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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

____________________________________

FORM 10-K

____________________________________


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2025


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______.

Commission file number 001-39221

____________________________________

OTIS WORLDWIDE CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________


Delaware						83-3789412
(State or other jurisdiction of incorporation)						(I.R.S. Employer Identification No.)

One Carrier Place, Farmington, Connecticut 06032

(Address of principal executive offices, including zip code)

(860) 674-3000

(Registrant's telephone number, including area code)

____________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)	OTIS	New York Stock Exchange

0.318% Notes due 2026	OTIS/26	New York Stock Exchange
2.875% Notes due 2027	OTIS/27	New York Stock Exchange
0.934% Notes due 2031	OTIS/31	New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý. No ¨.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐. No ý.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý. No ¨.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý. No ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	ý	Accelerated Filer	¨

Non-accelerated Filer	¨	Smaller Reporting Company	☐

		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. § 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ý.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐. No ý.

The aggregate market value of the voting Common Stock held by non-affiliates as of June 30, 2025 was $38,824,474,742 based on the New York Stock Exchange closing price for such shares on that date. For purposes of this calculation, the Registrant has assumed that its directors and executive officers are affiliates.

As of January 22, 2026, there were 388,720,773 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III hereof incorporates by reference portions of the Otis Worldwide Corporation Proxy Statement for the 2026 Annual Meeting of Shareholders (the "2026 Proxy Statement"). The 2026 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

OTIS WORLDWIDE CORPORATION

Form 10-K

For the Year Ended December 31, 2025

TABLE OF CONTENTS


			Page

PART I

Item 1. Business			1

Cautionary Note Concerning Factors That May Affect Future Results			9

Item 1A. Risk Factors			10

Item 1B. Unresolved Staff Comments			22

Item 1C. Cybersecurity			22

Item 2. Properties			24

Item 3. Legal Proceedings			24

Item 4. Mine Safety Disclosures			24

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer of Purchases of Equity Securities			25

Item 6. [Reserved]			26

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations			27

Item 7A. Quantitative and Qualitative Disclosures About Market Risk			48

Item 8. Financial Statements and Supplementary Data			50

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			100

Item 9A. Controls and Procedures			100

Item 9B. Other Information			100

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			100

PART III

Item 10. Directors, Executive Officers and Corporate Governance			101

Item 11. Executive Compensation			103

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			104

Item 13. Certain Relationships and Related Transactions, and Director Independence			105

Item 14. Principal Accounting Fees and Services			105

PART IV

Item 15. Exhibits and Financial Statement Schedule			106

Item 16. Form 10-K Summary			112

SIGNATURES			113

Table of Contents

Otis Worldwide Corporation's and its subsidiaries' names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or tradenames of Otis Worldwide Corporation and its subsidiaries. Names, abbreviations of names, logos, and product and service designators of other companies are either the registered or unregistered trademarks or tradenames of their respective owners. As used herein, the terms "we", "us", "our", "the Company" or "Otis", unless the context otherwise requires, mean Otis Worldwide Corporation and its subsidiaries. References to Internet websites in this Form 10-K are provided for convenience only. Information available through these websites is not incorporated by reference into this Form 10-K.

PART I

Item 1. Business

Our Company

Otis is the world’s leading elevator and escalator manufacturing, installation, service and modernization company. We serve customers in over 200 countries and territories around the world. Otis has global scale and local focus, with more than 1,400 branches and offices, and a direct physical presence in more than 70 countries.

The following description of our business 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. 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.

Our New Equipment customers include real estate and building developers and general contractors who develop and/or design buildings for residential, commercial, retail or mixed-use activity. We also sell New Equipment to government agencies, particularly, to support infrastructure projects, such as airports, railways or metros. We generally sell directly to our customers through our New Equipment sales personnel. Due to the nature of the customer base in China and certain other geographies, our direct sales force is augmented by agents and distributors. Given the breadth of our customer base and the large number of customers to whom we deliver new equipment on an annual basis, we are not dependent on any single customer and do not have any contracts material to Otis as a whole with any single customer. The same is true for our broad and geographically dispersed network of agents and distributors.

New Equipment customers typically engage with us at an early stage during the construction cycle. The timing of order placement depends on factors including project complexity and customer requirements. Elevator installation usually occurs midway through building construction.

New Equipment orders are generally delivered within 12 months of booking, although larger projects can take longer to deliver based on customer construction schedules, and in some regions, mostly in China, the order to delivery window is shorter. When placing New Equipment orders, customers typically make an advance payment to cover costs including design and contract engineering. These advance payments are typically followed by periodic progress payments at specified milestones, such as delivery of materials at the job site and completion of installation and equipment commissioning. Installation is carried out by our installation technicians or through subcontractors, in which case we typically complete the final inspection and commissioning to ensure that our quality standards are met. Revenues are recognized based on percentage of completion. Once commissioned, New Equipment units are typically supported by a warranty for a limited period of time.

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.

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Gen2

Gen2 has been our principal low-and mid-rise elevator solution. Since its launch in 2000, we have sold over one million units, making it our best-selling elevator platform.

Gen3

The successor to the Gen2 family of elevators, the Gen3 platform enhances the space-saving, energy-efficient design of the Gen2 elevator with the connectivity of the Otis ONE IoT (Internet of Things) digital service platform, while offering additional safety features for passengers and our colleagues who maintain the elevator.

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. A foldable, in-ceiling platform allows maintenance operations to be performed safely from within the car rather than on top of it and, depending on local regulations, eliminates the need for a refuge space above the car and the protrusion on the roof allowing for a flat roof design. 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.

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 to elevator solutions, we also offer escalators and moving walkways. With a range of finishes and aesthetics, Otis escalators integrate easily with any building design. Our smart design and features enhance sustainability and passenger safety, such as sensor-equipped escalators and moving walkways that efficiently run only when passengers approach, or operate at reduced speeds to conserve energy when there are no riders.

Service

Through our Service segment, we perform maintenance and repair services, as well as modernization services to upgrade elevators and escalators. 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.

Service customers typically comprise building owners, facility managers, housing associations and government agencies that operate buildings where elevators and escalators are installed. Customers securing services for elevators are frequently different from those who initially make purchasing decisions with respect to New Equipment solutions. As the largest service provider in the industry worldwide, we have a wide range of customers in our Service segment and do not have any single service contract that is material to Otis as a whole. Contract duration depends on several factors, including customer needs, regulatory requirements and industry/geography dynamics. 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 provide our Service offerings to our customers through a global network of 37,000 Service mechanics operating out of more than 1,400 branches 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. 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.

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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 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. Our Service sales personnel seek to win service contracts upon the expiration or termination of existing service contracts from customers by offering a superior value proposition through service excellence, an engaged and technically sophisticated group of field service technicians, a streamlined customer experience and reliable elevator and escalator operating performance.

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. 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.

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 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.

Otis ONE is our latest cloud-based IoT technology, designed to continuously monitor equipment health and performance in real time to provide proactive, predictive and transparent information to our technicians and customers. The technology expands predictive and remote maintenance capabilities to support improved elevator up-time and service productivity.

We offer additional technology and multimedia options to customers with voice, data and video digital services, leveraging our IoT technologies, as described below. These are often incorporated as an optional upgrade on maintenance contracts.

eView In-Car Display

Our in-car display streams live, customizable infotainment to passengers and can connect them to OTISLINE, Otis' 24-hour service call center, during an emergency.

Compass 360 Destination Management System

Our proprietary destination management system groups passengers by their desired destination and directs them to an assigned car that minimizes waiting and ride time. The system's algorithms anticipate traffic demand within a building and improve traffic flow.

eCall Plus Smartphone App

Otis' smartphone app enables passengers to summon their elevator remotely for a touchless experience.

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Research and Development & Intellectual Property

Innovation is a fundamental characteristic of our history and is central to our strategy. For 2025, research and development ("R&D") expense was $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, which in combination with R&D expense was 1.4% as a percentage of net sales. 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. The R&D centers are strategically located close to concentrations of customers and factories to enable efficient development of engineering solutions that can serve as global model products and adapt quickly and efficiently to local customer needs and local demographic and construction trends. We have 1,300 engineers 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 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 believe that our patents and trade secrets create a competitive advantage and that we have taken reasonable measures to build a portfolio of valid and enforceable intellectual property rights. However, these intellectual property rights might be challenged and could be found invalid or unenforceable. Loss of strategic patents and trade secrets could significantly affect our competitiveness. See Item 1A in this Form 10-K for further discussion of intellectual property matters.

Joint Ventures and Non-Wholly Owned Subsidiaries

Our international strategic relationships, joint ventures and non-wholly owned subsidiaries are an important part of our business as they support our access to international markets and customers. Results of these entities are consolidated with our financial and operational results. 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"). 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. 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.

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. Due to the global and localized nature of the industry, there are numerous participants of varying size that operate in our industry. According to industry estimates, there are hundreds of participants that offer New Equipment solutions and several thousand participants that offer maintenance and service solutions. In both the New Equipment and Service segments, major competitors globally include KONE Oyj, Schindler Group and TK Elevator, while there are a number of additional competitors in the Asia Pacific region. Competitive dynamics vary significantly by segment and geography. In the Service segment, independent service providers and other small operators are significant competitors in most of our local geographies. 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.

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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. 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 efficiency and at quality levels expected by our customers. 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.

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 these results of our business strategies support our ability to successfully compete across the New Equipment and Service segments, and help deliver sustainable earnings growth.

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.

Compliance with Government Regulations

We conduct our business through subsidiaries and affiliates worldwide. Any changes in legislation or government policies impacting our industry, including with respect to employee safety, labor-related regulations, industrial equipment, licensing requirements, foreign ownership limitations and building and elevator safety codes, can affect our operations. We closely monitor local legislation and government policies in the locations in which we operate.

United States (the "U.S.") laws, regulations, orders, and other measures concerning the export or re-export of products, software, services and technology to, and other trade-related activities involving, non-U.S. countries and parties affect the operations of Otis and its affiliates, as do those of other countries pertaining to similar matters.

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. We do not anticipate that compliance with current provisions relating to the protection of the environment or that any payments we may be required to make for cleanup liabilities will have a material adverse effect upon our competitive position, cash flows, results of operations or financial condition.

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.

Seasonality

Our business and operating results are generally not subject to significant fluctuations as a result of seasonality, although we have experienced lower New Equipment net sales in Asia in the first calendar quarter, coinciding with Lunar New Year celebrations. 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.

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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. We rely on approximately 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. While we believe no single supplier is material to our business, some components or applications require particular specifications or qualifications. In those cases, there may be a single supplier or a limited number of suppliers that can readily provide such components, which have in the past, and could in the future, result in supply constraints or cost pressures due to an issue with such a supplier, including financial or operational difficulties or a contract dispute. We implement mitigation actions to address potential disruption in and other risks relating to our supply chain, including the use of safety stock and alternative materials, as well as risk assessments, qualification of multiple supply sources and use of long-term supplier agreements.

Although at times high prices for some important raw materials have caused margin and cost pressures for our business, we do not expect near-term unavailability or pricing of materials, components or supplies that would have a material adverse effect on our business. 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.

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. 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. 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. 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). 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. Our climate strategy is designed to build resiliency and strengthen the operational efficiency of our business and supply chain. 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.

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. 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. 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. Neither our Connect & Thrive report nor our company website are incorporated by reference into this Form 10-K.

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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. 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. These groups collaborate with subject matter experts across their functions to develop and implement sustainable-related strategies that align with our vision.

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. 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.

Approximately 64% of our U.S. workforce is covered by a collective bargaining agreement. Outside 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. The collective bargaining agreement for most of our bargaining unit colleagues in the U.S. was renewed without disruption in July 2022 and is set to expire in July 2027. For a discussion of risks associated with employment-related matters, see Item 1A in this Form 10-K.

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 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. While our programs vary by location and eligibility, they generally include base and overtime pay, short-term incentive bonuses, long-term incentive pay in the form of stock awards, retirement plan benefits, health care and insurance benefits, tuition assistance through our Employee Scholar program, paid sick, bereavement, vacation, parental and family leaves, and wellness and employee assistance programs.

Health and Safety

Safety is one of the Otis Absolutes. For that reason, safety measures and indicators are regularly monitored by management and reported to our Board of Directors. To promote safety, we have a health and safety management system and regularly measure the effectiveness of our health and safety programs. We also provide regular health and safety training to our field professionals and we regularly enhance our learning tools to support the success of our health and safety programs. 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 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. See the "Sustainability 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.

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. 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.

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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 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). Our BRGs have evolved to ensure global alignment and greater accountability for business goals while offering programming for our Otis colleagues relevant to our "4C pillars" of Career, Culture, Customer, and Community.

We track our colleagues’ voluntary attrition rate to help us assess our workplace initiatives. 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. 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. The engagement survey, which anonymizes the data, covers topics such as safety, ethics, belonging, quality, company prospects, inclusion, success, growth and managerial effectiveness.

Corporate Information

Otis is a Delaware corporation and was incorporated on March 1, 2019 in connection with the separation and distribution ("Separation") of each of Otis and Carrier Global Corporation ("Carrier") from United Technologies Corporation, subsequently renamed RTX Corporation ("UTC" or "RTX", as applicable) into separate independent publicly traded companies. The Separation occurred on April 3, 2020. References to "UTC" relate to pre-Separation matters, and references to "RTX" relate to post-Separation matters.

The Separation was completed pursuant to a Separation and Distribution Agreement ("Separation Agreement") and other agreements with UTC and Carrier related to the Separation, including but not limited to a tax matters agreement ("TMA"), an employee matter agreement ("EMA") and an intellectual property agreement (the "Intellectual Property Agreement"). For further discussion of these agreements, see Item 1A, "Note 1: Business Overview" in Item 8 and Item 15 in this Form 10-K.

Available Information

This Form 10-K and our quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports are available free of charge through the Investors section of our Internet website (http://www.otis.com) under the heading "Financial Information" as soon as reasonably practicable after these reports are electronically filed with, or furnished to, the SEC. In addition, the SEC maintains a website (http://www.sec.gov) containing reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

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Cautionary Note Concerning Factors That May Affect Future Results

This Form 10-K contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for Otis’ future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe," "expect," "expectations," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "outlook," "medium-term," "near-term," "confident," "goals" and other words of similar meaning in connection with a discussion of future operating or financial performance. 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. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, Otis claims the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such 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.

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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. The forward-looking statements speak only as of the date of this report, or in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our other filings with the SEC.

Item 1A. Risk Factors

Risks Related to Our Business

We may be affected by global economic conditions in general and conditions in the construction and infrastructure industries in particular.

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. In addition, the current global economic environment has resulted, and may continue to result, in increased levels of commodity, materials and wage inflation. These various global economic conditions have affected and may continue to affect our business in a number of ways as discussed in more detail in this Item 1A and elsewhere in this Form 10-K. More particularly, a slowdown in building and remodeling activity, whether due to remote work or otherwise, or decreased public spending on infrastructure projects could adversely affect our financial performance.

Our operations are subject to natural and man-made unexpected events that may increase our costs, limit access to building sites, interrupt production or our supply chain or otherwise adversely affect our business, results of operations or financial condition.

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. 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.

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 approximately 71% of our 2025 net sales derived from international operations. Changes in local and regional economic conditions, including credit conditions and fluctuations in exchange rates, may affect product demand and reported profits in our non-U.S. operations, where transactions are generally denominated in local currencies. In addition, currency fluctuations may affect the prices we pay for the materials used in our products. Though we engage in hedging strategies to manage foreign currency exposures in connection with certain cross-border transactions, our operating margins may be negatively impacted by currency fluctuations that result in higher costs or lower revenues for certain cross-border transactions. Our financial statements are denominated in 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. Given that the majority of our net sales are non-U.S. based, a strengthening of the U.S. dollar against other major foreign currencies has adversely affected and could in the future adversely affect our results of operations. 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.

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Our international operations subject us to risks associated with government policies on international trade and investments and risks in general and particularly in China.

Our international sales and operations are subject to risks associated with changes in local government laws, regulations and policies, including those related to investments and limitations on foreign ownership of businesses, taxation, foreign exchange controls, capital controls, local manufacturing, product content or supplier requirements, employment regulations and the repatriation of earnings. Government policies on international trade and investments such as import quotas, capital controls, punitive taxes or tariffs or similar trade barriers, whether imposed by individual governments or regional trade blocs, can affect demand for our products and services, impact the competitive position of our products or services, or encumber our ability to manufacture or sell products in certain 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.

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. These impacts may include hindering our ability to recruit 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. 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. 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. 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.

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. 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. Additionally, the escalation of trade conflicts between the U.S. and China could further impact economic conditions in the U.S. and China. 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.

We expect that net sales to emerging markets will continue to account for a significant portion of our net sales as those and other developing nations and regions around the world increase their demand for our products and services. A slowdown in urbanization in emerging countries, such as China or India, have and could continue to adversely affect our financial performance. In addition, as part of our global business model, we operate in certain countries, including Argentina, Brazil, China, India, Indonesia, Malaysia, Mexico, Poland, South Africa, Ukraine, Turkey and certain countries in the Middle East, that carry high levels of currency, political, compliance and economic risk. Our emerging market operations can present many risks, including differences in culturally accepted practices (such as employment and business practices), compliance risks, economic and government instability, currency fluctuations, and the imposition of foreign exchange and capital controls. 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.

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Our international operations subject us to risks associated with geopolitical conflicts.

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. 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. 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.

We use a variety of raw materials, supplier-provided parts, components, sub-systems and third-party manufacturing services in our business, and significant shortages, supplier capacity constraints, supplier production disruptions or price increases could increase our operating costs and adversely impact the competitive positions of our products.

Our reliance on suppliers (including third-party manufacturers) and commodity markets to secure the raw materials and components used in our products exposes us to volatility in the prices and availability of these materials. Issues with suppliers, (such as a disruption in deliveries, capacity and credit constraints, production disruptions, quality issues and supplier closings or bankruptcies), price increases or decreased availability of raw materials or commodities (particularly steel) have in the past had and could in the future have a material adverse effect on our ability to meet our commitments to customers or could increase our operating costs, either of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

Adverse changes in our relationships with, or the financial condition, performance or purchasing patterns, or compliance practices of, key distributors and agents could adversely affect us.

Certain of our businesses sell a significant amount of their products to distributors and agents, particularly in China, that have valuable relationships with customers. Some of these distributors and agents also sell our competitors’ products, and if they favor competing products for any reason they may fail to market our products effectively. Adverse changes in our relationships with these distributors and other partners, or adverse developments in their financial condition, performance or purchasing patterns, or compliance practices, could adversely affect our reputation, competitive position, results of operations, cash flows or financial condition.

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. The product and service needs of our customers change and evolve regularly, and we invest substantial amounts in research and development efforts to pursue advancements in technologies, products and services. Our 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.

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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. 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. 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. 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.

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.

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. To generate an acceptable return on our investment on these contracts, we must be able to accurately estimate our costs to provide the services and deliver the products required by the contract and to be able to complete the contracts in a timely manner. If we fail to accurately estimate our costs or the time required to complete a new equipment order, or the extent of required maintenance pursuant to a service contract, or execute on our productivity initiatives, the profitability of our contracts may be materially and adversely affected. Some of our contracts provide for liquidated damages if we do not perform in accordance with the contract. As a result of these and other factors, we may not be able to provide products and services at competitive prices while maintaining anticipated levels of profitability, which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

We may not realize expected benefits from our cost reduction, restructuring and transformation efforts, including UpLift, and our profitability may be negatively impacted or our business otherwise might be adversely affected.

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. If we do not successfully manage restructuring and other transformation activities, expected efficiencies and benefits might be delayed or not realized, and our operations and business could be disrupted. 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.

We operate in challenging markets for talent and may fail to attract, develop and retain key personnel.

We depend on the skills, institutional knowledge, working relationships, and continued services and contributions of key personnel, including our leadership team, engineers, field professionals, and others at all levels of the company. In addition, our ability to achieve our operating and strategic goals depends on our ability to identify, hire, train and retain qualified individuals. 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. Any such losses, failures or increased costs could have material adverse effects on our results of operations, financial condition and cash flows.

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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.

As of December 31, 2025, we had $7.7 billion outstanding long-term debt. Our debt level and related debt service obligations could have negative consequences, including, among others:

•requiring us to dedicate significant cash flow from operations to the payment of principal and interest on our debt, which would reduce funds we have available for other purposes, such as acquisitions and reinvestment in our businesses; and

•reducing our flexibility in planning for or reacting to changes in our business and market conditions.

We may need additional financing for general corporate purposes. For example, we may need funds to increase our investment in research and development activities, to refinance or repay existing debt, or to make a strategic acquisition. We may be unable to obtain additional financing on terms favorable to us, if at all. Volatility in the world financial markets could further increase borrowing costs or affect our ability to access the capital markets. 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.

We have an investment-grade credit rating from each of Moody’s Investors Service, Inc. and Standard & Poor’s. There can be no assurance that we will be able to maintain our credit ratings, and any actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade or similar announcement, could increase the cost of borrowing under any indebtedness we may incur, reduce market capacity for our commercial paper, require the posting of additional collateral under our derivative contracts, or otherwise have a negative impact on our liquidity, capital position and access to the capital markets.

If we raise additional funds through the issuance of equity securities, our shareholders will experience dilution of their ownership interest. If we raise additional funds by issuing debt, we may be subject to limitations on our operations due to restrictive covenants or rating agencies may downgrade our credit rating.

Quarterly cash dividends and share repurchases may be discontinued, accelerated or modified, are subject to a number of uncertainties and may affect the price of Common Stock.

Quarterly cash dividends and share repurchases are a component of our capital allocation strategy, which we fund with operating free cash flow, borrowings and divestitures. In general, dividends and share repurchases may be discontinued, accelerated, suspended or delayed at any time without prior notice. Furthermore, the amount of such dividends and repurchases may be changed, and the amount, timing and frequency of such dividends and repurchases may vary from historical practice or from the Company’s stated expectations. Decisions with respect to dividends and share repurchases are subject to the discretion of our Board of Directors and are based on a variety of factors. Important factors that could cause us to discontinue, limit, suspend, increase or delay our quarterly cash dividends or share repurchases include market conditions, the market price of our Common Stock, the nature and timing of other investment and acquisition opportunities, changes in our business strategy, the terms of our financing arrangements, our outlook as to the ability to obtain financing at attractive rates, the impact on our credit ratings and the availability of domestic cash. 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.

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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, including of the interests in certain ventures and entities which we do not already wholly own, in addition to internal growth. Our due diligence reviews in connection with our acquisitions may not identify all of the material issues necessary to accurately estimate the cost and potential loss contingencies of a particular transaction, including potential exposure to regulatory sanctions resulting from an acquisition target’s previous activities. For example, we may incur unanticipated costs, expenses or other liabilities as a result of an acquisition target’s violation of applicable laws, such as anti-corruption, antitrust, anti-collusion, environmental or income tax laws. We also may incur unanticipated costs or expenses, including post-closing asset impairment charges, as well as expenses associated with eliminating duplicate facilities, litigation and other liabilities. We may incur unexpected costs associated with labor law, tax or pension matters or to bring acquired assets up to our operating standards. We may encounter difficulties in integrating acquired businesses with our operations, applying our internal controls to these acquired businesses or in managing strategic investments. In addition, accounting requirements relating to business combinations, including the requirement to expense certain acquisition costs as incurred, may cause us to incur greater earnings volatility and generally lower earnings during periods in which we acquire new businesses.

We also make strategic divestitures from time to time. Our divestitures may result in continued financial exposure to the divested businesses, such as through guarantees, other financial arrangements, continued supply and services arrangements, and environmental and product liability claims, following the transaction. Under these arrangements, nonperformance by those divested businesses could result in obligations being imposed on us that could have a material adverse effect on our competitive position, cash flows, results of operations or financial condition.

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.

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. 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. Changes in local government laws, regulations and policies, including those related to investments and limitations on foreign ownership of businesses, could adversely impact our ability to participate in and operate our joint ventures, or could result in changes to the ownership structure or allocation of rights in our joint ventures. If we are not successful in maintaining our joint ventures and other strategic partnerships, our financial condition, results of operations and cash flows may be adversely affected.

Joint ventures and non-wholly owned subsidiaries inherently involve special risks. Whether or not we hold a majority interest or maintain operational control in such arrangements, our partners or other shareholders may (1) have economic or business interests or goals that are inconsistent with or contrary to ours, (2) exercise veto or other rights, to the extent available, to block actions that we believe to be in our or the joint venture’s or non-wholly owned subsidiary’s best interests, (3) take action contrary to our policies or objectives with respect to our investments, business or compliance practices or (4) be unable or unwilling (including as a result of financial or other difficulties) to fulfill their obligations, such as contributing capital to expansion or maintenance projects, under the joint venture or other agreement. There can be no assurance that any particular joint venture or non-wholly owned subsidiary will be beneficial to us.

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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. Changes to tax laws and regulations, as well as changes and conflicts in related interpretations or other tax guidance could materially impact our tax receivables and liabilities and our deferred tax assets and deferred tax liabilities. Additionally, in the ordinary course of business, we are subject to examinations by various tax authorities. In addition, governmental authorities in various jurisdictions could launch new examinations and expand existing examinations. The global and diverse nature of our operations means that these risks will continue and additional examinations, proceedings and contingencies will arise from time to time. Our competitive position, cash flows, results of operation or financial condition may be affected by the outcome of examinations, proceedings and contingencies that cannot be predicted with certainty.

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.

The performance of the financial markets and interest rates, as well statutory and/or regulatory changes, can impact our defined benefit pension plan expenses and funding obligations. Significant decreases in the discount rate or investment losses on plan assets may increase our funding obligations and adversely impact our financial results. 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. These risks relate to, among other things, product safety, personal injuries, intellectual property rights, contract-related claims, taxes, environmental matters, competition laws and laws governing improper business practices. We could be charged with wrongdoing in connection with such matters. If convicted or found liable, we could be subject to significant fines, penalties, repayments and other damages (in certain cases, treble damages).

As a global business, we are subject to complex laws and regulations in the U.S. and other countries in which we operate. Those laws and regulations may be interpreted in different ways. They may also change from time to time, as may related interpretations and other guidance. 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, structure our contracts and comply with the terms of these contracts and/or enforce our rights thereunder.

Product and general liability claims (including claims related to the safety, reliability or maintenance of our products) and accident risks during the production, installation, maintenance and use of our products can result in significant costs, including settlements, punitive damages and other risks such as damage to our reputation, negative publicity and management distraction, which could reduce demand for our products and services.

In addition, we are subject to the U.S. Foreign Corrupt Practices Act (the "FCPA") and other anti-corruption laws that generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. The FCPA applies to companies, individual directors, officers, employees and agents. Under certain anti-corruption laws, companies also may be held liable for the actions of partners or representatives. Certain of our customer relationships are with governmental entities and are, therefore, subject to the FCPA and 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. 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.

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Moreover, we are subject to antitrust and anti-collusion laws, including mandatory supply laws and bidding regulations, in various jurisdictions throughout the world. Changes in these laws or their interpretation, administration and/or enforcement may occur over time, and any such changes may limit our future acquisitions or operations, or result in changes to our strategies, sales and distribution structures or other business practices. We are subject to ongoing claims related to alleged violations of anti-collusion laws in certain European countries, where we are subject to claims for overcharges on elevators and escalators related to civil cartel cases. 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. 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.

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.

We also must comply with various laws and regulations relating to the export of products, services and technology from the U.S. and other countries having jurisdiction over our operations. In the U.S., these laws include, among others, the Export Administration Regulations administered by the Department of Commerce and embargoes and sanctions regulations administered by the Department of the Treasury. 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.

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. 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. Our ability to deliver on our sustainability and responsibility initiatives is subject to numerous risks, many of which are outside of our control. 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. In addition, standards for tracking and reporting on sustainability-related matters have not been harmonized and continue to evolve. 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.

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. 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.

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Information security, data privacy and identity protection may require significant resources and present certain risks to our business, reputation and financial condition.

We collect, store, have access to and otherwise process certain company and third-party confidential or sensitive data that may be subject to data privacy and cybersecurity laws, regulations or customer-imposed controls, including proprietary business information, personal data and other information. We also develop products that may in certain cases collect, store, have access to, and otherwise process certain personally identifiable or confidential data of our customers who purchase and use such products either separately or as a part of another product or system or by way of access to our websites or social media accounts. Although we seek to protect such data and design our products to enable our customers to use them while complying with applicable data privacy and cybersecurity laws and/or customer-imposed controls, we have experienced cyberattacks. While these attacks have not to our knowledge had a material adverse impact on the Company to date, our internal systems and products may be vulnerable to further cyberattacks, security breaches, theft, programming errors or employee errors, which could lead to the compromise of confidential and sensitive data, unauthorized access, use, disclosure, modification or destruction of information, improper use of our systems, software solutions or networks, defective products, production downtimes and/or operational disruptions in violation of applicable law and/or contractual obligations. A significant actual or perceived risk of theft, loss, fraudulent use or misuse of customer, employee or other data, whether by us, our suppliers, distributors, customers or other third parties, as a result of employee error or malfeasance, or as a result of the compromise of software, security and other products we incorporate into our products, as well as non-compliance with applicable industry standards or our contractual or other legal obligations or privacy and information security policies regarding such data, could result in costs, fines, litigation or regulatory actions, or could lead customers to select products and services of our competitors. In addition, any such event could harm our reputation, cause unfavorable publicity or otherwise adversely affect certain potential customers’ perceptions of the security and reliability of our services as well as our credibility and reputation, which could result in lost sales. Because of the global nature of our business, both our internal systems and products must comply with the applicable laws, regulations and standards in a number of jurisdictions, which continue to evolve and in certain cases, include provisions that are unclear. 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 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. As global standards and regulations relating to AI increase and change, they could result in additional costs, regulatory scrutiny, legal liability and reputational harm, including if we fail to comply with such standards and regulations. Additionally, misuse of sensitive data used in AI models may lead to privacy violations or non-compliance with data protection laws.

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.

The efficient operation of our business requires continued substantial investment in technology infrastructure systems, including partial shifting from virtual private networks to cloud-based networks, and we must attract and retain qualified people to operate these systems, expand and improve them, integrate new systems effectively and efficiently convert to new systems when required. An inability to fund, acquire and implement these systems might impact our ability to respond effectively to changing customer expectations, manage our business, scale our solutions effectively or impact our customer service levels, which could put us at a competitive disadvantage and negatively impact our financial results. Repeated or prolonged interruptions of service due to problems with our systems or third-party technologies, whether or not in our control, could have a significant negative impact on our reputation and our ability to sell products and services. Furthermore, we are highly dependent upon a variety of internal computer and telecommunication systems to operate our business. Failure to design, develop and implement new technology infrastructure systems in an effective and timely manner, or to adequately invest in and maintain these systems, could result in the diversion of management’s attention and resources and could materially adversely affect our operating results, competitive position and ability to efficiently manage our business. 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.

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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. Cyber-based risks, in particular, are evolving and include attacks on our IT infrastructure, as well as attacks targeting the security, integrity and/or availability of the hardware, software and information installed, stored or transmitted in our products, including after the purchase of those products and when they are installed into third-party products, facilities or infrastructure. 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. We continue to make investments and adopt measures designed to enhance our protection, detection, response, and recovery capabilities, and to mitigate potential risks to our technology, products, services and operations from potential cyberattacks. However, given the unpredictability, nature and scope of cyberattacks, it is possible that potential vulnerabilities could go undetected for an extended period. As a result of a cyberattack, we could potentially be subject to production downtimes, operational delays or other detrimental impacts on our operations or ability to provide products and services to our customers; destruction or corruption of data; security breaches; manipulation or improper use of our or third-party systems, networks or products; financial losses from remedial actions, loss of business, potential liability, penalties, fines and/or damage to our reputation, any of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

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 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. We also rely on nondisclosure agreements, information technology security systems and other measures to protect certain customer and supplier information and intellectual property that we have in our possession or to which we have access. Our efforts to protect such intellectual property and proprietary rights may not be sufficient. We cannot be sure that our pending patent applications will result in the issuance of patents to us, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors or that these patents will be found to be valid or sufficiently broad to preclude our competitors from introducing technologies similar to those covered by our patents and patent applications. Our ability to protect and enforce our intellectual property rights also may be limited. In addition, we may be the target of competitor or other third-party patent enforcement actions seeking substantial monetary damages or seeking to prevent the sale and marketing of certain of our products or services. Our competitive position also may be adversely impacted by limitations on our ability to obtain possession of, and ownership or necessary licenses concerning, data important to the development or provision of our products or service offerings, or by limitations on our ability to restrict the use by others of data related to our products or services. Any of these events or factors could subject us to judgments, penalties and significant litigation costs or temporarily or permanently disrupt our sales and marketing of the affected products or services and could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

Operating outside the United States also exposes us to additional intellectual property risk. The laws and enforcement practices of certain jurisdictions in which we operate may not protect our intellectual property rights to the same extent as in the United States and may impose joint venture, technology transfer, local service or other foreign investment requirements, and restrictions that potentially compromise control over our technology and proprietary information. 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.

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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.

Otis’ amended and restated certificate of incorporation and amended and restated bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with Otis’ Board of Directors rather than to attempt a hostile takeover. These provisions include, among others, (1) the ability of our remaining directors to fill vacancies on Otis’ Board of Directors (except in an instance where a director is removed by shareholders and the resulting vacancy is filled by shareholders); (2) limitations on shareholders’ ability to call a special shareholder meeting; (3) rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings; and (4) the right of Otis’ Board of Directors to issue preferred stock without shareholder approval.

In addition, we are subject to Section 203 of the Delaware General Corporation Law (the "DGCL"), which could have the effect of delaying or preventing a change of control that you may favor. Section 203 provides that, subject to limited exceptions, persons that acquire, or are affiliated with persons that acquire, more than 15% of the outstanding voting stock of a Delaware corporation may not engage in a business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or any of its affiliates becomes the holder of more than 15% of the corporation’s outstanding voting stock.

We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with Otis’ Board of Directors and by providing Otis’ Board of Directors with more time to assess any acquisition proposal. These provisions are not intended to make Otis immune from takeovers; however, these provisions apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that Otis’ Board of Directors determines is not in the best interests of Otis and our shareholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

Our amended and restated bylaws designate the state courts within the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against Otis and our directors and officers.

Otis’ amended and restated bylaws provide that, unless Otis’ Board of Directors otherwise determines, the state courts within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Otis, any action asserting a claim for or based on a breach of a fiduciary duty owed by any current or former director or officer or other employee of Otis to Otis or its shareholders, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, any action asserting a claim against Otis or any current or former director or officer or other employee of Otis arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws, any action asserting a claim relating to or involving Otis governed by the internal affairs doctrine, or any action asserting an "internal corporate claim" as that term is defined in Section 115 of the DGCL.

To the fullest extent permitted by law, this exclusive forum provision applies to state and federal law claims, including claims under the federal securities laws, including the Securities Exchange Act of 1934, as amended (the "Exchange Act"), although Otis shareholders will not be deemed to have waived Otis’ compliance with the federal securities laws and the rules and regulations thereunder. The enforceability of similar exclusive forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and it is possible that, in connection with claims subject to exclusive federal jurisdiction, a court could find the exclusive forum provision contained in the amended and restated bylaws to be inapplicable or unenforceable.

This exclusive forum provision may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with Otis or our directors or officers, which may discourage such lawsuits against Otis and our directors and officers. 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.

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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. If we are required to pay under these indemnities to RTX and/or Carrier, our financial results could be negatively impacted. Also, the RTX or Carrier indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which RTX and Carrier are allocated responsibility, and RTX and/or Carrier may not be able to satisfy their respective indemnification obligations in the future.

Pursuant to the Separation Agreement, the TMA and the EMA, each party agreed to indemnify the other parties for certain liabilities. Indemnities that we may be required to provide RTX and/or Carrier are not subject to any cap, may be significant and could negatively impact our business. Third parties could also seek to hold us responsible for any of the liabilities that RTX and/or Carrier has agreed to retain. The indemnities from RTX and Carrier for our benefit may not be sufficient to protect us against the full amount of such liabilities, and RTX and/or Carrier may not be able to fully satisfy their respective indemnification obligations. Any amounts we are required to pay pursuant to such indemnification obligations and other liabilities could require us to divert cash that would otherwise have been used in furtherance of our operating business. Moreover, even if we ultimately succeed in recovering from RTX or Carrier, as applicable, we may be temporarily required to bear these losses ourselves. Each of these risks could negatively affect our business, results of operations and financial condition.

If the Separation, together with certain related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, including as a result of subsequent acquisitions of our stock or the stock of RTX, we, as well as RTX, Carrier, and RTX's shareholders, could be subject to significant tax liabilities. In addition, if certain internal restructuring transactions were to fail to qualify as transactions that are generally tax-free for U.S. federal or non-U.S. income tax purposes, we, as well as RTX and Carrier could be subject to significant tax liabilities. In certain circumstances, we could be required to indemnify RTX for material taxes and other related amounts pursuant to indemnification obligations under the TMA.

In connection with the Separation, our former parent UTC received a ruling from the IRS regarding certain U.S. federal income tax matters relating to the Separation and an opinion of outside counsel regarding the qualification of certain elements of the Separation under Section 355 of the Code. The IRS ruling and the opinion of counsel were based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of UTC (and RTX), Otis and Carrier, including those relating to the past and future conduct of UTC (and RTX), Otis and Carrier. Notwithstanding receipt of the IRS ruling and the opinion of counsel, the IRS could determine that the Separation and/or certain related transactions should be treated as taxable transactions for U.S. federal income tax purposes if it determines that any of the representations, assumptions or undertakings upon which the IRS ruling or the opinion of counsel was based were inaccurate or have not been complied with. In addition, the IRS ruling does not address all of the issues that are relevant to determining whether the Separation, together with certain related transactions, qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes. The opinion of counsel represents the judgment of such counsel and is not binding on the IRS or any court, and the IRS or a court may disagree with the conclusions in the opinion of counsel. Accordingly, notwithstanding receipt by UTC of the IRS ruling and the opinion of counsel, there can be no assurance that the IRS will not assert that the Separation and/or certain related transactions did not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge.

If the distribution of Common Stock pursuant to the Separation were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, RTX would recognize a taxable gain as if it had sold the Common Stock in a taxable sale for its fair market value, and RTX shareholders who received Common Stock in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. Even if the distribution of Common Stock pursuant to the Separation were to otherwise qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code, it may result in a taxable gain to RTX (but not its shareholders) under Section 355(e) of the Code if the Separation were deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50% or greater interest (by vote or value) in RTX or Otis. 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).

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In addition, in connection with and prior to the Separation, UTC and its subsidiaries completed various internal reorganization transactions. With respect to certain transactions undertaken as part of the internal reorganization, UTC obtained tax rulings in certain non-U.S. jurisdictions and/or opinions of external tax advisors, in each case, regarding the tax treatment of such transactions. Such tax rulings and opinions were based upon and relied on, among other things, various facts and assumptions, as well as certain representations (including with respect to certain valuation matters relating to the internal reorganization), statements and undertakings of UTC (and RTX), Otis, Carrier or their respective subsidiaries. If any of these representations or statements were, or become, inaccurate or incomplete, or if RTX, Otis, Carrier or any of their respective subsidiaries do not fulfill or otherwise comply with any such undertakings or covenants, such tax rulings and/or opinions may be invalid or the conclusions reached therein could be jeopardized. Further, notwithstanding receipt of any such tax rulings and/or opinions, there can be no assurance that the relevant taxing authorities will not assert that the tax treatment of the relevant transactions differs from the conclusions reached in the relevant tax rulings and/or opinions. In the event the relevant taxing authorities prevail with any challenge in respect of any relevant transaction, we, as well as RTX and Carrier, could be subject to significant tax liabilities.

Under the TMA, Otis generally is required to indemnify RTX and Carrier for any taxes resulting from the Separation and certain related transactions (and any related costs and other damages) to the extent such amounts resulted from (1) an acquisition of all or a portion of the equity securities or assets of Otis, whether by merger or otherwise (and regardless of whether we participated in or otherwise facilitated the acquisition), (2) other actions or failures to act by Otis or (3) certain of Otis’ representations, covenants or undertakings contained in any of the Separation-related agreements and documents or in any documents relating to the IRS ruling and/or the opinion of counsel being incorrect or violated. Further, under the TMA, we generally are required to indemnify RTX and Carrier for a specified portion of any taxes (and any related costs and other damages) (a) arising as a result of the failure of the Separation and certain related transactions to qualify as a transaction that is generally tax-free (including as a result of Section 355(e) of the Code) or a failure of any internal separation transaction that is intended to qualify as a transaction that is generally tax-free to so qualify, in each case, to the extent such amounts do not result from a disqualifying action by, or acquisition of equity securities of, Otis, Carrier or RTX or (b) arising from an adjustment, pursuant to an audit or other tax proceeding, with respect to any transaction undertaken in connection with the Separation that is not intended to qualify as a transaction that is generally tax-free. Any such indemnity obligations could be material.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

Cybersecurity Risk Management and Strategy

The security of our products, services and corporate network is a key priority for our business. We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats (as defined in Item 106(a) of Regulation S-K). These risks include, among other things, operational risks, intellectual property theft, fraud, extortion, harm to employees, customers, business partners or the riding public, violation of privacy or security laws and other litigation and legal risk, and reputational risks.

Otis has taken a risk-based approach to cybersecurity, which considers the sensitivity and volume of the relevant data, the potential effects on third parties and individuals, the needs of our business, and the costs and/or practicality of remediation. Based on this qualitative and quantitative assessment, we determine if identified cybersecurity risks are at an acceptable level, or should be mitigated or transferred.

We have implemented cybersecurity policies throughout our operations, including designing and incorporating cybersecurity, as appropriate, into our products and services while they are being developed. 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.

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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.

As part of the above processes, we conduct monthly third-party scanning of our network.

Otis also applies a risk-based approach to mitigate cybersecurity risks associated with our use of third-party service providers, including those in our supply chain that have access to our customer and employee data or our systems. Third-party risks are included within our ERM process. In addition, cybersecurity considerations affect the selection and oversight of our third-party service providers. We perform due diligence on third parties that have access to our most critical systems, data or facilities that house such systems or data, and based on our risk assessment put in place contractual undertakings and oversight, to manage and reduce the risks associated with such third-party vendors. 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.

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".

Cybersecurity Governance

Otis has established a three-level governance model for managing cybersecurity risks. Cybersecurity risks are overseen by the Audit Committee of our Board of Directors (the "Board"). 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. Our Cybersecurity Program is directed by both our CDO and CISO and we have established a Cyber Governance Council and Steering Committee made up of senior management (including our CEO). 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.

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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. In addition, the Audit Committee participated in a simulated cybersecurity incident tabletop exercise in 2025. 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 CDO and CISO collectively have over 25 years of prior work experience in various roles involving managing information security, developing cybersecurity strategy and implementing effective information and cybersecurity programs, as well as relevant degrees and certifications, including Certified Information Security Manager certification and NACD Cyber training. All Otis colleagues engaged in cybersecurity are required to have a baseline certification (such as Security+, CISSP or CISM), as well as an operational cyber certification (for example, incident response or forensics analysis).

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. We 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 branches and R&D centers typically support both our New Equipment and Service segments.

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, 2025 are substantially in good operating condition.

Item 3. Legal Proceedings

For a discussion regarding material legal proceedings, see "Note 20: Contingent Liabilities" to the Consolidated Financial Statements within Item 8 of this Form 10-K.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

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. The information required by Item 5 with respect to securities authorized for issuance under equity compensation plans is incorporated by reference to Part III, Item 12 in this Form 10-K.

Stock Performance Graph

The following table and graph illustrate the total return from December 31, 2020 through December 31, 2025, for (1) our Common Stock, (2) the Standard and Poor's (the "S&P") 500 Index, and (3) the S&P 500 Industrials Sector Index. 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. The comparison reflected in the graph and the table are not intended to forecast the future performance of our Common Stock and may not be indicative of our future performance.

Comparison 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

Stock Performance Graph 2025 JPEG v2.jpg

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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.

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.

Under these programs, shares may be purchased on 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 Exchange Act.

Item 6. [Reserved]

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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. 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 and commercial buildings and infrastructure projects. Our New Equipment customers include real-estate and building developers and general contractors who develop and/or design buildings for residential, commercial, retail or mixed-use activity. We sell our New Equipment directly to customers, as well as through agents and distributors.

Through our Service segment, we perform maintenance and repair services for both our own products and those of other manufacturers and provide modernization services to upgrade elevators and escalators. Maintenance services include inspections to ensure code compliance, preventive maintenance offerings and other customized maintenance offerings tailored to meet customer needs, as well as repair services to address equipment and component wear and tear and breakdowns. Modernization services enhance equipment operation and improve building functionality. 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.

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. We function under a centralized operating model whereby we pursue a global strategy set around New Equipment and Service because we seek to grow our maintenance portfolio, in part, through the conversion of new elevator and escalator installations into service contracts. Accordingly, we benefit from an integrated global strategy, which sets priorities and establishes accountability across the full product lifecycle.

For additional discussion of our business, refer to Item 1 in this Form 10-K.

UpLift

Announced in July 2023, UpLift is a program with the goal of transforming our operating model. 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. As of 2025, total restructuring and other incremental costs to complete the transformation ("UpLift transformation costs") are approximately $300 million, including trailing restructuring costs expected in 2026 of $18 million.

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.

UpLift costs incurred are as follows:


(dollars in millions)	2025		2024		2023
UpLift restructuring costs	$	76	$	31	$	25
UpLift transformation costs	69		65		16
Total UpLift costs	$	145	$	96	$	41

Total UpLift costs incurred to date are $282 million, including $132 million of restructuring costs and $150 million of transformation costs.

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UpLift restructuring costs are primarily severance costs and are recorded primarily in Selling, general and administrative in the Consolidated Statements of 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. These costs are recorded in Other income (expense), net in the Consolidated Statements of Operations.

For further details, refer to the discussion on restructuring costs in the "Results of Operations," as well as "Note 15: Restructuring and Transformation Costs" to the Consolidated Financial Statements in Item 8 in this Form 10-K.

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. 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.

Based on additional information received from RTX during the year, which resulted in additional indemnification expense of $67 million, offset by indemnity payments made to RTX of $205 million, the Company now estimates the amount payable to RTX to be $56 million. The indemnification expense is included in Other income (expense), net in the Consolidated Statements of Operations in 2025. 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.

For further details, refer to "Note 14: Income Taxes" and "Note 20: Contingent Liabilities" to the Consolidated Financial Statements in Item 8 in this Form 10-K.

Impact of Global Macroeconomic Conditions on Our Company

Global macroeconomic conditions have impacted, and continue to impact, aspects of the Company's operations and overall financial performance. These macroeconomic conditions include, among others, inflationary pressures, high interest rates, tighter credit conditions and changes in global trade policies including higher tariffs in the U.S. and other countries. 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.

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 position based on our available cash and cash equivalents and our access to credit facilities and the capital markets.

See the "Liquidity and Financial Condition" section of this item of this Form 10-K for further detail and Item 1A in this Form 10-K for macroeconomic risks related to our business.

Risks Associated with Ongoing Conflicts

The ongoing conflict between Russia and Ukraine has resulted in worldwide geopolitical and macroeconomic uncertainty, including volatile commodity markets, foreign exchange fluctuations, supply chain disruptions, increased risk of cybersecurity incidents, reputational risk, increased operating costs (including fuel and other input costs), environmental, health and safety risks related to securing and maintaining facilities, additional sanctions and other regulations (including restrictions on the transfer of funds to and from Russia). We do not have operations in Russia.

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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. 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. Depending on the ultimate outcomes of these conflicts, which remain uncertain, they could heighten certain risks disclosed in Item 1A in this Form 10-K, including but not limited to, adverse effects on macroeconomic conditions, including increased inflation, constraints on the availability of commodities, supply chain disruption and decreased business spending; cyber-incidents; disruptions to our or our business partners’ global technology infrastructure, including through cyberattack or cyber-intrusion; adverse changes in international trade policies and relations; claims, litigation and regulatory enforcement; our ability to implement and execute our business strategy; terrorist activities; our exposure to foreign currency fluctuations; reputational risk; 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.

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. 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.

For a discussion of Otis’ climate near-term science-based targets, see the discussion under "Sustainability and Responsibility" in Item 1 in this Form 10-K.

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RESULTS OF OPERATIONS

Net Sales


(dollars in millions)	2025			2024			2023
Net sales	$	14,431		$	14,261		$	14,209
Percentage change year-over-year	1		%	—		%	4		%

The factors contributing to the total percentage change year-over-year in total Net sales are as follows:


	2025		2024
Organic volume	—	%	1	%
Foreign currency translation	1	%	(1)	%
Acquisitions and divestitures, net and Other	—	%	—	%


Total % change	1	%	—	%

The Organic volume was flat for 2025 driven by an increase in organic sales of 5% in Service, offset by a decrease of (7)% in New Equipment.

The Organic volume increase of 1% for 2024 was driven by an increase in organic sales of 7% in Service, offset by a decrease of (6)% in New Equipment.

See "Segment Review" below for a discussion of Net sales by segment.

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. Productivity was partially offset by the impact of tariffs and inflationary pressures, including higher labor costs.

The Organic volume increase of 1% in total cost of products and services sold in 2024 was primarily driven by the organic sales increases noted above and inflationary pressures, including annual wage increases and higher Service-related material costs, partially offset by productivity and lower commodity prices, primarily steel.

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Gross Margin


(dollars in millions)	2025			2024			2023
Gross margin	$	4,370		$	4,257		$	4,193
Gross margin percentage	30.3		%	29.9		%	29.5		%

Gross margin percentage increased 40 basis points in 2025 compared to 2024, primarily due to the increase in Service sales and decrease in New Equipment sales 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.

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. Research and development includes product development and innovation, including digital features, enhancements to current elevator and escalator systems, and the development of the next-generation products.

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.

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 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.

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. 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. 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.

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UpLift restructuring costs were $76 million and $31 million in 2025 and 2024, respectively. 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. 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.

Most of the expected restructuring charges will require cash payments, which we have funded and expect to continue to fund with cash generated from operations. 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.

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. 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.

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.

The change in Other income (expense), net of $130 million in 2025 compared to 2024, was primarily driven by lower Separation-related adjustments of $107 million, gains on sales of assets of $29 million, lower impairment loss related to net assets held for sale of $8 million and favorable foreign currency mark-to-market adjustments, partially offset by higher UpLift transformation costs of $4 million.

The change in Other income (expense), net of $(257) million in 2024 compared to 2023, was primarily driven by Separation-related adjustments of $177 million, UpLift transformation costs of $65 million, $18 million of impairment loss related to net assets held for sale, foreign currency mark-to-market adjustments, and non-recurring litigation-related settlement costs, including $18 million in the second quarter of 2024, partially offset by other reserve adjustments.

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. 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.

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Interest Expense (Income), Net


(dollars in millions)	2025		2024		2023


Interest expense (income), net	$	196	$	(31)	$	150

Interest expense (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.

The change in Interest expense (income), net of $227 million in 2025 compared to 2024, was primarily driven by the absence of $200 million of interest income related to the favorable ruling received in August 2024 regarding a tax litigation in Germany, higher interest related to the $600 million and €850 million unsecured, unsubordinated debt issued in November 2024, as well as the $500 million unsecured, unsubordinated debt issued in September 2025, partially offset by lower interest expense related to the repayment of the $1.3 billion unsecured, unsubordinated debt in April 2025. Interest expense (income), net in 2025 was also impacted by interest reserve adjustments related to non-recurring tax items.

The change in Interest expense (income), net of $(181) million in 2024 compared to 2023, was primarily driven by approximately $200 million related to the German tax litigation, interest reserve adjustments and higher interest income, partially offset by higher interest expense related to the $600 million and €850 million unsecured, unsubordinated debt issued in November 2024 and $750 million unsecured, unsubordinated debt issued in August 2023.

The average interest rate on our external debt for 2025, 2024 and 2023 was 2.8%, 2.5% and 2.1%, respectively.

For additional discussion of borrowings, see "Note 8: Borrowings and Lines of Credit" to the Consolidated Financial Statements 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.

Income Taxes


	2025		2024		2023
Effective tax rate	24.8	%	15.0	%	26.2	%

The 2025 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. The 2025 effective tax rate is higher than the 2024 effective tax rate primarily due to the absence of estimated tax benefits arising from the resolution of the German tax litigation and the absence of the reduction in a deferred tax liability related to the mitigation of future repatriation costs, both recorded in 2024, and the tax effect of the increase in our estimated nondeductible TMA indemnity obligation payable to RTX recorded in 2025. These impacts were partially offset by an incremental benefit related to foreign-derived intangible income and foreign valuation allowance releases recorded in 2025.

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.

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.

For additional discussion of income taxes and the effective income tax rate, see "Note 14: Income Taxes" to the Consolidated Financial Statements in Item 8 in this Form 10-K.

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Noncontrolling Interest in Subsidiaries' Earnings and Net Income Attributable to Otis Worldwide Corporation


(dollars in millions)	2025		2024		2023
Noncontrolling interest in subsidiaries' earnings	$	71	$	89	$	92
Net income attributable to Otis Worldwide Corporation	$	1,384	$	1,645	$	1,406

Noncontrolling interest in subsidiaries' earnings decreased in 2025 in comparison to 2024, primarily driven by lower net income from non-wholly owned subsidiaries. Other than our acquisition of the noncontrolling shares of Otis Electric during the fourth quarter of 2025, ownership interest in the underlying non-wholly owned subsidiaries has remained generally consistent year-over-year. See "Note 1: Business Overview" to the Consolidated Financial Statements in Item 8 in this Form 10-K for further discussion of the noncontrolling interest acquisition.

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. See "Note 1: Business Overview" to the Consolidated Financial Statements in Item 8 in this Form 10-K for further discussion of the noncontrolling interest acquisition.

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.

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).

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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. Our New Equipment customers include real-estate and building developers and general contractors who develop and/or design buildings for residential, infrastructure, commercial, retail or mixed-use activity. We sell directly to customers as well as through agents and distributors. We also sell New Equipment to government agencies to support infrastructure projects, such as airports, railways or metros.

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)	%

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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.

New Equipment operating profit decreased $(89) million. The impacts of lower volume, unfavorable price and tariff headwinds, and regional and product mix were partially offset by productivity, including the benefits of restructuring actions. 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. 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. Operating margin decreased 50 basis points.

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Service

The Service segment performs maintenance and repair services for both our products and those of other manufacturers and provides modernization services to upgrade elevators and escalators. Maintenance services include inspections to ensure code compliance, preventive maintenance offerings and other customized maintenance offerings tailored to meet customer needs, as well as repair services that address equipment and component wear and tear, and breakdowns. Modernization services enhance equipment operation and improve building functionality. 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.

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 for 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%.


Components of Net sales change:	Maintenance and Repair		Modernization
Organic volume	4	%	9	%
Foreign currency translation	1	%	—	%
Acquisitions/Divestitures, net and Other	—	%	1	%


Total % change	5	%	10	%

Operating profit

Service operating profit increased $189 million including foreign exchange tailwinds of $36 million. Higher volume, improved pricing, productivity and gains on sales of assets of $19 million, were partially offset by inflationary pressures including higher labor costs, and mix. Operating margin increased 50 basis points.

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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%.




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. 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.

Corporate and Unallocated


(dollars in millions)	2025		2024		2023
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 adjustments	70		177		—
Litigation-related settlement costs	21		18		—
Held for sale impairment	10		18		—
Other, net	1		(1)		—
Total Corporate and Unallocated	$	481	$	506	$	209

General corporate expenses and other increased $22 million and $32 million in 2025 compared to 2024 and 2024 compared to 2023, respectively, primarily due to higher corporate costs including annual wage increases and other employment-related costs, partially offset by foreign currency mark-to-market adjustments and gains on sales of assets of $7 million in 2025.

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. 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.

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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.

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. We manage our worldwide cash requirements by reviewing available funds among the many subsidiaries through which we conduct our business and the cost-effectiveness with which those funds can be accessed. On occasion, we are required to maintain cash deposits with certain banks with respect to contractual obligations related to acquisitions and divestitures or other legal obligations. 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. 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. There can be no assurance that we will continue to have access to the capital markets on terms acceptable to us.

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. For the remainder of the Company’s undistributed international earnings, unless tax effective to repatriate, we will continue to permanently reinvest these earnings.

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

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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. The remainder of the proceeds were used to fund the repayment of certain of our commercial paper borrowings.

A portion of the proceeds from the November 2024 issuance of the Euro and USD notes listed above were used to fund the repayment at maturity of the Company's $1.3 billion 2.056% notes that were due April 5, 2025. The remainder of the proceeds were used to fund the repayment of the Company's commercial paper and for other general corporate purposes.

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.

As of December 31, 2025, there were no borrowings outstanding under the Company's $1.5 billion commercial paper program. For additional discussion of borrowings, see "Note 8: Borrowings and Lines of Credit" to the Consolidated Financial Statements in Item 8 of this Form 10-K.

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.

Discussion of Cash Flows

The following table reflects the major categories of cash flows. For additional details, see the Consolidated Statements of Cash Flows.


(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. Primary activities include net income from operations adjusted for non-cash transactions, working capital changes and changes in other assets and liabilities.

The increase in net cash provided by operating activities in 2025 compared to 2024 was primarily driven by working capital balances during the periods, including a decrease in Other current assets in 2025 compared to an increase in 2024, due to the refunds received in 2025 from the German tax litigation, a larger increase in Accounts payable in 2025 compared to 2024, due to the timing of payments to suppliers, partially offset by a larger increase in Accounts receivable, net, in 2025 compared to 2024, due to the timing of billings and collections. 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.

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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. 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. The primary driver of the inflow related to $1.5 billion of net income. The decrease in Other current assets due to refunds received in 2025 from the German tax litigation and the increase in Accounts payable due to timing of payments to suppliers were partially offset by an increase in Accounts receivable, net, due to timing of billings and collections and a decrease in Accrued Liabilities due to Separation-related and UpLift-related payments. For additional discussion of the German tax litigation, see "Note 1: Business Overview" and "Note 20: Contingent Liabilities" to the Consolidated Financial Statements in Item 8 of this Form 10-K.

During 2024, net cash provided by operating activities was $1.6 billion. 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. A decrease in Accounts receivable, net, due to the timing of billings and collections is mostly offset by an increase in Accounts payable due to the timing of payments to suppliers. For additional discussion of the German tax litigation, see "Note 1: Business Overview" and "Note 20: Contingent Liabilities" to the Consolidated Financial Statements in Item 8 of this Form 10-K.

Investing activities

Cash flows from investing activities primarily represent inflows and outflows associated with long-term assets, including capital expenditures, investments in businesses and securities, proceeds from the sale of fixed assets and the settlement of derivative contracts.

The increase in net cash used in investing activities in 2025 compared to 2024 was primarily driven by the net cash payments from the settlement of derivative instruments in 2025 compared to net cash receipts in 2024, partially offset by higher net proceeds from sale of fixed assets in 2025 compared to 2024. 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 primary drivers of the outflow related to $204 million of net cash payments from the settlement of derivative instruments, $152 million of capital expenditures and $109 million of acquisitions of businesses and intangible assets, partially offset by $60 million of net proceeds from the sale of fixed assets.

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.

As discussed in "Note 16: Financial Instruments" to the Consolidated Financial Statements in Item 8 in this Form 10-K, we enter into derivative instruments for risk management purposes. We operate internationally and, in the normal course of business, are exposed to fluctuations in interest rates, foreign exchange rates and commodity prices. These fluctuations can increase the costs of financing, investing and operating the business. We use derivative instruments, including forward contracts and options to manage certain foreign currency and commodity price exposures.

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.

The increase in net cash used in financing activities in 2025 compared to 2024 was primarily due to the repayment of long-term debt in 2025 and lower net proceeds from the long-term debt issuance in 2025 compared to 2024. The decrease in net cash used in financing activities in 2024 compared to 2023 was primarily due to the higher net proceeds from the long-term debt issued in 2024 compared to 2023.

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During 2025, net cash used in financing activities was $2.4 billion. The primary drivers of the outflow were repayments of long-term debt of $1.3 billion, repurchases of our Common Stock of $809 million, dividends paid on our Common Stock and to noncontrolling shareholders of $647 million and $69 million, respectively, and acquisitions of noncontrolling interest shares of $217 million, including approximately $215 million for our purchase of all outstanding shares from the noncontrolling shareholder of Otis Electric. These were partially offset by the net proceeds from the long-term debt issuance of $495 million and net proceeds from short-term borrowings of $142 million.

During 2024, net cash used in financing activities was $309 million. 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. These were partially offset by the net proceeds from the long-term debt issuance of $1.5 billion.

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.

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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. ("Highland"), a private limited liability company (société à responsabilité limitée) incorporated and existing under the laws of the Grand Duchy of Luxembourg ("Luxembourg"). The Euro Notes are fully and unconditionally guaranteed by Otis Worldwide Corporation ("OWC") on an unsecured, unsubordinated basis. 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. As a company incorporated and existing under the laws of Luxembourg, and with its registered office in Luxembourg, Highland is subject to Luxembourg insolvency and bankruptcy laws in the event any insolvency proceedings are initiated against it. Luxembourg bankruptcy law is significantly different from, and may be less favorable to creditors than, the bankruptcy law in effect in the United States and may make it more difficult for creditors to recover the amount they could expect to recover in liquidation under U.S. insolvency and bankruptcy rules.

The Euro Notes are not guaranteed by any of OWC's or Highland's subsidiaries (all OWC subsidiaries other than Highland are referred to herein as "non-guarantor subsidiaries"). Holders of the Euro Notes will have a direct claim only against Highland, as issuer, and OWC, as guarantor.

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. This summarized financial information is not intended to present the financial position or results of operations of OWC or Highland in accordance with U.S. GAAP.


	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

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	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. "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. Management believes the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. The most significant areas involving management judgments and estimates are described below. Actual results in these areas could differ from management’s estimates.

Revenue Recognition from Contracts with Customers

We recognize revenue in accordance with FASB ASC Topic 606: Revenue from Contracts with Customers and its related amendments, (referred to, collectively, as "ASC 606"). For new equipment and modernization contracts, equipment and installation are typically procured in a single contract providing the customer with a complete installed elevator or escalator unit. The combination of equipment and installation promises are typically a single performance obligation. For these performance obligations, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress. Contract costs are usually incurred over a period of time, which can be several years, and the estimation of these costs requires management’s judgment. 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.

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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. In developing our cost estimates, we utilize a combination of our historical costs experience and expected costs considering current circumstances. We review cost estimates for modification on significant new equipment and modernization contracts on a quarterly basis and when circumstances change, and for others, no less frequently than annually or when circumstances change and warrant a modification to a previous estimate. We record changes in contract estimates using the cumulative catch-up method and we review changes in contract estimates for their impact on net sales or operating profit in the Consolidated Financial Statements. 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.

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. Management estimates that our earnings during the periods when the temporary differences become deductible will be generally sufficient to realize the related future income tax benefits, which may be realized over an extended period of time. For those jurisdictions where the expiration date of tax carryforwards or the projected operating results indicate that realization is not likely, a valuation allowance is provided.

In assessing the need for a valuation allowance, we estimate future taxable income, considering the feasibility of ongoing tax planning strategies and the realizability of tax loss carryforwards. Valuation allowances related to deferred tax assets can be affected by changes to tax laws, changes to statutory tax rates and future taxable income levels. In the event we were to determine that we would not be able to realize all or a portion of our deferred tax assets in the future, we would reduce such amounts through an increase to tax expense in the period in which that determination is made or when tax law changes are enacted. Conversely, if we were to determine that we would be able to realize our deferred tax assets in the future in excess of the net carrying amounts, we would decrease the recorded valuation allowance through a decrease to tax expense in the period in which that determination is made.

In the ordinary course of business there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the Consolidated Financial Statements.

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. The fair value of the consideration paid, including contingent consideration, is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed.

We review our goodwill for impairment on an annual basis at July 1 or more frequently if events or a change in circumstances indicate that the carrying amount may not be recoverable. We test goodwill for impairment at a level within the Company referred to as the reporting unit, which is one level below the operating segment level. We have determined there are three reporting units within each business segment.

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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 qualitative assessment requires judgments by management about economic conditions including the entity’s operating environment, its industry and other market considerations, entity-specific events related to financial performance or loss of key personnel and other events that could impact the reporting unit. If management concludes, based on assessment of relevant events, facts and circumstances, that it is more likely than not that a reporting unit’s fair value is greater than its carrying value, no further impairment testing is required. If we determine, based on this assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying value, we perform a quantitative goodwill impairment test by comparing the reporting unit’s fair value with its carrying value. An impairment loss is recognized for the amount by which the reporting unit’s carrying value exceeds its fair value, up to the total amount of goodwill allocated to the reporting unit. No impairment loss is recognized if the fair value of the reporting unit exceeds its carrying value.

We completed the annual goodwill impairment test for all of our reporting units as of July 1, 2025 and determined 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.

Contingent Liabilities

Otis is party to litigation related to a number 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. The outcome of these matters may have a material effect on the financial position, results of operations or cash flows. Management regularly analyzes current information about these matters and accrues for contingent losses that are probable and reasonably estimable. To assess the exposure to potential liability, we consult with relevant internal and external counsel. In making the decision regarding the need for loss accruals, management considers the degree of probability of an unfavorable outcome and the ability to make a sufficiently reliable estimate of the amount of loss. See Part I, Item 1A in this Form 10-K for further discussion.

Employee Benefit Plans

We sponsor domestic and international defined benefit pension and other postretirement plans. Major assumptions used in the accounting for these employee benefit plans include the discount rate, expected return on plan assets, rate of increase in employee compensation levels and mortality rates. Assumptions are determined based on company data and appropriate market indicators, and are evaluated each year as of December 31. A change in any of these assumptions would have an effect on net periodic pension and postretirement benefit costs reported in the Consolidated Financial Statements.

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.

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.

The weighted-average discount rates used to measure pension liabilities and costs are generally based on yield curves developed utilizing high quality corporate bonds, as well as each plan’s specific cash flows, and are compared to high-quality bond indices for reasonableness. The weighted-average discount rate used to measure pension liabilities was 3.6% in 2025 and 3.3% in 2024, reflecting changes in market interest rates.

See "Note 11: Employee Benefit Plans" to the Consolidated Financial Statements in Item 8 in this Form 10-K for further discussion.

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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. 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. See also "Note 11: Employee Benefit Plans" to the Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion of our expected pension and postretirement contributions.

Long-term Debt

See "Note 8: Borrowings and Lines of Credit" to the Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion of our long-term debt principal payments as of December 31, 2025. 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.

Purchase Obligations

Purchase obligations include amounts committed for the purchase of goods and services under legally enforceable contracts or purchase orders. Where it is not practically feasible to determine the legally enforceable portion of our obligation under certain of our long-term purchase agreements, we include additional expected purchase obligations beyond what may be legally enforceable. We enter into contractual purchase commitments with suppliers and service vendors to support our information technology that are either necessary to operate our business or result from implementing strategic initiatives. 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. The timing of expected cash flows associated with these obligations is based upon management's estimates over the terms of these agreements and is largely based upon historical experience. 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.

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Unrecognized Tax Benefits

Otis has unrecognized tax benefits of $152 million as of December 31, 2025. The timing of when such unrecognized tax benefits will become realizable is uncertain. See "Note 14: Income Taxes" to the Consolidated Financial Statements in Item 8 in this Form 10-K for additional discussion on unrecognized tax benefits.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our primary market exposures are to fluctuations in foreign currency exchange rates, commodity prices and interest rates. To manage certain of those exposures, we use derivative instruments, including forward contracts. Derivative instruments utilized in our hedging activities are viewed as risk management tools, involve relatively little complexity and are not used for trading or speculative purposes. We diversify the counterparties used and monitor the concentration of risk to limit our counterparty exposure.

To quantify our market risk exposure, we perform a sensitivity analysis based on hypothetical changes in foreign currency exchange rates and interest rates.

Refer to "Note 2: Summary of Significant Accounting Policies", "Note 8: Borrowings and Lines of Credit" and "Note 16: Financial Instruments" in 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.

Foreign Currency Risk

For our non-U.S. based entities, a substantial portion of revenues are generated, and costs are incurred, in local currencies. We transact business in various foreign currencies, which exposes our cash flows and earnings to changes in foreign currency exchange rates. We periodically enter into sales contracts denominated in currencies other than the functional currency of the parties to the transaction, which can create foreign exchange exposure.

The value of certain foreign currencies as compared to the U.S. dollar may impact Otis’ financial results. We 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.

We manage foreign currency exposures associated with committed foreign currency purchases and sales, as well as foreign currency denominated assets and liabilities that are created in the ordinary course of business. Foreign exchange exposures arising from intercompany loan and deposit transactions are also hedged regularly. 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. 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. We believe these foreign currency forward exchange contracts and the offsetting underlying commitments or investments, when taken together, do not create material market risk.

While the objective of the hedging program is to minimize the foreign currency exchange impact on operating results, there are typically variances between the hedging gains or losses and the translational impact due to the length of hedging contracts, changes in the sales profile, volatility in the exchange rates and other such operational considerations. Otis does not enter into hedging contracts for speculative purposes.

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). As of December 31, 2025, these net investment hedges are deemed to be effective.

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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. 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.

Commodity Price Risk

The fluctuation in prices of certain raw materials may impact Otis' financial results. We are exposed to volatility in the prices of commodities used in some of our products and component parts, such as steel, aluminum and copper, among others. When possible and appropriate, we maintain fixed price contracts on raw materials and component parts. However, we are prone to exposure as these contracts expire. When possible and appropriate, we also include price escalation linked to commodity prices in contracts with our customers and take pricing actions for future contracts. However, products and services delivered to our customers can be provided a year or more after being agreed to, and not all raw material price increases can be passed along to customers with existing contracts. Therefore, when commodity price risk is not mitigated by other methods, we may enter into hedging contracts. Otis does not enter into hedging contracts for speculative purposes.

Commodity hedging contracts are sensitive to changes in commodity prices, but any losses or gains would be offset by corresponding gains or losses in the underlying commodity purchases being hedged. 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 fair value of our fixed-rate debt as of December 31, 2025 and 2024. 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. Therefore, we believe our exposure to interest rate risk on our fixed-rate debt is not material.

From time to time, we may hedge floating rates using interest rate swaps. 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.

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Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND

FINANCIAL STATEMENT SCHEDULE


						Page
Management's Report on Internal Control Over Financial Reporting						51
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)						52
Consolidated Statements of Operations for the years ended December 31, 202 5 , 202 4 and 202 3						54
Consolidated Statements of Comprehensive Income for the years ended December 31, 202 5 , 202 4 and 202 3						55
Consolidated Balance Sheets as of December 31, 202 5 and 202 4						56
Consolidated Statements of Changes in Equity for the years ended December 31, 202 5 , 202 4 and 202 3						57
Consolidated Statements of Cash Flows for the years ended December 31, 202 5 , 202 4 and 202 3						58
Notes to Consolidated Financial Statements						59
Financial Statement Schedule - Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 202 5 , 202 4 and 202 3						99

(All other schedules are not required and have been omitted)

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Management's Report on Internal Control over Financial Reporting

The management of Otis is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management has assessed the effectiveness of Otis' internal control over financial reporting as of December 31, 2025. In making its assessment, management has utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). Management concluded that based on its assessment, Otis' internal control over financial reporting was effective as of December 31, 2025. The effectiveness of Otis' internal control over financial reporting, as of December 31, 2025, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.


OTIS WORLDWIDE CORPORATION (Registrant)

by:			/s/ Judith F. Marks
			Judith F. Marks
			Chair, President and Chief Executive Officer

by:			/s/ Cristina Méndez
			Cristina Méndez
			Executive Vice President and Chief Financial Officer


by:			/s/ Michael P. Ryan
			Michael P. Ryan
			Senior Vice President and Chief Accounting Officer

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Otis Worldwide Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Otis Worldwide Corporation and its subsidiaries (the "Company") as of December 31, 2025 and 2024, and the related consolidated statements of operations, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes and financial statement schedule listed in the accompanying index (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimated Costs at Completion for New Equipment and Modernization Contracts

As described in Notes 2 and 21 to the consolidated financial statements, the Company recognized $5.0 billion and $1.9 billion of revenue from new equipment and modernization contracts, respectively, for the year ended December 31, 2025. For new equipment and modernization contracts, equipment and installation are typically procured in a single contract providing the customer with a complete installed elevator or escalator unit. The combination of equipment and installation promises are typically a single performance obligation. For these performance obligations, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress. As disclosed by management, contract costs are usually incurred over a period of time, which can be several years, and the estimation of these costs requires management’s judgment. The long-term nature of the contracts, the complexity of the products and the scale of the projects can affect management’s ability to estimate costs precisely. In developing the cost estimates, management utilizes a combination of the historical costs and expected costs considering current circumstances. Management reviews cost estimates for modification on significant new equipment and modernization contracts on a quarterly basis and when circumstances change and, for others, no less frequently than annually or when circumstances change and warrant a modification to a previous estimate. Management records changes in contract estimates using the cumulative catch-up method and reviews changes in contract estimates for their impact on net sales or operating profit in the consolidated financial statements. 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.

The principal considerations for our determination that performing procedures relating to revenue recognition - estimated costs at completion for new equipment and modernization contracts is a critical audit matter are the significant judgment by management to determine the estimated costs at contract completion, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the estimated expected labor and indirect labor costs used in the development of estimated costs at contract completion.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the determination of the estimated costs at contract completion and development of the significant assumptions related to the estimated expected labor and indirect labor costs. These procedures also included, among others, evaluating and testing management’s process for developing and modifying estimated costs at contract completion for a sample of contracts, which included evaluating the reasonableness of significant assumptions related to the estimated expected labor and indirect labor costs considered by management specific to each contract. Evaluating the reasonableness of the estimated expected labor and indirect labor costs involved assessing management’s ability to reasonably estimate costs at completion by (i) testing costs incurred to date and obtaining a sample of executed contracts and related change orders, (ii) performing a comparison of the margin, driven by the estimated and actual costs incurred, to that of similar completed equipment contracts, and (iii) evaluating the timely identification of circumstances that may warrant a modification to estimated total cost to complete.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut

February 5, 2026

We have served as the Company’s auditor since 2019.

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OTIS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS



(dollars in millions, except per share amounts; shares in millions)	2025		2024		2023
Net sales:
Product sales	$	4,989	$	5,367	$	5,812
Service sales	9,442		8,894		8,397
	14,431		14,261		14,209
Costs and expenses:
Cost of products sold	4,182		4,459		4,843
Cost of services sold	5,879		5,545		5,173
Research and development	152		152		144
Selling, general and administrative	1,979		1,861		1,884
	12,192		12,017		12,044
Other income (expense), net	(106)		(236)		21
Operating profit	2,133		2,008		2,186
Non-service pension cost (benefit)	3		—		5
Interest expense (income), net	196		(31)		150
Net income before income taxes	1,934		2,039		2,031
Income tax expense	479		305		533
Net income	1,455		1,734		1,498
Less: Noncontrolling interest in subsidiaries' earnings	71		89		92








Net income attributable to Otis Worldwide Corporation	$	1,384	$	1,645	$	1,406



Earnings per share (Note 3):

Basic	$	3.52	$	4.10	$	3.42
Diluted	$	3.50	$	4.07	$	3.39

Weighted average number of shares outstanding
Basic shares	392.8		401.7		411.4
Diluted shares	394.9		404.4		414.6

See accompanying Notes to Consolidated Financial Statements.

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OTIS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



(dollars in millions)	2025		2024		2023


Net income	$	1,455	$	1,734	$	1,498
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax	(366)		(13)		(93)
Pension and postretirement benefit plan adjustments:
Net actuarial gain (loss)	63		(2)		(90)
Prior service credit	(5)		—		—
Amortization of actuarial (gain) loss and prior service credit	3		—		(1)
Other	(5)		6		(1)
	56		4		(92)
Tax benefit (expense)	(15)		(2)		22
Pension and postretirement benefit plan adjustments, net of tax	41		2		(70)
Change in unrealized cash flow hedging:
Unrealized cash flow hedging gain (loss)	(3)		2		6
Adjustment for net (gain) loss realized and included in net income	2		—		(8)
Change in unrealized cash flow hedging, net of tax	(1)		2		(2)
Tax benefit (expense)	(1)		—		—
Change in unrealized cash flow hedging, net of tax	(2)		2		(2)

Other comprehensive income (loss), net of tax	(327)		(9)		(165)
Comprehensive income (loss), net of tax	1,128		1,725		1,333
Less: Comprehensive (income) loss attributable to noncontrolling interest	(86)		(75)		(85)
Comprehensive income attributable to Otis Worldwide Corporation	$	1,042	$	1,650	$	1,248

See accompanying Notes to Consolidated Financial Statements.

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OTIS WORLDWIDE CORPORATION

CONSOLIDATED BALANCE SHEETS


(dollars in millions)	2025		2024
Assets
Cash and cash equivalents	$	1,096	$	2,300

Accounts receivable (net of allowance for expected credit losses of $125 and $125)	3,688		3,428
Contract assets	699		706
Inventories	613		557
Other current assets	405		679
Total Current Assets	6,501		7,670
Future income tax benefits	407		302
Fixed assets, net	743		701
Operating lease right-of-use assets	554		422
Intangible assets, net	343		311
Goodwill	1,695		1,548
Other assets	410		362
Total Assets	$	10,653	$	11,316

Liabilities and Equity (Deficit)
Short-term borrowings and current portion of long-term debt	$	1,056	$	1,351
Accounts payable	2,142		1,879
Accrued liabilities	1,847		1,921
Contract liabilities	2,611		2,598

Total Current Liabilities	7,656		7,749
Long-term debt	6,900		6,973
Future pension and postretirement benefit obligations	419		434
Operating lease liabilities	397		298
Future income tax obligations	223		207
Other long-term liabilities	329		383
Total Liabilities	15,924		16,044
Commitments and contingent liabilities (Note 20)
Redeemable noncontrolling interest	75		57
Shareholders' Equity (Deficit):
Common Stock and additional paid-in-capital	333		265
Treasury Stock	(4,198)		(3,390)

Accumulated deficit	(440)		(978)

Accumulated other comprehensive income (loss)	(1,087)		(745)
Total Shareholders' Equity (Deficit)	(5,392)		(4,848)
Noncontrolling interest	46		63
Total Equity (Deficit)	(5,346)		(4,785)
Total Liabilities and Equity (Deficit)	$	10,653	$	11,316

See accompanying Notes to Consolidated Financial Statements.

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OTIS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY


(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' (Deficit) Equity		Noncontrolling Interest		Total (Deficit) Equity		Redeemable Noncontrolling Interest
Balance as of December 31, 2022	$	162	$	(1,575)	$	(2,865)	$	(592)	$	(4,870)	$	71	$	(4,799)	$	135
Net income	—		—		1,406		—		1,406		83		1,489		9
Other comprehensive income (loss), net of tax	—		—		—		(158)		(158)		(3)		(161)		(4)
Stock-based compensation and Common Stock issued under employer plans	51		—		(2)		—		49		—		49		—
Cash dividends declared ($1.31 per Common Share)	—		—		(539)		—		(539)		—		(539)		—
Repurchase of Common Shares	—		(807)		—		—		(807)		—		(807)		—
Dividends attributable to noncontrolling interest	—		—		—		—		—		(79)		(79)		(9)

Acquisitions, disposals and other changes	—		—		(5)		—		(5)		(3)		(8)		4

Balance as of December 31, 2023	213		(2,382)		(2,005)		(750)		(4,924)		69		(4,855)		135



Net income	—		—		1,645		—		1,645		80		1,725		9
Other comprehensive income (loss), net of tax	—		—		—		5		5		(5)		—		(9)
Stock-based compensation and Common Stock issued under employer plans	53		—		(3)		—		50		—		50		—
Cash dividends declared ($1.51 per Common Share)	—		—		(606)		—		(606)		—		(606)		—
Repurchase of Common Shares	—		(1,008)		—		—		(1,008)		—		(1,008)		—
Dividends attributable to noncontrolling interest	—		—		—		—		—		(81)		(81)		(12)
Acquisitions, disposals and other changes	(1)		—		(9)		—		(10)		—		(10)		(66)
Balance as of December 31, 2024	265		(3,390)		(978)		(745)		(4,848)		63		(4,785)		57
Net income	—		—		1,384		—		1,384		65		1,449		6
Other comprehensive income (loss), net of tax	—		—		—		(342)		(342)		8		(334)		7
Stock-based compensation and Common Stock issued under employer plans	71		—		(3)		—		68		—		68		—
Cash dividends declared ($1.65 per Common Share)	—		—		(647)		—		(647)		—		(647)		—
Repurchase of Common Shares	—		(808)		—		—		(808)		—		(808)		—
Dividends attributable to noncontrolling interest	—		—		—		—		—		(63)		(63)		(5)

Acquisitions, disposals and other changes	(3)		—		(196)		—		(199)		(27)		(226)		10
Balance as of December 31, 2025	$	333	$	(4,198)	$	(440)	$	(1,087)	$	(5,392)	$	46	$	(5,346)	$	75

See accompanying Notes to Consolidated Financial Statements.

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OTIS WORLDWIDE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS


(dollars in millions)	2025		2024		2023
Operating Activities:
Net income	$	1,455	$	1,734	$	1,498
Adjustments to reconcile net income to net cash flows provided by operating activities, net of acquisitions and dispositions:
Depreciation and amortization	175		181		193
Deferred income tax expense (benefit)	(104)		(31)		(61)
Stock compensation cost	80		73		64



Gain from reversal of German Tax Litigation interest accrual (Note 1)	—		(50)		—
Change in:
Accounts receivable, net	(111)		(68)		(239)
Contract assets and liabilities, current	(71)		(40)		(30)
Inventories	(25)		26		15
Other current assets	225		(354)		38
Accounts payable	181		57		152
Accrued liabilities	(140)		85		33


Pension and postretirement contributions	(43)		(51)		(48)
Other operating activities, net	(26)		1		12
Net cash flows provided by operating activities	1,596		1,563		1,627
Investing Activities:
Capital expenditures	(152)		(126)		(138)
Acquisitions of businesses and intangible assets, net of cash (Note 7)	(109)		(87)		(36)

Net proceeds from the sale of fixed assets	60		6		7
Proceeds from sale of (investments in) marketable securities, net	—		(9)		4

Receipts (payments) on settlements of derivative contracts, net	(204)		49		(28)
Other investing activities, net	(1)		3		8
Net cash flows provided by (used in) investing activities	(406)		(164)		(183)
Financing Activities:
Net proceeds from (repayments of) borrowings (maturities of 90 days or less)	(25)		11		(113)
Proceeds from borrowings (maturities longer than 90 days)	167		—		—

Proceeds from issuance of long-term debt	500		1,497		747
Payment of debt issuance costs	(5)		(11)		(6)
Repayment of long-term debt	(1,300)		—		(534)

Dividends paid on Common Stock	(647)		(606)		(539)
Repurchases of Common Stock	(809)		(1,007)		(800)
Acquisition of noncontrolling interest shares (Note 1)	(217)		(75)		—
Dividends paid to noncontrolling interest	(69)		(94)		(85)

Other financing activities, net	(16)		(24)		(20)
Net cash flows provided by (used in) financing activities	(2,421)		(309)		(1,350)





Effect of foreign exchange rate changes on cash and cash equivalents	15		(49)		(9)
Net increase (decrease) in cash and cash equivalents	(1,216)		1,041		85
Cash, cash equivalents and restricted cash, beginning of year	2,321		1,280		1,195
Cash, cash equivalents and restricted cash, end of year	1,105		2,321		1,280
Less: Restricted cash	9		21		6
Cash and cash equivalents, end of period	$	1,096	$	2,300	$	1,274
Supplemental cash flow information:
Interest paid	$	230	$	172	$	132

See accompanying Notes to Consolidated Financial Statements.

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Note 1: Business Overview

Otis (as defined below) is the world’s largest elevator and escalator manufacturing, installation and service company. Our operations are classified into two 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, for 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.

UpLift

During 2023, the Company announced UpLift to transform the Company's operating model. UpLift includes, among other aspects, the standardization of processes and improvement of supply chain procurement, as well as organizational changes which result in restructuring actions. See Note 15, "Restructuring and Transformation Costs" for information regarding UpLift restructuring actions and related costs incurred.

German Tax Litigation

In August 2024, we received a favorable ruling regarding a tax litigation in Germany. As a result, income tax benefits of approximately $185 million and related interest income of approximately $200 million are included in Income tax expense (benefit) and Interest expense (income), net, respectively, in the Consolidated Statements of Operations for 2024. The income tax benefits are recorded as an income tax receivable in Other current assets in the Consolidated Balance Sheets as of December 31, 2024. The interest income includes the reversal of an interest accrual of $50 million and recognition of an interest receivable of approximately $140 million reflected in Accrued liabilities and Other current assets, respectively, in the Consolidated Balance Sheets as of December 31, 2024.

The Company has started to receive refunds and anticipates the refund process to continue into 2026. As a result, Other current assets in the Consolidated Balance Sheets as of December 31, 2025 and 2024 include an income tax receivable of approximately $75 million and $175 million, respectively, and an interest receivable of approximately $65 million and $140 million, respectively.

Pursuant to the Tax Matters Agreement ("TMA") with RTX Corporation ("RTX", our former parent), and based on the facts and contractual provisions at the time, the Company recorded indemnification expense of $194 million for amounts due to RTX resulting from the outcome of this tax litigation in Germany in 2024. Based on additional information received from RTX during the year, which resulted in additional indemnification expense of $67 million, offset by indemnity payments made to RTX of $205 million, the Company now estimates the amount payable to RTX to be $56 million. The indemnification expense is included in Other income (expense), net in the Consolidated Statements of Operations in 2025 and 2024, and the amounts payable to RTX are included in Accrued liabilities in the Consolidated Balance Sheets as of December 31, 2025 and 2024, respectively.

See Note 14, "Income Taxes" and Note 20, "Contingent Liabilities" for additional information.

Acquisitions of Noncontrolling Interests

In October 2025, we purchased all of the outstanding shares of Otis Electric Elevator Company Limited ("Otis Electric") from the noncontrolling shareholder for approximately $215 million ($80 million from Cash and $135 million from borrowings). As a result, $188 million was recorded to Accumulated deficit for the difference between the purchase price and the historical noncontrolling interest carrying value and $27 million was recorded to Noncontrolling interest. Otis Electric is now 100% owned by our joint venture Otis Elevator (China) Investment Company Limited ("Otis China") and one of its subsidiaries. The impact to Accumulated other comprehensive income (loss) was not significant.

The Company owned a controlling interest and had operational control of Otis Electric as of and for the years ended December 31, 2025, 2024 and 2023, and all other periods during 2025, 2024 and 2023, and therefore its financial results are included in our Consolidated Financial Statements.

In 2024, we purchased all of the outstanding shares of our consolidated subsidiary in Japan from the noncontrolling shareholders for approximately $70 million.

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Separation from United Technologies Corporation

On April 3, 2020, United Technologies Corporation, subsequently renamed to RTX Corporation ("UTC" or "RTX", as applicable), completed the spin-off of the Company into an independent publicly-traded company (the "Separation") through a pro-rata distribution of 0.5 shares of Common Stock for every share of UTC common stock held at the close of business on the record date of March 19, 2020 ("Distribution"). Otis began to trade as a separate public company (New York Stock Exchange ("NYSE"): OTIS) on April 3, 2020. See Note 2, "Summary of Significant Accounting Policies" for additional information regarding the Separation and related costs.

Unless the context otherwise requires, references to "Otis", "we", "us", "our" and "the Company" refer to (i) Otis Worldwide Corporation's business prior to the Separation and (ii) Otis Worldwide Corporation and its subsidiaries following the Separation, as applicable. References to "UTC" relate to pre-Separation matters, and references to "RTX" relate to post-Separation matters.

Note 2: Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation. The accompanying Consolidated Financial Statements include the accounts of Otis and its controlled subsidiaries, as well as entities where Otis has a variable interest and is the primary beneficiary as defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 810, Consolidation. The factors we use to determine the primary beneficiary of a variable interest entity ("VIE") may include decision authority, control over management of day-to-day operations and the amount of our equity investment in relation to others' investments.

All significant intercompany accounts and transactions within the Company have been eliminated in the preparation of the Consolidated Financial Statements.

Certain amounts for prior years have been reclassified to conform to the current year presentation, which are immaterial.

Use of Estimates. The preparation of the Consolidated Financial Statements and accompanying notes in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. In addition, estimates and assumptions may impact the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. 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 conditions, including inflationary pressures, higher interest rates and tighter credit conditions as of December 31, 2025 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 Consolidated Financial Statements resulting from our assessments of these matters, future assessment of our current expectations at that time of the magnitude and duration of these macroeconomic conditions, as well as other factors, could result in material impacts to our Consolidated Financial Statements in future reporting periods.

New import tariffs implemented 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 Consolidated Financial Statements 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.

Cash and Cash Equivalents. Cash and cash equivalents includes cash on hand, demand deposits and short-term cash investments that are highly liquid in nature and have original maturities of three months or less.

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Restricted Cash. In certain circumstances we are required to maintain cash deposits with certain banks with respect to contractual or other legal obligations, and therefore the use of these cash deposits for general operational purposes is restricted. Our restricted cash balances are $9 million and $21 million as of December 31, 2025 and 2024, respectively, which are primarily included in Other current assets in the Consolidated Balance Sheets.

Accounts Receivable. The Company records accounts receivable when the right to consideration becomes unconditional. We regularly evaluate the collectability of our accounts receivable and maintain reserves for expected credit losses. We do not believe that accounts receivable represent significant concentrations of credit risk because of the diversified portfolio of individual customers and geographic areas.

Trade receivables. Trade receivables as of December 31, 2025 and 2024 are $3.7 billion and $3.4 billion, respectively. Trade receivables include billed receivables which are currently due from customers and unbilled receivables where we have satisfied our performance obligations but the amounts due may not be currently billable to the customer under the terms of the contract. Amounts are billed as work progresses in accordance with agreed-upon contract terms, either at periodic intervals or upon achievement of contractual milestones.

Retainage. Current and long-term accounts receivable as of December 31, 2025 and 2024 include retainage of $58 million and $57 million, respectively. Retainage represents amounts that, pursuant to the applicable contract, are not due until after project completion and acceptance by the customer.

Customer Financing Notes Receivable. Through financing arrangements with our customers, we extend payment terms, which are generally not more than one year in duration. Customer financing notes receivable as of December 31, 2025 and 2024 are $47 million and $55 million, respectively, and are included in Accounts receivable, net as of December 31, 2025 and 2024.

Credit Losses. We are exposed to credit losses primarily through our net sales of products and services to our customers which are recorded as Accounts Receivable, net in the Consolidated Balance Sheets. We evaluate each customer's ability to pay through assessing customer creditworthiness, historical experience and current economic conditions through a reasonable forecast period. Factors considered in our evaluation of assessing collectability and risk include: underlying value of any collateral or security interests, significant past due balances, historical losses and existing economic conditions including country and political risk. There can be no assurance that actual results will not differ from estimates or that consideration of these factors in the future will not result in an increase or decrease to the allowance for credit losses. We may require collateral or prepayment to mitigate credit risk.

We estimate expected credit losses of financial assets with similar risk characteristics. We determine an asset is impaired when our assessment identifies there is a risk that we will be unable to collect amounts due according to the contractual terms of the agreement. We monitor our ongoing credit exposure through reviews of customer balances against contract terms and due dates, current economic conditions and dispute resolution. Estimated credit losses are written off in the period in which the financial asset is no longer collectible.

The changes in allowance for credit losses related to Accounts receivable, net for 2025, 2024, and 2023 are as follows:


(dollars in millions)	2025		2024		2023
Balance as of January 1	$	125	$	130	$	152

Provision for expected credit losses	33		34		29
Write-offs charged against the allowance for expected credit losses	(39)		(32)		(48)
Foreign exchange and other	6		(7)		(3)
Balance as of December 31	$	125	$	125	$	130

Factoring. The Company may sell certain trade accounts and notes receivable to lending institutions primarily to manage credit risk. Financial assets sold under these arrangements are excluded from Accounts receivable, net in the Company’s Consolidated Balance Sheets at the time of sale if the Company has surrendered control over the related assets. Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of the Company’s continuing involvement with the assets transferred. Gains and losses stemming from transfers reported as sales are included in Interest expense (income), net in the accompanying Consolidated Statements of Operations.

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Contract Assets and Liabilities. Contract assets and liabilities represent the difference in the timing of revenue recognition from receipt of cash from our customers and billings.

Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billings. Performance obligations partially satisfied in advance of customer billings are included in Contract assets, current. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. See Note 4, "Contract Assets and Liabilities" for further discussion of contract assets and liabilities.

Inventories. Inventories are stated at the lower of cost or estimated realizable value and are primarily based on a first-in, first-out method. Valuation write-downs for excess, obsolete and slow-moving inventory are estimated by comparing the inventory levels of individual parts to both future sales forecasts or production requirements and historical usage rates in order to identify inventory where the resale value or replacement value is less than inventoriable cost. See Note 5, "Inventories" for further details of the inventories by classification.

Fixed Assets. Fixed assets, including software capitalized for internal-use, are recorded at cost. Depreciation of fixed assets is computed over the fixed assets' useful lives on a straight-line basis, unless another systematic and rational basis is more representative of the fixed asset's pattern of use. See Note 6, "Fixed Assets" for further details of useful lives.

Internal Use Software. The Company capitalizes direct costs of services used in the development of, and external software acquired for use as, internal-use software. Amounts capitalized are amortized over a period ranging from three to five years, on a straight-line basis, unless another systematic and rational basis is more representative of the software's use. Amounts are reported as a component of Machinery and equipment.

Asset Retirement Obligations. The Company records the fair value of legal obligations associated with the retirement of tangible long-lived assets in the period in which the legal obligations are determined to exist. Upon initial recognition of a liability, the Company capitalizes the cost of the asset retirement obligation by increasing the carrying amount of the related long-lived asset. Over time, the liability is adjusted for changes in its present value and the capitalized cost is depreciated over the useful life of the related asset.

Fair Value of Financial Instruments. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

Level I – Quoted prices for identical instruments in active markets.

Level II – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level III – Instruments whose significant value drivers are unobservable.

The carrying amount of current trade receivables, accounts payable and accrued expenses approximates fair value due to the short maturity (less than one year) of the instruments.

Equity Method Investments. Entities in which we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in Other assets in the Consolidated Balance Sheets. Under this method of accounting, our share of the net earnings or losses of the investee entity is included in Other income (expense), net in the Consolidated Statements of Operations since the activities of the investee entity are closely aligned with the operations of the Company. We evaluate our equity method investments whenever events or changes in circumstance indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

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Business Combinations. We account for transactions that are classified as business combinations in accordance with the FASB ASC Topic 805: Business Combinations. Once a business is acquired, the fair values of the identifiable assets acquired and liabilities assumed are determined with the excess cost recorded to goodwill. As required, preliminary fair values are determined once a business is acquired, with the final determination of the fair values being completed within the one-year measurement period from the date of acquisition.

Goodwill, Intangible Assets and Long-Lived Assets. Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Intangible assets consist of service portfolios, patents, trademarks/trade names, customer relationships and other intangible assets. Acquired intangible assets are recognized at fair value during acquisition accounting and then amortized to Cost of products and services sold and Selling, general and administrative over the applicable useful lives.

Goodwill and Indefinite-Lived Intangible Assets. Goodwill and intangible assets deemed to have indefinite lives are not amortized. Goodwill and indefinite-lived intangible assets are subject to impairment testing annually or when a triggering event occurs using the guidance and criteria described in FASB ASC Topic 350: Intangibles – Goodwill and Other. This testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value.

We test goodwill for impairment at a level within the Company referred to as the reporting unit, which is one level below the operating segment level. When testing goodwill for impairment, the Company may first assess qualitative factors. If an initial qualitative assessment identified that it is more likely than not that the fair value of a reporting unit is less than its carrying value, additional quantitative testing is performed. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, an impairment charge is recognized based on the difference between the reporting unit's carrying value and its fair value. When it is determined that a quantitative analysis is required, the Company primarily utilizes a discounted cash flow methodology to calculate the fair value of its reporting units. The Company completed its most recent annual impairment testing as of July 1, 2025, and determined in the qualitative assessment that quantitative testing is not necessary. There were no triggering events since the annual impairment test.

Finite-Lived Intangible Assets and Long-Lived Assets. Useful lives of finite-lived intangible assets are estimated based upon the nature of the intangible asset. These intangible assets are amortized based on the pattern in which the economic benefits of the intangible assets are consumed or if straight-line amortization approximates the pattern of economic benefit, a straight-line amortization method may be used. The range of estimated useful lives is as follows:


Purchased service portfolios						5 to 25 years
Patents, trademarks/trade names						4 to 40 years
Customer relationships and other						1 to 20 years

The Company evaluates the potential impairment of long-lived assets, including finite-lived intangible assets, whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. If the carrying value of other long-lived assets held and used exceeds the sum of the undiscounted expected future cash flows, the carrying value is written down to fair value. See Note 6, "Fixed Assets" and Note 7, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding intangible assets and other long-lived assets.

Income Taxes. In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Where applicable, associated interest expense has also been recognized. We recognize accrued interest related to unrecognized tax benefits in Interest expense (income), net. Penalties, if incurred, would be recognized as a component of Income tax expense.

The U.S. Tax Cuts and Jobs Act ("TCJA") subjects the Company to a tax on Global Intangible Low-Taxed Income ("GILTI"). GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. We account for GILTI as a period cost as incurred.

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See Note 14, "Income Taxes" for additional information.

Revenue Recognition. We recognize revenue in accordance with FASB ASC Topic 606: Revenue from Contracts with Customers and its related amendments, (referred to, collectively, as "ASC 606"). The Company's revenue streams include new equipment, maintenance and repair, and modernization. New equipment, modernization and repair services revenue are recognized over time as we are enhancing an asset the customer controls. Maintenance revenue is recognized on a straight-line basis over the life of the maintenance contract.

New Equipment, Modernization and Repair Services. For new equipment and modernization transactions, equipment and installation are typically procured in a single contract providing the customer with a complete installed elevator or escalator unit. The combination of equipment and installation promises are typically a single performance obligation. For repair services, the customer typically contracts for specific short-term services which form a single performance obligation.

For these performance obligations, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which corresponds with and best depicts transfer of control or the enhancement of the customer’s assets. 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. In developing our cost estimates, we utilize a combination of our historical cost experience and expected costs considering current circumstances. Specific to new equipment and modernization arrangements, the Company, based on project progression, reviews cost estimates for modification on significant contracts on a quarterly basis and when circumstances change, and for others, no less frequently than annually or when circumstances change and warrant a modification to a previous estimate. These estimates form the basis for the amount of revenue to be recognized and include the latest updated total transaction price, costs and risks for each contract. These estimates for our ongoing contracts may materially change due to the change and completions of the contract scopes, cost estimates and customers' plans, among other factors.

For performance obligations recognized under the cost to cost method, we record changes in contract estimates using the cumulative catch-up method. 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.

Maintenance. Our customers purchase maintenance contracts which include services such as required periodic maintenance procedures, preventive services and stand ready obligations to remediate issues with the elevator/escalator when and if they arise. Given the continuous nature of these services throughout the year, we recognize revenue on maintenance contracts on a straight-line basis which aligns with the cost profile of these services. Contractual changes are typically recognized prospectively as most modifications are extensions of the existing arrangement.

Transaction Price Considerations. Our contracts with customers typically include fixed payments to Otis. These fixed payments are generally received as we progress the performance obligations to the customers. As a result, we have not identified any significant financing elements in our contracts, and our contracts do not have significant estimates related to variable consideration except in the case of a project having an underlying performance issue, which is rare. In situations where multiple performance obligations in a single contract exist (e.g., both new equipment and maintenance), the transaction price is allocated to each performance obligation in proportion to its stand-alone selling price. Estimates are made to account for changes in transaction prices attributable to pricing disputes that occur subsequent to the inception of contracts, based upon historical experience and the status of contracts.

Certain Costs to Obtain or Fulfill Contracts. Certain costs to obtain or fulfill a contract with a customer must be capitalized, to the extent recoverable from the associated contract margin, and subsequently amortized as the products or services are delivered to the customer. Sales commissions related to new equipment, modernization and maintenance contracts, excluding renewals, are capitalized as contract fulfillment costs and are amortized consistent with the pattern of transfer of the goods or services. Customer contract costs, which do not qualify for capitalization as contract fulfillment costs, are expensed as incurred.

Loss Contracts. Loss provisions on contracts are recognized to the extent that estimated contract costs exceed the estimated consideration from the products or services contemplated under the contractual arrangement. For new commitments, we generally record loss provisions at contract inception. For existing commitments, anticipated losses on contractual arrangements are recognized in the period in which losses become probable.

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Remaining Performance Obligations ("RPO"). RPO represents the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. As of December 31, 2025, our total RPO was approximately $19.1 billion. Of the total RPO as of December 31, 2025, we expect approximately 75% will be recognized as sales over the following 24 months.

Additional disclosure required by ASC 606 is provided in Note 21, "Segment Financial Data", including disaggregation of revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

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 date 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. Our obligations to suppliers, including the amounts due and scheduled payment dates, are not impacted by the suppliers' decisions to sell their receivables to the financial institutions, or otherwise pledge their receivables as collateral, under these arrangements. The Company is not a party to the arrangements between the suppliers and the financial institutions, and the Company's payment terms to the financial institutions, including the timing and amount of payments, are based on the original supplier invoices.

Based on the applicable supplier agreements, the payment terms of these supplier invoices typically range between 30 and 240 days from the invoice date.

The outstanding obligations confirmed by the Company as valid to the financial institutions under our supplier finance programs were $831 million and $714 million as of December 31, 2025 and 2024, respectively, including $80 million and $67 million as of December 31, 2025 and 2024, respectively, related to programs with payment terms of 240 days from the invoice date. These obligations are included in Accounts payable in the Consolidated Balance Sheets, and all activity related to the obligations is presented within operating activities in the Consolidated Statements of Cash Flows.

The Company or the financial institutions may terminate the agreements with advanced notice. Otis has pledged no assets in connection with its supplier finance programs.

The changes in outstanding obligations confirmed as valid by the Company under its supplier finance programs for 2025 and 2024 are as follows:


(dollars in millions)	2025		2024
Confirmed obligations outstanding as of January 1	$	714	$	627
Invoices confirmed during the year	2,064		2,118
Confirmed invoices paid during the year	(1,970)		(2,013)
Foreign currency exchange impact	23		(18)
Confirmed obligations outstanding as of December 31	$	831	$	714

Self-Insurance. The Company is primarily self-insured for a number of risks including, but not limited to, workers’ compensation, general liability, automobile liability and employee-related healthcare benefits. The Company has obtained insurance coverage for amounts exceeding individual and aggregate loss limits. The Company accrues for known future claims and incurred but not reported losses within Accrued liabilities and Other long-term liabilities in the Consolidated Balance Sheets, totaling $240 million and $238 million as of December 31, 2025 and 2024, respectively.

Derivatives and Hedging Activity. We have used derivative instruments, principally forward contracts, to help manage certain foreign currency and commodity price exposures. Derivative instruments are viewed as risk management tools by us and are not used for trading or speculative purposes. By their nature, all financial instruments involve market and credit risks. We enter into derivative and other financial instruments with major investment-grade financial institutions and have policies to monitor the credit risk of those counterparties. We limit counterparty exposure and concentration of risk by diversifying counterparties. While there can be no assurance, we do not anticipate any material non-performance by any of these counterparties.

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Designated Derivative Instruments. Derivatives used for hedging purposes may be designated and effective as a hedge of the identified risk exposure at the inception of the contract. All derivative instruments are recorded in the Consolidated Balance Sheets at fair value. Derivatives are used to hedge foreign currency denominated balance sheet items and commodity prices for materials recognized in cost of sales, and are reported directly in earnings along with offsetting transaction gains and losses on the items being hedged. Derivatives used to hedge forecasted cash flows associated with foreign currency commitments or forecasted commodity purchases may be accounted for as cash flow hedges, as deemed appropriate. Gains and losses on derivatives designated as cash flow hedges are recorded in Other comprehensive income (loss), net of tax and reclassified to earnings as a component of product sales or expenses, as applicable, when the hedged transaction occurs. Gains and losses on derivatives designated as cash flow hedges are recorded in Other operating activities, net within the Consolidated Statement of Cash Flows until reclassification to earnings. To the extent that a previously designated hedging transaction is no longer an effective hedge, any ineffectiveness measured in the hedging relationship is recorded in earnings in the period it occurs.

Additional information pertaining to net investment hedging is included in Note 16, "Financial Instruments".

Non-Designated Derivative Instruments. To the extent the hedge accounting criteria are not applied, the foreign currency forward contracts and commodity price contracts are utilized as economic hedges and changes in the fair value of these contracts are recorded in earnings in the period in which they occur. Additional information pertaining to these contracts is included in Note 16, "Financial Instruments".

In addition, the Company periodically enters into sales contracts denominated in currencies other than the functional currency of the parties to the transaction. The Company accounts for these transactions separately valuing the embedded derivative component of these contracts. The changes in the fair value of these embedded derivatives are immaterial in 2025, 2024 and 2023.

Environmental. Environmental investigatory, remediation, operating and maintenance costs are accrued 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 with respect to each individual site, including current laws, regulations and prior remediation experience. Where no amount within a range of estimates is more likely, the minimum is accrued. Liabilities with fixed or reliably determinable future cash payments are discounted. Accrued environmental liabilities are not reduced by potential insurance reimbursements. See Note 20, "Contingent Liabilities" for additional details on the environmental remediation activities.

Research and Development. These costs are expensed in the period incurred and are shown on a separate line of the Consolidated Statements of Operations. Research and development expenses, covering research and the advancement of potential new and improved products and their uses, primarily include salaries and other employment costs.

Other Income (Expense), Net. Other income (expense), net includes the impact of changes in the fair value and settlement of certain derivatives, gains or losses on sale of businesses and fixed assets, earnings from equity method investments, fair value changes on marketable securities, impairments, UpLift transformation costs, Separation-related adjustments, gains on insurance recoveries and certain other infrequent operating income and expense items. See Note 15, "Restructuring and Transformation Costs" for additional details on UpLift transformation costs.

Foreign Exchange. We conduct business in many different currencies and, accordingly, are subject to the inherent risks associated with foreign exchange rate movements. The financial position and results of operations of substantially all of our foreign subsidiaries are measured using the local currency as the functional currency. Foreign currency denominated assets and liabilities are translated into U.S. dollars at the exchange rates existing at the respective balance sheet dates, and income and expense items are translated at the average exchange rates during the respective periods. The aggregate effects of translating the balance sheets of these subsidiaries are deferred within Accumulated other comprehensive income (loss).

Pension and Postretirement Obligations. Guidance under FASB ASC Topic 715: Compensation – Retirement Benefits requires balance sheet recognition of the overfunded or underfunded status of pension and postretirement benefit plans. Under this guidance, actuarial gains and losses, prior service costs or credits and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized in Other comprehensive income (loss), net of tax effects, until they are amortized as a component of net periodic benefit cost. See Note 11, "Employee Benefit Plans" for additional information.

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Additional Paid-in Capital. Additional paid-in capital includes the value of stock-based award activity, as well as the difference between the cost of acquiring the Noncontrolling interest in consolidated subsidiaries and Otis' carrying value of the Noncontrolling interest associated with those subsidiaries.

Noncontrolling Interest. Ownership interest in the Company's consolidated subsidiaries held by parties other than the Company are presented separately from Shareholders' Equity (Deficit) as "Noncontrolling interest" within equity in the Consolidated Balance Sheets. The amount of net income attributable to Otis Worldwide Corporation and the noncontrolling interest are both presented in the Consolidated Statements of Operations.

All noncontrolling interest with redemption features, such as put options or other contractual obligations to acquire the noncontrolling interest, that are not solely within our control are redeemable noncontrolling interest. Redeemable noncontrolling interest are reported in the mezzanine section of the Consolidated Balance Sheets, between Liabilities and Shareholders' Equity (Deficit), at the greater of redemption value or initial carrying value.

The activity attributable to noncontrolling interest and redeemable noncontrolling interest for 2025, 2024 and 2023 is presented in the Consolidated Statements of Changes in Equity.

Separation from UTC and Related Costs. The Separation, as further described in Note 1, "Business Overview", was completed pursuant to a Separation and Distribution Agreement ("Separation Agreement") and other agreements with our former parent, UTC, and Carrier Global Corporation ("Carrier"), related to the Separation, including but not limited to a tax matters agreement (the "Tax Matters Agreement" or "TMA").

We entered into the TMA with our former parent UTC and Carrier that governs the parties’ respective rights, responsibilities and obligations with respect to tax matters (including responsibility for taxes, entitlement to refunds, allocation of tax attributes, preparation of tax returns, control of tax contests and other tax matters). Subject to certain exceptions set forth in the TMA, Otis generally is responsible for federal, state and foreign taxes imposed on a separate return basis on Otis (or any of its subsidiaries) with respect to taxable periods (or portions thereof) that ended on or prior to the date of the Distribution. The TMA provides special rules that allocate responsibility for tax liabilities arising from a failure of the Separation transactions to qualify for tax-free treatment based on the reasons for such failure.

Accounting Pronouncements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"), which provides temporary optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments in ASU 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. Additionally, in December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 ("ASU 2022-06"), which allows ASU 2020-04 to be adopted and applied prospectively to contract modifications made on or before December 31, 2024. The adoption of this ASU did not have a material impact on our Consolidated Financial Statements.

In September 2022, the FASB issued ASU 2022-04, Liabilities - Supplier Finance Programs (Topic 450-50): Disclosure of Supplier Finance Program Obligations, which requires entities that use supplier finance programs in connection with the purchase of goods and services to disclose the key terms of the programs and information about obligations outstanding at the end of the reporting period, including a rollforward of those obligations. The guidance does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. ASU 2022-04 is effective for fiscal years beginning after December 15, 2022, except for the disclosure of rollforward information, which is effective for fiscal years beginning after December 15, 2023. The adoption of this ASU did not have a material impact on our Consolidated Financial Statements, as disclosed in Note 2, "Summary of Significant Accounting Policies" under the heading "Supplier Finance Programs".

In August 2023, the FASB issued ASU 2023-05, Business Combinations - Joint Ventures Formations (Subtopic 805-60): Recognition and Initial Measurement ("ASU 2023-05"), which requires that joint ventures, upon formation, apply a new basis of accounting by initially measuring assets and liabilities at fair value. The amendments in ASU 2023-05 are effective for joint ventures that are formed on or after January 1, 2025. The adoption of this ASU did not have a material impact on our Consolidated Financial Statements.

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In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. We adopted this standard effective for the reporting period December 31, 2024. The adoption of this standard resulted in additional disclosure. See Note 21, "Segment Financial Data" for further details.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024. The adoption of this ASU resulted in additional annual disclosure, but did not impact our consolidated financial position, results of operations, or cash flows.

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 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 Consolidated Financial Statements.

In July 2025, the FASB issued 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 are currently evaluating the impact of this standard, however; we do not expect it to have a material impact on our 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 non-exchange-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.

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In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. Consistent with the original objective of Update 2017-12, the objective of this Update is to more closely align hedge accounting with the economics of an entity’s risk management activities. The amendments in this Update are intended to 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 December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The amendments in this Update result in a comprehensive list of interim disclosures that are required by GAAP. In developing the list of disclosures required by other Topics, the Board focused on identifying the interim disclosures that are currently required under GAAP. The objective of the amendments is to provide clarity about the current requirements, rather than evaluate whether to expand or reduce interim disclosure requirements. The amendments in ASU 2025-11 are effective for fiscal years beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. We are currently evaluating the impact of this standard.

Other new accounting pronouncements issued but not effective until after December 31, 2025 did not and are not expected to have a material impact on our financial position, results of operations or cash flows.

Note 3: Earnings per Share


(dollars in millions, except per share amounts; shares in millions)	2025		2024		2023
Net income attributable to common shareholders	$	1,384	$	1,645	$	1,406

Basic weighted average number of shares outstanding	392.8		401.7		411.4
Stock awards and equity units (share equivalent)	2.1		2.7		3.2
Diluted weighted average number of shares outstanding	394.9		404.4		414.6

Earnings Per Share of Common Stock:
Basic	$	3.52	$	4.10	$	3.42
Diluted	$	3.50	$	4.07	$	3.39

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 the 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 from UTC and converted upon the Separation, in accordance with the Employee Matters Agreement. There were 0.4 million, 0.7 million and 1.0 million of anti-dilutive stock awards excluded from the computation for 2025, 2024 and 2023 respectively.

The impact of redeemable noncontrolling interest to Net income attributable to common shareholders was immaterial for 2025, 2024, and 2023.

Note 4: Contract Assets and Liabilities

Contract assets reflect revenue recognized in advance of customer billings. 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.

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Total Contract assets and Contract liabilities as of December 31, 2025 and 2024 are as follows:


(dollars in millions)	2025		2024
Contract assets, current	$	699	$	706

Total contract assets	699		706

Contract liabilities, current	(2,611)		(2,598)
Contract liabilities, noncurrent (included within Other long-term liabilities)	(29)		(38)
Total contract liabilities	(2,640)		(2,636)
Net contract liabilities	$	(1,941)	$	(1,930)

Contract assets decreased by $7 million and Contract liabilities increased by $4 million during 2025 due to the progression of current contracts and timing of billing on customer contracts, net of the foreign exchange increases of $33 million and $120 million, respectively.

During 2025, 2024 and 2023, we recognized revenue of approximately $2.0 billion each year related to the contract liabilities as of January 1, 2025, 2024, and 2023.

Note 5: Inventories

Inventories consisted of the following as of December 31:


(dollars in millions)	2025		2024
Raw materials and work-in-process	$	139	$	134
Finished goods	474		423
Total	$	613	$	557

Raw materials and work-in-process and finished goods are net of valuation write-downs of $84 million and $82 million as of December 31, 2025 and 2024, respectively.

Note 6: Fixed Assets

Fixed assets consisted of the following as of December 31:


(dollars in millions)	Estimated Useful Lives	2025		2024
Land		$	39	$	38
Buildings and improvements	20 - 40 Years	498		516
Machinery and equipment	3 - 12 Years	1,311		1,234
Assets under construction		156		105
		2,004		1,893
Less: Accumulated depreciation		(1,261)		(1,192)
Total		$	743	$	701

Depreciation expense was $113 million, $120 million and $126 million in 2025, 2024 and 2023, respectively.

Note 7: Business Acquisitions, Dispositions, Goodwill and Intangible Assets

Business Acquisitions. Our acquisitions of businesses and intangible assets, net of cash, totaled $109 million, $87 million and $36 million (including debt assumed) in 2025, 2024 and 2023, respectively, and were primarily in our Service segment. Transaction costs incurred were not considered significant.

Table of Contents

Goodwill. Changes in our Goodwill balances in 2025 were as follows:


(dollars in millions)	Balance as of December 31, 2024		Goodwill Resulting From Business Combinations		Foreign Currency Translation and Other		Balance as of December 31, 2025
New Equipment	$	277	$	—	$	17	$	294
Service	1,271		65		65		1,401
Total	$	1,548	$	65	$	82	$	1,695

Changes in our Goodwill balances in 2024 were as follows:


(dollars in millions)	Balance as of December 31, 2023		Goodwill Resulting From Business Combinations		Foreign Currency Translation and Other		Balance as of December 31, 2024
New Equipment	$	295	$	—	$	(18)	$	277
Service	1,293		46		(68)		1,271
Total	$	1,588	$	46	$	(86)	$	1,548

Intangible Assets. Identifiable intangible assets are comprised of the following:


	2025				2024
(dollars in millions)	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Amortized:
Purchased service portfolios	$	2,133	$	(1,818)	$	1,930	$	(1,640)
Patents, trademarks/trade names	19		(16)		18		(16)
Customer relationships and other	61		(43)		52		(39)
	2,213		(1,877)		2,000		(1,695)
Unamortized:
Trademarks and other	7		—		6		—
Total	$	2,220	$	(1,877)	$	2,006	$	(1,695)

Amortization of intangible assets was $62 million in 2025 and 2024, and $67 million in 2023. Excluding the impact of acquisitions, currency translation adjustments and the reclassification of $16 million of intangible assets, net to assets held for sale in 2024, there were no other significant changes in our Intangible Assets during 2025, 2024 and 2023.

The estimated future amortization of intangible assets over the next five years is as follows:

Otis Worldwide Corp 10-K