You probably know Caterpillar (NYSE: CAT) as the world’s biggest maker of construction machinery.
But that business is suffering from high tariffs, and it’s power generation for data centers that is boosting the company now. As you’re no doubt aware, data centers are mushrooming around the world in a race to develop artificial intelligence.
As for Caterpillar, its overall revenue sank 1% in the second quarter from a year earlier, thanks to tariffs. However, its power generation revenue, primarily from data centers, jumped 28%. That revenue accounted for 14.5% of the company’s overall sales.
Caterpillar’s work at data centers includes primary and backup power systems. Among products it provides are turbines for on-site primary power, generators for backup, and microgrids that tie together fossil fuel and renewable energy sources.
Among the data centers the company has worked on are a Microsoft facility in Wyoming, a Sabey Corp. center in New York City and Aligned Data Centers throughout the country.
Data center growth
There should be plenty of data centers for Caterpillar to service going forward. The global data center construction market totaled $240.97 billion in 2024 and will likely hit $456.5 billion by 2030, according to Grand View Research.
Caterpillar itself is quite bullish on the power generation segment. “We expect full-year growth for power generation,” CEO Joseph Creed said on the company’s earnings call this week. “Demand remains strong for both prime and backup power applications, driven by increasing energy demands to support data center growth, related to cloud computing and generative AI.”
Investors and analysts are enthusiastic as well. “The market seems to be gaining conviction that Caterpillar’s exposure to power generation for data centers is the real deal and has been buoying performance while the other industrial businesses struggle,” wrote Morningstar analyst George Maglares.
Strength in power generation can’t propel the company by itself, but it could lessen the pain of potential weakness in other parts of the company.
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