Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 4, 2026 · Beat 4 of last 7 quarters
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Caterpillar's record quarter underscores the AI infrastructure buildout's demand for power generation equipment, with power generation sales to users up 72% and backlog stretching to 2030. The company's capacity expansions, including restarting the 10-megawatt reciprocating engine platform and repurposing facilities, signal sustained investment to meet data center power demand. This strength in power generation, combined with construction demand from data center builds, positions Caterpillar as a key beneficiary of the physical infrastructure buildout.
Caterpillar reported record Q2 sales and revenues of $20.5 billion, up 24% YoY, with adjusted EPS of $8.17, up 73%. All three primary segments grew sales to users, with Power & Energy up 33% (power generation up 72% on data center demand), Construction Industries up 22% for the sixth consecutive quarter, and Resource Industries up 17%. Backlog grew to $72 billion, up $9 billion sequentially, with all segments contributing. The company recognized $392 million in IEEPA tariff recoveries and incurred $400 million in other tariff costs, lower than the $700 million estimate. MP&E free cash flow was a record $5.1 billion, and the company returned $2.2 billion to shareholders.
Management raised full-year 2026 sales and revenues growth guidance to mid- to high-teens, up from low double-digit growth guided last quarter, driven by strong demand across all three primary segments and increased capacity throughput in the second half. They expect adjusted operating profit margin to be higher than previously guided, though excluding IEEPA tariff recoveries it would be near the bottom of the target range. MP&E free cash flow guidance was raised to the top half of the $6-15 billion target range. Management noted strong order rates, with Power & Energy customers placing orders as far out as 2030, and plans to bring 1.5 GW of 10-megawatt reciprocating engine capacity back online with shipments starting in Q4.
“We continue to see strong momentum in our end markets despite ongoing uncertainty due to geopolitical events. We are increasing our full year 2026 sales and revenues expectations to mid- to high teens growth based on the healthy demand we are seeing across all 3 of our primary segments.”
on Guidance raise
“Power & Energy customers continue planning with us by sharing their long-term forecasts, and some are placing orders as far out as 2030.”
on Backlog and demand visibility
“We have constant discussions with our customers. And all I can tell you is what our discussions with them is no one is slowing down at the moment. In fact, if we can get more units out, they're asking us to give them more units.”
on AI data center demand
Is the 10-megawatt recip capacity part of the 65 GW target? Are you more or less confident on data center demand visibility through 2030?
The 10-megawatt unit was not included in the 65 GW target. Customers are not slowing down; they are asking for more units. Orders are coming in for 2029-2030, and oil and gas backlog is nearly 2x year-ago levels, so demand is broadening beyond data centers.
What is the composition of backlog growth—large chunky awards vs broad-based? And are incremental margins in Power & Energy sustainable?
Backlog growth was broad-based across all three segments. Power & Energy backlog is more extended, with growth in oil and gas and power generation, including large prime power orders. Incremental margins benefited from lower tariffs; expect some freight pressure but strong operating leverage.
Are you sold out for 2027-2028? How are you approaching gas recip prime demand and slot allocation?
Lead times are extended: gas prime into late 2028, turbines a bit further. We are protecting long-time oil and gas customers and working with customers to schedule deliveries. We have some flexibility to move schedules to maximize customer coverage.