OTIS · Q2 2026 Earnings

Cautious

Otis Worldwide

Reported July 22, 2026

30-second summary

Otis printed Q2 revenue of $3.86B (+7% reported / +6% organic YoY) and non-GAAP EPS of $1.01 versus a prior guide of -3% to -5% YoY — a clean beat that clears the entire H1 bar. But management then cut FY26 adjusted EPS from $4.20–4.24 to $4.01–4.05 (-$0.20 midpoint, -4.7%), FY operating profit from ~$2.5B to ~$2.4B, and FY FCF from $1.60–1.65B to $1.50–1.55B (-7.6% midpoint). The Q2 beat is real; the H2 setup is materially worse than the prior guide implied, and the "take a measured approach" language directly contradicts last quarter's "sequential improvement" thesis.

Headline numbers

EPS

Q2 FY2026

$1.01

0.0% vs est.

Revenue

Q2 FY2026

$3.86B

+7.0% YoY

+2.9% vs est.

Gross margin

Q2 FY2026

29.5%

Free cash flow

Q2 FY2026

$0.22B

Operating margin

Q2 FY2026

14.9%

Key financials

Q2 FY2026

Metric	Q2 FY2026	Q2 FY2025	YoY	Q1 FY2026	QoQ
Revenue	$3.86B	$3.60B	+7.3%	$3.57B	+8.2%
EPS	$1.01	$1.05	-3.8%	$0.89	+13.5%
Gross margin	29.5%	30.2%	-70bps	30.3%	-80bps
Operating margin	14.9%	15.2%	-30bps	15.1%	-20bps
Free cash flow	$0.22B	$0.18B	+24.6%	$0.38B	-41.3%

Guidance

Full-year EPS, operating profit, and free cash flow guidance lowered 4–8%; FY revenue and segment growth rates reaffirmed despite Q2 beat on earnings and profit margin.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Adjusted EPS	Q2 FY2026	-3% to -5% YoY	1.01	actual YoY change approximately flat vs prior guidance of -3 to -5% decline	Beat
Adjusted Operating Profit	Q2 FY2026	decline at similar level as Q1	15.2% margin	beat qualitative guidance of profit decline	Beat
Organic Sales Growth	Q2 FY2026	expected to accelerate	7% YoY	in-line with qualitative expectation of acceleration	Met

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Adjusted EPS	FY2026	$4.20 to $4.24	$4.01 to $4.05	-$0.19 to -$0.23 (midpoint -$0.20)	Lowered
Adjusted Operating Profit	FY2026	approximately $2.5 billion, up $20 to $60 million at constant currency	approximately $2.4 billion	-$0.1 billion (midpoint)	Lowered
Adjusted Free Cash Flow	FY2026	$1.60 to $1.65 billion	$1.50 to $1.55 billion	-$0.10 to -$0.15 billion (midpoint -$0.125 billion)	Lowered

Segment KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Service	$2.58B	$2.319B	+11.3%
New Equipment	$1.279B	$1.276B	+0.2%

Other KPIs

Q2 FY2026

Segment	Q2 FY2026	Q2 FY2025	YoY
Service Organic Sales Growth	9%	4%	—
Modernization Orders Growth	9% (constant currency)	—	—
Modernization Backlog Growth	24% (actual), 26% (constant currency)	—	—
Service Operating Margin	23.2%	24.9%	—
New Equipment Operating Margin	3.1%	5.3%	—
Adjusted Operating Profit Margin	15.2%	17.0%	—
Adjusted Free Cash Flow	$290 million	—	—
Customer Units Under Service	2.5 million	—	—

Management tone

Note: no earnings transcript was available for this release, so tone analysis draws from press-release language and the FY guide movement rather than prepared-remarks quotes.

The "sequential improvement" framing has quietly disappeared. Last quarter Christina committed to service margin "sequentially improving in the coming quarters" and YoY expansion by Q4. Q2 service margin came in at 23.2% — below that Q2 pointer — and this quarter's press-release framing shifts from margin recovery to "confidence in the durability of our Service-led growth model." The word "margin" has been swapped for "growth model." Management is preparing investors to judge the segment on a different axis than the one they just missed on.

"Growing momentum" became "take a measured approach" in one quarter. The Q1 deck leaned on "increasing backlog and pricing actions give us confidence in growing momentum"; this quarter's language is "as we look to the second half of the year and take a measured approach to our outlook." That linguistic shift is doing the work of a $0.20 EPS cut and a $125M FCF cut. Management is no longer forecasting a back-half snap-back — they are hedging it.

The FY operating profit guide crossed from growth to decline in one quarter. Q1 FY26 guided FY adjusted operating profit to +$20–60M constant-currency growth. This quarter's guide is -$45M to -$15M cc — a swing from modest growth to modest decline. The Q2 operating profit beat did not just fail to raise the FY; it was more than offset by expected H2 deterioration. That's the single most important number in this release and it's buried under a headline of Q2 beats.

Modernization framing shifted from ceiling-raising to backlog-defending. This quarter's language — "strong backlog in both modernization and New Equipment provides good visibility and supports our expectation for continued growth in the quarters ahead" — is defensive rather than expansive, anchored on backlog rather than orders. With mod orders at +9% cc, the multi-year mod cycle thesis is being defended on backlog cushion, not order momentum.

Answers to last quarter's watch list

Q2 FY2026 service operating margin and the sequential improvement claim — Service margin printed 23.2%, well short of Christina's ~24% Q2 pointer. The sequential-recovery framing is materially weaker than promised, and FY operating profit was cut ~$100M — a direct confirmation of the "low end of the range" risk the prior watch flagged.

Resolved negatively

Modernization orders rebound vs. the Q1 deceleration — Mod orders came in at +9% cc, well short of the +20% watch threshold. The +26% backlog gives revenue cover (mod organic revenue printed +24%), but the orders curve has flattened into the single digits.

Resolved negatively

Q2 FY2026 EPS landing inside the -3% to -5% YoY guide — Q2 adjusted EPS of $1.01 was down 4% YoY, landing inside the guide range. The Q2 outcome itself was in-line; the FY EPS range was still cut to $4.01–4.05, meaning the H2 bar is now steeper, not lower. Status: Resolved (on Q2) but the FY setup deteriorated

Service margin expansion claim "towards the end of the year" — Otis didn't reaffirm the Q4 FY26 YoY margin expansion claim explicitly in the release; the press-release language moved to generic "confidence in durability" rather than the specific late-year margin recovery Christina staked out on the Q1 call.

Not resolved

Portfolio unit growth and maintenance organic recovery — Maintenance & Repair organic grew +6% in Q2, a solid print. Portfolio unit growth wasn't broken out separately in the release. Status: Resolved positively (on M&R)

Middle East EBIT impact materializing — The $5–10M/quarter potential impact from the Q1 call wasn't called out on the print. Given the FY operating profit cut, it's plausible the impact is baked into the new guide without explicit disclosure.

Not resolved

Tariff favorability sustaining — Not disclosed in the release. The FY operating profit cut against no revenue guide change and a Q2 beat implies H2 cost pressure that could include tariff erosion, but the source is not itemized.

Not resolved

What to watch into next quarter

H2 EPS math check — FY $4.01–4.05 midpoint against H1 EPS of $1.90 requires H2 of roughly $2.13. Watch whether Q3 EPS confirms that trajectory or forces another cut — anything materially below $0.95 in Q3 puts the low end of the FY range at risk.

Modernization orders next-quarter test — Orders at +9% cc versus a +26% backlog. Another sub-15% cc print would tip the multi-year mod cycle thesis from "cycling normal comps" to "orders curve genuinely flattening" — the +26% backlog conversion (mod organic revenue +24% this quarter) buys another 2–3 quarters of revenue cover, but not indefinitely.

Service margin Q3 print and Q4 YoY expansion commitment — Christina's Q1 commitment to Q4 FY26 YoY service margin expansion is the entire FY recovery pillar. Watch whether Q3 service margin shows sequential improvement and whether management refreshes or drops the Q4 YoY expansion language on the Q3 call.

FCF conversion rate in H2 — FY FCF guide of $1.50–1.55B against H1 adjusted FCF of $562M requires H2 of ~$960M. Watch whether Q3 delivers >$300M adjusted FCF as a confirming print or whether working capital pressure keeps compounding.

New equipment orders sustaining the return to growth — NE reported revenue at 0% YoY (organic -1%) is the first non-negative reported print in the down-cycle. Watch whether Q3 NE orders and revenue cross positive, or whether Q2 was a comp-driven blip. The NE margin at 3.1% has room to expand meaningfully once volume returns.

Whether the FY26 operating profit guide holds at -$45 to -$15M cc — Two consecutive cuts to the operating profit range is a trajectory. A third cut on the Q3 call would mark FY26 as a structural down year and re-rate the multi-year earnings power framing.

Sources

Otis Worldwide Q2 FY2026 press release (Form 8-K Exhibit 99): https://www.sec.gov/Archives/edgar/data/1781335/000178133526000110/a2026-06x308xkerexhibit99.htm
Otis Worldwide Q1 FY2026 press release and prepared remarks (for prior guidance baseline)

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