Has CAT Stock Become A Different Bet?

Caterpillar’s shifting revenue mix reveals a company changing its core narrative. Management sounds notably different on its earnings calls today compared to a year ago. Through 2025, leadership kept pointing to one specific sales tool for its construction machines. However, in the fiscal Q2 2026 call, management pivoted to lead with data centers instead. Construction is still about a third of Caterpillar’s revenue, so you should care when management changes how it talks about a business that size. So what did Caterpillar’s management use to lead with?

Caterpillar Used To Lead With Merchandising Programs

Caterpillar’s management used to lead with merchandising programs, a sales tool for its construction machines. In the fiscal Q1 2025 call, management said the programs were yielding results. In the fiscal Q2 2025 call, it said the programs lifted sales to users above expectations. Sales to users counts machines bought by end customers, not by dealers.

The programs mattered because management tied them to how Caterpillar’s construction business performed. In the fiscal Q4 2025 call, management said Construction Industries’ sales to users grew faster than its global industry in 2025. Management said the merchandising programs supported that growth.

In the fiscal Q2 2026 call, the merchandising programs came up only once. Management led with data center power demand and a $72 billion backlog instead. Backlog means orders Caterpillar (CAT) has taken but not yet delivered.

How Big Are Caterpillar’s Power And Construction Businesses?

Power & Energy is the bigger business, with $32.2 billion of revenue in fiscal 2025. Its revenue rose 11.6% that year. Construction Industries revenue slipped 1.6%, to $25.1 billion. Over the twelve months through Q2 2026, Power & Energy accounted for 43% of Caterpillar’s total revenue, compared to 34% for Construction Industries.

Management tied the power growth to data centers. In fiscal Q2 2026, Power & Energy sales rose 17%, to $8.2 billion. Sales to users of power generation equipment grew 72% in the quarter. Management said that came from very strong demand for large generator sets and turbines used in data centers.

Construction Industries grew fastest in that quarter. Its sales rose 35%, to $8.3 billion. Management put the rise down to higher sales volume and better prices. So Caterpillar’s construction sales grew strongly even after the shift in management’s talk.

Is Caterpillar A Riskier Bet After The Shift?

Mostly not, though one construction figure is worth watching. Caterpillar has increasingly positioned itself as a bet on power demand—even if Construction Industries took the lead in the latest quarter. Power & Energy was its biggest business in fiscal 2025 and grew fastest that year. Construction sales edged past it in fiscal Q2 2026. But construction demand looks healthy without the programs in the spotlight. Construction sales to users rose 22% in fiscal Q2 2026, the sixth straight quarter of growth.

The figure to watch is dealer inventory. Caterpillar’s own construction sales rose faster than sales to users. Dealers also added $400 million of construction inventory, against a decrease a year earlier. So part of the quarter’s construction sales went into dealer stock, not to end customers.

Dealer stock matters more at today’s share price. Caterpillar’s shares trade at 34.8 times its earnings over the past twelve months, against 22.1 for the S&P 500. At that premium, you have less room for a slowdown in construction.

You will see at the fiscal Q3 2026 results whether construction dealer inventory rises again. Flat or lower dealer inventory would mean construction demand is coming from end customers. A second rise, with slower sales to users, would mean dealers are stocking machines that customers have not yet bought. In that case, the quiet around merchandising programs would look like a real concern. Management once credited those programs with lifting sales to users.

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