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Dive brief:
- Caterpillar reported record sales and revenue of $19.1 billion in the fourth quarter, driven by strong demand for construction, mining and power equipment as tariff uncertainty weighed on manufacturing costs.
- The Irving, Texas-based company experienced double-digit sales growth in its three main segments during the period. Operating profit, however, was $2.7 billion, down 9% from last year. Higher tariff and restructuring costs were partially offset by turbine and engine orders from oil and gas and data center customers.
- Caterpillar recently accepted the supply two gigawatt generators for American Intelligence and Power Corp’s multimillionaires data center development in Mason County, West Virginia. Excluding this deal, the company’s order book reached a record $51 billion at the end of the year.
Diving knowledge:
“With a record portfolio, we enter the new year with strong momentum and a continued focus on delivering long-term value for our customers and shareholders,” Caterpillar CEO Joe Creed said on an earnings call Thursday.
During the quarter, the largest increase in sales came from the company’s energy and power segment, formerly known as transportation and energy, followed by construction and mining. Power and energy sales grew to $9.4 billion, up 23% from the prior year. Operating profit was $1.8 billion, up 25% from a year ago.
“We’re one of the fastest solutions out there for data centers trying to get up and running quickly,” Creed said. The company talks weekly with hyperscalers and large data center customers to make sure it’s aligned with their project plans, he said.
Sales of construction and mining equipment also increased during the period from a year earlier. However, segment profits fell short due to “unfavorable” fare costs and pricing. Caterpillar reported a nearly $1 billion impact on manufacturing and $282 million related to higher restructuring costs.
For the full year, Caterpillar reported sales and revenue of $67.6 billion, up 4% from 2024. The increase came in part from record sales in the company’s power and energy segment. Power generation sales alone topped $10 billion by 2025, Creed said. Meanwhile, operating profit was $11.2 billion, down 15% from a year earlier.
Tariff volatility increased manufacturing costs and hurt profitability through 2025. Caterpillar worked to mitigate tariffs in the form of cost controls and price actions, resulting in a net incremental headwind of $1.7 billion for the year, Creed said.
Looking ahead, Caterpillar expects full-year 2026 sales and revenue to grow between 5% and 7% year-over-year, according to its presentation slides. The company is also bracing for incremental fee costs of $2.6 billion and restructuring costs of $300 million to $350 million.
Wall Street analysts were positive about the report. While the tariffs are “keeping a lid” on margins, Caterpillar appears to be conservative around 2026 and the strong backlog creates some upside for 2027, Bank of America research analyst Michael Feniger said in a note. He also noted that power and energy are in a “sweet spot” as Caterpillar looks to regain the machinery side of the business.
Caterpillar is also making a leadership change. Tony Fassino, president of the construction segment, will retire at the end of May after 30 years with the company, according to a press release. Rod Shurman, who has been with Caterpillar since 1997, is scheduled to take over on February 1.
With the exception of Caterpillar’s power and energy business, Creed said orders within its construction and mining segments can be inconsistent or “gruntful.”
“We are happy to see the orders that came in,” he said. “I don’t know if you can count on repeating it every quarter.”
