorable pricing, Service sales growing faster than New Equipment sales, lower commodity prices, and the benefits from productivity, partially offset by the inflationary pressures described above.
Gross margin percentage increased 40 basis points in 2024 compared to 2023 , due to Service sales growing faster than New Equipment sales, the benefits from productivity and lower commodity prices, partially offset by the inflationary pressures described above.
The proceeds from the August 2023 issuance of $750 million notes listed above were used to fund the repayments of Otis' commercial paper and €500 million 0.000% notes that were due in November 2023, with the remainder used for other general corporate purposes. There is no commercial paper outstanding as of December 31, 2024.
The proceeds from the August 2023 issuance of $750 million notes listed above were used to fund the repayments of Otis' commercial paper and €500 million 0.000% notes that were due in November 2023, with the remainder used for other general corporate purposes.
German Tax Litigation In August 2024, we received a favorable ruling regarding a German tax litigation. As a result, we recorded income tax benefits of approximately $185 million and related interest income of approximately $200 million, which are included in Income tax expense (benefit), net and Interest expense (income), net, respectively, in the Consolidated Statements of Operations for 2024.
As a result, we recorded income tax benefits of approximately $185 million and related interest income of approximately $200 million, which are included in Income tax expense (benefit), net and Interest expense (income), net, respectively, in the Consolidated Statements of Operations for 2024.
Goodwill We have generated goodwill as a result of our acquisitions. At the time of acquisition, we account for business acquisitions using the purchase method of accounting, in accordance with which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date.
At the time of acquisition, we account for business acquisitions using the purchase method of accounting, in accordance with which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date.
Restructuring Costs (dollars in millions) 2024 2023 2022 UpLift restructuring costs $ 31 $ 25 $ — Other restructuring costs 40 42 60 Total restructuring costs $ 71 $ 67 $ 60 We initiate restructuring actions to keep our cost structure competitive.
Restructuring Costs (dollars in millions) 2025 2024 2023 UpLift restructuring costs $ 76 $ 31 $ 25 Other restructuring costs 54 40 42 Total restructuring costs $ 130 $ 71 $ 67 We initiate restructuring actions to keep our cost structure competitive.
Higher volume, improved pricing on maintenance contracts, and productivity including the benefits from UpLift were partially offset by inflationary pressures, including annual wage increases and higher material costs.
Higher volume, improved pricing on maintenance contracts, and productivity including the benefits from UpLift were partially offset by inflationary pressures, including annual wage increases and higher material costs. Operating margin increased 60 basis points.
For additional discussion of borrowing activity, see "Note 9: Borrowings and Lines of Credit" in Item 8 in this Form 10-K. 41 Table of Contents Guaranteed Securities: Summarized Financial Information The following information is provided in compliance with Rule 13-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended, with respect to the 2026 Euro Notes, the 2027 Euro Notes and the 2031 Euro Notes (together the "Euro Notes"), in each case issued by Highland Holdings S.à r.l.
For additional discussion of acquisition of noncontrolling interest, borrowing and share repurchase activity, see "Note 1: Business Overview", "Note 8: Borrowings and Lines of Credit", and "Note 12: Stock", respectively, to the Consolidated Financial Statements in Item 8 in this Form 10-K. 42 Table of Contents Guaranteed Securities: Summarized Financial Information The following information is provided in compliance with Rule 13-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended, with respect to the 2026 Euro Notes, the 2027 Euro Notes and the 2031 Euro Notes (together the "Euro Notes"), in each case issued by Highland Holdings S.à r.l.
In the following table, we show the timing of payments of interest on long-term debt as of December 31, 2024: Payments Due by Period (dollars in millions) Total 2025 2026-2027 2028-2029 Thereafter Long-term debt - future interest $ 1,738 $ 216 $ 395 $ 285 $ 842 For long-term debt denominated in foreign currencies, the interest payments above reflect U.S. dollar amounts using foreign currency exchange rates as of December 31, 2024.
In the following table, we show the timing of payments of interest on long-term debt as of December 31, 2025: Payments Due by Period (dollars in millions) Total 2026 2027-2028 2029-2030 Thereafter Long-term debt - future interest $ 1,799 $ 231 $ 411 $ 279 $ 878 For long-term debt denominated in foreign currencies, the interest payments above reflect U.S. dollar amounts using foreign currency exchange rates as of December 31, 2025.
The decrease in net cash provided by operating activities in 2024 compared to 2023 was primarily driven by Separation-related and UpLift-related net payments, approximately $49 million and $86 million, respectively, in 2024, compared to net payments of approximately $25 million and $20 million, respectively, in 2023.
Additionally, Separation-related and UpLift-related net payments were approximately $258 million and $97 million, respectively, in 2025, compared to net payments of approximately $49 million and $86 million, respectively, in 2024. 40 Table of Contents The decrease in net cash provided by operating activities in 2024 compared to 2023 was primarily driven by Separation-related and UpLift-related net payments, approximately $49 million and $86 million, respectively, in 2024, compared to net payments of approximately $25 million and $20 million, respectively, in 2023.
(dollars in millions) 2024 2023 2022 Net cash flows provided by (used in): Operating activities $ 1,563 $ 1,627 $ 1,560 Investing activities (164) (183) (33) Financing activities (309) (1,350) (3,652) Effect of exchange rate changes on cash and cash equivalents (49) (9) (157) Net increase (decrease) in cash and cash equivalents and restricted cash $ 1,041 $ 85 $ (2,282) Operating activities Cash flows from operating activities primarily represent inflows and outflows associated with our operations.
(dollars in millions) 2025 2024 2023 Net cash flows provided by (used in): Operating activities $ 1,596 $ 1,563 $ 1,627 Investing activities (406) (164) (183) Financing activities (2,421) (309) (1,350) Effect of exchange rate changes on cash and cash equivalents 15 (49) (9) Net increase (decrease) in cash and cash equivalents and restricted cash $ (1,216) $ 1,041 $ 85 Operating activities Cash flows from operating activities primarily represent inflows and outflows associated with our operations.
UpLift transformation costs are primarily for consultants, third-party service providers and personnel focused on designing and implementing a centralized service delivery model that supports our new organizational structure, including the standardization of our supply chain and digital technology procurement.
UpLift transformation costs are primarily for consultants, third-party service providers and personnel focused on designing and implementing a centralized service delivery model that supports our new organizational structure, including the standardization of our supply chain and digital technology procurement. These costs are recorded in Other income (expense), net in the Consolidated Statements of Operations.
Modernization offerings can range from relatively simple upgrades of interior finishes and aesthetics, to complex upgrades of larger components and sub-systems. Our typical Service customers include building owners, facility managers, housing associations and government agencies that operate buildings where elevators and escalators are installed.
Modernization offerings range from relatively simple upgrades of interior finishes and aesthetics to complex upgrades of larger components and sub-systems, including the machine, ropes or belts, safety systems and the entire car or escalator. Our typical Service customers include building owners, facility managers, housing associations and government agencies that operate buildings where elevators and escalators are installed.
Other than our acquisition of the noncontrolling shares of our subsidiary in Japan during the second quarter of 2024, ownership interest in the underlying non-wholly owned subsidiaries has remained generally consistent year-over-year.
Noncontrolling interest in subsidiaries' earnings were relatively flat in 2024 in comparison to 2023. Other than our acquisition of the noncontrolling shares of our subsidiary in Japan during the second quarter of 2024, ownership interest in the underlying non-wholly owned subsidiaries has remained generally consistent year-over-year.
Net income attributable to Otis Worldwide Corporation increased in 2024 compared to 2023, due to a lower effective tax rate and lower interest expense, partially offset by lower operating profit (including the unfavorable impact of foreign exchange rates).
Net income attributable to Otis Worldwide Corporation decreased in 2025 compared to 2024, due to a higher effective tax rate and higher interest expense, partially offset by higher operating profit (including the impact of foreign exchange rates) and lower noncontrolling interest in subsidiaries' earnings.
On January 16, 2025, our Board of Directors revoked any remaining share repurchase authority under the prior share repurchase program and approved a new share repurchase program for up to $2.0 billion of Common Stock.
Share Repurchase Program On January 16, 2025, our Board of Directors revoked any remaining share repurchase authority under the prior share repurchase program and approved a share repurchase program for up to $2.0 billion of Common Stock, of which approximately $1.3 billion was remaining as of December 31, 2025.
The following table contains several key measures of our financial condition and liquidity: (dollars in millions) December 31, 2024 December 31, 2023 Cash and cash equivalents $ 2,300 $ 1,274 Total debt 8,324 6,898 Net debt (total debt less cash and cash equivalents) 6,024 5,624 Total equity (4,785) (4,855) Total capitalization (total debt plus total equity) 3,539 2,043 Net capitalization (total debt plus total equity less cash and cash equivalents) 1,239 769 Total debt to total capitalization 235 % 338 % Net debt to net capitalization 486 % 731 % The Company does not intend to reinvest certain undistributed earnings of our international subsidiaries that have been previously taxed in the U.S.
The following table contains several key measures of our financial condition and liquidity: (dollars in millions) December 31, 2025 December 31, 2024 Cash and cash equivalents $ 1,096 $ 2,300 Total debt 7,956 8,324 Net debt (total debt less cash and cash equivalents) 6,860 6,024 Total equity (5,346) (4,785) Total capitalization (total debt plus total equity) 2,610 3,539 Net capitalization (total debt plus total equity less cash and cash equivalents) 1,514 1,239 Total debt to total capitalization 305 % 235 % Net debt to net capitalization 453 % 486 % The Company does not intend to reinvest certain undistributed earnings of our international subsidiaries that have been previously taxed in the U.S.
Summary performance for Service for 2024, 2023 and 2022 was as follows: Total Increase (Decrease) Year-Over-Year for: (dollars in millions) 2024 2023 2022 2024 compared with 2023 2023 compared with 2022 Net sales $ 8,894 $ 8,397 $ 7,801 $ 497 5.9 % $ 596 7.6 % Cost of sales 5,533 5,173 4,791 360 7.0 % 382 8.0 % 3,361 3,224 3,010 137 4.2 % 214 7.1 % Operating expenses 1,176 1,210 1,178 (34) (2.8) % 32 2.7 % Operating profit $ 2,185 $ 2,014 $ 1,832 $ 171 8.5 % $ 182 9.9 % Operating profit margin 24.6 % 24.0 % 23.5 % Summary analysis of the Net sales change for Service f or 2024 and 2023 compared with the prior years was as follows: Components of Net sales change: 2024 2023 Organic 6.8 % 7.7 % Foreign currency translation (1.2) % (0.4) % Acquisitions/Divestitures, net and Other 0.3 % 0.3 % Total % change 5.9 % 7.6 % 2024 Compared with 2023 Net Sales The organic sales increase of 6.8% is due to organic sales increases in maintenance and repair of 5.7% and modernization of 11.7%.
Summary performance for Service for 2025, 2024 and 2023 was as follows: Total Increase (Decrease) Year-Over-Year for: (dollars in millions) 2025 2024 2023 2025 compared with 2024 2024 compared with 2023 Net sales $ 9,442 $ 8,894 $ 8,397 $ 548 6 % $ 497 6 % Cost of sales 5,860 5,533 5,173 327 6 % 360 7 % 3,582 3,361 3,224 221 7 % 137 4 % Operating expenses 1,208 1,176 1,210 32 3 % (34) (3) % Operating profit $ 2,374 $ 2,185 $ 2,014 $ 189 9 % $ 171 8 % Operating profit margin 25.1 % 24.6 % 24.0 % Summary analysis of the Net sales change for Service f or 2025 and 2024 compared with the prior years was as follows: Components of Net sales change: 2025 2024 Organic volume 5 % 7 % Foreign currency translation 1 % (1) % Acquisitions/Divestitures, net and Other — % — % Total % change 6 % 6 % 2025 Compared with 2024 Net Sales The organic sales increase of 5% is due to increases in maintenance and repair of 4% and modernization of 9%.
Cost of Products and Services Sold (dollars in millions) 2024 2023 2022 Cost of products and services sold $ 10,004 $ 10,016 $ 9,765 Percentage change year-over-year (0.1) % 2.6 % (3.4) % The factors contributing to the percentage change year-over-year in total cost of products and services sold are as follows: 2024 2023 Organic volume 0.9 % 4.8 % Foreign currency translation (1.3) % (1.3) % Acquisitions and divestitures, net and Other 0.3 % (0.9) % Total % change (0.1) % 2.6 % The organic increase in total cost of products and services sold in 2024 and 2023, were primarily driven by the organic sales changes noted above.
Cost of Products and Services Sold (dollars in millions) 2025 2024 2023 Cost of products and services sold $ 10,061 $ 10,004 $ 10,016 Percentage change year-over-year 1 % — % 3 % The factors contributing to the percentage change year-over-year in total cost of products and services sold are as follows: 2025 2024 Organic volume (1) % 1 % Foreign currency translation 1 % (1) % Acquisitions and divestitures, net and Other 1 % — % Total % change 1 % — % The Organic volume decrease of (1)% in total cost of products and services sold in 2025 was primarily driven by the organic sales changes noted above.
These costs are recorded in Other income (expense), net in the Consolidated Statements of Operations. Other restructuring action costs were $40 million in 2024 and included $24 million of costs related to 2024 actions and $16 million of costs related to 2023 actions.
These costs are recorded in Other income (expense), net in the Consolidated Statements of Operations. Other restructuring action costs were $54 million in 2025 and included $36 million of costs related to 2025 actions and $18 million of costs related to 2024 actions.
Components of Net sales change: Maintenance and Repair Modernization Organic 5.7 % 11.7 % Foreign currency translation (1.1) % (1.5) % Acquisitions/Divestitures, net and Other 0.3 % 0.1 % Total % change 4.9 % 10.3 % Operating profit Service operating profit increased $171 million including foreign exchange headwinds of $(21) million.
Components of Net sales change: Maintenance and Repair Modernization Organic volume 6 % 12 % Foreign currency translation (1) % (2) % Acquisitions/Divestitures, net and Other — % — % Total % change 5 % 10 % Operating Profit Service operating profit increased $171 million including foreign exchange headwinds of $(21) million.
Working capital activity includes a smaller decrease in Accounts receivable, net in 2024 compared to 2023 due to the timing of billings and collections, mostly offset by a smaller increase in Accounts payable in 2024 compared to 2023 due to the timing of payments to suppliers and other activity.
Working capital activity includes a smaller decrease in Accounts receivable, net in 2024 compared to 2023 due to the timing of billings and collections, mostly offset by a smaller increase in Accounts payable in 2024 compared to 2023 due to the timing of payments to suppliers and other activity. During 2025, net cash provided by operating activities was $1.6 billion.
Summary performance for New Equipment for 2024, 2023 and 2022 was as follows: Total Increase (Decrease) Year-Over-Year for: (dollars in millions) 2024 2023 2022 2024 compared with 2023 2023 compared with 2022 Net sales $ 5,367 $ 5,812 $ 5,778 $ (445) (7.7) % $ 34 0.6 % Cost of sales 4,443 4,837 4,855 (394) (8.1) % (18) (0.4) % 924 975 923 (51) (5.2) % 52 5.6 % Operating expenses 595 594 542 1 0.2 % 52 9.6 % Operating profit $ 329 $ 381 $ 381 $ (52) (13.6) % $ — — % Operating profit margin 6.1 % 6.6 % 6.6 % 34 Table of Contents Summary analysis of the Net sales change for New Equipment for 2024 and 2023 compared with the prior years was as follows: Components of Net sales change: 2024 2023 Organic (6.4) % 2.6 % Foreign currency translation (1.4) % (2.1) % Acquisitions/Divestitures, net and Other 0.1 % 0.1 % Total % change (7.7) % 0.6 % 2024 Compared with 2023 The organic sales decrease of (6.4)% was driven by a greater than 20% decline in China, partially offset by mid single-digit organic sales growth in Americas and Asia Pacific and low single-digit organic sales growth in EMEA.
Summary performance for New Equipment for 2025, 2024 and 2023 was as follows: Total Increase (Decrease) Year-Over-Year for: (dollars in millions) 2025 2024 2023 2025 compared with 2024 2024 compared with 2023 Net sales $ 4,989 $ 5,367 $ 5,812 $ (378) (7) % $ (445) (8) % Cost of sales 4,157 4,443 4,837 (286) (6) % (394) (8) % 832 924 975 (92) (10) % (51) (5) % Operating expenses 592 595 594 (3) (1) % 1 — % Operating profit $ 240 $ 329 $ 381 $ (89) (27) % $ (52) (14) % Operating profit margin 4.8 % 6.1 % 6.6 % Summary analysis of the Net sales change for New Equipment for 2025 and 2024 compared with the prior years was as follows: Components of Net sales change: 2025 2024 Organic volume (7) % (6) % Foreign currency translation — % (1) % Acquisitions/Divestitures, net and Other — % (1) % Total % change (7) % (8) % 35 Table of Contents 2025 Compared with 2024 The organic sales decrease of (7)% was driven by a greater than (20)% decline in China and high single-digit decline in Americas, partially offset by mid single-digit growth in EMEA and Asia Pacific.
During 2024, net cash used in investing activities was $164 million. The primary drivers of the outflow related to $126 million of capital expenditures and $87 million of acquisitions of businesses and intangible assets, partially offset by $49 million of net cash receipts from the settlement of derivative instruments. During 2023, net cash used in investing activities was $183 million.
The primary drivers of the outflow related to $126 million of capital expenditures and $87 million of acquisitions of businesses and intangible assets, partially offset by $49 million of net cash receipts from the settlement of derivative instruments.
Income Taxes 2024 2023 2022 Effective tax rate 15.0 % 26.2 % 27.5 % The 2024 effective tax rate is lower than the 2023 effective tax rate and the statutory U.S. rate primarily due to recognition of estimated tax benefits arising as a result of the resolution of the German tax litigation and the reduction of a deferred tax liability related to the mitigation of future repatriation costs.
The 2024 effective tax rate is lower than the 2023 effective tax rate and the statutory U.S. rate primarily due to recognition of estimated tax benefits arising from the resolution of the German tax litigation and the reduction of a deferred tax liability related to the mitigation of future repatriation costs.
Borrowings and Lines of Credit The following is a summary of the long-term debt issuances and repayments in 2024, 2023 and 2022: (dollars in millions) Issuance Date Description of Debt Aggregate Principal Balance November 19, 2024 2.875% notes due 2027 (€850 million principal value) $ 899 November 19, 2024 5.125% notes due 2031 600 August 16, 2023 5.25% notes due 2028 750 Repayment Date Description of Debt Aggregate Principal Paid November 13, 2023 0.000% notes due 2023 (€500 million principal value) $ 534 January 14, 2022 LIBOR plus 45 bps floating rate notes due 2023 500 38 Table of Contents A portion of the proceeds from the November 2024 issuance of the Euro and USD notes listed above will be used to fund the repayment at maturity of the Company's currently outstanding $1.3 billion 2.056% notes due April 5, 2025.
Borrowings and Lines of Credit The following is a summary of the long-term debt issuances and repayments in 2025, 2024 and 2023: (dollars in millions) Issuance Date Description of Debt Aggregate Principal Balance September 4, 2025 5.131% notes due 2035 $ 500 November 19, 2024 2.875% notes due 2027 (€850 million principal value) 899 November 19, 2024 5.125% notes due 2031 600 August 16, 2023 5.25% notes due 2028 750 Repayment Date Description of Debt Aggregate Principal Paid April 7, 2025 2.056% notes due 2025 $ 1,300 November 13, 2023 0.000% notes due 2023 (€500 million principal value) 534 39 Table of Contents A portion of the proceeds from the September 2025 issuance of $500 million notes listed above will be used to fund the repayment at maturity of the Company's currently outstanding ¥21.5 billion Japanese Yen denominated 0.370% notes due March 18, 2026.
Selling, General and Administrative (dollars in millions) 2024 2023 2022 Selling, general and administrative $ 1,861 $ 1,884 $ 1,763 Percentage of Net sales 13.0 % 13.3 % 12.9 % Selling, general and administrative expenses decreased $23 million in 2024 compared to 2023, driven by savings resulting from UpLift, lower restructuring costs and favorable foreign exchange impacts, partially offset by annual wage increases and higher other employment-related costs.
Selling, General and Administrative (dollars in millions) 2025 2024 2023 Selling, general and administrative $ 1,979 $ 1,861 $ 1,884 Percentage of Net sales 13.7 % 13.0 % 13.3 % Selling, general and administrative expenses increased $118 million in 2025 compared to 2024, driven by higher restructuring costs, annual wage increases, other employment-related costs and the impact from foreign exchange, partially offset by savings resulting from UpLift.
Approximately $50 million of savings was realized for the 2024 and 2023 actions during 2024. For additional discussion of restructuring and transformation costs, see "Note 16: Restructuring and Transformation Costs" in Item 8 in this Form 10-K.
Approximately $43 million of savings was realized for the 2025 and 2024 actions during 2025. For additional discussion of restructuring and transformation costs, see "Note 15: Restructuring and Transformation Costs" to the Consolidated Financial Statements in Item 8 in this Form 10-K.
Operating margin increased 60 basis points. 36 Table of Contents 2023 Compared with 2022 Net Sales The organic sales increase of 7.7% is due to organic sales increases in maintenance and repair of 7.8%, and modernization of 7.3%.
Operating margin increased 50 basis points. 37 Table of Contents 2024 Compared with 2023 Net Sales The organic sales increase of 7% is due to increases in maintenance and repair of 6%, and modernization of 12%.
These include sales personnel, field technicians with separate skills in performing installation and service, as well as engineers driving our continued product development and innovation.
We serve our customers through a global network of colleagues. These include sales personnel, field technicians with separate skills in performing installation and service, as well as engineers driving our continued product development and innovation.
UpLift includes the standardization of our processes and improvement of our supply chain procurement, among other aspects of the program, as well as organizational changes which result in restructuring actions.
UpLift includes the standardization of our processes and improvement of our supply chain procurement, among other aspects of the program, as well as organizational changes which result in restructuring actions. The annual run-rate savings generated by UpLift are approximately $200 million.
The table below presents approximate cash outflows related to the restructuring actions during 2024, and the expected cash payments to complete the actions announced: (dollars in millions) UpLift Actions Other Actions Total Restructuring Cash outflows during the year ended December 31, 2024 $ 31 $ 34 $ 65 Expected cash payments remaining to complete actions announced 37 53 90 The approved UpLift restructuring actions are expected to generate approximately $80 million in annual recurring savings by the end of 2025, primarily in Selling, general and administrative expenses, and of which approximately $39 million was realized during 2024.
The table below presents approximate cash outflows related to the restructuring actions during 2025, and the expected cash payments to complete the actions announced: (dollars in millions) UpLift Actions Other Actions Total Restructuring Cash outflows during the year ended December 31, 2025 $ 39 $ 49 $ 88 Expected cash payments remaining to complete actions announced 68 40 108 The approved UpLift restructuring actions are expected to generate approximately $103 million in annual recurring savings by the end of 2025, primarily in Selling, general and administrative expenses, of which approximately $84 million and $39 million were realized during 2025 and 2024, respectively, including $50 million of incremental savings compared to 2024.
Year Ended December 31, (dollars in millions) 2024 2023 OWC Statement of Operations - Standalone and Unconsolidated Revenue $ — $ — Cost of revenue — — Operating expenses 10 9 Income from consolidated subsidiaries 49 143 Income (loss) from operations excluding income from consolidated subsidiaries (191) (11) Net income (loss) excluding income from consolidated subsidiaries (364) (119) As of December 31, (dollars in millions) 2024 2023 OWC Balance Sheet - Standalone and Unconsolidated Current assets (intercompany receivables from non-guarantor subsidiaries) $ — $ — Current assets (excluding intercompany receivables from non-guarantor subsidiaries) 1,490 63 Noncurrent assets (investments in consolidated subsidiaries) 1,198 1,236 Noncurrent assets (excluding investments in consolidated subsidiaries) 37 43 Current liabilities (intercompany payables to non-guarantor subsidiaries) 6,277 3,753 Current liabilities (excluding intercompany payables to non-guarantor subsidiaries) 1,625 119 Noncurrent liabilities (intercompany payables to non-guarantor subsidiaries) — — Noncurrent liabilities (excluding intercompany payables to non-guarantor subsidiaries) 5,100 5,880 42 Table of Contents Year Ended December 31, (dollars in millions) 2024 2023 Highland Statement of Operations - Standalone and Unconsolidated Revenue $ — $ — Cost of revenue — — Operating expenses 1 1 Income from consolidated subsidiaries 420 477 Income (loss) from operations excluding income from consolidated subsidiaries (1) (1) Net income (loss) excluding income from consolidated subsidiaries (248) (196) As of December 31, (dollars in millions) 2024 2023 Highland Balance Sheet - Standalone and Unconsolidated Current assets (intercompany receivables from non-guarantor subsidiaries) $ — $ 75 Current assets (excluding intercompany receivables from non-guarantor subsidiaries) — — Noncurrent assets (investments in consolidated subsidiaries) 15,711 15,711 Noncurrent assets (intercompany receivables from non-guarantor subsidiaries) 460 518 Noncurrent assets (excluding investments in consolidated subsidiaries) — — Current liabilities (intercompany payables to non-guarantor subsidiaries) — — Current liabilities (excluding intercompany payables to non-guarantor subsidiaries) 4 1 Current liabilities (intercompany payables from non-guarantor subsidiaries) 9 — Noncurrent liabilities (intercompany payables to non-guarantor subsidiaries) 3,513 3,467 Noncurrent liabilities (excluding intercompany payables to non-guarantor subsidiaries) 2,017 1,199 CRITICAL ACCOUNTING ESTIMATES Preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
Year Ended December 31, (dollars in millions) 2025 2024 OWC Statement of Operations - Standalone and Unconsolidated Revenue $ — $ — Cost of revenue — — Operating expenses 11 10 Income from consolidated subsidiaries — 1 Income (loss) from operations excluding income from consolidated subsidiaries (85) (191) Net income (loss) excluding income from consolidated subsidiaries (280) (364) As of December 31, (dollars in millions) 2025 2024 OWC Balance Sheet - Standalone and Unconsolidated Current assets (intercompany receivables from non-guarantor subsidiaries) $ — $ — Current assets (excluding intercompany receivables from non-guarantor subsidiaries) 188 1,490 Noncurrent assets (investments in consolidated subsidiaries) 1,031 1,151 Noncurrent assets (excluding investments in consolidated subsidiaries) 39 37 Current liabilities (intercompany payables to non-guarantor subsidiaries) 7,508 6,277 Current liabilities (excluding intercompany payables to non-guarantor subsidiaries) 333 1,625 Noncurrent liabilities (intercompany payables to non-guarantor subsidiaries) — — Noncurrent liabilities (excluding intercompany payables to non-guarantor subsidiaries) 5,412 5,100 43 Table of Contents Year Ended December 31, (dollars in millions) 2025 2024 Highland Statement of Operations - Standalone and Unconsolidated Revenue $ — $ — Cost of revenue — — Operating expenses — 1 Income from consolidated subsidiaries 499 420 Income (loss) from operations excluding income from consolidated subsidiaries — (1) Net income (loss) excluding income from consolidated subsidiaries (243) (248) As of December 31, (dollars in millions) 2025 2024 Highland Balance Sheet - Standalone and Unconsolidated Current assets (intercompany receivables from non-guarantor subsidiaries) $ — $ — Current assets (excluding intercompany receivables from non-guarantor subsidiaries) — — Noncurrent assets (investments in consolidated subsidiaries) 15,711 15,711 Noncurrent assets (intercompany receivables from non-guarantor subsidiaries) 470 460 Noncurrent assets (excluding investments in consolidated subsidiaries) — — Current liabilities (intercompany payables to non-guarantor subsidiaries) — — Current liabilities (excluding intercompany payables to non-guarantor subsidiaries) 708 4 Current liabilities (intercompany payables from non-guarantor subsidiaries) 20 9 Noncurrent liabilities (intercompany payables to non-guarantor subsidiaries) 4,174 3,513 Noncurrent liabilities (excluding intercompany payables to non-guarantor subsidiaries) 1,577 2,017 CRITICAL ACCOUNTING ESTIMATES Preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
In the following table, we show the timing of these payments as of December 31, 2024: Payments Due by Period (dollars in millions) Total 2025 2026-2027 2028-2029 Thereafter Other long-term liabilities $ 192 $ 10 $ 105 $ 14 $ 63 The amounts above include $80 million of non-current contractual payables due to RTX for reimbursement of tax payments that RTX is responsible to pay after the Separation pursuant to the TMA.
In the following table, we show the timing of these payments as of December 31, 2025: Payments Due by Period (dollars in millions) Total 2026 2027-2028 2029-2030 Thereafter Other long-term liabilities $ 140 $ 41 $ 33 $ 9 $ 57 The amounts above include $23 million of non-current contractual payables due to RTX for reimbursement of tax payments that RTX is responsible to pay after the Separation pursuant to the TMA. 47 Table of Contents Unrecognized Tax Benefits Otis has unrecognized tax benefits of $152 million as of December 31, 2025.
As of December 31, 2024, we had cash and cash equivalents of approximately $2.3 billion, of which approximately 37% was held by the Company's foreign subsidiaries. Domestic cash and cash equivalents as of December 31, 2024 includes amounts that will be used to fund the repayment at maturity of the $1.3 billion 2.056% notes due April 5, 2025.
As of December 31, 2025, we had cash and cash equivalents of approximately $1.1 billion, of which approximately 86% was held by the Company's foreign subsidiaries. Domestic cash and cash equivalents as of December 31, 2025 includes amounts that will be used to fund the repayment at maturity of the Japanese Yen denominated 0.370% notes due March 18, 2026.
Modernization offerings can range from relatively simple upgrades of interior finishes and aesthetics to complex upgrades of larger components and sub-systems. Our typical Service customers include building owners, facility managers, housing associations and government agencies that operate buildings where elevators and escalators are installed. We serve our customers through a global network of employees.
Modernization offerings range from relatively simple upgrades of interior finishes and aesthetics, to complex upgrades of larger components and sub-systems, including the machine, ropes or belts, safety systems and the entire car or escalator. Our typical Service customers include building owners, facility managers, housing associations and government agencies that operate buildings where elevators and escalators are installed.
New Equipment operating profit decreased $(52) million including foreign exchange headwinds of $(8) million. The impacts of lower volume and unfavorable regional and product mix were partially offset by favorable price, productivity including the benefits from UpLift, and commodity tailwinds.
The impacts of lower volume and unfavorable regional and product mix were partially offset by favorable price, productivity including the benefits from UpLift, and commodity tailwinds.
Financing activities Cash flows from financing activities primarily represent inflows and outflows associated with equity and borrowings. Primary activities include short-term and long-term borrowing activity, paying dividends to shareholders, the repurchase of our Common Stock and dividends or other payments to noncontrolling interests.
Primary activities include short-term and long-term borrowing activity, paying dividends to shareholders, the repurchase of our Common Stock and dividends or other payments to noncontrolling interests.
Operating margin decreased 50 basis points. 2023 Compared with 2022 The organic sales increase of 2.6% was driven by mid single-digit organic sales growth in EMEA and low single-digit organic sales growth in Americas and Asia. New Equipment operating profit was flat, including $(26) million of foreign exchange headwinds.
Operating margin decreased 130 basis points. 2024 Compared with 2023 The organic sales decrease of (6)% was driven by a greater than 20% decline in China, partially offset by mid single-digit growth in Americas and Asia Pacific and low single-digit growth in EMEA. New Equipment operating profit decreased $(52) million including foreign exchange headwinds of $(8) million.
As discussed below, we do not have operations in Russia. To the extent possible, we continue to operate our business in Ukraine, which represented less than 1% of our 2024, 2023 and 2022 revenue and operating profit.
We do not have operations in Russia. 28 Table of Contents To the extent possible, we continue to operate our business in Ukraine, which represented less than 1% of our 2025, 2024 and 2023 net sales and operating profit. Additionally, we do not have operations or material net sales in Israel or Gaza.
Selling, general and administrative expenses increased $121 million in 2023 compared to 2022, driven by annual wage increases, higher other employment-related costs, higher restructuring costs and higher credit loss reserves, partially offset by favorable foreign exchange impacts of $8 million.
Selling, general and administrative expenses decreased $23 million in 2024 compared to 2023, driven by savings resulting from UpLift, lower restructuring costs and favorable foreign exchange impacts, partially offset by annual wage increases and higher other employment-related costs.
Environmental, Social and Governance ("ESG") There have been no, and we do not expect there to be in the near term, material impacts on our business, financial condition or results of operations as a result of compliance with legislation or regulatory rules regarding climate change, from the known physical eff ects of climate change or as a result of implementing our ESG initiatives.
Sustainability-related matters There have been no, and we do not expect there to be in the near term, material impacts on our business, financial condition or results of operations as a result of compliance with legislation or regulatory rules regarding climate change, from the known physical effects of climate change or as a result of implementing our sustainability-related initiatives or from transitional risks such as increased regulations or customer shifting preference toward low carbon products, as determined under our climate scenarios.
We currently do not expect any significant impact to our capital and financial resources from these macroeconomic conditions, including to our overall liquidity position based on our available cash and cash equivalents and our access to credit facilities and the capital markets.
Other than the impact from new tariffs currently in effect of approximately $20 million during 2025 and a similar impact anticipated in 2026, we currently do not expect any significant impact to our capital and financial resources from these macroeconomic conditions, including to our overall liquidity posi tion based on our available cash and cash equivalents and our access to credit facilities and the capital markets.
For additional discussion of borrowings, see "Note 9: Borrowings and Lines of Credit" in Item 8 in this Form 10-K. For additional discussion of German tax litigation, see "Note 21: Contingencies" and "Note 22: Segment Financial Data" in Item 8 in this Form 10-K.
For additional discussion of German tax litigation, see "Note 20: Contingent Liabilities" and "Note 21: Segment Financial Data" to the Consolidated Financial Statements in Item 8 in this Form 10-K.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+0 added−0 removed14 unchanged
Biggest changeWe have a high volume of foreign currency exposures that result from our international net sales, purchases, investments and other international transactions. International net sales were approxi matel y $10.0 billion, $10.2 billion and $9.9 billion in 2024 , 2023 and 2022, respectively .
Biggest changeWe have a high volume of foreign currency exposures that result from our international net sales, purchases, investments and other international transactions. International net sales were approximately $10.2 billion, $10.0 billion and $10.2 billion in 2025, 2024 and 2023, respectively.
The currency effects of this debt are reflected in the Accumulated other comprehensive income (loss) within Shareholder's (Deficit) Equity in the Balance Sheet in Item 8 in this Form 10-K. Refer to "Note 9: Borrowings and Lines of Credit" in Item 8 in this Form 10-K for additional discussion of our borrowings.
The currency effects of this debt are reflected in the Accumulated other comprehensive income (loss) within Shareholder's (Deficit) Equity in the Balance Sheet in Item 8 in this Form 10-K. Refer to "Note 8: Borrowings and Lines of Credit" in Item 8 in this Form 10-K for additional discussion of our borrowings.
Our long-term debt portfolio consists of fixed-rate instruments, and, therefore, any fluctuation in market interest rates is not expected to have a material effect on the Company's results of operations. Additionally, the investors in our fixed-rate debt obligations generally do not have the right to demand we pay off these obligations prior to maturity.
Our long-term debt portfolio consists of f ixed-rate instruments, and, therefore, any fluctuation in market interest rates is not expected to have a material effect on the Company's results of operations. Additionally, the investors in our fixed-rate debt obligations generally do not have the right to demand we pay off these obligations prior to maturity.
More than insignificant exposures that cannot be naturally offset are generally hedged with foreign currency derivatives. The aggregate notional amount of our outstanding foreign currency hedges was approximately $5.1 billion and $4.9 billion as of December 31, 2024 and 2023 , respectively. Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates.
More than insignificant exposures that cannot be naturally offset are generally hedged with foreign currency derivatives. The aggregate notional amount of our outstanding foreign currency hedges was approximately $5.4 billion and $5.1 billion as of December 31, 2025 and 2024, respectively. Foreign currency forward contracts are sensitive to changes in foreign currency exchange rates.
The hedges would be designated as fair value hedges and the gains and losses on the swaps would be reported in interest expense, reflecting that portion of interest expense at a variable rate. 48 Table of Contents
The hedges would be designated as fair value hedges and the gains and losses on the swaps would be reported in interest expense, reflecting that portion of interest expense at a variable rate. 49 Table of Contents
An unfavorable exchange rate movement of 10% to our portfolio of foreign currency contracts would have resulted in an increase in unrealized losses of $124 million and $120 million as of December 31, 2024 and 2023, respectively. Such losses or gains would be offset by corresponding gains or losses in the remeasurement of the underlying transactions or investments being hedged.
An unfavorable exchange rate movement of 10% to our portfolio of foreign currency contracts would have resulted in an increase in unrealized losses of $163 million and $124 million as of December 31, 2025 and 2024, respectively. Such losses or gains would be offset by corresponding gains or losses in the remeasurement of the underlying transactions or investments being hedged.
Refer to "Note 2: Summary of Significant Accounting Policies", "Note 9: Borrowings and Lines of Credit" and "Note 17: Financial Instruments" i n Item 8 in this Form 10-K for additional discussion of foreign currency exchange, interest rates and financial instruments, including the average aggregate notional amount of our outstanding foreign currency and commodity price hedges during 2024 and 2023 .
Refer to "Note 2: Summary of Significant Accounting Policies", "Note 8: Borrowings and Lines of Credit" and "Note 16: Financial Instruments" i n Item 8 in this Form 10-K for additional discussion of foreign currency exchange, interest rates and financial instruments, including the average aggregate notional amount of our outstanding foreign currency and commodity price hedges during 2025 and 2024 .
As of December 31, 2024, these net investment hedges are deemed to be effective. 47 Table of Contents As of December 31, 2024 we have approximately €2.0 billion ($2.0 billion) of Euro denominated long-term debt. This debt was issued by a subsidiary with Euro functional currency.
As of December 31, 2025, these net investment hedges are deemed to be effective. 48 Table of Contents As of December 31, 2025 we have approximately €2.0 billion ($2.3 billion) of Euro denominated long-term debt. This debt was issued by a subsidiary with Euro functional currency.
Therefore, we believe these commodity hedging contracts and the offsetting underlying purchases, when taken together, do not create material market risk. Interest Rate Risk A 100 basis points increase in interest rates would have had an approximate $400 million reduction on the fai r value of our fixed-rate debt as of December 31, 2024 and 2023 .
Therefore, we believe these commodity hedging contracts and the offsetting underlying purchases, when taken together, do not create material market risk. Interest Rate Risk A 100 basis points increase in interest rates would have had an appro ximate $400 million reduction on the fair value of our fixed-rate debt as of December 31, 2025 and 2024.
As discussed in "Note 17: Financial Instruments" in Item 8 in this Form 10-K, as of December 31, 2024 we have ¥21.5 billion ($137 million) of Japanese Yen denominated long-term debt that qualifies as a net investment hedge against our investments in Japanese businesses, as well as derivative instruments that qualify as net investment hedges against our investments in certain European businesses with notional amounts of €150 million ($156 million) and Asian businesses with notional amounts of HK$1.3 billion and ¥2.1 billion ($178 million total) .
As discussed in "Note 16: Financial Instruments" in Item 8 in this Form 10-K, as of December 31, 2025 we have ¥21.5 billion ($137 million) of Japanese Yen denominated long-term debt that qualifies as a net investment hedge against our investments in Japanese businesses, as well as derivative instruments that qualify as net investment hedges against our investments in certain European businesses with notional amounts of €169 million ($199 million) and Asian businesses with notional amounts of HK$2.2 billion ($283 million).

Other OTIS 10-K year-over-year comparisons