Caterpillar (CAT) stock surged Thursday morning after the industrial machinery giant reported higher profits as demand for its power-generation equipment surged amid the build-out of AI data centers.
The company reported an adjusted profit of $5.16 per share for the quarter, up from $5.14 per share a year earlier. Revenue increased to $19.1 billion from $16.2 billion a year ago. Those figures were above Wall Street’s expectations of $4.71 earnings per share and revenue of $17.7 billion, according to S&P Global Market Intelligence.
Its power and energy segment, which it called its “largest and fastest-growing segment,” saw sales to users grow 37% to mark a second quarter of double-digit growth, CEO Joseph Creed said on the company’s earnings call Thursday morning
The stock traded up as much as 5% in early trading to a record high but pared some gains amid a broader market sell-off.
Soaring investment plans from the world’s biggest tech giants have been a focus for investors, but these plans to invest in the AI boom have also pushed industrial companies to new heights as demand for power generation and construction equipment has surged.
Global power usage by data centers is expected to grow from a current level of around 55 gigawatts to 84 gigawatts in the next two years, according to research from Goldman Sachs.
Proof of demand has shown up in industrial sector earnings, as companies like Caterpillar, GE Vernova (GEV), and Honeywell (HON) have benefited from Big Tech’s AI arms race funded by seemingly near-limitless spending.
The industrials sector has gained roughly 20% over the past year, outperforming the S&P 500’s (^GSPC) 14.7% return by a healthy margin.
Caterpillar’s fourth quarter retail sales in its power generation segment were 44% higher in the fourth quarter of 2025 compared to the same quarter a year prior. Its order backlog grew by $11.3 billion quarter over quarter to hit a record high of $51.2 billion worth of equipment, as demand for equipment like natural gas turbines and electricity transformers piled up.
The company said it was expecting 2026 full-year capital expenditures of around $3.5 billion, driven primarily by capacity expansion.
AI’s power and electricity chokepoint was also in focus for political and corporate leaders at the 2026 World Economic Forum in Davos, Switzerland, in mid-January, where conversation focused on the soaring need for power and the tech industry’s struggle to secure it.
In a conversation at Davos, Nvidia CEO Jensen Huang said that the AI revolution will require “trillions of dollars” of spending on what the chipmaking leader called the “largest infrastructure build-out in history.”
During his own keynote address in Davos, President Trump said the US was intent on building and opening up new energy plants instead of shutting them down, as the country’s power grid has struggled to adapt to the surge in new electricity demand.
Coincidentally, Trump’s tariff policies may turn out to be a weak spot for Caterpillar. The company faced a tariff hit of between $1.6 billion and $1.75 billion in 2025, and Caterpillar expects an even bigger headwind from tariffs in 2026, warning of a $2.6 billion hit from tariffs in 2026, according to its fourth quarter earnings report.
Though trade policy hasn’t made a large dent in Caterpillar’s firehose of demand.
“It’s not a demand issue for us,” Creed said during the fourth quarter earnings call. “It’s really going to be can we bring on the supply faster? We’re going to get out as much product as we can.”
Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.
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