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Otis Worldwide Corporation’s Service Boom — Why Are Margins Moving Backward?

Otis Worldwide Corporation reported solid top-line growth driven primarily by a robust performance in its Service segment amid improving trends in new equipment sales and strong cash generation during the second quarter of 2026. The company achieved 6% organic sales growth overall, with Service sales up 9% organically—bolstered by modernization growth of 24%, double-digit repair growth, and accelerating maintenance trends. Modernization orders increased 9%, contributing to a backlog growth of 26% at constant currency, underscoring strong customer demand and execution capabilities. Despite volume growth, adjusted operating profit declined by $32 million relative to the prior year (excluding a $7 million foreign exchange tailwind), and adjusted operating margin reduced by 180 basis points to 15.2%. The Service segment operating margin narrowed by 170 basis points to 23.2%, impacted by higher labor and material costs alongside investments in service quality initiatives and portfolio mix shifts favoring modernization.