Unexpected beneficiaries of the AI boom: Caterpillar

The well-known American manufacturer of construction and mining equipment, Caterpillar, has posted another set of outstanding quarterly results. Valuations are keeping pace: the stock is up more than 50% year-to-date, with the last month alone delivering gains of over 30%.

Financials

• The company reported revenue growth of 22%, rising to USD 17.4 billion.
• The Energy & Transportation segment increased by more than 30% year over year, while the Construction Industries and Resource Industries segments rose by 39% and 35% YoY, respectively.
• The order backlog increased to USD 62.7 billion.

Both analysts and company representatives point to the key role of the massive build-out of computing infrastructure needed to support AI models. The company has effectively become indispensable to the sector’s expansion.
This is visible not only in profitability but also in the market’s expectations for the company’s future results.

• By the end of 2030, the Energy & Transportation segment alone is expected to reach revenues of USD 59.1 billion. EPS forecasts of USD 47 over the same period imply profit growth of nearly 20% per year.
• All of this has enabled the company to return a record amount of profit to investors. Caterpillar recently committed to a record share buyback program, allocating USD 5 billion.
• It is also worth noting that, according to Bloomberg data, the company still has not completed purchases totaling approximately USD 20 billion announced for 2024.

Does the company have only reasons to keep rising? That depends.

First of all, current sentiment toward the stock is largely based on the assumption that the pace of AI infrastructure build-out - and all related assets - will remain at least at the current level. This is a very optimistic assumption.

AI is not the only structural trend supporting the company’s valuation. It is worth noting that the world may be entering another multi-year cycle of urbanization and increased investment in mining. These trends should be far more stable than AI-related investment, but they will also be more spread out over time and most likely less margin-accretive.

Speaking of margins: while the outlook is optimistic, recent trends are not as favorable.

Source: Bloomberg Finance Lp

The question of margin expansion remains debatable in an environment of rising labor, raw material, and energy costs - factors that are crucial for de facto industrial companies such as Caterpillar. This also affects the company’s customers.

Source: Bloomberg Finance Lp

From a multiples perspective, the company is also starting to send warning signals. Increases are reaching 50% across a broad range of valuation metrics.

CAT.US (D1)

The uptrend has remained extremely dynamic since the start of 2025, and there are currently no technical indications suggesting a slowdown in the bullish trend. Source: xStation5.