Key Points
- Caterpillar beat Wall Street earnings expectations for the fourth quarter.
- The company warned tariffs could cost it $2.6 billion in 2026. Sales in the Power and Energy division jumped 23% year-over-year.
- AI data centers are driving demand for backup power generators.
- Operating profit fell 9% due to higher manufacturing costs.
Caterpillar delivered a mixed message to investors on Thursday. On one hand, the company smashed profit expectations thanks to the artificial intelligence boom. On the other hand, it warned that hefty government tariffs will cost the business billions this year.
The world’s largest maker of construction and mining equipment reported that revenue jumped to $19.1 billion in the fourth quarter. Adjusted profit came in at $5.16 per share, easily beating the $4.68 analysts had predicted.
The star of the show was the company’s Power and Energy division. Sales in this unit surged 23% compared to last year. This growth is largely due to tech giants racing to build data centers for AI. These massive facilities consume huge amounts of electricity and require Caterpillar’s industrial-strength generators for backup power.
However, the cost of doing business is rising fast. Caterpillar estimates that import tariffs imposed by the Trump administration will cost the company about $2.6 billion in 2026. About $800 million of that hit will happen in the first three months of the year alone. These rising costs for materials already caused operating profits to dip by 9% last quarter, despite the higher sales.
Executives noted that financial planning has become a headache because trade policies in Washington keep changing. To manage expectations, the company offered a wide range of possibilities for its profit margins this year. While many U.S. companies claim they can handle the new taxes, Caterpillar’s numbers show that the pressure on the industrial sector is real.
Despite the tariff warning, Caterpillar’s stock rose about 1% in premarket trading. Investors seem focused on the company’s ability to raise prices and the potential recovery in its construction equipment business.
Analysts believe that as non-residential building projects stabilize and rental fleets restock, the construction segment will return to growth later in 2026. For now, the heavy equipment giant is relying on the high-tech AI revolution to power its earnings while navigating a tricky political landscape.
