Key Takeaways

  • Caterpillar's second-quarter sales and revenue hit a record $20.5 billion, driven by rising demand for bulldozers, generators, and other industrial equipment.
  • The Texas-based company saw growth momentum across its three main segments—Construction, Power & Energy, and Resource Industries—with sales and revenue up 24% from $16.6 billion last year.
  • Part of the growth came from higher volumes and favorable pricing. Caterpillar saw positive dealer inventory changes in North America, with backlog orders from data center and oil and gas customers continuing to rise. The company also benefited from a $392 million refund related to the revocation of International Emergency Economic Powers Act (IEEPA) tariffs.

Deep Dive

The record quarter comes amid growing concerns about the durability of data center construction driven by AI demand. Last week's sharp sell-off in chip stocks highlighted investor anxiety over whether AI spending and its returns can support high stock valuations.

On Tuesday's earnings call (Eastern Time), Caterpillar Chairman and CEO Joseph Creed addressed AI demand concerns, saying customer discussions are ongoing but "no one is slowing down right now."

According to Caterpillar's earnings presentation, electric power retail sales grew 72% year-over-year in the quarter, which Creed attributed to "very strong demand for large generator sets and turbines used in data center applications."

Creed said orders from Power & Energy customers extend into 2030, with about 59% of the company's $72 billion backlog expected to ship within the next 12 months. Beyond hyperscale data center operators, customers in oil and gas, mining, and marine sectors are also making large engine and turbine purchases.

To meet growing demand, Creed said Caterpillar is restarting production of its 10-megawatt medium-speed gas reciprocating engine platform. The product was discontinued in 2022 due to "limited industry opportunities." Caterpillar plans to restore 1.5 gigawatts of capacity, with first deliveries beginning in the fourth quarter.

Caterpillar's Power & Energy segment posted second-quarter sales of $8.2 billion, up 17% year-over-year; segment profit rose 30% year-over-year to $2 billion.

Construction segment sales reached $8.3 billion, up 35% year-over-year. Caterpillar attributed this to stronger-than-expected demand in North America, where sales rose 50% year-over-year to nearly $5.1 billion. Segment profit increased 57% year-over-year to $1.9 billion.

Additionally, Caterpillar has begun delivering initial construction equipment to Major Projects, a rental joint venture serving customers on multi-billion-dollar projects in North America. Creed said this complements Caterpillar's existing dealer rental offerings, making it easier for large contractors to do business with the company.

In July, Caterpillar completed the acquisition of Skycatch, a provider of AI-driven spatial data capture, processing, and analysis software for the mining industry. Caterpillar's Resource Industries segment (including mining and rail equipment) posted sales of $4.6 billion, up 20% year-over-year; segment profit reached $693 million, up 23% year-over-year.

Looking ahead, despite ongoing geopolitical uncertainty, the company raised its full-year guidance. Caterpillar now expects sales and revenue to grow by a "mid-to-high double-digit" percentage year-over-year. Creed said the company plans to expand capacity and increase throughput in the second half of the year.

Meanwhile, the company is preparing for high tariff costs. CFO Kyle Epley said on the call that excluding IEEPA refunds already received or expected, Caterpillar anticipates full-year tariff costs of $2.2 billion.