Caterpillar shares climbed Thursday after the heavy machinery manufacturer posted fourth-quarter results that surpassed Wall Street forecasts, though full-year guidance for 2026 signaled margin pressures ahead.

The Peoria, Illinois-based company announced earnings per share of $5.16 on revenue of $19.1 billion for the period ended December 31. Analysts surveyed had estimated earnings of $4.71 per share on sales of $17.9 billion.

The results showed a modest improvement from the year-ago quarter, when the company generated per-share earnings of $5.14 on sales of $16.2 billion. However, operating margins contracted year over year, squeezed by tariff costs and softer pricing power in certain markets.

Shares rose 4.3% to $671.33 in morning trading, outpacing the broader market indices.

Prudent Outlook Tempers Investor Enthusiasm

Management’s 2026 guidance introduced a note of caution. The company indicated that sales growth would reach the upper end of its targets, while operating margins would settle near the lower end of its range.

Caterpillar’s long-term strategic framework calls for annual revenue growth of 5% to 7% through 2030, with margins that fluctuate based on volume and economic conditions. Translating the guidance suggests 2026 sales approaching $72 billion with operating profit between $12 billion and $13 billion—modestly below the current analyst consensus of $13.3 billion in operating profit on similar revenue.

Industry analysts reported that tariff-related costs continue to constrain margin expansion despite volume growth.

The AI Connection: Power Generation Acts as Growth Driver

Over the past year, Caterpillar shares have surged 65%, significantly outpacing the wider market’s 15% gain. The outperformance indicates increasing investor recognition of the company’s exposure to the artificial intelligence infrastructure buildout, particularly through its power generation business.

Industry forecasts project global electricity demand will increase 40% by 2035, with data centers acting as a primary catalyst. Power consumption by data centers alone is expected to triple during this period, with U.S. facilities requiring more than 100 gigawatts of additional generating capacity by the mid-2030s.

While Caterpillar doesn’t compete in utility-scale gas turbine manufacturing, it maintains a firm market position in gas-powered generators for backup and distributed power generation—critical infrastructure for data centers that require an uninterrupted electricity supply.

Fourth-Quarter Performance Summary Power Segment Strength

The company’s Power & Energy segment delivered particularly strong results, with sales of $9.4 billion, representing 23% year-over-year growth, driven by higher volume and improved pricing. Segment profit advanced 25%, outpacing revenue growth and demonstrating operational leverage.

The construction equipment business also contributed to the quarter’s performance, though it faces cyclical headwinds.

Going forward, analysts expect investors to closely monitor pricing trends, particularly in construction markets where the economic uncertainty might pressure demand. The power generation and data center infrastructure story, however, appears positioned to provide a durable growth tailwind extending well into the next decade.

The data emphasize how traditional industrial companies are finding surprising growth vectors in the digital economy’s physical infrastructure needs—transforming a century-old machinery manufacturer into an indirect play on the expansion of artificial intelligence.