Caterpillar expects AI-driven demand for power, construction to fuel growth

By Nandan Mandayam

April 30 (Reuters) – Caterpillar raised its annual and long-term revenue forecasts on Thursday, as an AI-focused data center boom creates record order backlog for its power generation and backup equipment, underscoring strong momentum for the business in the coming years.

Shares of the company rose as much as 9.7% to a record high, putting the stock on track for its best day in six months.

Caterpillar’s power and energy business and the construction unit, its two biggest revenue generators, have been posting strong sales as technology companies spend billions of dollars on building data centers and related infrastructure in their race to create cutting-edge artificial intelligence tools.

“Investment in critical infrastructure programs and data centers is contributing to overall construction spending levels,” CEO Joe Creed said on a post-earnings call with analysts.

Power generation equipment sales are expected to triple by 2030 from 2024 levels, compared to a two-fold increase projected earlier, Caterpillar said in a presentation. Its order backlog of $62.7 billion at the end of the March quarter was at an all-time high.

The global industrial bellwether estimated its full-year revenue would rise in the low double-digit percentage range, compared with about 7% average growth it previously projected.

Caterpillar also raised its long-term average revenue growth forecast between 2024 and 2030 to 6-9%, compared with 5-7% previously.

SOARING REVENUE IN KEY BUSINESSES

Revenue from the construction segment jumped 38% to $7.16 billion, on higher sales to its dealers in North America, Caterpillar’s biggest market. The power and energy segment revenue soared 22% to $7.03 billion.

For the January-March period, Caterpillar posted a profit of $5.54 per share, with analysts expecting $4.62 per share.

Overall revenue grew 22% to $17.42 billion, marking the biggest growth in 4-1/2 years, compared to expectations of $16.61 billion.

Caterpillar said benefits from higher sales volume and better pricing were partly offset by unfavorable manufacturing costs of $710 million, largely tied to higher tariffs.

It also trimmed its projection of a tariff hit to between $2.2 billion and $2.4 billion for the year from $2.6 billion estimated previously. It expects tariff costs of $700 million for the second quarter.

Incoming CFO Kyle Epley explained that the lower tariff impact stemmed from a switch to Section 232 levies after the U.S. Supreme Court struck down President Donald Trump’s IEEPA tariffs.

U.S. industrial firms were among the hardest-hit by tariffs as it raised costs of imported raw materials and production machinery.

(Reporting by Nandan Mandayam in Bengaluru; Editing by Anil D’Silva)