Can Data Center Power Fuel CAT Stock To New Highs?

Caterpillar (CAT) has almost doubled over the past year, gaining 96.3% while the S&P 500 returned 19.1%. Deere and Cummins each gained about 43%. The broader machinery cycle carried Caterpillar part of the way, but enthusiasm around power generation drove the premium. The gap to the stock’s 52-week high is what a buyer now has to price against those expectations.

Caterpillar Sells The Engines And Turbines Data Centers Run On

In the second quarter of 2026, sales to users of power generation equipment grew 72%, on demand for the large gensets and turbines that stand behind data centers. That growth sits inside a Power & Energy segment whose sales to users grew 33%. The order book grew across all three segments. Backlog reached $72 billion, roughly 92% higher than a year earlier, and some customers are now placing orders as far out as 2030.

Caterpillar is adding capacity against that demand. It restarted a gas engine platform it had shut down a few years ago, aiming to bring about 1.5 gigawatts of capacity back online. It also converted a work-tool plant in Wamego, Kansas in under a year to ship the PGM130 unit used for data center power generation. It has raised its full-year 2026 sales outlook to mid-to-high teens growth.

But Caterpillar Earns Less Per Dollar Than It Used To

Revenue over the past twelve months came to $74.73 billion, up 18.4%, against a three-year average growth rate of 5.3%. That is a real acceleration. Profitability has not kept up. Operating margin over those twelve months was 17.5%, below its own three-year average of 18.7%.

Adjusted operating margin in the second quarter of 2026 alone was better than a year earlier, so the trailing shortfall is not a business coming apart. It is a business absorbing cost to add capacity. Stripping out one-off tariff recoveries, management expects full-year 2026 adjusted operating margin near the bottom of its target range, with tariff costs of around $2.2 billion, the low end of the range it had previously given. The build behind the power story costs money too, in depreciation and in plant spend.

So What Is Left In The Price For You?

At $822 the stock trades roughly 23% below its 52-week high of $1,063, taking some of the froth out of the valuation. Buying here is a bet that the construction side holds up while power ramps.

Caterpillar delivered its first units to Major Projects, a dealer-owned rental venture built for multibillion-dollar jobs, and rental fleet loading is now a bigger piece of construction growth. Against that, management expects Construction Industries dealer inventory to fall by over $1 billion in the fourth quarter, and still plans to finish 2026 above the year-earlier level.

So watch the margin. The backlog is already huge and stretches years out, so another record order changes little. What is still open is whether operating margin climbs back toward its three-year average as the tariff comparisons lap.

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