Caterpillar Tops $20 Billion in Quarterly Sales for First Time as Data Center Power Backlog Stretches Into 2030
Second quarter 2026 earnings call, August 4, 2026
Caterpillar delivered the strongest quarter in its history, crossing $20 billion in sales and revenues for the first time ever, up 24% year-over-year to $20.5 billion. Adjusted profit per share surged 73% to $8.17, and the company raised its full-year sales growth outlook to mid- to high-teens from its prior forecast, citing broadening strength across all three primary segments. CEO Joe Creed called it a milestone that "underscores both the essential work our customers do every day and the dedication of Caterpillar employees worldwide."
Backlog Swells to $72 Billion, With Orders Stretching to 2030
The headline number for investors is the backlog, which grew $9 billion sequentially to $72 billion, a 92% increase versus the second quarter of 2025. All three segments contributed to the growth, but the most striking disclosure was on lead times in Power & Energy: Caterpillar is now taking large reciprocating engine orders into 2028 and turbine orders further out than that, with some customers placing orders as far out as 2030. Fifty-nine percent of the backlog is expected to ship within the next 12 months, a ratio that has held steady for three quarters, suggesting the extension is structural rather than a temporary order pull-forward. Creed was direct about demand durability when pressed on AI capex sustainability: "No one is slowing down at the moment. In fact, if we can get more units out, they're asking us to give them more units."
Caterpillar Resurrects a Discontinued Engine Platform to Meet Demand
In one of the more notable disclosures on the call, Caterpillar is restarting production of its 10-megawatt medium-speed gas reciprocating engine platform, a product line it stopped manufacturing in 2022 after limited demand in its legacy marine-focused MaK business. The company plans to bring roughly 1.5 gigawatts of capacity online, with shipments starting in the fourth quarter and a full ramp over 18 months. Creed emphasized this is incremental to, not part of, the company's existing 65-gigawatt capacity target for 2030, and that the investment required was minimal because Caterpillar already had the supply base and internal machining capability in place. The company only made the decision after securing first orders, a detail that speaks to how tight the market for large power generation equipment has become. The platform fits a specific niche, slotting between Caterpillar's high-speed reciprocating engines and its industrial gas turbines, both of which are now sold out well into 2028 and 2029, respectively.
Power & Energy Margins Show the Capacity Investment Is Paying Off
Power & Energy segment profit grew 30% versus the prior year, with margin expanding 250 basis points to 24.6%, even as the company absorbs higher depreciation tied to capacity expansion. CFO Kyle Epley noted this reflects favorable price realization and higher volume outpacing manufacturing cost inflation, though he flagged potential freight cost pressure in the back half. Analyst Jamie Cook of Truist pointed out the segment's roughly 39% incremental margin as evidence the capacity build-out is not diluting profitability, a dynamic management attributed to disciplined production ramp rather than a step-function capacity unlock. Creed noted the 250,000-square-foot Wamego, Kansas facility conversion, previously a construction work-tools plant now repackaging the PGM130 generator set for data centers, was completed in under 12 months, "substantially less than building a new factory."
Tariffs Prove Less Costly Than Feared
Caterpillar recognized $392 million in IEEPA tariff recoveries in the quarter and now expects full-year tariff costs, excluding those recoveries, of approximately $2.2 billion, the low end of its previously communicated range. Second-quarter tariff costs of roughly $400 million came in well below the $700 million the company had guided to in April, a favorable swing Epley attributed to adjustments in how previously incurred tariffs were computed rather than any change in trade policy. Excluding the one-time IEEPA benefit, full-year adjusted operating margin is still expected to land near the bottom of the company's target range, meaning tariffs remain a real drag on profitability even as the outlook improves elsewhere.
Construction Rental Strategy Shifts Into Higher Gear
Construction Industries sales grew 35% to $8.3 billion, marking the sixth consecutive quarter of sales-to-users growth, and the segment delivered its first units to Major Projects, a new Cat dealer-owned rental joint venture aimed at multibillion-dollar infrastructure, energy, and data center builds. Dealer rental fleet loading turned into a tailwind this quarter after being a headwind a year ago, and management expects that dynamic to strengthen further in the third quarter as the Major Projects fleet ramps. Responding to a question about whether Caterpillar's rental mix would eventually resemble that of national rental companies, Creed argued dealers need the full breadth of rental equipment to remain competitive: "Customers, I don't think, are going to rush to Cat dealers for our equipment if they can't also get the other rental equipment that they need." Fourth-quarter dealer inventory is still expected to decline by more than $1 billion in a more typical seasonal drawdown, though the company plans to end the year with higher inventory than in 2025 given the strength of underlying demand.
Resource Industries Adds Data and AI Capability Through Skycatch Acquisition
Resource Industries closed its acquisition of Skycatch in July, following the earlier purchase of RPMGlobal, adding high-precision spatial data capture paired with AI-driven analytics for mining customers. Management framed this as part of a broader technology investment push intended to improve decision-making and reduce operational delays for mining operators, though the financial contribution from the deal was not quantified on the call. Segment sales grew 20% to $4.6 billion, with margin up only 40 basis points to 14.9%, the weakest incremental margin performance of the three segments, weighed down by unfavorable manufacturing costs even as higher sales volume and services growth provided an offset.
Balance Sheet and Capital Return Remain Unchanged in Character
Free cash flow from machinery, power and energy hit a record $5.1 billion in the quarter, and the company now expects full-year free cash flow in the top half of its $6 billion to $15 billion target range. Caterpillar returned $2.2 billion to shareholders in the quarter through buybacks and dividends, and raised its dividend by 8% in June, its sixth consecutive year of a high-single-digit increase. Customer credit quality was described as the strongest on record, with past dues at 1.31%, the lowest since 1998, and an allowance rate of 0.84%, the lowest ever reported in a single quarter at Cat Financial.