Caterpillar Earnings Show Data-Center Demand, Tariff Drag

Caterpillar Inc. reported record fourth-quarter sales on Jan. 29, 2026, driven by power-and-energy demand linked to data-center expansion. Management said tariffs will erode margins and push 2026 operating profit toward the bottom of its target range.

Record Quarter, Backlog, and Segment Performance

Caterpillar said in a press release that fourth-quarter sales and revenues reached $19.1 billion, up 18% year-over-year, with adjusted profit per share of $5.16. The company’s backlog hit a record $51 billion at quarter-end, rising $21 billion or 71% from a year earlier.

Sales increased across all three primary segments. Construction Industries rose 15% to $6.9 billion, Resource Industries climbed 13% to $3.4 billion, and Power & Energy surged 23% to $9.4 billion. The power-and-energy growth reflects strong demand for power-generation equipment tied to data-center expansion.

For the full year, sales and revenues totaled $67.6 billion, up 4% from 2024. Higher volume added $3.4 billion, offset by $0.8 billion in unfavorable pricing.

Tariffs Pressure Margins and 2026 Outlook

Adjusted operating profit margin declined to 15.6% in the quarter, down 270 basis points from a year earlier, while the full-year margin fell 350 basis points to 17.2%. Tariffs reduced margins by about 600 basis points in Construction Industries, 490 in Resource Industries, and 220 in Power & Energy.

On the earnings call, management said it expects sales growth across all three segments and services revenue growth in 2026. It forecast adjusted operating-margin guidance near the top half of the target range excluding incremental tariffs and close to the bottom including them. The company also expects MP&E-free cash flow (cash flow excluding maintenance, property, and equipment expenditures) to be slightly lower than last year due to higher capital spending.

Management said, "For 2026, we anticipate sales growth across all three primary segments, driven by stronger volume and price."

Cash Flow and Shareholder Returns

Caterpillar generated $11.7 billion in enterprise operating cash flow and $9.5 billion in MP&E-free cash flow for the year. Enterprise cash totaled $10.0 billion at year-end. The company returned $7.9 billion to shareholders through repurchases and dividends, equal to 84% of MP&E-free cash flow.

Services revenues reached $24 billion for the full year. Cat Financial reported fourth-quarter revenue of $949 million, up 7% year-over-year, while profit fell 61% to $139 million.