Otis Worldwide (OTIS)

Built for the Vertical Century. Otis and the Future of Urban Mobility

In an increasingly urban and aging world, few services are as essential—and as overlooked—as elevators. Otis Elevator Company, the undisputed leader in the global elevator market, moves over 2 billion people daily and maintains more than 2.3 million units worldwide. With a service portfolio 25% larger than its nearest competitor and customer retention rates nearing 95%, Otis has built one of the most recurring, resilient, and high-margin business models in industrials. As scale drives density and density drives margins, Otis enjoys a self-reinforcing advantage that’s hard to dislodge.

At first glance, the elevator industry may not seem like a particularly exciting place to allocate capital. The sale of new equipment is cyclical, commoditized, and often barely profitable. But the true economics lie elsewhere. Elevator maintenance is legally mandated, largely non-discretionary, and resembles a high-margin software business in terms of pricing power and cash conversion. In mature markets like Spain, Otis generates operating margins close to 30% thanks to unmatched density, while globally, more than 70% of its costs are labor—making route optimization and portfolio scale critical levers.

The real story at Otis begins after installation. Thanks to inflation-linked service contracts, long-term customer relationships, and increasing digitalization through programs like Otis ONE, the company has successfully transformed its installed base into a platform for recurring, growing, and predictable earnings. Every new elevator, every modernization project, and every connected unit is a gateway to long-term service revenues—many of which now include subscription-based features beyond traditional maintenance.

Following its 2020 spin-off from United Technologies, Otis has reoriented its strategy toward growth and operating efficiency. It’s doubled its salesforce, improved free cash flow per share, and expanded EBIT margins, all while keeping capital intensity remarkably low. With modernizations accelerating in Europe, new installations growing in Asia, and a global push to convert unconnected elevators into intelligent, service-linked assets, Otis is far from the legacy industrial some investors mistake it for.

Yet despite all this, the stock remains modestly valued relative to its cash generation, with market concerns focused on short-term headwinds in new equipment. In this analysis, I take a deep dive into the economics of the elevator business, the structural moat Otis has quietly built, and the long-term levers it can pull to deliver consistent, compounding returns. If you’re looking for a business that pairs infrastructure-like stability with asset-light economics and global tailwinds, Otis deserves your attention.