TLDR
- Caterpillar reported Q4 EPS of $5.16, beating analyst estimates of $4.68 per share, with revenue reaching $19.1 billion versus expected $17.86 billion
- The company’s power and energy division sales jumped 23% in Q4, driven by massive AI data center demand for continuous power generators
- Caterpillar warned of $2.6 billion in tariff-related costs for 2026, up from $1.8 billion in absolute tariff value from the previous year
- The AI boom has made power and energy the company’s largest business segment by sales, overtaking traditional construction equipment
- Stock gained 4.4% in early trading and is up 60% over the past year, roughly four times the S&P 500’s gains
Caterpillar crushed Wall Street expectations in its fourth quarter. But there’s a catch coming in 2026.
The heavy equipment maker reported earnings per share of $5.16. That beat analyst estimates of $4.68 by a comfortable margin. Revenue hit $19.1 billion, well above the $17.86 billion consensus.
The real story here is what’s driving those numbers. AI data centers are eating up power. And Caterpillar makes the massive generators needed to keep them running 24/7.
The company’s power and energy division posted a 23% sales increase in the fourth quarter. Orders for “prime power” systems are climbing fast. These are the big generators that provide continuous electricity, not just backup power.
CEO Joe Creed said data center customers are scrambling for additional on-site power. The rapid growth of AI infrastructure isn’t slowing down. And Caterpillar is positioned right in the middle of it.
Here’s the kicker: power and energy is now Caterpillar’s largest business segment by sales. It’s overtaken the traditional construction equipment unit that built the company’s reputation.
The stock jumped 4.4% in early trading on the earnings news. Over the past year, shares are up about 60%. That’s roughly four times what the S&P 500 gained in the same period.
Tariff Costs Set to Jump
Now for the less exciting part. Caterpillar warned investors that tariff-related costs will hit $2.6 billion in 2026.
That’s a big jump from the $1.8 billion in absolute tariff value from last year. President Trump’s tariffs have hammered industrial companies. Many slashed forecasts and raised prices throughout last year.
The company laid out two scenarios for its annual operating profit margin. With tariffs factored in, Caterpillar expects margins near the bottom of its target range.
Jefferies analyst Stephen Volkmann noted that better sales were held back by tariff headwinds. He expects those pressures to stick around through 2026. That’s going to limit margin expansion.
Construction Segment Eyes Recovery
Operating profit fell 9% in the fourth quarter. The adjusted figure came to $5.16 per share, up slightly from $5.14 a year earlier.
Caterpillar previously set an adjusted operating profit margin target of 15% to 19% through 2024. The company aims to reach 21% to 25% by 2030, depending on sales levels.
Wall Street analysts expect the construction segment to bounce back in 2026. Stronger dealer orders and stabilizing non-residential construction activity should help. Increased rental fleet demand is another positive factor.
The company recorded 15 positive EPS revisions and just 5 negative revisions in the last 90 days. Stock price closed at $643.28. It’s up 11.44% over the past three months and 71.55% over the last year.
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