Item 1. Financial Statements

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Item 1. Financial Statements

OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Quarter Ended June 30,
(dollars in millions, except per share amounts; shares in millions)	2026		2025
Net sales:
Product sales	$	1,279	$	1,276
Service sales	2,580		2,319
	3,859		3,595
Costs and expenses:
Cost of products sold	1,081		1,066
Cost of services sold	1,642		1,440
Research and development	39		38
Selling, general and administrative	520		499
	3,282		3,043
Other income (expense), net	(2)		(5)
Operating profit	575		547
Non-service pension cost (benefit)	2		—
Interest expense (income), net	26		26
Net income before income taxes	547		521
Income tax expense (benefit)	98		98
Net income	449		423






Less: Noncontrolling interest in subsidiaries' earnings	21		30
Net income attributable to Otis Worldwide Corporation	$	428	$	393





Earnings per share (Note 2):
Basic	$	1.12	$	1.00
Diluted	$	1.12	$	0.99





Weighted average number of shares outstanding:
Basic shares	382.6		393.7
Diluted shares	383.5		395.8

See accompanying Notes to Condensed Consolidated Financial Statements.

OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



	Six Months Ended June 30,
(dollars in millions, except per share amounts; shares in millions)	2026		2025
Net sales:
Product sales	$	2,428	$	2,439
Service sales	4,997		4,506
	7,425		6,945
Costs and expenses:
Cost of products sold	2,039		2,042
Cost of services sold	3,168		2,813
Research and development	77		75
Selling, general and administrative	1,030		963
	6,314		5,893
Other income (expense), net	3		(94)
Operating profit	1,114		958
Non-service pension cost (benefit)	2		—
Interest expense (income), net	85		71
Net income before income taxes	1,027		887
Income tax expense (benefit)	225		208
Net income	802		679
Less: Noncontrolling interest in subsidiaries' earnings	34		43








Net income attributable to Otis Worldwide Corporation	$	768	$	636

Earnings per share (Note 2):

Basic	$	1.99	$	1.61
Diluted	$	1.99	$	1.60

Weighted average number of shares outstanding:
Basic shares	385.2		395.1
Diluted shares	386.4		397.3

See accompanying Notes to Condensed Consolidated Financial Statements.

OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2026		2025		2026		2025


Net income	$	449	$	423	$	802	$	679
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	48		(170)		100		(293)
Pension and postretirement benefit plan adjustments	—		—		—		1

Change in unrealized cash flow hedging	4		(7)		6		(7)
Other comprehensive income (loss), net of tax	52		(177)		106		(299)
Comprehensive income (loss), net of tax	501		246		908		380
Less: Comprehensive (income) loss attributable to noncontrolling interest	(19)		(38)		(32)		(55)
Comprehensive income attributable to Otis Worldwide Corporation	$	482	$	208	$	876	$	325

See accompanying Notes to Condensed Consolidated Financial Statements.

OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(dollars in millions)	June 30, 2026		December 31, 2025
Assets
Cash and cash equivalents	$	813	$	1,096

Accounts receivable (net of allowance for expected credit losses of $129 and $125)	3,985		3,688
Contract assets	824		699
Inventories	686		613
Other current assets	531		405

Total Current Assets	6,839		6,501
Future income tax benefits	426		407
Fixed assets (net of accumulated depreciation of $1,291 and $1,261)	755		743
Operating lease right-of-use assets	580		554
Intangible assets, net	387		343
Goodwill	1,794		1,695
Other assets	375		410
Total Assets	$	11,156	$	10,653
Liabilities and Equity (Deficit)
Short-term borrowings and current portion of long-term debt	$	1,390	$	1,056
Accounts payable	2,099		2,142
Accrued liabilities	1,713		1,847
Contract liabilities	3,023		2,611


Total Current Liabilities	8,225		7,656
Long-term debt	7,046		6,900
Future pension and postretirement benefit obligations	411		419
Operating lease liabilities	410		397
Future income tax obligations	196		223
Other long-term liabilities	322		329
Total Liabilities	16,610		15,924
Commitments and contingent liabilities (Note 15)
Redeemable noncontrolling interest	106		75
Shareholders' Equity (Deficit):

Common Stock and additional paid-in capital	353		333

Treasury Stock	(5,005)		(4,198)
Accumulated deficit	(117)		(440)

Accumulated other comprehensive income (loss)	(979)		(1,087)
Total Shareholders' Equity (Deficit)	(5,748)		(5,392)
Noncontrolling interest	188		46
Total Equity (Deficit)	(5,560)		(5,346)
Total Liabilities and Equity (Deficit)	$	11,156	$	10,653

See accompanying Notes to Condensed Consolidated Financial Statements.

OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


(dollars in millions, except per share amounts)	Common Stock and Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity (Deficit)		Noncontrolling Interest		Total Equity (Deficit)		Redeemable Noncontrolling Interest























































Quarter Ended June 30, 2026
Balance as of March 31, 2026	$	332	$	(4,601)	$	(378)	$	(1,033)	$	(5,680)	$	171	$	(5,509)	$	74
Net income	—		—		428		—		428		21		449		—
Other comprehensive income (loss), net of tax	—		—		—		54		54		(1)		53		(1)
Stock-based compensation and Common Stock issued under employee plans	20		—		(1)		—		19		—		19		—

Cash dividends declared ($0.44 per common share)	—		—		(167)		—		(167)		—		(167)		—
Repurchase of Common Shares	—		(404)		—		—		(404)		—		(404)		—
Dividends attributable to noncontrolling interest	—		—		—		—		—		(4)		(4)		(1)
Acquisitions, disposals and other changes	1		—		1		—		2		1		3		34
Balance as of June 30, 2026	$	353	$	(5,005)	$	(117)	$	(979)	$	(5,748)	$	188	$	(5,560)	$	106

Quarter Ended June 30, 2025
Balance as of March 31, 2025	$	278	$	(3,646)	$	(889)	$	(871)	$	(5,128)	$	75	$	(5,053)	$	62
Net income	—		—		393		—		393		30		423		—
Other comprehensive income (loss), net of tax	—		—		—		(185)		(185)		4		(181)		4
Stock-based compensation and Common Stock issued under employee plans	22		—		(3)		—		19		—		19		—
Cash dividends declared ($0.42 per common share)	—		—		(164)		—		(164)		—		(164)		—
Repurchase of Common Shares	—		(302)		—		—		(302)		—		(302)		—
Dividends attributable to noncontrolling interest	—		—		—		—		—		(13)		(13)		—
Acquisitions, disposals and other changes	—		—		—		—		—		1		1		—
Balance as of June 30, 2025	$	300	$	(3,948)	$	(663)	$	(1,056)	$	(5,367)	$	97	$	(5,270)	$	66

See accompanying Notes to Condensed Consolidated Financial Statements.

OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


(dollars in millions, except per share amounts)	Common Stock and Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Equity (Deficit)		Noncontrolling Interest		Total Equity (Deficit)		Redeemable Noncontrolling Interest

Six Months Ended June 30, 2026
Balance as of December 31, 2025	$	333	$	(4,198)	$	(440)	$	(1,087)	$	(5,392)	$	46	$	(5,346)	$	75
Net income	—		—		768		—		768		34		802		—
Other comprehensive income (loss), net of tax	—		—		—		108		108		—		108		(2)
Stock-based compensation and Common Stock issued under employee plans	28		—		(1)		—		27		—		27		—
Cash dividends declared ($0.86 per common share)	—		—		(330)		—		(330)		—		(330)		—
Repurchase of Common Shares	—		(807)		—		—		(807)		—		(807)		—
Dividends attributable to noncontrolling interest	—		—		—		—		—		(7)		(7)		(1)
Acquisitions, disposals and other changes	(8)		—		—		—		(8)		1		(7)		34
Noncontrolling interest adjustment (Note 1)	—		—		(114)		—		(114)		114		—		—
Balance as of June 30, 2026	$	353	$	(5,005)	$	(117)	$	(979)	$	(5,748)	$	188	$	(5,560)	$	106

Six Months Ended June 30, 2025
Balance as of December 31, 2024	$	265	$	(3,390)	$	(978)	$	(745)	$	(4,848)	$	63	$	(4,785)	$	57
Net income	—		—		636		—		636		43		679		—
Other comprehensive income (loss), net of tax	—		—		—		(311)		(311)		6		(305)		6
Stock-based compensation and Common Stock issued under employee plans	35		—		(2)		—		33		—		33		—
Cash dividends declared ($0.81 per common share)	—		—		(319)		—		(319)		—		(319)		—
Repurchase of Common Shares	—		(558)		—		—		(558)		—		(558)		—
Dividends attributable to noncontrolling interest	—		—		—		—		—		(15)		(15)		—
Acquisitions, disposals and other changes	—		—		—		—		—		—		—		3
Balance as of June 30, 2025	$	300	$	(3,948)	$	(663)	$	(1,056)	$	(5,367)	$	97	$	(5,270)	$	66

See accompanying Notes to Condensed Consolidated Financial Statements.

OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(dollars in millions)	2026		2025
Operating Activities:
Net income	$	802	$	679
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization	83		86
Deferred income tax expense (benefit)	(38)		(74)
Stock compensation cost	39		44




Change in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	(300)		(146)
Contract assets and liabilities, current	284		70
Inventories	(79)		(15)
Other current assets	67		10
Accounts payable	(48)		(212)
Accrued liabilities	(68)		23


Pension contributions	(21)		(27)
Other operating activities, net	(41)		(33)
Net cash flows provided by (used in) operating activities	680		405
Investing Activities:
Capital expenditures	(77)		(70)
Acquisitions of businesses and intangible assets, net of cash (Note 5)	(193)		(82)
Net proceeds from the sale of fixed assets	—		34



Purchase of short-term investments	(84)		—
Receipts (payments) on settlements of derivative contracts	35		(200)
Other investing activities, net	3		(2)
Net cash flows provided by (used in) investing activities	(316)		(320)
Financing Activities:
Net proceeds from (repayments of) borrowings (maturities of 90 days or less)	(33)		473


Proceeds from issuance of long-term debt	700		—
Payment of debt issuance costs	(5)		—
Repayment of long-term debt	(135)		(1,300)


Dividends paid on Common Stock	(330)		(319)
Repurchases of Common Stock	(807)		(561)
Acquisition of noncontrolling interest shares	(10)		—
Dividends paid to noncontrolling interest	(7)		(5)
Other financing activities, net	6		(10)
Net cash flows provided by (used in) financing activities	(621)		(1,722)





Effect of exchange rate changes on cash and cash equivalents	1		19
Net increase (decrease) in cash, cash equivalents and restricted cash	(256)		(1,618)
Cash, cash equivalents and restricted cash, beginning of year	1,105		2,321
Cash, cash equivalents and restricted cash, end of period	849		703
Less: Restricted cash	36		15

Cash and cash equivalents, end of period	$	813	$	688

See accompanying Notes to Condensed Consolidated Financial Statements.

OTIS WORLDWIDE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: General

The Condensed Consolidated Financial Statements as of June 30, 2026 and for the quarters and six months ended June 30, 2026 and 2025 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods. The Condensed Consolidated Balance Sheet as of December 31, 2025 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles ("GAAP") in the United States ("U.S."). The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the Company's annual consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for fiscal year 2025 ("2025 Form 10-K" or "Form 10-K").

Unless the context otherwise requires, references to "Otis," "we," "us," "our" and "the Company" refer to Otis Worldwide Corporation and its subsidiaries.

There have been no changes to the Company's significant accounting policies described in the Company's 2025 Form 10-K that have a material impact on the Company's Condensed Consolidated Financial Statements and the related notes.

Use of Estimates. The preparation of these Condensed Consolidated Financial Statements and accompanying notes in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates.

We assessed certain accounting matters that generally require consideration of forecasted financial information in the context of the information reasonably available to us and the unknown future impacts of macroeconomic developments, including geopolitical conflicts, inflationary pressures, higher interest rates, tighter credit conditions and changes in global trade policies including higher tariffs in the U.S. and other countries, as of June 30, 2026 and through the date of this report. The accounting matters assessed included, but were not limited to, our allowance for credit losses, the carrying value of our goodwill and other long-lived assets, financial assets and revenue recognition. While there was not a material impact to our Condensed Consolidated Financial Statements as of June 30, 2026 and for the quarters and six months ended June 30, 2026 and 2025 resulting from our assessments of these matters, future assessment of our expectations of the magnitude and duration of these macroeconomic developments, as well as other factors, could result in material impacts to our Condensed Consolidated Financial Statements in future reporting periods.

New import tariffs implemented in 2025 and 2026 by the U.S. and other countries, as currently in effect, could have a material impact on our results in 2026 and future years. The impact of tariffs is dependent upon negotiations with customers and suppliers and other mitigation efforts and potential further changes in global trade policies, including higher tariffs in the U.S. or other countries.

We also assessed certain accounting matters as they relate to the ongoing conflict between Russia and Ukraine and the conflicts in the Middle East, including, but not limited to, our allowance for credit losses, the carrying value of long-lived assets, revenue recognition and the classification of assets. There was not a material impact to our Condensed Consolidated Financial Statements as of June 30, 2026 and for the quarters and six months ended June 30, 2026 and 2025 resulting from our assessment of these matters. We continue to assess the impact on our results of operations, financial position and overall performance as the situations develop and any broader implications they may have on the global economy.

German Tax Litigation. In August 2024, we received a favorable ruling regarding a tax litigation in Germany. The Company began receiving refunds during 2025 and anticipates the refund process to continue through 2026. As a result, our Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025 include an income tax receivable of approximately $35 million and $75 million, respectively, and an interest receivable of approximately $20 million and $65 million, respectively.

Pursuant to the Tax Matters Agreement ("TMA") with United Technologies Corporation ("UTC"), our former parent, subsequently renamed RTX Corporation ("RTX"), and based on the facts and contractual provisions, additional information received from RTX and indemnity payments during 2025, the Company estimated the amount payable to RTX as a result of the outcome of the German tax litigation to be $56 million as of December 31, 2025. Based on indemnity payments made to RTX and adjustments to the indemnity payable in the six months ended June 30, 2026, the Company now estimates the remaining amount payable to RTX to be $55 million. The adjustments to the indemnity payable resulted in indemnification expense of $5 million for the six months ended June 30, 2026, compared to $6 million and $58 million for the quarter and six months ended June 30, 2025, respectively. There was no indemnification expense in the quarter ended June 30, 2026. This indemnification expense is included in Other income (expense), net in the Condensed Consolidated Statements of Operations for the quarters and six months ended June 30, 2026 and 2025, respectively. This estimate could further change due to the parties' continuing dispute concerning the scope of the final indemnity amount, which will be resolved pursuant to the procedures set forth in the TMA.

See Note 10, "Income Taxes" and Note 15, "Contingent Liabilities" for additional information.

Supplier Finance Programs. Certain Otis subsidiaries participate in supplier finance programs, under which we agree to pay third-party financial institutions the stated amounts of confirmed invoices from suppliers on the original due dates of the invoices, while the participating suppliers generally have the ability to sell, or otherwise pledge as collateral, their receivables from the Company to the participating financial institutions. The outstanding obligations confirmed by the Company as valid to the financial institutions under our supplier finance programs were $716 million and $831 million as of June 30, 2026 and December 31, 2025, respectively, including $98 million and $80 million as of June 30, 2026 and December 31, 2025, respectively, related to programs with payment terms of 240 days from the invoice date. These obligations are included in Accounts payable in the Condensed Consolidated Balance Sheets, and all activity related to the obligations is presented within operating activities in the Condensed Consolidated Statements of Cash Flows.

Noncontrolling Interest Adjustment. In the quarter ended March 31, 2026, the Company recorded an out of period adjustment to correct an immaterial error within Equity, recognizing $114 million in Noncontrolling interest and Accumulated deficit resulting from previous step acquisitions. This misstatement did not have an impact on previous results of operations or cash flows.

Note 2: Earnings per Share


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions, except per share amounts; shares in millions)	2026		2025		2026		2025




Net income attributable to common shareholders	$	428	$	393	$	768	$	636

Basic weighted average number of shares outstanding	382.6		393.7		385.2		395.1
Stock awards and equity units (share equivalent)	0.9		2.1		1.2		2.2
Diluted weighted average number of shares outstanding	383.5		395.8		386.4		397.3

Earnings Per Share of Common Stock:


Basic	$	1.12	$	1.00	$	1.99	$	1.61



Diluted	$	1.12	$	0.99	$	1.99	$	1.60

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of Otis' common stock ("Common Stock") is lower than the exercise price of the related stock awards during the period because the effect would be anti-dilutive. In addition, the computation of diluted earnings per share excludes the effect of the potential exercise of stock awards when the awards' assumed proceeds exceed the average market price of the common shares during the period. Lastly, the computations of diluted earnings per share include outstanding awards granted prior to the separation and distribution ("Separation") of each of Otis and Carrier Global Corporation from UTC, our former parent, subsequently renamed RTX Corporation, and converted upon the Separation, in accordance with the Employee Matters Agreement, dated as of April 2, 2020, by and among UTC, Otis and Carrier Global Corporation. There were 3.2 million and 1.0 million of anti-dilutive stock awards excluded from the computation for the quarter and six months ended June 30, 2026, respectively, compared to 0.5 million for the same periods in 2025.

The impact of redeemable noncontrolling interest to Net income attributable to common shareholders was immaterial in the quarters and six months ended June 30, 2026 and 2025.

Note 3: Revenue Recognition

We account for revenue in accordance with Accounting Standards Codification ("ASC") Topic 606: Revenue from Contracts with Customers.

Contract Assets and Liabilities. Contract assets reflect revenue recognized in advance of customer billing. Contract liabilities are recognized when a customer pays consideration, or we have an unconditional right to receive consideration, in advance of the satisfaction of performance obligations under the contract. We receive payments from customers based on the terms established in our contracts, which are payments in advance of performing work, progress payments as we perform contract work over time, or in some cases, payments upon completion of work.

Total Contract assets and Contract liabilities as of June 30, 2026 and December 31, 2025 are as follows:


(dollars in millions)	June 30, 2026		December 31, 2025
Contract assets, current	$	824	$	699

Total contract assets	824		699

Contract liabilities, current	(3,023)		(2,611)
Contract liabilities, non-current (included within Other long-term liabilities)	(26)		(29)
Total contract liabilities	(3,049)		(2,640)
Net contract liabilities	$	(2,225)	$	(1,941)

Contract assets increased by $125 million during the six months ended June 30, 2026, as a result of the progression and timing of billing on customer contracts. Contract liabilities increased by $409 million during the six months ended June 30, 2026 primarily due to the timing of billings on customer contracts in excess of revenue earned.

In the six months ended June 30, 2026 and 2025, we recognized revenue of approximately $1.7 billion and $1.6 billion related to contract liabilities as of January 1, 2026 and 2025, respectively.

Remaining Performance Obligations ("RPO"). RPO represents the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. As of June 30, 2026, our total RPO was approximately $19.7 billion. Of the total RPO as of June 30, 2026, we expect approximately 75% will be recognized as sales over the following 24 months.

Note 4: Inventories

Inventories consisted of the following as of June 30, 2026 and December 31, 2025:


(dollars in millions)	June 30, 2026		December 31, 2025
Raw materials and work-in-process	$	147	$	139
Finished goods	539		474
Total	$	686	$	613

Raw materials, work-in-process and finished goods are net of valuation write-downs of $78 million and $84 million as of June 30, 2026 and December 31, 2025, respectively.

Note 5: Business Acquisitions, Dispositions, Goodwill and Intangible Assets

Business Acquisitions. Our acquisitions of businesses and intangible assets, net of cash, totaled $193 million and $82 million in the six months ended June 30, 2026 and 2025, respectively, and were primarily in our Service segment. Transaction costs incurred were not considered significant.

In April 2026, we acquired the majority ownership of a French company, a provider of elevator maintenance, repair, modernization and digital services for $170 million funded by cash on hand and commercial paper borrowings. The entity is included in our Service segment. The acquisition supports growth in the Service segment and expands our maintenance portfolio. We recorded approximately $142 million of Goodwill, $64 million of Intangible assets and $33 million of Redeemable noncontrolling interest.

The preliminary purchase price allocation for the acquisition is not yet finalized. Accordingly, adjustments may be made to the values of the assets acquired and liabilities assumed as additional information is obtained about the facts and circumstances that existed at the valuation date.

Goodwill. Changes in our Goodwill balance during the six months ended June 30, 2026 were as follows:


(dollars in millions)	Balance as of December 31, 2025		Goodwill Resulting from Business Combinations		Foreign Currency Translation and Other		Balance as of June 30, 2026
New Equipment	$	294	$	—	$	(9)	$	285
Service	1,401		145		(37)		1,509
Total	$	1,695	$	145	$	(46)	$	1,794

Intangible Assets. Intangible assets cost and accumulated amortization were $2,255 million and $1,868 million, respectively, as of June 30, 2026, and $2,220 million and $1,877 million, respectively, as of December 31, 2025.

Amortization of intangible assets for the quarter and six months ended June 30, 2026 was $13 million and $27 million, respectively, compared to $15 million and $30 million for the same periods in 2025. Excluding the impact of acquisitions and currency translation adjustments, there were no other significant changes in our Intangible assets during the quarters and six months ended June 30, 2026 and 2025.

Held For Sale Assets and Liabilities. Assets held for sale were $4 million and $5 million as of June 30, 2026 and December 31, 2025, respectively. These balances are included in Other current assets in the Condensed Consolidated Balance Sheets. There were no liabilities held for sale as of June 30, 2026 and December 31, 2025.

During 2025, we sold one of our non-U.S. subsidiaries, primarily related to the Service segment. The Company recorded an impairment loss of $10 million related to the sale in Other income (expenses), net in the Condensed Consolidated Statements of Operations in the six months ended June 30, 2025.

Note 6: Borrowings and Lines of Credit

Short-term borrowings consisted of the following:


(dollars in millions)	June 30, 2026		December 31, 2025
Commercial paper	$	—	$	—
Other borrowings	210		215
Total short-term borrowings	$	210	$	215

Commercial Paper and Other Borrowings. As of June 30, 2026, there were no borrowings outstanding under the Company's $1.5 billion commercial paper programs. We use our commercial paper borrowings for general corporate purposes including to finance acquisitions, pay dividends, repurchase shares and for debt refinancing. The need for commercial paper borrowings may arise if the use of domestic cash for general corporate purposes exceeds the sum of domestic cash generation and foreign cash repatriated to the U.S. Other borrowings primarily consist of borrowings for the purchase of the outstanding shares of Otis Electric Elevator Company Limited from the noncontrolling shareholder in 2025.

Long-term debt. As of June 30, 2026, we had a revolving credit agreement with various banks providing for a $1.5 billion unsecured, unsubordinated five-year revolving credit facility, maturing August 8, 2030. As of June 30, 2026, there were no borrowings under the revolving credit agreement. The undrawn portion of the revolving credit agreement serves as a backstop for the issuance of commercial paper.

On March 16, 2026, the Company repaid the Japanese Yen denominated 0.370% notes due in 2026, upon maturity, using cash on hand.

On May 7, 2026, we issued $700 million unsecured, unsubordinated three-year notes due May 7, 2029 with an interest rate of 4.488%. A majority of the proceeds will be used to fund the repayment at maturity of the Euro denominated 0.318% notes due December 15, 2026. The remainder of the proceeds were used to fund the repayment of certain of our commercial paper borrowings and for other general corporate purposes.

As of June 30, 2026, the Company is in compliance with all covenants in the revolving credit agreement and the indentures governing all outstanding long-term debt. Long-term debt, including the current portion, consisted of the following:


(dollars in millions)	June 30, 2026		December 31, 2025


0.370% notes due 2026 (¥21.5 billion principal value)	$	—	$	137
0.318% notes due 2026 (€600 million principal value)	681		705
2.293% notes due 2027	500		500
2.875% notes due 2027 (€850 million principal value)	965		999
5.250% notes due 2028	750		750
4.488% notes due 2029	700		—
2.565% notes due 2030	1,500		1,500
5.125% notes due 2031	600		600
0.934% notes due 2031 (€500 million principal value)	568		588
5.131% notes due 2035	500		500
3.112% notes due 2040	750		750
3.362% notes due 2050	750		750
Other (including finance leases)	6		6
Total principal long-term debt	8,270		7,785
Other (discounts and debt issuance costs)	(44)		(44)
Total long-term debt	8,226		7,741
Less: current portion	1,180		841
Long-term debt, net of current portion	$	7,046	$	6,900

We may redeem any series of notes at our option pursuant to certain terms.

Debt discounts and debt issuance costs are presented as a reduction of debt on the Condensed Consolidated Balance Sheets and are amortized as a component of interest expense over the term of the related debt using the effective interest method. The Condensed Consolidated Statements of Operations for the quarters and six months ended June 30, 2026 and 2025 reflect the following:


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2026		2025		2026		2025
Debt issuance costs amortization	$	3	$	2	$	5	$	5
Total interest expense on external debt	62		50		120		107

The unamortized debt issuance costs as of June 30, 2026 and December 31, 2025 were $41 million.

The weighted average maturity of our long-term debt as of June 30, 2026 is approximately 6.0 years. The weighted average interest expense rate on our borrowings outstanding as of June 30, 2026 and December 31, 2025 was as follows:


	June 30, 2026	December 31, 2025
Short-term commercial paper	—%	—%
Total long-term debt	3.2%	3.0%

The weighted average interest expense rate on our borrowings during the quarters and six months ended June 30, 2026 and 2025 was as follows:


	Quarter Ended June 30,		Six Months Ended June 30,
	2026	2025	2026	2025
Short-term commercial paper	3.5%	4.2%	3.5%	4.2%
Total long-term debt	3.1%	2.8%	3.0%	2.8%

Note 7: Employee Benefit Plans

Pension and Postretirement Plans. The Company sponsors both funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit plans, and defined contribution plans. Contributions to our plans were as follows:


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2026		2025		2026		2025
Defined benefit plans	$	10	$	9	$	21	$	27
Defined contribution plans	19		17		41		38
Multi-employer pension and postretirement plans	44		42		83		81

The following table illustrates the components of net periodic benefit cost for the Company's defined benefit pension plans:


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2026		2025		2026		2025
Service cost	$	9	$	9	$	18	$	17
Interest cost	10		8		19		16
Expected return on plan assets	(9)		(8)		(18)		(17)

Recognized actuarial net loss	1		—		1		1

Total net periodic benefit cost	$	11	$	9	$	20	$	17

Postretirement Benefit Plans. The Company sponsors postretirement benefit plans that provide health benefits to eligible retirees. The postretirement plans are unfunded. The net periodic benefit cost was less than $1 million for the quarters and six months ended June 30, 2026 and 2025.

Stock-based Compensation. The Company adopted the 2020 Long-Term Incentive Plan (the "Plan") effective April 3, 2020. As of June 30, 2026, approximately 16 million shares remain available for awards under the Plan.

The Company measures the cost of all share-based awards, including stock options, at fair value on the grant date and recognizes this cost in the Condensed Consolidated Statements of Operations over the award's applicable vesting period. A forfeiture rate assumption is applied on grant date to adjust the expense recognition for awards that are not expected to vest.

Stock-based compensation expense and the resulting tax benefits were as follows:


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2026		2025		2026		2025
Stock-based compensation expense (Share Based)	$	20	$	23	$	39	$	44


Less: future tax benefit	(3)		(2)		(4)		(4)
Stock-based compensation expense, net of tax	$	17	$	21	$	35	$	40

As of June 30, 2026, following our annual equity award grant issuance on February 3, 2026, there was approximately $114 million of total unrecognized compensation cost related to non-vested equity awards granted under the Plan. This cost is expected to be recognized ratably over a weighted-average period of 1.8 years.

Note 8: Stock

Preferred Stock. There are 125 million shares of $0.01 par value Preferred Stock authorized, of which none were issued as of June 30, 2026 and December 31, 2025.

Common Stock. There are 2.0 billion shares of $0.01 par value Common Stock authorized. As of June 30, 2026 and December 31, 2025, 439.9 million and 439.4 million shares of Common Stock were issued, respectively, which includes 59.2 million and 49.6 million shares of treasury stock, respectively.

Treasury Stock. As of June 30, 2026, the Company was authorized by the Board of Directors of Otis to purchase up to $2.0 billion of Common Stock under a share repurchase program, of which $500 million was remaining at such time.

During the quarter and six months ended June 30, 2026, the Company repurchased 5.1 million and 9.6 million shares, respectively, for $400 million and $800 million, respectively, compared to 3.2 million and 5.8 million shares, respectively, in the same periods of 2025 for $300 million and $553 million, respectively. Share repurchases in excess of issuances are subject to a 1% excise tax, which is included as part of the cost basis of the shares acquired in Treasury Stock on the Condensed Consolidated Balance Sheets, as well as within financing activities in the Condensed Consolidated Statements of Cash Flows when paid.

The Company's share repurchase program does not obligate it to acquire any specific number of shares. Under this program, shares may be purchased in the open market, in privately negotiated transactions, under accelerated share repurchase programs or under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Note 9: Accumulated Other Comprehensive Income (Loss)

A summary of the changes in each component of Accumulated other comprehensive income (loss), net of tax, for the quarters and six months ended June 30, 2026 and 2025 is provided below:


(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2026
Balance as of March 31, 2026	$	(1,001)	$	(35)	$	3	$	(1,033)
Other comprehensive income (loss) before reclassifications, net	50		—		5		55

Amounts reclassified, pre-tax	—		—		(1)		(1)
Tax benefit reclassified	—		—		—		—
Balance as of June 30, 2026	$	(951)	$	(35)	$	7	$	(979)

Six Months Ended June 30, 2026
Balance as of December 31, 2025	$	(1,053)	$	(35)	$	1	$	(1,087)
Other comprehensive income (loss) before reclassifications, net	102		—		8		110
Amounts reclassified, pre-tax	—		—		(2)		(2)
Tax benefit reclassified	—		—		—		—
Balance as of June 30, 2026	$	(951)	$	(35)	$	7	$	(979)


(dollars in millions)	Foreign Currency Translation		Defined Benefit Pension and Postretirement Plans		Unrealized Hedging Gains (Losses)		Accumulated Other Comprehensive Income (Loss)
Quarter Ended June 30, 2025
Balance as of March 31, 2025	$	(799)	$	(75)	$	3	$	(871)
Other comprehensive income (loss) before reclassifications, net	(178)		—		(8)		(186)

Amounts reclassified, pre-tax	—		—		2		2
Tax benefit reclassified	—		—		(1)		(1)
Balance as of June 30, 2025	$	(977)	$	(75)	$	(4)	$	(1,056)

Six Months Ended June 30, 2025
Balance as of December 31, 2024	$	(672)	$	(76)	$	3	$	(745)
Other comprehensive income (loss) before reclassifications, net	(305)		—		(9)		(314)

Amounts reclassified, pre-tax	—		1		3		4
Tax benefit reclassified	—		—		(1)		(1)
Balance as of June 30, 2025	$	(977)	$	(75)	$	(4)	$	(1,056)

Amounts reclassified that relate to defined benefit pension and postretirement plans include amortization of prior service costs and actuarial net losses recognized during each period presented. These costs are recorded as components of net periodic pension cost for each period presented. See Note 7, "Employee Benefit Plans" for additional information.

Note 10: Income Taxes

The decrease in the effective tax rate for the quarter and six months ended June 30, 2026, compared to the same periods in 2025, is primarily due to the reduction in a deferred tax liability related to the mitigation of future repatriation costs recorded in the quarter ended June 30, 2026. In addition, the decrease in the effective tax rate for the six months ended June 30, 2026, is due to the absence of the impact of the increase in our estimated nondeductible TMA indemnity obligation payable to RTX recorded in the quarter ended March 31, 2025.

Otis conducts business globally and, as a result, Otis or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the ordinary course of business, Otis could be subject to examination by taxing authorities throughout the world, including such major jurisdictions as Austria, Belgium, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, Mexico, Netherlands, Portugal, South Korea, Spain, Switzerland, the United Kingdom and the U.S. With a few exceptions, Otis is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2016.

A subsidiary of Otis lost a tax litigation case in Belgium in 2023 and decided not to appeal. Otis may receive the assessment for tax and interest within the next 12 months. The associated tax and interest have been fully reserved.

See Note 15, "Contingent Liabilities" for discussion regarding the German tax litigation.

Note 11: Restructuring and Transformation Costs

We initiate restructuring actions to keep our cost structure competitive. Charges generally arise from severance related to workforce reductions, and to a lesser degree, facility exit and lease termination costs associated with the consolidation of office and manufacturing operations. Due to the size, nature and frequency of these discrete actions, they are fundamentally different from the Company's ongoing productivity initiatives.

During the quarters and six months ended June 30, 2026 and 2025, we recorded restructuring costs for new and ongoing restructuring actions, including UpLift actions, as follows:


	Quarter Ended June 30, 2026						Quarter Ended June 30, 2025
(dollars in millions)	UpLift		Other		Total		UpLift		Other		Total
Cost of products and services sold	$	—	$	3	$	3	$	(2)	$	6	$	4
Selling, general and administrative	—		8		8		27		6		33

Total	$	—	$	11	$	11	$	25	$	12	$	37

	Six Months Ended June 30, 2026						Six Months Ended June 30, 2025
(dollars in millions)	UpLift		Other		Total		UpLift		Other		Total
Cost of products and services sold	$	—	$	6	$	6	$	7	$	21	$	28
Selling, general and administrative	—		12		12		38		14		52

Total	$	—	$	18	$	18	$	45	$	35	$	80

Restructuring costs incurred and expected, unless otherwise indicated, are related approximately 30% to New Equipment and 70% to Service.

UpLift Restructuring Actions and Transformation Costs. In 2023, we announced UpLift to transform our operating model. UpLift includes, among other aspects, the standardization of our processes and improvement of our supply chain procurement, as well as organizational changes which result in restructuring actions.

UpLift restructuring actions were approved in the years ended December 31, 2025, 2024 and 2023. These costs are primarily severance related costs. These actions initiated during 2025, 2024 and 2023 were substantially completed as of December 31, 2025. Expected total costs and remaining costs to incur for the actions initiated are approximately $150 million and $18 million, respectively. Following completion of the program, the Company does not expect to incur restructuring or transformation costs of a similar nature. Ongoing costs related to continuous improvement initiatives are expected to be consistent with historical operating expenses.

In the quarter and six months ended June 30, 2025, we incurred $18 million and $41 million, respectively, of incremental, non-restructuring costs associated with transforming our operating model as a part of UpLift ("UpLift transformation costs"), which are recorded in Other income (expense), net in the Condensed Consolidated Statements of Operations. The 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.

Other Restructuring Actions. The Other restructuring expenses incurred during the quarters and six months ended June 30, 2026 and 2025, were primarily the result of restructuring programs initiated during 2026 and 2025 related to severance and facility exit costs. We are targeting to complete in 2026 the majority of the remaining restructuring actions initiated in the quarter and six months ended June 30, 2026 and the full year 2025, with certain utilization beyond 2026 due to contractual obligations or legal requirements in the applicable jurisdictions. Expected total costs and remaining costs to incur for the other restructuring actions initiated are $71 million and $17 million, respectively.

Reorganization of Operations in China

In January 2025, we announced the reorganization of our operations in China. Among other aspects, this reorganization resulted in restructuring actions of approximately $30 million. These actions included severance related costs, and these actions were substantially completed as of December 31, 2025. Amounts related to the reorganization of operations in China are included within Other restructuring.

Restructuring Accruals. The following table summarizes the accrual balance and utilization for restructuring actions, which are primarily for severance costs:


(dollars in millions)	UpLift Actions		Other Actions		Total Restructuring Actions
Restructuring accruals as of December 31, 2025	$	50	$	24	$	74
Net restructuring costs	—		18		18
Utilization, foreign exchange and other costs	(24)		(17)		(41)
Restructuring accruals as of June 30, 2026	$	26	$	25	$	51

Note 12: Financial Instruments

We enter into derivative instruments primarily for risk management purposes, including derivatives designated as hedging instruments under ASC 815, Derivatives and Hedging. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, commodity prices and foreign exchange rates. These fluctuations can increase the costs of financing, investing in and operating the business. We may use derivative instruments, including swaps, forward contracts and options, to manage certain foreign currency, commodity price and interest rate exposures.

The four-quarter average of the notional amount of foreign exchange contracts hedging foreign currency transactions was approximately $5.8 billion and $5.6 billion as of June 30, 2026 and December 31, 2025, respectively. The four-quarter average of the notional amount of contracts hedging commodity purchases was $10 million and $12 million as of June 30, 2026 and December 31, 2025, respectively.

The following table summarizes the fair value and presentation on the Condensed Consolidated Balance Sheets for derivative instruments as of June 30, 2026 and December 31, 2025:


(dollars in millions)	Balance Sheet Classification	June 30, 2026		December 31, 2025
Derivatives designated as Cash flow hedging instruments:
	Asset Derivatives:
Foreign exchange contracts	Other current assets	$	7	$	4
Commodity contracts	Other current assets	1		—
Foreign exchange contracts	Other assets	5		2
	Total asset derivatives	$	13	$	6

	Liability Derivatives:
Foreign exchange contracts	Accrued liabilities	$	(3)	$	(3)

Foreign exchange contracts	Other long-term liabilities	—		(2)
	Total liability derivatives	$	(3)	$	(5)
Derivatives not designated as Cash flow hedging instruments:
	Asset Derivatives:
Foreign exchange contracts	Other current assets	$	83	$	11
Commodity contracts	Other current assets	1		1
Foreign exchange contracts	Other assets	8		2

	Total asset derivatives	$	92	$	14

	Liability Derivatives:
Foreign exchange contracts	Accrued liabilities	$	(25)	$	(25)

Foreign exchange contracts	Other long-term liabilities	(2)		(2)

	Total liability derivatives	$	(27)	$	(27)

Derivatives designated as Cash flow hedging instruments*.* The amount of gain or (loss) attributable to foreign exchange and commodity contract activity reclassified from Accumulated other comprehensive income (loss) for the quarters and six months ended June 30, 2026 and 2025 was immaterial, and is presented in Note 9, "Accumulated Other Comprehensive Income (Loss)".

The pre-tax effect of cash flow hedging relationships on Accumulated other comprehensive income (loss) as of June 30, 2026 and December 31, 2025 are presented in the table below:


(dollars in millions)						June 30, 2026						December 31, 2025
Gain (loss) recorded in Accumulated other comprehensive income (loss)						$	8					$	1

The Company utilizes the critical terms match method in assessing firm commitment derivatives and regression testing in assessing commodity derivatives for hedge effectiveness. Accordingly, the hedged items and derivatives designated as hedging instruments are highly effective.

Assuming current market conditions continue, pre-tax gains of $5 million are expected to be reclassified from Accumulated other comprehensive income (loss) into Cost of products sold to reflect the fixed prices obtained from foreign exchange and commodity hedging within the next 12 months. All derivative contracts accounted for as cash flow hedges as of June 30, 2026 will mature by December 2031.

Net Investment Hedges. We may use non-derivative instruments (foreign currency denominated borrowings) and derivative instruments (foreign exchange forward contracts) to hedge portions of the Company's investments in foreign subsidiaries and manage foreign exchange risk. For instruments that are designated and qualify as a hedge of net investment in foreign operations and that meet the effectiveness requirements, the net gains or losses attributable to changes in spot exchange rates are recorded in foreign currency translation within Other comprehensive income (loss) on the Condensed Consolidated Statements of Comprehensive Income, and will remain in Accumulated other comprehensive income (loss) until the hedged investment is sold or substantially liquidated. The remainder of the change in value of such instruments is recorded in earnings, including to the extent foreign currency denominated borrowings are not designated in, or are de-designated from, a net investment hedge relationship.

Our use of derivative instruments designated as hedges of the Company's net investment in foreign subsidiaries can vary depending on the Company's desired foreign exchange risk coverage.

As of June 30, 2026, we have derivative instruments that qualify as net investment hedges against our investments in certain European businesses (notional amount of €130 million) and Asian businesses (notional amount of HK$2.2 billion and ¥16 billion). The net investment hedges are deemed to be effective. The maturity dates of the current derivative instruments designated in net investment hedges range from 2026 to 2027.

During the quarter ended June 30, 2026, we de-designated a derivative instrument that qualified as a net investment hedge in certain European businesses with the notional amount of €30 million. During the six months ended June 30, 2026, we de-designated derivative and non-derivative instruments that qualified as net investment hedges in certain European and Asian businesses with notional amounts of €169 million and ¥21.5 billion, respectively. These de-designated instruments were deemed to be effective until de-designation.

The following table summarizes the amounts of gains (losses) recognized in other comprehensive income (loss) related to non-derivative and derivative instruments designated as net investment hedges:


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2026		2025		2026		2025
Foreign currency denominated long-term debt	$	—	$	(4)	$	2	$	(10)

Foreign currency forward contracts	2		(11)		9		(6)
Total	$	2	$	(15)	$	11	$	(16)

Derivatives not designated as Cash flow hedging instruments. The net effect of derivatives not designated as Cash flow hedging instruments within Other income (expense) net, on the Condensed Consolidated Statements of Operations was as follows:


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2026		2025		2026		2025
Foreign exchange contracts	$	5	$	10	$	12	$	16

The effects of gains (losses) from derivatives not designated as Cash flow hedge instruments within Cost of products sold on the Condensed Consolidated Statements of Operations were as follows:


	Quarter Ended June 30,				Six Months Ended June 30,
(dollars in millions)	2026		2025		2026		2025
Commodity and foreign exchange contracts	$	6	$	—	$	8	$	2

Note 13: Fair Value Measurements

Valuation Techniques. Our marketable securities include investments that are traded in active markets, either domestically or internationally, and are measured at fair value using closing stock prices from active markets. The fair value gains or losses related to our marketable securities are recorded through net income. Our derivative assets and liabilities include foreign exchange and commodity contracts that are measured at fair value using internal and third party models based on observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties' credit risks.

As of June 30, 2026, there has not been any significant impact to the fair value of our derivative liabilities due to our own credit risk. Similarly, there has not been any significant adverse impact to our derivative assets based on our evaluation of our counterparties' credit risks.

Due to their short-term nature, the carrying value approximated fair value for the current portion of the Company’s financial instruments not carried at fair value. The fair value of receivables, including customer financing notes receivable, net, that were issued long-term are based on the discounted values of their related cash flows at interest rates reflecting the attributes of the counterparties, including geographic location. Customer-specific risk, including credit risk, is already considered in the carrying value of those receivables. Our long-term debt, as described in Note 6, "Borrowings and Lines of Credit", is measured at fair value using closing bond prices from active markets.

Recurring Fair Value Measurements. In accordance with the provisions of ASC 820: Fair Value Measurements, the following tables provide the valuation hierarchy classification of assets and liabilities that are carried at fair value and measured on a recurring and non-recurring basis in our Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025:


	June 30, 2026
(dollars in millions)	Total		Level 1		Level 2		Level 3
Recurring fair value measurements:
Marketable securities	$	58	$	58	$	—	$	—
Derivative assets	105		—		105		—
Derivative liabilities	(30)		—		(30)		—


	December 31, 2025
(dollars in millions)	Total		Level 1		Level 2		Level 3
Recurring fair value measurements:
Marketable securities	$	55	$	55	$	—	$	—
Derivative assets	20		—		20		—
Derivative liabilities	(32)		—		(32)		—

In addition to the table above, due to the short-term nature, Cash and cash equivalents carrying amount approximates fair value and is classified as Level 1.

Fair Value of Financial Instruments. The following table provides carrying amounts and fair values of financial instruments that are not carried at fair value as of June 30, 2026 and December 31, 2025:


	June 30, 2026				December 31, 2025
(dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term receivables, net	$	52	$	51	$	49	$	48
Customer financing notes receivable, net	14		11		16		14
Short-term borrowings	(210)		(210)		(214)		(214)
Long-term debt, including current portion (excluding leases and other)	(8,264)		(7,690)		(7,779)		(7,269)
Long-term liabilities, including current portion	(26)		(25)		(84)		(81)

The following tables provide the valuation hierarchy classification of assets and liabilities that are not carried at fair value in the Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025:


	June 30, 2026
(dollars in millions)	Total		Level 1		Level 2		Level 3
Long-term receivables, net	$	51	$	—	$	51	$	—
Customer financing notes receivable, net	11		—		11		—
Short-term borrowings	(210)		—		(210)		—
Long-term debt, including current portion (excluding leases and other)	(7,690)		—		(7,690)		—
Long-term liabilities, including current portion	(25)		—		(25)		—


	December 31, 2025
(dollars in millions)	Total		Level 1		Level 2		Level 3
Long-term receivables, net	$	48	$	—	$	48	$	—
Customer financing notes receivable, net	14		—		14		—
Short-term borrowings	(214)		—		(214)		—
Long-term debt, including current portion (excluding leases and other)	(7,269)		—		(7,269)		—
Long-term liabilities, including current portion	(81)		—		(81)		—

Note 14: Guarantees

The Company provides service and warranty on its products beyond normal service and warranty policies. The carrying amount of service and product guarantees were $9 million and $10 million as of June 30, 2026 and December 31, 2025, respectively.

The Company provides certain financial guarantees to third parties. As of June 30, 2026, Otis has stand-by letters of credit with maximum potential payment totaling $160 million. We accrue costs associated with guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available facts, and where no amount within a range of estimates is more likely, the minimum is accrued. In accordance with ASC Topic 460: Guarantees, we record these liabilities at fair value. As of June 30, 2026, Otis has determined there are no estimated costs probable under these guarantees.

Note 15: Contingent Liabilities

Except as otherwise noted, while we are unable to predict the final outcome, based on information currently available, we do not believe that resolution of any of the following matters will have a material adverse effect upon our competitive position, results of operations, cash flows or financial condition. In addition to the specific amounts noted below, where we have recorded loss contingency accruals for the below and other matters, the amounts in aggregate are not material. Legal costs generally are expensed when incurred.

Legal Proceedings.

German Tax Litigation

In the third quarter of 2024, Otis prevailed in a German tax litigation case stemming from the 1998 reorganization of the Company's operations in Germany. As a result of winning the case, the Company expects to receive total refunds of prepaid tax, prepaid interest, overpayment interest, and court fees of approximately €313 million net of tax (approximately $356 million) as of June 30, 2026. The Company began receiving refunds during 2025 and anticipates the refund process to continue through 2026.

The recoveries related to this matter are allocated between RTX and the Company pursuant to the terms of the TMA with our former parent, UTC, by way of indemnification payments. The Company has established an indemnity payable to RTX, which is intended to cover RTX’s tax and interest payable to the Internal Revenue Service ("IRS"). The Company and RTX disagree about both the scope of the indemnity payable to RTX and the Company’s liability for interest accruing on amounts already paid to RTX. This dispute will be resolved pursuant to the procedures set forth in the TMA.


(dollars in millions)						June 30, 2026						March 31, 2026						December 31, 2025
Indemnity Payable (in Accrued liabilities)						$	55					$	55					$	56

This estimate could further change due to the parties' continuing dispute concerning the scope of the final indemnity amount, which will be resolved pursuant to the procedures set forth in the TMA.

See Note 1, "General" for additional information on the impacts of the TMA activity to the Condensed Consolidated Financial Statements as of and for the quarter and six months ended June 30, 2026.

Asbestos Matters

We have been named as defendants in lawsuits alleging personal injury as a result of exposure to asbestos. While we have never manufactured any asbestos-containing component parts, and no longer incorporate asbestos in any current products, certain of our historical products have contained components manufactured by third parties incorporating asbestos. A substantial majority of these asbestos-related claims have been dismissed without payment or were covered in full or in part by insurance or other forms of indemnity. Additional cases were litigated and settled without any insurance reimbursement. The amounts involved in asbestos-related claims were not material individually or in the aggregate as of and for the periods ended June 30, 2026 and December 31, 2025.

The estimated range of total liabilities to resolve all pending and unasserted potential future asbestos claims through 2059 is approximately $11 million to $31 million as of June 30, 2026 and December 31, 2025. Since no amount within the range of estimates is more likely to occur than any other, we have recorded the minimum amount of $11 million as of June 30, 2026 and December 31, 2025, which is principally recorded in Other long-term liabilities on our Condensed Consolidated Balance Sheets. Amounts are on a pre-tax basis, not discounted, and exclude the Company's legal fees to defend the asbestos claims (which will continue to be expensed as they are incurred). In addition, the Company has an insurance recovery receivable for probable asbestos-related recoveries of approximately $3 million as of June 30, 2026 and December 31, 2025, which is principally included in Other assets on our Condensed Consolidated Balance Sheets.

Other. We have commitments and contingent liabilities related to legal proceedings, self-insurance programs and matters arising out of the normal course of business. We accrue contingencies based on a range of possible outcomes. If no amount within this range is a better estimate than any other, we accrue the minimum amount. While it is not possible to determine the ultimate disposition of each of these claims and whether they will be resolved consistent with our beliefs, we expect that the outcome of such claims, individually or in the aggregate, will not have a material adverse effect on our business, financial condition, cash flows or results of operations.

In certain European countries, claims for overcharges on elevators and escalators related to civil cartel cases have been made, which we have accrued for based on our evaluation of the claims. While it is not possible to determine the ultimate disposition of each of these claims and whether they will be resolved consistent with our beliefs, historical settlement experiences of these claims have not been material to the business, financial condition, cash flows or results of operations. However, the future outcome of these cases cannot be determined.

In the ordinary course of business, the Company is also routinely a defendant in, party to or otherwise subject to many pending and threatened legal actions, claims, disputes and proceedings. These matters are often based on alleged violations of contract, product liability, warranty, regulatory, environmental, health and safety, employment, intellectual property, tax and other laws. In some of these proceedings, claims for substantial monetary damages are asserted against the Company and its subsidiaries and could result in fines, penalties, compensatory or treble damages or non-monetary relief. We do not believe that these matters will have a material adverse effect upon our competitive position, results of operations, cash flows or financial condition.

Refer to Note 16, "Segment Financial Data" for information about litigation-related settlement costs recognized in the six months ended June 30, 2025 for certain legal matters that are outside of the ordinary course of business.

Note 16: Segment Financial Data

Our operations are classified into two operating segments: New Equipment and Service. Through the New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators as well as escalators and moving walkways to customers in the residential, commercial and infrastructure projects. The Service segment provides maintenance and repair services for both our products and those of other manufacturers, and provides modernization services to upgrade elevators and escalators. The operating segments are generally based on the management structure of the Company, as well as how management allocates resources, assesses performance and makes strategic and operational decisions.

Segment Information. Otis discloses segment operating profit as its measure of segment performance, reconciled to Net income before income taxes. Segment operating profit excludes certain expenses and income that are not allocated to segments (as described below in "Corporate and Unallocated").

Otis' Chief Operating Decision Maker ("CODM") is the Company's Chief Executive Officer. The CODM assesses the performance of each operating segment and allocates resources to those segments based on net sales and segment operating profit. The CODM compares segment operating profit results to prior periods and forecasted amounts to assess performance and to make decisions regarding the allocation of capital and other investments. Discrete asset information for each segment is not presented to, or reviewed by, the CODM.

Segment information for the quarters ended June 30, 2026 and 2025 is as follows:


	Quarter Ended June 30, 2026						Quarter Ended June 30, 2025
(dollars in millions)	New Equipment		Service		Total		New Equipment		Service		Total
Net sales	$	1,279	$	2,580	$	3,859	$	1,276	$	2,319	$	3,595
Costs and expenses:
Cost of sales	1,080		1,640		2,720		1,061		1,440		2,501
Selling, general and administrative	132		329		461		119		292		411
Other including research and development	27		12		39		28		9		37
Total segment operating profit	$	40	$	599	639		$	68	$	578	646
Corporate and Unallocated
General corporate expenses and other					52						34
UpLift restructuring					—						25
Other restructuring					11						12
UpLift transformation costs					—						18
Separation-related adjustments					—						9


Other, net					1						1
Total company operating profit					575						547
Non-service pension cost (benefit)					2						—
Interest expense (income), net					26						26
Net income before income taxes					$	547					$	521

Segment information for the six months ended June 30, 2026 and 2025 is as follows:


	Six Months Ended June 30, 2026						Six Months Ended June 30, 2025
(dollars in millions)	New Equipment		Service		Total		New Equipment		Service		Total
Net sales	$	2,428	$	4,997	$	7,425	$	2,439	$	4,506	$	6,945
Costs and expenses:
Cost of sales	2,036		3,165		5,201		2,023		2,803		4,826
Selling, general and administrative	261		653		914		229		574		803
Other including research and development	53		24		77		53		14		67
Total segment operating profit	$	78	$	1,155	1,233		$	134	$	1,115	1,249
Corporate and Unallocated
General corporate expenses and other					96						77
UpLift restructuring					—						45
Other restructuring					18						35
UpLift transformation costs					—						41
Separation-related adjustments					5						61
Litigation-related settlement costs					—						21
Held for sale impairment					—						10
Other, net					—						1
Total company operating profit					1,114						958
Non-service pension cost (benefit)					2						—
Interest expense (income), net					85						71
Net income before income taxes					$	1,027					$	887

Corporate and Unallocated includes adjustments related to the Separation, litigation-related settlement costs, impairment loss related to net assets held for sale, restructuring costs, and UpLift transformation costs.

Separation-related adjustments represent net adjustments of amounts due to and from RTX in accordance with the TMA, including amounts due to RTX related to a favorable ruling received in August 2024 regarding the German tax litigation. These adjustments are recorded in Other income (expense), net in our Condensed Consolidated Statements of Operations during the quarters and six months ended June 30, 2026 and 2025, respectively. See Note 10, "Income Taxes" and Note 15, "Contingent Liabilities" for additional information about the German tax litigation.

Litigation-related settlement costs in the six months ended June 30, 2025 represent the aggregate amount of settlement costs and increase in loss contingency accruals, excluding legal costs, for certain legal matters that are outside of the ordinary course of business due to the size, complexity and/or unique facts of these matters.

Impairment loss related to net assets held for sale is recorded in Other income (expense), net in the Condensed Consolidated Statements of Operations in the six months ended June 30, 2025. See Note 5, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information about the held for sale assets and liabilities.

Refer to Note 11, "Restructuring and Transformation Costs" for more information about restructuring and UpLift transformation costs.

Note 17: Accounting Pronouncements

In July 2025, the FASB issued Accounting Standards Update ("ASU") 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide a practical expedient when developing reasonable and supportable forecasts as part of estimating expected credit losses, allowing entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments in ASU 2025-05 are effective for fiscal years beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. We adopted this ASU on January 1, 2026 and elected to utilize the practical expedient. The adoption of the ASU and the election of the practical expedient did not have a material impact on our Condensed Consolidated Financial Statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this update require disclosure, in the notes to financial statements, on disaggregated information about specific categories underlying certain income statement expense line items that are considered relevant, including the purchase of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in ASU 2024-03 are effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. Adoption of this ASU will result in additional disclosure, but will not impact our condensed consolidated financial position, results of operations, or cash flows.

In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. The amendments in this update require an entity involved in an acquisition transaction effected primarily by exchanging equity interests when the legal acquiree is a VIE that meets the definition of a business to consider the factors in the ASU to determine which entity is the accounting acquirer. The amendments in ASU 2025-03 are effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. We are currently evaluating the impact of this standard, however; we do not expect it to have a material impact on our Condensed Consolidated Financial Statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this update remove all references to prescriptive and sequential software development stages (referred to as "project stages") throughout Subtopic 350-40. The amendments in this update specify that the disclosures in Subtopic 360-10, Property, Plant, and Equipment—Overall, are required for all capitalized internal-use software costs, regardless of how those costs are presented in the financial statements. Additionally, the amendments clarify that the intangibles disclosures in paragraphs 350-30-50-1 through 50-3 are not required for capitalized internal-use software costs. The amendments in ASU 2025-06 are effective for fiscal years beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the impact of this standard.

In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. The amendments in this update exclude from derivative accounting nonexchange-traded contracts with underlyings that are based on operations or activities specific to one of the parties to the contract. The amendments in ASU 2025-07 are effective for fiscal years beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the impact of this standard.

In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. Consistent with the original objective of ASU 2017-12, the objective of this update is to more closely align hedge accounting with the economics of an entity’s risk management activities and better reflect those strategies in financial reporting by enabling entities to achieve and maintain hedge accounting for highly effective economic hedges of forecasted transactions. The amendments in ASU 2025-09 apply to any entity that elects to apply hedge accounting in accordance with Topic 815 and are effective for fiscal years beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. Early adoption is permitted. We are currently evaluating the impact of this standard.

In May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818). The amendments in this update are expected to provide investors with additional decision-useful information by improving the (1) understandability of financial accounting and reporting information about environmental credits and environmental credit obligations associated with regulatory compliance programs and (2) comparability of that information by reducing diversity in practice. The amendments in ASU 2026-02 are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. We are currently evaluating the impact of this standard.

Other new accounting pronouncements issued but not effective until after June 30, 2026 are not expected to have a material impact on our financial position, results of operations or liquidity.

With respect to the unaudited condensed consolidated financial information of Otis Worldwide Corporation for the quarters and six months ended June 30, 2026 and 2025, PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") reported that it has applied limited procedures in accordance with professional standards for a review of such information. However, its report dated July 23, 2026, appearing below, states that the firm did not audit and does not express an opinion on that unaudited condensed consolidated financial information. PricewaterhouseCoopers has not carried out any significant or additional review procedures beyond those that would have been necessary if their report had not been included. Accordingly, the degree of reliance on its report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended ("the Act") for its report on the unaudited condensed consolidated financial information because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers within the meaning of Sections 7 and 11 of the Act.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Otis Worldwide Corporation

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Otis Worldwide Corporation and its subsidiaries (the "Company") as of June 30, 2026, and the related condensed consolidated statements of operations, of comprehensive income, of changes in equity for the three-month and six-month periods ended June 30, 2026 and 2025 and the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2026 and 2025, including the related notes (collectively referred to as the "interim financial information"). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2025, and the related consolidated statements of operations, of comprehensive income, of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February 5, 2026, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2025, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut

July 23, 2026

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