U.S. industrial giant Caterpillar reported strong fourth-quarter results driven by rising artificial intelligence-related demand, while warning that tariffs could weigh heavily on profitability in the year ahead. The company said sales growth reflects a mixed global economy, with expanding AI infrastructure offsetting growing trade-related costs.
Caterpillar’s power and energy segment recorded quarterly sales growth of more than 20%, making it the company’s largest business by revenue. Demand has surged for large prime power generator systems as data centers seek reliable, around-the-clock electricity to support rapid expansion. Management said orders from data center customers continue to rise as on-site power becomes increasingly critical.
The company cautioned that tariff-related costs could exceed $2.6 billion in 2026, up from $1.8 billion last year. Executives noted that while tariffs remain manageable, they are limiting margin expansion across business segments. Analysts expect these headwinds to persist through next year, keeping pressure on profits.
Despite the challenges, Caterpillar exceeded market expectations. Adjusted earnings per share rose to $5.16, while revenue increased to $19.1 billion, beating analyst forecasts. Shares climbed in early trading as investors focused on AI-driven growth and improving long-term demand prospects.
