Updated version 5 - Caterpillar quarterly profits exceed expectations, but unchanged growth targets weigh on stock price

Second section updated with post-opening share price movement

Nathan Gomes/Nandan Mandayam

Reuters, October 29 - Caterpillar (CAT.N) reported third quarter profit that slightly exceeded expectations on Thursday, driven mainly by AI-powered power equipment demand, but the company's unchanged annual sales outlook raised questions in the market over how much longer the data center boom can drive growth.

Seen as a bellwether for the global industrial economy and famous for its iconic yellow bulldozers and large mining trucks, Caterpillar’s shares fell 10% at the open.

Caterpillar is benefiting from data center expansion across the United States, driven by artificial intelligence, which has boosted demand for construction equipment and generators. However, as opposition to data centers grows and calls to slow the development of artificial intelligence increase, investor sentiment has weakened.

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The company’s third quarter backlog grew to a record $78.1 billion, up $6 billion from the previous quarter. However, the growth rate was slower than earlier this year.

Over the past few months, Caterpillar’s share price has been under pressure, down more than 20% since August, as investors sought assurance that the company could sustain the revenue and profit growth momentum driven by data center customers.

The company expects its revenue growth rate in 2026 to be between 15% and 19%, while analysts expect growth to be in the high teens, around 18%.

Caterpillar also kept its annual tariff cost forecast unchanged at around $2.2 billion.

According to data compiled by London Stock Exchange Group (LSEG), the company’s quarterly revenue grew 17% to $20.7 billion, beating analyst expectations of $20.55 billion.

The company reported adjusted earnings per share for the quarter ended September of $7.20, compared to $4.95 a year earlier and an analyst average forecast of $7.08.

In each of the past four quarters, the company’s earnings have beaten Wall Street expectations by at least 40 cents, with last quarter’s per-share profit nearly $2 above expectations.

Oppenheimer analyst Kristen Owen said that despite Caterpillar’s overall growth, its earnings outperformance still showed investors “a crack in Caterpillar’s armor.”

Caterpillar said its third quarter operating profit included $128 million in benefits related to Emergency Economic Powers Act (IEEPA) tariff reimbursements.

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