Caterpillar surges as data center boom drives profit growth

Caterpillar Inc. surged after the company crushed Wall Street’s second-quarter expectations and raised its sales outlook, easing concerns that demand for power-generation equipment used in data centers was beginning to cool.

Shares were up as much as about 13% in early trading on Tuesday after the company reported stronger sales across its businesses, posted a record equipment backlog and increased its forecast for 2026 sales and revenues growth to the mid- to high-teens, from its previous outlook for low- to mid-teens growth issued in April.

Sales rose to $20.5 billion in the period, the company said, exceeding the $19 billion average of estimates compiled by Bloomberg.

“Strong order rates and a growing backlog reflect broadening momentum across all three of our primary segments,” Chief Executive Joe Creed said in a statement.

Caterpillar’s power and energy unit manufactures generators, engines and gas turbines for industrial facilities and large-scale computing centers. The segment has grown to become the company’s largest by sales, overtaking its better known business that manufactures diggers and other construction machinery, and catching the eye of investors who have made Caterpillar part of the broader AI.

The company’s second-quarter earnings excluding one-time items were $8.17 per share, compared with $4.72 a year earlier. That compared with the $6.17 average of analysts’ estimate compiled by Bloomberg.

The company also posted a record backlog of $72 billion, up 92% from a year ago. On a call with investors, Creed said some of those orders extend as far out as 2030.

“Those backlogs are pointing to the same drivers — data center build-outs. Chips, servers, now industrial equipment,” said Mark Malek, Chief Investment Officer at Siebert Financial.

The earnings and revenue beat comes after a recent selloff in AI-adjacent stocks amid concerns about the sustainability of capital spending by Big Tech. Caterpillar and other makers of power equipment for data center, such as Vertiv Holdings Co. and GE Vernova Inc., saw their stock prices decline in recent weeks.

Baird downgraded Caterpillar’s stock last week to a hold-equivalent rating, citing a growing push by local and state governments to restrict construction of data centers. And investor Michael Burry, well known for his bets against the US housing market prior to the 2008 crisis, has said he is shorting the stock.

The pullback across AI-adjacent stocks was driven “by a superficial narrative that the AI trade had run its course,” said David Wagner, a portfolio manager at Aptus Capital Advisors. Caterpillar’s “record order rates underscore that the physical foundation required to support digital infrastructure continues to expand, regardless of seasonal market chatter.”

The construction industries business, which makes the firm’s signature yellow construction machinery, also saw strong growth for the quarter, with sales increasing 35% as dealers stocked up on equipment.

Creed said Tuesday the company’s mining equipment sales are being driven by rising demand for copper and gold.