Caterpillar beats estimates as AI boom drives energy equipment demand; shares surge

By Nathan Gomes and Nandan Mandayam (Reuters) -Caterpillar topped third-quarter profit and revenue estimates on Wednesday as a boom in AI technologies drove demand for its energy equipment, sending its shares up 12%. The industrial equipment maker's energy and transportation unit has fueled much of the company's growth in recent quarters as AI-driven investments in power-hungry data centers have boosted demand for its power-generation systems. President Donald Trump's focus on energy projects has also aided the segment, which also makes mining equipment such as excavators and giant shovels and contributes 40% to Caterpillar's overall revenue. "Power-generation sales are expected to continue sustainably growing as CAT maintains their market leadership in backup power generation for data center applications," said Third Bridge analyst Ryan Keeney. The unit posted a 17% rise in third-quarter sales to about $7.2 billion. However, industrial machinery makers including Caterpillar are grappling with higher costs from Trump's expansive tariffs on imports, while weak demand and elevated interest rates are limiting their ability to pass on the burden to customers. The company said on Wednesday it expects annual tariff costs between $1.6 billion and $1.75 billion, compared with its prior expectation of $1.5 billion to $1.8 billion. Tariff headwinds are expected to be larger in the final quarter of the year, compared to the third quarter, finance chief Andrew Bonfield told analysts in an earnings call. During the second quarter, companies across the globe flagged a combined annual financial hit of between $16.2 billion and $17.9 billion and nearly $15 billion for 2026, according to a Reuters tariff tracker. The company, seen as a bellwether for the global industrial economy, reported quarterly revenue of $17.6 billion, beating Wall Street's expectation of $16.77 billion, according to data compiled by LSEG. Its mainstay construction segment posted a 7% rise in revenue to $6.76 billion, helped by price hikes. The company reported a quarterly adjusted per share profit of $4.95, topping the average estimate of $4.52. Caterpillar's shares are up about 60% so far this year, outperforming the S&P 500 Industrials index's 17% rise. (Reporting by Nandan Mandayam and Nathan Gomes in Bengaluru; Editing by Shinjini Ganguli and Saumyadeb Chakrabarty)

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