What Otis Worldwide Corporation told the SEC could break it.

Otis's elevator/escalator manufacturing is exposed to commodity costs — primarily steel — which move its cost of products sold; commodity-price swings (alongside tariffs and wage inflation) materially affect gross margin.

“The Organic volume increase of 1% in total cost of products and services sold in 2024 was primarily driven by the organic sales increases noted above and inflationary pressures, including annual wage increases and higher Service-related material costs, partially offset by productivity and lower commodity prices, primarily steel.”

China is Otis's most significant geographic exposure — its largest joint venture is there (operating via Otis China and Otis Electric), New Equipment sales declined >20% in China in 2025, and Otis announced a ~$30M reorganization of its China operations in January 2025 amid US-China tensions.

“Our largest joint venture is located in China with the remainder of our joint ventures and non-wholly owned subsidiaries located in various other countries. Prior to October 2025, we operated in China through two principal joint ventures: Otis Elevator (China) Investment Company Limited ("Otis China") and Otis Electric Elevator Company Limited ("Otis Electric").”

Tariff headwinds contributed to an $89M decrease in Otis's New Equipment operating profit in 2025, and more restrictive trade policies or retaliatory tariffs in countries where Otis sells, procures materials, or manufactures could materially harm results.

“The impacts of lower volume, unfavorable price and tariff headwinds, and regional and product mix were partially offset by productivity, including the benefits of restructuring actions. Operating margin decreased 130 basis points.”

Although Otis uses ~400 key suppliers and most components are available from two or more sources, certain components requiring particular specifications come from a single or limited number of suppliers — which has caused, and could again cause, supply constraints or cost pressures if such a supplier has financial/operational difficulties or a contract dispute.

“While we believe no single supplier is material to our business, some components or applications require particular specifications or qualifications. In those cases, there may be a single supplier or a limited number of suppliers that can readily provide such components, which have in the past, and could in the future, result in supply constraints or cost pressures due to an issue with such a supplier, including financial or operational difficulties or a contract dispute.”