Otis Worldwide's net margin has expanded from 10.2% in Q4 2024 to 12.0% in Q4 2025, indicating the company's ability to improve profitability. This margin expansion has been driven by Otis' focus on elevator service and modernization contracts, which typically carry higher margins than new equipment sales. The company has highlighted its strategic shift towards a "solutions-oriented" business model that emphasizes recurring revenue from maintenance and upgrade services. Otis' service and modernization revenue has grown at a 7.5% compound annual rate over the past three years, compared to 4.2% growth in new equipment sales. This suggests that Otis is successfully executing on its strategy to increase the share of higher-margin service and modernization work in its revenue mix. As this trend continues, the company's overall profitability should continue to improve. Otis has also implemented pricing initiatives to offset inflationary pressures, further supporting its margin expansion. The company reported a 120 basis point increase in gross margins in Q4 2025 compared to the prior year. Otis' ability to effectively manage costs and pass through price increases demonstrates its operational discipline and pricing power, which should contribute to sustainable margin improvements going forward. Given Otis' favorable business mix shift, operational efficiency gains, and pricing power, I believe the company is well-positioned to continue expanding its net margins over the medium term. This margin expansion, combined with Otis' leading market position and global footprint, makes the stock an attractive investment opportunity. PORTFOLIO ROTATION:

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