Caterpillar's Parabolic Rise Continues As AI Boom Supercharges Generator Sales
Hyperscalers are deploying as much as $725 billion in capital expenditures this year, primarily on AI data center buildouts, and it comes as no surprise that Caterpillar posted solid first-quarter earnings, as surging on-site power demand has created a boom for the company's power-generation business.
CAT is one of the world's biggest makers of machines used to build, mine, dig, haul, and power industrial sites. But what has investors focused on in recent quarters is its energy and power unit, which makes diesel and natural-gas engines, generators, turbines, and backup power systems.
CAT reported first-quarter per-share profit excluding one-time items of $5.54, compared with $4.25 a year earlier, beating the average analyst estimate tracked by Bloomberg of $4.63.
The heavy-equipment maker reported that sales at its power and energy unit grew by 23% year over year, largely driven by strong demand for on-site power generation at data centers.
Here's a snapshot of first-quarter earnings (courtesy of Bloomberg):
Adjusted EPS $5.54 vs. $4.25 y/y, estimate $4.63 (Bloomberg Consensus)
- EPS $5.47 vs. $4.20 y/y
Revenue $17.42 billion, +22% y/y, estimate $16.24 billion
Financial segment revenue $942 million, +8.2% y/y, estimate $895.8 million
Machinery, Power & Energy revenue $16.47 billion, +23% y/y, estimate $15.41 billion
Adjusted operating income $3.13 billion, estimate $2.74 billion
Machinery, Power & Energy operating income $3.00 billion, +19% y/y, estimate $2.63 billion
Financial Products operating income $237 million, +18% y/y, estimate $225.3 million
R&D expenses $537 million, +12% y/y, estimate $530.2 million
Backlog $62.7 billion
CAT shares are up 5% in premarket trading in New York.
CAT shares have gone parabolic as news stories for data center power have erupted in recent years.
Dec Mullarkey, managing director at SLC Management, was quoted by Bloomberg as saying, "Caterpillar is certainly benefiting from the AI buildout," adding, "And given there is no letup in related capex, which has been confirmed in this earnings season, Caterpillar will continue to be an essential player in all that."
On Wednesday, Alphabet and Meta Platforms both raised their full-year capex guidance, while Microsoft reported its first estimate of spending through the end of December, matching Alphabet's $190 billion. Amazon reported $200 billion in spending this year, as the 2026 capex spending forecast by hyperscalers exceeds $700 billion, according to Bloomberg.
Soaring capex spending by hyperscalers this year only suggests increased demand for CAT's power-generation systems.