AI Infrastructure and Construction Demand Reshape Caterpillar’s Growth Mix

Caterpillar’s growth story is broadening beyond traditional heavy equipment

Caterpillar (CAT) is increasingly being pulled by two major sources of demand: stronger construction activity and the infrastructure required to support data centers and artificial intelligence.

The company reported record second-quarter sales and revenues of $20.5 billion, up 24% from $16.6 billion a year earlier and marking its first quarter above $20 billion. Construction Industries revenue climbed roughly 35% to $8.35 billion, while demand for power-generation equipment tied to data centers contributed to another major source of growth.

Key Points

• Caterpillar posted record second-quarter sales and revenues of $20.5 billion, up 24% year over year, while adjusted operating margin expanded to 21.9%.
• Construction Industries revenue increased roughly 35% to $8.35 billion as sales volumes and pricing improved, while rental fleet loading became a larger part of demand.
• Caterpillar ended June with a $72 billion backlog as power-generation demand from data centers added another major growth engine, but dealer inventory reductions are expected to weigh on second-half reported volume.

Construction demand is accelerating, but the source is changing

Construction Industries remains a central part of Caterpillar’s business. The segment generated approximately $8.35 billion in second-quarter revenue, up 34.8% from the prior year and representing roughly 41% of company revenue for the period.

Higher sales volumes contributed $1.75 billion to the increase, while favorable pricing added another $309 million. The performance followed a 38% year-over-year increase in first-quarter Construction Industries revenue to $7.16 billion.

The underlying source of that demand, however, has changed.

During 2025, Caterpillar regularly highlighted merchandising programs as an important reason its construction business was outperforming the broader industry. Construction Industries sales to users increased 5% for the full year.

By the second quarter of 2026, merchandising programs had moved out of the foreground. Instead, management identified rental fleet loading as a larger contributor to growth. These are machines purchased by Caterpillar dealers for their own rental fleets, and Caterpillar includes those purchases within sales to users.

The Major Projects rental joint venture is another part of that transition. The Cat dealer-owned operation received its first machines during the June quarter and is intended to serve large infrastructure, energy and data-center projects.

Construction Industries sales to users increased 22% during the quarter, extending growth to six consecutive quarters.

How is AI infrastructure changing Caterpillar’s business?

Caterpillar’s exposure to the AI investment cycle extends beyond the heavy machinery needed to construct data centers.

Demand for electricity is creating business for Caterpillar’s power-generation equipment, including generators and gas turbines. Second-quarter power and energy sales exceeded $8.2 billion, up 17% year over year and approaching the $8.3 billion generated by Construction Industries.

Within that business, power-generation sales jumped 72% to $3.10 billion, supported by demand for equipment used in data centers.

Power and energy also generated operating profit of slightly more than $2 billion, compared with just under $2 billion from construction.

At the same time, Caterpillar is incorporating AI into its own equipment and operations. Its autonomous product portfolio already includes haul trucks, drilling equipment, underground loaders, dozers and remote-controlled construction machinery.

The Cat AI Assistant extends that technology into equipment maintenance. Customers, technicians and operators can use voice commands to retrieve repair procedures, troubleshoot problems and identify required parts. The system draws on Caterpillar’s proprietary information from approximately 1.6 million connected assets and more than 16 petabytes of structured data.

Caterpillar is also applying AI to digital twins, site scanning, manufacturing operations and software development. The company plans to spend $100 million over five years on workforce training related to AI, autonomy and robotics.

Dealer inventories create the next test for CAT

Strong end-market demand does not mean Caterpillar’s reported growth will move in a straight line.

Construction Industries dealer inventory increased by $400 million during the June quarter. Management expects another slight increase during the third quarter before a more typical reduction of more than $1 billion in the fourth quarter.

That drawdown is expected to create a year-over-year volume headwind during the second half.

Caterpillar nevertheless expects to finish 2026 with more overall dealer inventory than it held at the end of 2025, reflecting a larger sales base and anticipated end-market growth.

The broader company outlook also strengthened. Caterpillar raised its full-year 2026 sales and revenues forecast to mid- to high-teens growth.

Backlog provides another measure of demand. Caterpillar’s total backlog increased by $9 billion during the second quarter to $72 billion. The reported backlog was also 92% higher than a year earlier, with some orders extending into 2030.

Those figures make the composition of future growth particularly important. Construction demand, rental fleet loading and AI-related power infrastructure are all contributing, while dealer inventory normalization is positioned to affect reported second-half volume.

What It Means for Investors

Caterpillar is still a major construction and industrial equipment manufacturer, but its recent results show a broader set of forces influencing the business.

Construction Industries remains substantial and is growing rapidly, while power generation has become increasingly important as data-center infrastructure expands. Caterpillar is simultaneously adding AI, autonomous equipment and connected-machine capabilities to its traditional equipment operations.

That shift has occurred alongside a major change in CAT’s valuation. Shares have gained roughly 90% over the past year, while reported forward earnings multiples range from about 26.5 times to above 30 times in the supplied data.

The combination places greater attention on whether operating performance can continue supporting the expectations reflected in the share price. Caterpillar’s $72 billion backlog, raised 2026 sales outlook and record quarterly revenue demonstrate the strength of current demand, while the expected dealer inventory drawdown provides a near-term counterweight.

For investors following CAT stock news, the central issue is therefore not simply whether Caterpillar remains exposed to construction. It is how much of its future growth increasingly comes from rental fleets, large infrastructure projects, data-center power demand and technology-enabled equipment.

Conclusion

Caterpillar’s record second quarter illustrates how its growth mix is evolving.

Sales and revenues reached $20.5 billion, Construction Industries grew roughly 35%, power-generation sales climbed 72%, and total backlog reached $72 billion. At the same time, rental fleet loading has become a larger part of construction demand, while data-center investment is supporting the company’s power-generation operations.

Caterpillar is also extending AI deeper into its own business through autonomous machinery, connected equipment, digital tools and workforce training.

The next phase will bring a different comparison. Dealer inventory is expected to decline by more than $1 billion in the fourth quarter, creating a volume headwind even as Caterpillar expects to finish 2026 with higher inventory than a year earlier.

The resulting picture is one of strong current demand paired with changing growth drivers—and a CAT share price that already reflects substantially higher expectations.

FAQs

Why is Caterpillar’s business growing in 2026?

Caterpillar reported second-quarter sales and revenues of $20.5 billion, up 24% year over year. Construction Industries benefited from higher sales volumes and favorable pricing, while power-generation equipment benefited from data-center demand.

How is AI benefiting Caterpillar?

Caterpillar is benefiting from demand for power-generation equipment used by data centers while also deploying AI and autonomy within its equipment and operations. Its technology includes autonomous machinery, the Cat AI Assistant, digital twins and AI-supported software development.

How large is Caterpillar’s Construction Industries business?

Construction Industries generated approximately $8.35 billion in second-quarter revenue, up 34.8% year over year and representing roughly 41% of Caterpillar’s quarterly revenue.

What is Caterpillar’s current backlog?

Caterpillar ended the June 2026 quarter with a $72 billion backlog after backlog increased by $9 billion during the quarter. The reported backlog was 92% higher than a year earlier.

What could affect Caterpillar’s growth in the second half of 2026?

Caterpillar expects Construction Industries dealer inventory to increase slightly in the third quarter before declining by more than $1 billion in the fourth quarter. Management expects that drawdown to create a year-over-year volume headwind during the second half.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

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