What Could Derail Caterpillar Stock?

Investors holding Caterpillar (CAT) stock are paying 33.9 times earnings, compared with 21.9 for the S&P 500. Sustaining that premium requires durable growth, and a rapidly expanding part of Caterpillar’s business is selling into a single type of project. During the company’s latest earnings call, a concern was raised about how long those projects will keep arriving. So what exactly is the concern?

Caterpillar’s Power Orders May Slow In Later Years

The concern is that data centers might stop ordering Caterpillar’s power equipment at their current pace a few years from now. This issue surfaced during the company’s second-quarter 2026 earnings call on August 4, 2026.

Data centers are driving a sharp rise in Caterpillar’s power sales. The company’s power generation sales to end users grew 72% in that quarter, and management credited very strong demand for large gensets and turbines used in these facilities. Executives expect power generation to grow for the full year as cloud computing and generative AI require more energy.

Management noted during the call that no customer is currently slowing down. Buyers are asking for more units, executives said, if Caterpillar can manage to produce them.

How Big Is Caterpillar’s Power & Energy Business?

Power & Energy is Caterpillar’s largest reported segment, generating revenue of $32.2 billion in fiscal 2025, up 11.6% from fiscal 2024. In the second quarter of 2026, the segment’s sales reached $8.2 billion, up 17% from a year earlier.  That growth rate is measured on the company’s call basis, which can differ from the full-year segment figures above. Caterpillar also maintains long-time oil and gas customers, meaning the data center concern touches only part of this segment.

Caterpillar’s price sits in the upper half of its ten-year range. The stock trades at 4.9 times sales, against 3.1 for the S&P 500. Over the past ten years, that multiple has ranged from 1.2 to 7.0.

The stock has already fallen 24.8% from its 52-week high. Even so, it returned 61% over the past twelve months, compared with 17.3% for the S&P 500. At this level, the price appears to assume that the power orders keep coming.

Some Caterpillar Orders Stretch Out To 2030

Some Power & Energy customers are placing orders as far out as 2030, management said in August. The potential slowdown presents a genuine risk to Caterpillar, but the timeline of these extended orders suggests the threat is still years away rather than a quarter away.

Orders secured across the whole company point in the same direction. Caterpillar’s backlog, representing the orders it has taken but not yet delivered, stood at $72 billion at the end of the second quarter. Management expects to deliver 59% of that total over the next twelve months, leaving the remainder for later periods. Buyers of its gas engines for prime power are now looking at delivery dates in the back half of 2028 and into 2029.

Caterpillar is actively expanding what it can build. The company is restarting a 10-megawatt gas engine line, and it plans to bring about 1.5 gigawatts of capacity back online.

Historical performance under stress is also a factor: Caterpillar stock has fallen further than the broader market during some past shocks. It declined 22.0% during the 2025 tariff shock, compared with 19.0% for the S&P 500. In the 2023 regional banking crisis, the stock dropped 17.0%, while the index fell only 6.7%.

Caterpillar’s backlog, along with its year-over-year change, is the metric to watch when the company next reports its quarterly results.

Does This Mean You Should Act On CAT?

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