Caterpillar Inc. (CAT) reported stronger-than-expected first-quarter 2026 earnings on Thursday, driven by robust demand across its construction and power generation businesses. The company posted earnings per share of $5.54 on revenue of $17.4 billion, surpassing Wall Street expectations of $4.65 per share on $16.5 billion in revenue, according to FactSet. A year earlier, the company had reported earnings of $4.25 per share on sales of $14.2 billion.
Total revenue rose 22% year over year to $17.42 billion, supported by strength across key segments. The company's core construction equipment division saw revenue jump 38%, reflecting solid demand and improved dealer inventory levels. Meanwhile, its power and energy segment posted a 22% increase in revenue, underscoring the growing importance of energy solutions in Caterpillar's portfolio.
AI boom fuels power generation segment
A key driver of recent growth has been demand from data centers, particularly those supporting artificial intelligence workloads. These facilities require large-scale, uninterrupted power supply, boosting demand for Caterpillar's generators and turbine systems. The company said sales increased in large reciprocating engines and in turbines and turbine-related services, primarily for data center applications. This shift marks a notable evolution for Caterpillar, which has traditionally been associated with heavy construction and mining equipment.
Caterpillar's backlog reached a record $63 billion at the end of the quarter, up 79% from a year earlier, offering strong visibility into future revenue. Profit per share reached $5.47, while adjusted earnings came in at $5.54, both improving from prior-year levels. Operating profit increased to $3.085 billion, reflecting a 20% rise driven by volume gains and pricing strength. Higher manufacturing costs, including tariff impacts, partially offset margin expansion during the quarter. Operating margin stood at 17.7%, slightly lower than 18.1% recorded in the same period last year.
Segment Performance and Market Drivers
Construction Industries led growth with a 38% revenue increase, reaching $7.161 billion during the quarter. Power and Energy sales rose 22% to $7.031 billion, driven by infrastructure and energy demand. Resource Industries recorded modest growth of 4%, reflecting mixed demand conditions across regions. While North America posted gains, Asia-Pacific showed weaker performance due to lower equipment demand.
Geographically, North America remained the primary growth driver with a 32% increase in total sales. Europe, Africa, and the Middle East also posted solid gains, supported by infrastructure activity. Meanwhile, Asia-Pacific growth remained limited, highlighting uneven global demand trends.
Cash Flow, Buybacks and Market Reaction
Caterpillar generated $1.9 billion in operating cash flow during the first quarter, supporting ongoing capital allocation strategies. The company ended the period with $4.1 billion in cash after deploying significant funds to shareholders. It allocated $5.0 billion for share repurchases and $0.7 billion for dividends during the quarter, signaling strong confidence in long-term business performance.
The stock reacted positively, with shares rising nearly 6% in premarket trading to around $844, reversing the prior session's decline. Caterpillar's stock has rallied sharply, gaining about 162% over the past year and 35% year to date. Based on 24 Wall Street analysts who have issued ratings for Caterpillar in the last 12 months, the stock has a consensus rating of 'Moderate Buy.' The average price target stands at $767.77, with the highest estimate at $960.
