Caterpillar Q2 Earnings Call Highlights

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Caterpillar (NYSE:CAT) reported record second-quarter sales and revenues of $20.5 billion, up 24% from a year earlier, as demand increased across its Construction Industries, Resource Industries and Power Energy segments. The company said it was the first quarter in its history with more than $20 billion in sales and revenues.

Adjusted profit per share rose 73% year over year to $8.17, while adjusted operating profit margin reached 21.9%, up 430 basis points. Chairman and CEO Joe Creed said higher equipment sales to end users and favorable price realization drove the growth. The company also generated a record $5.1 billion of machinery, energy and transportation free cash flow during the quarter.

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“Strong order rates and a growing backlog reflect broadening momentum across our business,” Creed said. Backlog increased by $9 billion sequentially to $72 billion, up about 92% from the second quarter of 2025. Caterpillar said 59% of that backlog is expected to be delivered in the next 12 months, while some Power Energy customers have placed orders extending as far as 2030.

Segment Growth and End-Market Demand

Power Energy sales rose 17% to $8.2 billion, with segment profit increasing 30% to $2 billion. Sales to users in the segment increased 33%, including a 72% increase in power-generation sales. Caterpillar attributed the power-generation gain to demand for large generator sets and turbines used in data-center applications.

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Oil and gas sales to users increased 6%, driven by engines, turbines and related services for gas compression applications. Creed said the company continues to see demand from oil and gas customers, noting that the segment’s oil and gas backlog was nearly twice its level from a year earlier.

Caterpillar plans to resume production of a 10-megawatt medium-speed gas reciprocating engine platform that it ceased manufacturing in 2022. The company expects to bring approximately 1.5 gigawatts of capacity back online, with initial shipments scheduled for the fourth quarter. Creed said the platform was not included in Caterpillar’s previously discussed 65-gigawatt capacity target through 2030.

Construction Industries sales increased 35% to $8.3 billion, while segment profit climbed 57% to $1.9 billion. Sales to users rose 22%, marking the sixth consecutive quarter of growth. North American demand was supported by rental fleet loading, non-residential and residential construction activity, and infrastructure projects, according to the company.

Construction activity in Europe was stable, while Africa remained strong, Caterpillar said. The company cited softer conditions in the Middle East and in Asia-Pacific markets outside China. In China, it expects growth in the above-10-ton excavator market from low activity levels.

Resource Industries sales rose 20% to $4.6 billion, and segment profit increased 23% to $693 million. Sales to users grew 17%, supported by mining, heavy construction, and quarry and aggregates activity. Caterpillar said demand for copper and gold, high equipment utilization and an aging fleet were supporting customer investment decisions.

Tariffs, Margins and Capital Deployment

Caterpillar’s second-quarter margin benefited from $392 million in expected recoveries related to International Emergency Economic Powers Act tariffs, as well as lower-than-expected tariff costs. CFO Kyle Epley said tariff costs, excluding those recoveries, were about $400 million in the quarter, below the $700 million estimate the company gave in April.

The company now expects full-year tariff costs of about $2.2 billion, excluding the expected second-quarter IEEPA recoveries. It expects roughly $600 million of tariff costs in the third quarter, with about half expected in Construction Industries and 25% each in Power Energy and Resource Industries.

Caterpillar returned $2.2 billion to shareholders during the quarter, including approximately $1.5 billion in share repurchases and the quarterly dividend. The company raised its dividend 8% in June, its sixth consecutive year of a high-single-digit quarterly increase. Enterprise cash totaled $6.7 billion at quarter-end.

Raised 2026 Outlook

The company raised its full-year 2026 outlook and now expects sales and revenues to grow in the mid- to high-teens percentage range. It also expects adjusted operating profit margin to exceed its prior forecast and machinery, energy and transportation free cash flow to land in the top half of its $6 billion to $15 billion annual target range.

Excluding the favorable IEEPA tariff recoveries, Caterpillar expects full-year adjusted operating margin to be near the bottom of its target range, reflecting tariffs and increased investments in capacity, technology, research and development, and other strategic initiatives.

For the third quarter, Caterpillar expects strong year-over-year sales growth in each of its three primary segments. It anticipates a more typical reduction of more than $1 billion in Construction Industries dealer inventory during the fourth quarter, although it plans to end the year with inventory above the prior-year level in anticipation of future end-market growth.

Creed said Caterpillar is expanding its rental strategy through Major Projects, a dealer-owned rental joint venture serving large North American infrastructure, energy, manufacturing and data-center projects. The company delivered its first units to the venture during the second quarter and expects additional fleet loading in the third quarter.

About Caterpillar (NYSE:CAT)

Caterpillar Inc is a global manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and locomotives. The company's product portfolio includes earthmoving machines such as excavators, bulldozers, wheel loaders and off‑highway trucks, as well as a range of power generation products including generator sets and power systems for industrial and commercial use. Caterpillar serves customers across heavy construction, mining, energy, transportation and related industries with both equipment and integrated technology solutions.

In addition to manufacturing, Caterpillar provides a broad range of aftermarket parts and support services, including maintenance, repair, remanufacturing and fleet management tools.

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