Caterpillar gains after Q4 earnings 📈AI support industrials?

Caterpillar (CAT.US) delivered a solid quarter in terms of both revenue and earnings per share, but tariffs clearly stood out as the key risk heading into 2026. The company estimates that the total negative impact from tariffs in 2026 could reach roughly $2.6 billion, notably above the range it communicated in October 2025 ($1.6–$1.75 billion per year). Caterpillar has also become a somewhat less obvious beneficiary of the data-center boom, and while it remains a classic “barometer” of the global industrial cycle, its power generation business is acting as a buffer — helping stabilize results even as the construction cycle is still in recovery mode.

Q4 results (quarter ended December 31, 2025)

• Revenue: $19.1B vs $16.2B a year ago

• Adjusted EPS: $5.16 vs $5.14 a year ago

• Operating profit: $2.66B, down 9% (as reported)

Caterpillar pointed to $1.03B in unfavorable manufacturing costs, largely tied to higher tariffs. Demand and volumes are supportive, but the cost backdrop remains challenging. So what, specifically, supported the quarter?

• Sustained, strong demand for power generation equipment / backup generators.

• The immediate driver is the rapid build-out of data centers (AI → higher computing-power needs → billions in infrastructure spending → stronger demand for backup power).

• The company has also been raising prices across parts of its industrial equipment portfolio, which has helped protect margins and partially offset softer conditions in the traditional construction business.

Looking ahead, expectations for 2026 are more constructive: analysts anticipate a return to growth in construction, supported by stronger dealer orders, stabilization in non-residential construction activity (though not necessarily housing), and rising demand from equipment rental fleets. In the near term, Wall Street’s narrative for CAT is an interesting mix: strong generator demand + pricing power versus tariffs, higher manufacturing costs, and a still-muted construction backdrop. After the earnings release, the stock is trading near record highs, around $660 per share.

Source: xStation5