Management attributed the 1% organic sales growth to a 5% increase in Service, which offset mixed conditions in New Equipment markets.
Modernization demand remains a durable multiyear driver, evidenced by an 11% increase in orders and a backlog that grew 30% at constant currency.
Service margins contracted 160 basis points due to intentional investments in sales capabilities and field resources, alongside a negative portfolio mix from lower-value markets.
New Equipment performance was bifurcated, with robust 20% order growth in North America contrasted by a low-teens decline in China.
The ‘we maintain’ majority investment was executed to integrate a digitally native, AI-enabled ecosystem that complements Otis ONE for multi-brand portfolios.
Management noted that while China continues to weigh on results, the worst of the market decline is likely over as demand trends toward stabilization.
Full-year 2026 guidance assumes Service organic sales will accelerate to mid-to-high single digits, supported by a 10% growth target in repair sales.
Management expects Service margins to sequentially improve and return to year-over-year expansion by Q4 2026 as pricing actions and retention improvements take hold.
The outlook assumes the Middle East conflict ends in Q2; a prolonged conflict could impact profit by $5 million to $10 million per quarter due to logistics and project delays.
A targeted cost reduction program in non-frontline activities is expected to deliver $10 million in savings during 2026, with a $20 million total run rate.
New Equipment sales in the Americas are projected to return to positive growth for the full year as strong 2024 orders begin to flow through the revenue cycle.
Fuel and logistics surcharges are being implemented to offset inflationary pressures, though management noted a time lag between cost incurrence and recovery.
Portfolio mix remains a headwind as recent growth has originated from lower-value markets, decelerating maintenance organic revenue to approximately 2% in Q1.
The company completed $400 million in opportunistic share repurchases in Q1, maintaining a target of $800 million for the full year.
Tariff regulations are expected to provide a $10 million tailwind in 2026 compared to original expectations of being flat year-over-year.
Margins are expected to step up from 23% in Q1 to approximately 24% in Q2, stabilizing in Q3 before expanding in Q4.
Expansion will be driven by pricing initiatives, modernization execution, and the recovery of maintenance sales to a 3% growth rate by year-end.
