What Has The Market Missed In Caterpillar Stock’s Drop?
For questions about this article or underlying research, email help@trefis.com.
Caterpillar (CAT) stock fell 20.8% between July 24 and October 22, 2026, while the S&P 500 gained 3.7%. Yet one Caterpillar business has been growing fast: the large gensets and turbines the company sells for data center applications. You probably still think of Caterpillar as a maker of construction equipment, but data centers have become its customers too. So how fast are Caterpillar’s power generation sales growing, now that data centers buy its equipment?
Caterpillar Sells Far More Power Equipment To Data Centers
Caterpillar’s power generation sales to users grew 72% in the second quarter of fiscal 2026, reflecting what management called very strong demand for large gensets and turbines used in data center applications. These sales sit inside the Power & Energy segment, where overall sales to users grew 33%.
This demand extends to Caterpillar’s orders. The company’s backlog reached $72 billion in that quarter, up 92% from a year earlier. Management said all three of its main segments added to it. This backlog sits close to a full year of sales, alongside the $74.7 billion of revenue Caterpillar reported over its last twelve months.
Are Caterpillar’s Data Center Orders Booked Years Ahead?
During the same call, an analyst raised a concern about AI and data center demand in later years. Management did not say how much of the orders booked out to 2030 depend on that demand, and an order is not yet a sale.
Not everything points in the same direction. Management raised its fiscal 2026 adjusted operating margin outlook. Excluding a $392 million boost from tariff recoveries, however, the company expects that margin to sit near the bottom of its target range. Even after the drop, the stock is priced at 29.9 times earnings, against 23.0 for the S&P 500.
What Would Show Caterpillar’s Power Business Slowing?
The clearest sign would be a backlog that stops growing. Caterpillar does not say how much of this backlog is data center work. When the makeup of the backlog came up on the August 4 call, management said the company does not discuss the specifics.
A slow build-out would offer the other sign. Caterpillar plans to bring about 1.5 gigawatts of capacity back online. First shipments are expected in the fourth quarter of 2026, followed by a ramp to that level over 18 months. If data center orders slow or that capacity arrives late, more of Caterpillar’s growth would have to come from construction. Management said residential and other parts of that business are not particularly strong, though it called that potential upside for the future.
Your Advisor Retired? Get A Second Opinion Before You Settle
A stock like Caterpillar can look very different depending on which part of the business you watch. When the advisor who built your plan moves on, it is a natural moment to ask whether the plan still fits the life you have now. Our partner advisory firm offers a free review of your holdings, fees and income plan.
Spot an error or want more like this? Tell us in 10 seconds.