Caterpillar’s latest quarterly performance reflected the crosscurrents shaping the global economy, as booming artificial intelligence-related investment boosted sales while rising tariffs cast a shadow over the year ahead.
The world’s largest construction equipment maker reported fourth-quarter earnings per share (EPS) of US$5.16, ahead of expectations for $4.71. Revenue came in at $19.13 billion, also topping forecasts of $17.85 billion, as strength in key end markets supported volumes.
"Our centennial year marked a significant milestone, underscored by the highest full-year sales and revenues in Caterpillar's history and a single-quarter record of $19.1 billion," said Caterpillar CEO Joe Creed.
"These results demonstrate the strength of our end markets and our disciplined execution. With a record backlog, we enter the new year with strong momentum and a continued focus on delivering long-term value for our customers and shareholders."
A major driver of growth was the company’s power and energy segment, which produces generators and related equipment.
Quarterly sales in the division surged more than 20% as demand tied to data centres and AI infrastructure continues to reshape the industrial landscape.
Like several large technology companies, Caterpillar and other industrial groups have increasingly been linked to the AI investment cycle in the eyes of investors.
Orders are rising for “prime power” systems - large generators designed to deliver continuous, round-the-clock electricity - as data-centre operators seek additional on-site power to support rapid capacity expansion, Creed said on a post-earnings call.
The AI boom has helped transform Caterpillar’s power and energy division into its largest business by sales, overtaking its traditional construction segment.
Investor response was positive. Caterpillar shares rose 3.4% during Thursday’s U.S. session and were up about 60% over the past year, roughly four times the gain of the S&P 500 over the same period.
For the full year, sales and revenues in 2025 totalled $67.6 billion, up 4% from $64.8 billion in 2024. The increase reflected higher sales volume of $3.4 billion, partly offset by unfavourable price realisation of $0.8 billion.
The rise in volume was primarily driven by stronger equipment sales to end users, indicating solid underlying demand across construction, mining and energy-related markets.
Despite the upbeat tone on demand and backlog, the company cautioned that trade policy will be a significant headwind.
Caterpillar warned that tariff-related costs could reach about $2.6 billion in 2026. By comparison, the absolute value of tariffs imposed last year totalled $1.8 billion.
Industrial firms were among the sectors hardest hit by President Donald Trump’s broad tariff measures last year, which forced many companies to cut forecasts and raise prices.
While several U.S. businesses have recently described tariffs as “manageable”, early commentary this earnings season indicates that profit margins remain under strain.
Reflecting this uncertainty, Caterpillar outlined two scenarios for its annual operating profit margin, continuing an approach adopted last year. Including the impact of tariffs, the company expects its annual adjusted operating profit margin to be near the bottom of its target range.
The outlook suggests that while AI-driven demand and a record backlog provide a cushion, higher input costs linked to trade policy could limit the extent to which revenue growth translates into profit expansion.
Caterpillar (NYSE: CAT) finished Thursday's session 3.4% higher at US$665.24. The company maintains a market capitalisation of $311.32 billion.
