Elevator giant Otis wants to be a defensive play in an volatile market. It has to prove itself first

Otis is the largest elevator company in the world, operating in 200-plus countries. In 2025, the company generated more than $14 billion in revenue — up roughly 13% since it was spun off from United Technologies in 2020. Otis' investment case hinges on the premise of long-term, stable growth, especially in an increasingly volatile market. But the company's stock is down about 15% year-to-date, underperforming both the industrial sector and the broader market.

Building new elevators isn't an inherently lucrative venture. In 2025, Otis' operating profit margin on new equipment was just 4.8%. The real profit driver of the business comes in servicing these elevators once they are installed. Initially, that involves things like maintenance and repairs. Then after about 20 years, the elevator needs to be modernized, which involves partially or fully replacing its parts.

"That's the engine that allows us to generate over 90% of our profits," said Otis CEO and Chair Judy Marks. Otis currently services about 2.5 million elevators worldwide, up from over 2 million units in 2020. The company has incrementally grown its profit margins on service over the past couple of years, reaching 25.5% by the end of 2025. But service margins fell by 250 basis points in the first quarter of 2026. That margin decline is a result of a broader issue the company has been working through since the start of last year. Otis saw its retention rate, meaning the customers that renew their service contracts, dropping as it entered 2025.

The company said it is making $50 million in incremental investments to its service business throughout 2026. In Otis' most recent quarter, service sales were up 11% year over year, but in its earnings call, Marks said the compan...