Caterpillar (CAT) shares surged 5.7% in premarket trading Wednesday after the heavy-equipment maker reported stronger-than-expected third-quarter results, driven by surging demand for energy and transportation equipment used to power artificial intelligence data centers.
Quarter led by energy and transportation
The company posted adjusted earnings of $4.95 per share, topping analysts’ average estimate of $4.51, according to data compiled by Bloomberg. Revenue from its operating segments rose 10% to $16.7 billion, led by the energy and transportation division, which provides battery storage systems and backup generators used by data centers and industrial clients.
That business has become Caterpillar’s (CAT) fastest-growing segment, outpacing its traditional construction and mining equipment operations as the AI boom drives greater need for electricity generation and resilient infrastructure.
Industrial demand and economic outlook
Caterpillar (CAT), one of the world’s largest makers of construction and mining machinery, is widely viewed as a bellwether for global economic activity. Its broad exposure across industries and regions gives investors insight into whether industrial demand is expanding or cooling.
The recent rally in Caterpillar (CAT) shares underscores how the AI-driven buildout of power-hungry data centers has attracted investor interest in legacy industrial manufacturers that supply the underlying infrastructure.
Tariffs to weigh on fourth quarter
The company also said it expects $650 million to $800 million in tariff-related costs in the fourth quarter. In August, Caterpillar (CAT) had warned that U.S. tariffs on imports would weigh more heavily on profits than initially projected, estimating a full-year impact of $1.5 billion to $1.8 billion. It now anticipates total tariff costs of $1.6 billion to $1.75 billion for the year.
Even with those challenges, Caterpillar (CAT) reiterated that its adjusted operating profit margin for 2025 should finish near the lower end of its previously guided range, signaling continued resilience despite global cost pressures.