Caterpillar gets a big AI sales boost as tariffs drag
The company logo for Caterpillar is displayed on a screen on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., April 15, 2025. REUTERS/Brendan McDermid
Jan 29 : Caterpillar's fourth-quarter results mirrored the global economy, with sales lifted by surging artificial intelligence-related spending even as the equipment giant braced investors for a $2 billion-plus tariff hit in the year ahead.
The world's largest construction equipment firm said quarterly sales at its power and energy segment, which makes generators, jumped more than 20 per cent.
Like the Big Tech giants, Caterpillar and several other industrial firms have leaned on AI to drive investor sentiment. Its shares gained about 60 per cent over the last year, roughly four times the S&P 500's gains in that time.
The AI-boom has turned Caterpillar's power and energy segment into its largest business by sales, surpassing its mainstay construction unit.
Orders are rising for "prime power" systems, large generators designed to provide continuous, around-the-clock electricity, CEO Joe Creed said on a post-earnings call, as data-center customers look for additional on-site power to keep up with rapid growth.
Shares of Caterpillar, widely viewed as a bellwether for the global industrial economy, were up about 4.4 per cent in early trade.
TARIFF HEADWINDS
The company warned of tariff-related costs of about $2.6 billion in 2026. The absolute value of tariffs imposed last year was $1.8 billion, it said.
Industrial firms were among the hardest hit by President Donald Trump's expansive tariffs last year, slashing forecasts and raising prices. While many U.S. firms have told investors this year that tariffs are "manageable," early earnings-season commentary suggests profit margins are under pressure.
"Better-than-expected sales across business segments were hindered by tariff headwinds, limiting the margin expansion for the quarter," said Jefferies analyst Stephen Volkmann.
Volkmann added that he expects the headwinds to persist through 2026.
Caterpillar outlined two scenarios for annual operating profit margin, echoing a trend from last year.
Including tariffs, the company expects annual adjusted operating profit margin to be near the bottom of the target range.
During its November investor day, Caterpillar unveiled an adjusted operating profit margin target of 15 per cent to 19 per cent through 2024, rising to 21 per cent to 25 per cent by 2030, depending on sales levels.
On an adjusted basis, it earned a profit per share of $5.16 for the quarter ended December 31, up from $5.14 a year ago. Revenue rose to $19.1 billion from $16.2 billion.
Analysts on average had expected the company to report a quarterly profit of $4.68 per share and revenue of $17.86 billion, according to data compiled by LSEG.
Wall Street expects the construction segment to return to growth in 2026, supported by stronger dealer orders, stabilizing non-residential construction activity, and increased rental fleet demand.
