Caterpillar surges 6.5% on record backlog, AI data center demand
Equipment maker reports $51B order book as power generation for AI infrastructure fuels growth
Caterpillar shares surged 6.5% to $722.64 on Thursday after the heavy equipment manufacturer reported record quarterly results driven by an unprecedented $51 billion backlog, fueled by growing demand for power generation solutions from artificial intelligence data centers.
The company's fourth-quarter revenue of $19.1 billion represented an 18% increase from the prior year, while adjusted earnings per share reached $5.16, surpassing analyst expectations. The backlog figure marks a 71% year-over-year increase and provides visibility into future revenue streams through 2027 and beyond.
Much of the backlog growth stems from Caterpillar's expanding role in powering the infrastructure build-out for AI data centers. The company recently secured a major agreement to supply 2 gigawatts of natural gas generation and battery storage for American Intelligence & Power Corporation's Monarch Compute Campus, a massive AI-focused data center project. Deliveries for this initial phase are scheduled between September 2026 and August 2027, with the campus ultimately designed to scale up to 8 GW of capacity.
The strategic pivot toward AI infrastructure has transformed Caterpillar's Power & Energy segment into its largest and fastest-growing business unit. As hyperscale data center operators seek reliable backup and primary power solutions to support AI workloads, traditional industrial equipment manufacturers have found an unexpected growth avenue.
"Caterpillar is expanding its involvement in AI data centers by providing power generation solutions, including a 2 GW natural gas generation project for the Monarch Compute Campus," according to industry analysis. "The generators will operate on natural gas and incorporate advanced emissions controls."
Analysts responded swiftly to the earnings beat and backlog expansion. HSBC raised its price target to $850 from $660, maintaining a buy rating, while Truist Securities increased its target to $786 from $729. The new targets imply significant upside from current levels, with HSBC's call suggesting roughly 18% additional potential.
The strong performance also contributed to broader market strength. Caterpillar has been among the top contributors to the Dow Jones Industrial Average's recent milestone, which surpassed 50,000 points for the first time. The industrial giant's rally has coincided with the index's historic run, reflecting growing investor confidence in the intersection of traditional manufacturing and emerging technology infrastructure.
Full-year 2025 revenue reached a record $67.6 billion, up 4% from 2024, while adjusted earnings per share hit $19.06. The company generated $11.7 billion in enterprise operating cash flow and returned $7.9 billion to shareholders through share repurchases and dividends.
Looking ahead, management has indicated confidence in sustaining growth near the top end of its 5-7% compound annual growth rate range for 2026. The massive backlog provides substantial revenue visibility, though execution risks remain given the scale and complexity of large infrastructure projects.
The stock's surge puts Caterpillar near its 52-week high of $723.16, a dramatic recovery from its 52-week low of $263.63. With 14 buy ratings, 12 hold ratings, and 2 sell ratings among analysts, the consensus remains broadly positive on the company's strategic transition toward AI-related infrastructure.
As the artificial intelligence boom drives unprecedented demand for data center capacity, traditional industrial companies like Caterpillar are finding new life supplying the backbone of the digital economy. The question for investors now is whether this strategic pivot can sustain momentum beyond the current infrastructure build cycle.