Caterpillar Inc. (CAT), Financial Analysis

1 Revenue & Business Model

• Storyline: power equipment for data centers takes over from construction as the growth source. Power Generation external sales rose from $4.29bn in FY2021 to $10.28bn in FY2025 and $9.34bn in 9M 2026, +32.7%. Chapters 2 to 4 cover the three revenue drivers: Power & Energy, Construction Industries and Resource Industries.
• Business model: Caterpillar designs and builds construction and mining machines, diesel and gas engines, industrial gas turbines (Solar Turbines) and locomotives, sold mainly through independent dealers; Cat Financial finances dealer and customer purchases. Four reportable segments plus All Other.
• Segments FY2025, recast basis (Rail in Resource Industries): Power & Energy sales $28.62bn, profit $6.26bn; Construction Industries $25.06bn and $4.68bn; Resource Industries $15.92bn and $2.15bn; Financial Products $4.22bn and $966m. Segment sales include inter segment sales.
• Three reporting bases: FY2021 and FY2022 show the Energy & Transportation segment (FY2023 Form 10-K); FY2023 shows Power & Energy incl. Rail (FY2025 Form 10-K); FY2024 and FY2025 are recast with Rail in Resource Industries (8-K of 26 Mar 2026, unaudited). No like for like five year segment series exists.
• Sales and revenues FY2021 $50.97bn to FY2025 $67.59bn, a 7.3% CAGR; TTM Q3 2026 $77.77bn.
• Regions FY2025: North America $36.6bn (54.2%), EAME $12.8bn (18.9%), Asia/Pacific $11.2bn (16.6%), Latin America $7.0bn (10.3%). Q3 2026 North America +24.1%, Asia/Pacific (2.2%).

2 Power & Energy: Data Center Power and a Record Backlog

• Power & Energy sales $8.78bn in Q3 2026, +17.7%; segment profit $2.14bn, 24.4% margin against 21.9%. Sales volume +$879m and price +$216m. 9M 2026 sales $24.05bn, +18.6%.
• Power Generation $3.42bn, +29.9%, led by turbines and engines for data centers (8-K Ex 99.1); Oil and Gas $2.24bn, +13.0%; Industrial $1.63bn, +4.0%. Power Generation was 46.9% of the segment's external sales against 42.6% a year earlier.
• Backlog $72.1bn at 30 Jun 2026 against $39.8bn at 30 Sep 2025, with the largest increase in Power & Energy; $29.2bn was not expected to ship within twelve months. The Q3 2026 release calls the backlog a record without a figure; Caterpillar does not disclose segment backlog, turbine sales or data center sales in dollars.
• Capacity (CEO, Q1 and Q2 2026 calls): large reciprocating engine capacity to reach nearly 3x the 2024 level, about 15 GW a year added, spending mostly 2027 to 2029; turbine capacity at 2.5x 2024; restart of a 10 MW gas engine platform adds about 1.5 GW, first shipments in Q4 2026; agreement for up to 2.1 GW of gas gensets for data center prime power.

How the power equipment market is changing

• Gas turbine orders and backlog rise: GE Vernova Power orders $21.8bn in Q3 2026, +178% organically; gas equipment backlog plus slot reservations 122 GW at 30 Sep 2026 against 116 GW at 30 Jun 2026. Caterpillar's CEO cited gas prime power lead times into late 2028 and turbines into 2029 or later (Q2 2026 call).
• Data center operators contract power directly: Generac signed a long term Amazon supply agreement with initial deliveries of $2.4bn in 2027 and 2028 and holds a data center backlog of about $4.5bn; Baker Hughes booked a 1.1 GW order for 43 turbine packages from a US technology company; Bloom Energy product revenue +179.4%.
• Growth across power equipment suppliers: Vertiv net sales +61.2% with organic orders more than doubled; Cummins power generation product line +27.5% (Q2 2026) against Caterpillar Power Generation +29.9%.
• Oil and gas compression grows more slowly: Caterpillar Oil and Gas dealer retail sales +5% in Q3 2026 after +36% in Q4 2025; Baker Hughes IET revenue +3.1% while its orders rose 42%.

3 Construction Industries: Infrastructure, Data Center Sites and Dealer Fleets

• Construction Industries sales $7.98bn in Q3 2026, +18.1%, after +38.1% in Q1 and +34.8% in Q2 2026; segment profit $1.83bn, 22.9% margin against 20.4%. Volume +$874m against +$1.76bn in Q2; price +$349m.
• North America external sales $4.80bn, +22.6%, 60.6% of segment external sales; Latin America +26.1%, EAME +12.2%, Asia/Pacific +2.3%.
• Dealer retail sales (price neutral) +20% worldwide and +27% in North America in the three months to Sep 2026; Asia/Pacific (2%). Dealer inventory moves add to or subtract from Caterpillar's sales against end demand.
• Tariffs: about 50% of the expected 2026 tariff cost of about $2.2bn falls on Construction Industries (10-Q Q2 2026).

How the construction equipment market is changing

• Industry volume rose in 2026: CNH reports global heavy construction equipment industry volume +17% and light equipment +6% in Q2 2026, with demand +5% in North America, +9% in EMEA, +12% in South America and +16% in Asia Pacific.
• North America leads Caterpillar's growth: the Q2 2026 10-Q names Infrastructure Investment and Jobs Act funds still to be spent, data center construction and dealer rental fleet loading; it also cites growth in the above 10 ton excavator industry in China from low levels.
• Peers: Deere expects US and Canada construction equipment industry sales +5% to 10% and global roadbuilding about +10% in its FY2026, with Construction & Forestry net sales up about 20%; CNH Construction margin 1.7% on tariffs and higher R&D.
• Rental fleets and access equipment: Oshkosh Access backlog $2.66bn at 30 Sep 2026 against $721.2m a year earlier; Terex Aerials sales +32.0% on shipments to national rental customers, and Terex is in talks on a separation of Aerials.

4 Resource Industries: Copper, Gold and an Aging Mining Fleet

• Resource Industries sales $4.62bn in Q3 2026, +15.4%; segment profit $622m, 13.5% margin against 13.6%, with unfavorable manufacturing costs of $208m incl. tariffs. Volume +$478m, price +$96m.
• Mining, heavy construction, quarry and aggregates external sales $3.70bn, +21.8%; Rail $832m, (5.3%) on fewer international locomotive deliveries. Rail joined the segment on 1 Jan 2026.
• 9M 2026: segment sales $13.06bn, +13.1%, while segment profit $1.69bn, (2.1%) against 9M 2025; Q1 2026 margin 10.0% on tariff costs.
• Software: RPMGlobal (mining software, about $790m) closed in Q1 2026; Investor Day targets include at least 2m connected assets and three times as many autonomous trucks; 827 autonomous haul trucks operated at end 2025 against 690 a year earlier (Q4 2025 call).

How mining and rail equipment demand is changing

• Metal prices rose: Freeport realized copper $6.54 per pound in Q3 2026 against $4.68 a year earlier (+39.7%) and guides FY2026 capex of about $4.4bn incl. $3.0bn for major mining projects; Newmont realized gold $4,317 per ounce against $3,539 (+22.0%).
• Caterpillar's view (10-Q Q2 2026): most key commodities remain above investment thresholds, fleet utilization is high and fleet age elevated; end user sales expected to rise in 2026 on copper and gold demand, with rebuild activity up moderately.
• Aggregates and quarry equipment: Astec Materials Solutions sales +43.0% with book to bill of 142.2% (Q2 2026); Terex Materials Processing +11.3% pro forma, led by aggregates in North America.
• Rail: Wabtec Freight sales +6.9% with lower locomotive deliveries offset by mining sales; total backlog $31.4bn, +22.9%.

5 Financial Analysis & Ratios

• Operating margin 13.5% in FY2021, 19.3% in FY2023 and 20.2% in FY2024, then 16.5% in FY2025 with about $1.7bn of net tariff cost and price realization of ($0.8bn); TTM Q3 2026 18.3%.
• Net income TTM Q3 2026 $11.83bn; diluted EPS $25.49 against $18.81 in FY2025 and $22.05 in FY2024.
• Cash flow: consolidated free cash flow (operating cash flow less all capex incl. leased equipment) $9.62bn TTM, 12.4% of revenue. Company measure MP&E free cash flow was $9.53bn in 9M 2026 against $5.80bn; customer advances added $4.0bn and inventories used $4.1bn.
• Balance sheet at 30 Sep 2026: cash $7.93bn; MP&E debt $10.65bn; Financial Products debt $34.55bn, which funds $25.45bn of Cat Financial finance receivables; equity $21.48bn.
• Capital returns 9M 2026: buybacks $7.75bn, incl. accelerated share repurchases, and dividends $2.15bn; quarterly dividend raised 8% to $1.63 in June 2026; $8.4bn of the $20bn authorization of June 2024 unused at 30 Jun 2026.

Cost structure and profitability

• Cost of goods sold 64.5% of Q3 2026 sales and revenues against 66.2% a year earlier and 69.5% in Q4 2025, when unfavorable manufacturing costs of $1.03bn, largely tariffs, and Rail inventory write downs weighed.
• SG&A 8.7% and R&D 2.9% of sales against 10.3% and 3.1%; SG&A fell 1.4% to $1.80bn while sales rose 17.3%.
• Price against tariffs: price realization moved from ($0.8bn) in FY2025 to +$1.68bn in 9M 2026; the CFO expects about $2.2bn of tariff cost in 2026 against about $1.7bn net in 2025.
• IEEPA recoveries lift reported margins: $392m in Q2 and $128m in Q3 2026; without them the Q3 2026 operating margin is 19.8% (derived) against 20.4% reported.
• Capex 5.1% of Q3 2026 sales incl. leased equipment; FY2026 plan about $3.5bn, with MP&E capex to average 4% to 5% of MP&E sales through 2030 (CFO, Q1 2026 call).

6 MD&A & Management Commentary

Q3 2026 results release (8-K Ex 99.1, 29 Oct 2026)

• Sales and revenues $20.68bn, +17.3%: sales volume +$2.21bn, mainly equipment sales to end users; price realization +$663m; currency +$58m; Financial Products revenues +$116m.
• Operating profit $4.21bn, +38.1%, margin 20.4% (adjusted 20.6% against 17.5%); includes $128m of IEEPA tariff recoveries and $41m of restructuring costs. Diluted EPS $7.13 (adjusted $7.20) against $4.88 ($4.95).
• Segments: Power & Energy profit $2.14bn, +31.2%; Construction Industries $1.83bn, +33.0%; Resource Industries $622m, +14.3%; Financial Products $264m.
• Cash: enterprise operating cash flow $4.35bn; MP&E free cash flow $3.83bn against $3.23bn; buybacks $1.22bn and dividends $749m; inventories $22.21bn, +$4.08bn since Dec 2025.
• Cat Financial: past dues 1.31% against 1.47% a year earlier; allowance for credit losses $332m (0.91% of finance receivables) against $294m (0.84%) at 30 Jun 2026; Q3 write offs $28m.
• Q2 2026 (4 Aug 2026): sales and revenues $20.54bn, +24.0%, quarterly sales above $20bn for the first time; operating margin 20.9% incl. $392m of expected IEEPA recoveries; EPS $7.77 (adjusted $8.17); restructuring costs incl. a $139m loss on the divestiture of certain non US entities, excluded from adjusted EPS.

Management and CFO commentary

• CFO Kyle Epley, Q2 2026 call (4 Aug 2026): FY2026 sales growth raised to mid to high teens; adjusted margin above the April view and near the bottom of the 15% to 25% range excluding the IEEPA recovery; tariffs about $2.2bn excluding recoveries, with no further IEEPA recoveries assumed in 2H.
• CFO, Q2 2026 call: MP&E free cash flow in the top half of the $6bn to $15bn range after $5.1bn in Q2; capex about $3.5bn; restructuring $300m to $350m; tax rate about 23% excluding discrete items.
• CFO, Q2 2026 call, for Q3: higher sales in all three segments, higher adjusted margin, tariff cost about $600m, about 50% in Construction Industries; Power & Energy and Construction Industries margins up year on year, Resource Industries similar. The Q3 2026 release shows higher sales in all three segments, a higher adjusted margin, higher Power & Energy and Construction Industries margins and a similar Resource Industries margin; it states no Q3 tariff cost.
• Q1 2026 call (30 Apr 2026), Kyle Epley and Andrew Bonfield: growth raised to low double digits; tariffs cut to $2.2bn to $2.4bn; IEEPA refunds excluded after the Supreme Court decision; $4.5bn accelerated share repurchase.
• CFO Andrew Bonfield, Q4 2025 call (29 Jan 2026): 2026 growth near the top of the 5% to 7% target; tariffs about $2.6bn, $800m more than in 2025; price about 2%; MP&E free cash flow slightly below $9.5bn on capex of about $3.5bn.
• CEO Joe Creed, Q1 and Q2 2026 calls: record orders in Q1, Resource Industries orders the highest since 2012; 2030 targets raised to a 6% to 9% sales CAGR from 2024 and power generation sales above 3x the 2024 level.
• CEO Joe Creed, 8-K Ex 99.1 of 29 Oct 2026: Q3 2026 results reflect end markets, order rates and a record backlog.

7 Sector Summary & Valuation

• Sector: construction and mining machinery, reciprocating engines and gas turbines for power generation, incl. data centers, and rail. Like for like peer data is thin: Komatsu, Epiroc, Sandvik, Hitachi Construction Machinery and Liebherr file no reports with the SEC, and peers report segment margins on different bases.
• Power equipment growth, latest quarter: Bloom Energy +138.1%, Vertiv +61.2%, Generac Commercial & Industrial +27.9%, GE Vernova Power +24.8%, Cummins Power Systems +19.4% (Q2 2026), Caterpillar Power & Energy +17.7%; Caterpillar's segment margin of 24.4% compares with GE Vernova Power 21.4% and Cummins Power Systems 24.5% on segment EBITDA.
• Construction equipment: Caterpillar Construction Industries +18.1% at a 22.9% margin against Deere Construction & Forestry +18.3% at 12.1% (quarter to 2 Aug 2026) and CNH Construction +12.0% at 1.7% (Q2 2026).
• Valuation: Caterpillar trades at 24.5x TTM EPS and 4.2x EV/Sales on enterprise net debt incl. Financial Products debt; market value $287.2bn. Peer market values were not compiled from filings, so peer multiples are not shown.

8 Material Events & Contracts

• 11 Forms 8-K in twelve months: four earnings releases with dealer statistics, the segment recast of 26 Mar 2026, the credit facility renewal, four leadership notices and the annual meeting results with the dividend increase. No 8-K was filed for the Investor Day of 4 Nov 2025.
• Leadership: Joe Creed became Chairman on 1 Apr 2026 after D. James Umpleby III left the board; Kyle Epley succeeded Andrew Bonfield as CFO on 1 May 2026; Lynn Good joined the board on 1 Aug 2026; Derrick York leads Resource Industries from 1 Nov 2026.

9 Ownership, Voting Power & Annual Meeting

• One class of common stock, one vote per share; no controlling holder. Vanguard Capital Management reported 7.47% at 31 Mar 2026; State Street (7.41%) and BlackRock (6.60%) last reported in early 2024. 459.7m shares outstanding on the Q2 2026 10-Q cover.
• 2026 annual meeting (10 Jun 2026, virtual): all ten directors elected with 94.9% (James C. Fish, Jr.) to 99.5% (Lynn J. Good) of votes cast; say on pay 95.1%; shareholder proposal for action by written consent 39.5%, rejected.
• Insiders, 12 months: two open market purchases by director David MacLennan (550 shares, $0.39m). 29 Forms 4 report sales; the eight most recent, May to Aug 2026, total about $103.8m, mostly same day sales after option exercises. CEO Joe Creed sold 32,401 shares for about $26.2m on 28 Aug 2026 after exercising 44,403 options.
• Other sales: group presidents Anthony Fassino (about $23.4m), Bob De Lange (about $22.4m) and Denise Johnson (about $17.1m) and former CFO Andrew Bonfield (about $14.4m), all in May 2026 at prices above $900.

2026 annual meeting

• Virtual meeting of 10 Jun 2026; the 8-K reports vote results only, and no transcript of management remarks was found.
• PwC ratified as auditor with 372.9m votes for and 19.9m against; quarterly dividend raised the same day by $0.12 to $1.63, the 32nd consecutive year of higher annual dividends.

10 Risk Factors

• Item 1A of the FY2025 Form 10-K holds 27 risk factors, as in FY2024 (7,453 words against 7,454); 26 are unchanged and one, on pension funding, is reworded. The Forms 10-Q for Q1 and Q2 2026 report no material change.

How risk factors changed

• Comparison: 10-K FY2025 filed 13 Feb 2026 acc 0000018230-26-000008 against 10-K FY2024 filed 14 Feb 2025 acc 0000018230-25-000008.
• 26 of 27 risk factors are word for word identical to the FY2024 10-K apart from page numbers; the four group headings (Macroeconomic, Operational, Financial, Legal & Regulatory) are unchanged.
• Tariffs are named 3 times in each year; the international trade policy factor (122 words) is unchanged although Caterpillar reported higher tariff costs in 2025 and expects about $2.2bn in 2026 (10-Q Q2 2026).
• The one reference to data centers in each year concerns Caterpillar's own IT systems, and AI is not named in Item 1A in either year, while Power Generation sales for data center applications are the main growth driver cited in the 2026 earnings releases.
• Neither 10-Q filed since the FY2025 10-K reports a material change; the 20 Feb 2026 Supreme Court ruling on IEEPA tariffs and the 2026 segment realignment appear in MD&A and an 8-K; Item 1A text is unchanged.

11 Stock Price, Scenarios & Sensitivity

• CAT last traded at $624.89 on 30 Oct 2026 (close $622.75), 41.7% below the 52 week high of $1,071.51 and 16.9% above the low of $534.66. The close fell from $713.38 on 28 Oct to $647.39 on results day, (9.3%).
• Valuation: 24.5x TTM diluted EPS of $25.49; 4.2x EV/Sales incl. Financial Products debt; dividend yield 1.0% on the $1.63 quarterly dividend.
• Scenario model: sales and revenues grow from TTM Q3 2026 for three years; operating margin as stated; 23% tax rate; no other income; price equals TTM Q3 2029 EPS times exit P/E.

Critical factors and core assumptions

• Base: TTM Q3 2026 sales and revenues $77.77bn, operating profit $14.25bn (18.3% margin).
• Best case: 10% revenue CAGR, 23% operating margin, 28x P/E, share count (6%).
• Base case: 6% revenue CAGR, near the top of the 5% to 7% target of Nov 2025; 20% margin; 22x P/E; share count (6%) from buybacks of about 2% a year.
• Worst case: revenue (2%) a year on a data center and construction downturn; 15% margin, against 16.5% in FY2025 and 13.5% in FY2021; 16x P/E; share count (3%).
• Tax rate 23% (company guidance excl. discrete items); Financial Products profit stays within operating profit; no other income.

Scenarios, three years forward

Sensitivity analysis

Disclaimer

This analysis is for information only and is not financial advice. It is derived from public SEC filings retrieved via sec-api.io and is not a publication of the U.S. Securities and Exchange Commission. Scenario values are model outputs under stated assumptions and are not forecasts. Data as of 30 October 2026.

Sources

All company figures are read from SEC filings retrieved through the sec-api.io MCP server. Call statements are taken from the Q4 2025, Q1 2026 and Q2 2026 earnings calls and the Investor Day of 4 Nov 2025 held by the company.