Otis Worldwide — Income Statement, Cash Flows & Balance Sheet
Is Otis profitable?
Otis is a solidly profitable business, but reported earnings were inflated in 2024 by a large one-time tax windfall that makes year-over-year comparisons misleading.
| Metric | 2024 | 2025 | Change |
|---|---|---|---|
| Net sales | $14,261M | $14,431M | +1.2% |
| Operating profit | $2,008M | $2,133M | +6.2% |
| Operating margin | 14.1% | 14.8% | +0.7 pp |
| Net income attributable to Otis | $1,645M | $1,384M | -15.9% |
| Effective tax rate (GAAP) | 15.0% | 24.8% | +9.8 pp |
Revenue grew modestly while operating profit improved meaningfully — a healthy sign. The sharp drop in reported net income is not a sign of deterioration; it reflects the absence of a roughly $185M one-time tax benefit tied to a German court victory that boosted 2024's bottom line. Strip that out and the underlying business is performing well.
Rising costs in the service business are putting mild pressure on margins, though the overall trend remains positive.
| Metric | 2024 | 2025 | Change |
|---|---|---|---|
| Cost of services sold | $5,545M | $5,879M | +6.0% |
| Service revenue | $8,894M | $9,442M | +6.2% |
| Service gross margin | 37.7% | 37.7% | flat |
| SG&A + restructuring + transformation | $1,996M | $2,369M | +18.7% |
Service costs rose almost in lockstep with service revenue, keeping that gross margin steady. The notable increase in total below-the-line costs reflects elevated restructuring and transformation spending tied to the company's ongoing "UpLift" efficiency program, which management says is nearing completion.
Where does Otis's revenue come from?
Service — primarily maintenance and repair contracts — is the engine of Otis's profits, while New Equipment is shrinking and losing margin.
| Segment | 2024 Sales | 2025 Sales | Change | 2024 Op. Profit | 2025 Op. Profit | Change |
|---|---|---|---|---|---|---|
| New Equipment | $5,367M | $4,989M | -7.0% | $329M | $240M | -27.1% |
| Service | $8,894M | $9,442M | +6.2% | $2,185M | $2,374M | +8.7% |
New Equipment revenue is declining — driven largely by a weakening construction market in China, where sales fell sharply — and its segment profit dropped by more than a quarter. Service, which includes recurring maintenance contracts and modernization work, is growing steadily and generating the vast majority of the company's profit. This dynamic is actually common and desirable in the elevator industry: equipment installed today generates decades of maintenance revenue.
Does Otis generate cash?
Otis converts its profits into cash reliably, with operating cash flow holding steady around $1.6 billion annually.
| Metric | 2024 | 2025 | Change |
|---|---|---|---|
| Operating cash flow | $1,563M | $1,596M | +2.1% |
| Capital expenditures | $(126M) | $(152M) | +20.6% |
| Free cash flow (GAAP operating CF minus capex) | $1,437M | $1,444M | +0.5% |
| Dividends paid | $(606M) | $(647M) | +6.8% |
| Share repurchases | $(1,007M) | $(809M) | -19.7% |
Free cash flow (operating cash minus capital spending) was essentially flat year over year and comfortably funds both dividends and buybacks. Otis returned more than the equivalent of its entire free cash flow to shareholders in 2025 — a deliberate capital-light, shareholder-return-focused strategy. Cash on the balance sheet fell substantially, partly due to debt repayments and the buyout of a Chinese minority partner.
How strong is Otis's balance sheet?
Otis carries significant debt and operates with a negative book equity — an unusual but intentional structure common among mature, cash-generative businesses that return capital aggressively.
| Metric | 2024 | 2025 | Change |
|---|---|---|---|
| Cash & equivalents | $2,300M | $1,096M | -52.3% |
| Total debt (long-term + short-term) | $8,324M | $7,956M | -4.4% |
| Total shareholders' equity (deficit) | $(4,848M) | $(5,392M) | worsened |
| Current ratio (current assets ÷ current liabilities) | 0.99x | 0.85x | worsened |
The negative equity is not a distress signal — it reflects years of share buybacks funded by strong cash flows rather than an inability to pay bills. That said, the balance sheet offers limited cushion: the current ratio dipped below 1.0x, meaning current liabilities technically exceed current assets. Debt is well-structured with an average maturity of about 6.7 years, no significant near-term cliff, and the company confirmed it is in compliance with all debt covenants.