Cummins Inc. (CMI) | The Buildout — AI Infrastructure
The Verdict
Cummins is a global power leader spanning engines, components, distribution, power systems, and electrified power. For the AI buildout, the relevant piece is the power systems segment: it makes diesel and natural gas generator sets, controls, and microgrids that data centers use for backup and on-site prime power. The company's worldwide distribution and service network is part of the same offering. That positions Cummins as an indirect supplier of power infrastructure to the data center buildout rather than a direct provider of AI hardware.
| Market Cap | — |
| Revenue (TTM) | $33.9B |
| Revenue Growth | +0.1% |
| EBITDA Margin (TTM) | 14.5% |
| Net Debt | $5.1B |
| Earnings Beats | 7 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Power Systems revenue rose 19% YoY in Q2 2026, with management citing strong global power generation demand, especially in the U.S. and China.
- China power generation equipment sales rose 84% YoY in Q1 and 88% YoY in Q2, attributed to accelerating data center demand.
- The company signed a multiyear agreement with a global hyperscaler securing visibility into several gigawatts of future backup power genset demand.
- Large 95-liter genset orders are being booked into the second half of 2028, and management says backlog is very strong.
- Full-year Accelera EBITDA loss guidance improved to $260M–$290M from $325M–$355M originally, and Q2 operating cash flow was a record $1.5B.
What We’re Watching
- The first step-up of the 20 GW capacity program begins in 2027, but the bigger step-up is not until 2028, leaving growth capacity-constrained near term.
- EPA final rule remains pending after the July 2026 proposed rule; the final content determines 2027 transition mechanics.
- The B platform medium-duty HELM launch has slipped to January 2028 from prior implied 2027 timing.
- The May 2026 C3 AI trade-secret verdict is unquantified and was not addressed in the Q2 earnings-call excerpts.
The thesis is strengthening directionally: data center power generation has become the central growth driver, truck demand is recovering earlier than guided, and Accelera losses are narrowing. The open question is whether Cummins can convert its order visibility into revenue before competitors add capacity, and what the C3 AI liability ultimately costs.
Earnings Beat
Cummins reported Q2 2026 revenue of $9.5 billion, up 9% year over year, with EBITDA of $1.7 billion, or 17.5% of sales, versus $1.6 billion, or 18.4%, a year earlier. Gross margin was $2.5 billion, or 26.1% of sales, compared with $2.3 billion, or 26.4%, a year ago; management called it record Q2 results.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $8.4B | $8.5B | $8.2B | +2.7% |
| Gross margin | 26.7% | 22.9% | 26.4% | +30bps |
| EBITDA | $1.2B | $908M | $1.4B | −12.3% |
| EPS | $4.71 | $4.27 | $5.96 | −20.9% |
| Power Systems revenue | $2.3B | $2.0B | n/a | +19% YoY |
| China total revenue incl. JVs | $2.3B | $2.1B | n/a | +30% YoY |
We recently signed a multiyear agreement with a global hyperscaler, expanding a long-standing partnership and securing visibility into several gigawatts of future backup power genset demand.— Jennifer Rumsey, CEO, 2026-08-04
Management tone: Management's tone on the Q2 2026 call was confident and constructive. Executives were unusually specific about large-genset lead times, incentive compensation bridges, and segment margins. They declined to speculate on EPA noncompliance penalties and competitor behavior, and the C3 AI verdict was not addressed in the earnings-call excerpts reviewed.
Management Guidance
Cummins raised full-year 2026 total company revenue growth to +10% to +13% and EBITDA margin to 18% to 18.5%. N.A. heavy-duty truck forecast raised to 240,000–250,000 units, medium-duty to 130,000–140,000; global power generation revenue growth held at +15% to +25%. Capital investments held at $1.35B–$1.45B, Accelera revenue raised to $350M–$400M, and Accelera EBITDA loss improved to $260M–$290M. Management expects stronger H2 EBITDA percent than H1 with no one-time or nonroutine items in H2.
Trajectory
Revenue moved from $8.4 billion, +3% YoY, in Q1 2026 to $9.5 billion, +9% YoY, in Q2 2026. Q1 reported EBITDA was depressed by a $199 million fuel-cell sale charge; excluding that item, Q1 EBITDA was $1,489 million, or 17.7% of sales. Q2 reported EBITDA margin was 17.5%, down from 18.4% a year ago, and gross margin was 26.1% versus 26.4%. Top-line revenue is accelerating, but reported margin percentages are being held back by one-time and incentive-comp items rather than lower demand.
The Model
The model projects FY+1 revenue of $37,600 million and EBITDA of $6,881 million, an 18.3% margin, rising to FY+2 revenue of $40,540 million and EBITDA of $7,743 million, a 19.1% margin. The near-term projection reflects current demand signals across power generation and truck, while the FY+2 step-up assumes continued revenue conversion and a higher margin trajectory.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $33.7B | $37.6B | $40.5B |
| YoY Growth | — | +11.7% | +7.8% |
| EBITDA | $5.1B | $6.9B | $7.7B |
| EBITDA Margin | 15.1% | 18.3% | 19.1% |
Projections are the median of 5 independent model runs. The model’s revenue sits 1.2% above analyst consensus.
Cummins raised full-year 2026 total company revenue growth to +10% to +13% and EBITDA margin to 18% to 18.5%. N.A. heavy-duty truck forecast raised to 240,000–250,000 units, medium-duty to 130,000–140,000; global power generation revenue growth held at +15% to +25%. Capital investments held at $1.35B–$1.45B, Accelera revenue raised to $350M–$400M, and Accelera EBITDA loss improved to $260M–$290M. Management expects stronger H2 EBITDA percent than H1 with no one-time or nonroutine items in H2.
What Could Go Right — and Wrong
- The 20 GW capacity program ramps on schedule in 2027 and 2028, converting strong backlog into revenue.
- The hyperscaler agreement converts into firm multi-year orders beyond the initial 'several gigawatts' language.
- The EPA final rule preserves the measured transition and keeps current products available through 2027.
- Prime power scales earlier than expected through the Circe Energy project and the 130-liter natural gas genset.
- North American truck recovery and China power generation demand remain durable into 2027.
- Capacity additions slip, leaving demand unconverted until the larger 2028 step-up.
- The EPA final rule removes flexibility, disrupting the 2027 on-highway transition.
- Competitors including Caterpillar, Generac, BorgWarner, or CYD scale capacity before Cummins and take share.
- Mining engine demand weakens further as elevated inventory levels moderate sales.
- The C3 AI trade-secret verdict results in a material cash or legal outcome.
Looking Ahead
The next twelve months turn on two fronts: the on-highway platform transition begins in January 2027 with limited X15 and X10 production, and the 20 GW power generation capacity program begins its first step-up in 2027. The pending EPA final rule determines how smooth the transition is; meanwhile Circe Energy deliveries run from 2026 through 2030 and the hyperscaler agreement may begin converting to firm orders.
- Q3–Q4 2026H2 2026 financial delivery — Tests stronger H2 EBITDA percent than H1 with no one-time or nonroutine items.
- PendingEPA final rule — Tests whether the measured 2027 transition framework and flexibilities hold.
- January 2027X15 and X10 limited production — Tests launch execution for the next-generation on-highway engine transition.
- 202720 GW capacity step-up begins — Tests conversion of backlog into revenue as new capacity comes online.
- 2026–2030Circe Energy deliveries — Tests natural gas genset and integrated microgrid prime-power execution.
- January 2028Next-gen B platform launch — Tests medium-duty launch timing after the prior delay.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $34.1B | $33.7B | $33.9B | -1.3% |
| Gross Margin | 24.8% | 25.3% | 25.4% | +57bps |
| EBITDA | $4.8B | $5.1B | $35.5B | +5.7% |
| EBITDA Margin | 14.1% | 15.1% | 14.5% | +99bps |
| Net Income | $3.9B | $2.8B | $2.7B | -28.0% |
| Free Cash Flow | $279M | $2.4B | $17.0B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)25.4%
- EBITDA Margin (TTM)14.5%
- Net Margin (TTM)7.9%
- ROIC17.3%
- FCF Conversion54.3%
- SBC / Revenue0.0%
The Company
Cummins describes itself as a global power leader. Its Engine segment builds engines from 2.8 to 15 liters and 48 to 715 horsepower; Components makes aftertreatment, turbochargers, fuel systems, valvetrain, drivetrain and braking systems; Distribution sells parts and service; Power Systems makes generators from 2 kW to 3.5 MW and high-horsepower engines up to 4,400 hp; and Accelera makes electrified power systems and batteries. The AI buildout matters to Cummins because data centers need reliable backup and on-site power, and Cummins supplies diesel standby gensets, natural gas gensets, and integrated microgrid controls.
The company operates global manufacturing and distribution: Engine production in North Carolina; Components in North Carolina, South Carolina, Mexico, and the U.K.; Power Systems in Indiana and India; Accelera in North Carolina. It sells through company-owned, joint-venture, and independent distribution, and its largest customer PACCAR represented 13% of 2025 consolidated net sales. The 10-K also flags single-source parts and raw materials as an operational risk.
Business Segments
Competitive Landscape
Cummins' 10-K names Caterpillar, MTU/Rolls-Royce Power Systems, Kohler/SDMO, INNIO, Generac, and Mitsubishi Heavy Industries among Power Systems competitors, plus regional genset assemblers. The company pairs manufacturing with worldwide company-owned, joint-venture, and independent distribution that sells parts and service, and management describes demand as ahead of industry supply. Neighbor read-throughs show Caterpillar, Generac, and BorgWarner expanding capacity or entering adjacent power-gen architectures.
- CaterpillarNamed in the 10-K as a Power Systems competitor; neighbor read-through shows record backlog and large-engine capacity expansion from 2x to nearly 3x 2024 levels.
- GeneracNamed in the 10-K as a Power Systems competitor; neighbor read-through shows data center backlog over $700M and capacity above $1B by Q4 2026.
- MTU/Rolls-Royce Power SystemsNamed in the 10-K Power Systems competitor list; not discussed.
- Kohler/SDMONamed in the 10-K Power Systems competitor list; not discussed.
- INNIONamed in the 10-K Power Systems competitor list; not discussed.
Supply Chain
Cummins sits between industrial suppliers and power and truck end users. It sources parts and raw materials with disclosed single-source risk, manufactures engines and gensets, and sells through owned and independent distribution.
More on CMI: Earnings recap