Power and energy move to the center of Caterpillar’s growth

Caterpillar delivered its first-ever $20.5 billion sales quarter in the second quarter, supported by rising electricity demand for artificial intelligence infrastructure. The company’s power and energy division generated more than $8.2 billion in revenue, nearly catching up with the traditional construction segment, which brought in $8.3 billion.

Operating profit in the power and energy business climbed to just over $2 billion, surpassing the construction division. The figures pointed to pricing power driven by demand for electricity from data centers and AI infrastructure. A backlog that rose to $72 billion at the end of June also reinforced expectations for continued growth.

Key figures from the quarter

  • Total sales and revenue rose 24% year on year to $20.5 billion from $16.6 billion.
  • Earnings per share came in at $7.77.
  • Adjusted operating margin increased from 17.6% to 21.9%.
  • Cash flow from operations was reported at $4.4 billion.

The stock rally has pushed valuation above tech giants

CAT shares have gained about 90% over the past year. That rise lifted the company’s forward price-to-earnings ratio to 32.05 as of August 28, a valuation that implies a higher multiple than even AI leaders such as Microsoft, Alphabet and Nvidia.

The market is increasingly pricing Caterpillar as more than a cyclical heavy equipment maker, instead viewing it as a company that helps power AI growth. Still, the report also highlighted a clear risk: if AI infrastructure spending slows or alternative electricity suppliers gain ground, the current valuation leaves limited room for disappointment. Caterpillar’s construction and resource industries businesses still account for a significant share of total revenue and remain more cyclical.

On the institutional side, hedge fund ownership fell to 84 funds in the latest quarter from 87 in the previous one. Short interest of 1.57% suggested there was no large bearish bet against the stock.

Arkansas move expands workforce investment

On August 17, the company launched a new manufacturing workforce commitment in Arkansas. The move, worth up to $3 million, was Caterpillar’s fifth allocation under its five-year, $100 million Building the Future Workforce Initiative program.

The initiative includes education and local partners such as Arkansas Pulaski Technical College and the Little Rock Regional Chamber. The North Little Rock facility already employs more than 530 people and works with 60 suppliers in the state.