Caterpillar shares surge on record backlog and data centre demand
Power & Energy segment sales jump 22% annually as artificial intelligence infrastructure build-out drives order activity
Caterpillar shares jumped five per cent in premarket trading following the release of first-quarter earnings that highlighted a record backlog and robust order activity. The market reaction reflects growing confidence in the company's ability to capitalise on the infrastructure requirements for artificial intelligence, with the heavy equipment maker noting significant momentum in its order book.
The primary driver of this growth has been a boom in data centre equipment, specifically within the Power & Energy segment. Total sales for this division rose by 22 per cent on an annualised basis during the first three months of the year. This surge is attributed to strong demand for electricity generation equipment, including engines, turbines, and related services required to power the expanding AI infrastructure.
Consequently, Caterpillar has revised its full-year revenue growth forecast to the low double digits. This represents a significant upward adjustment from the company's previous projection of seven per cent growth. The company now expects to deliver stronger performance across the year, underpinned by the sustained demand for power solutions needed to support high-compute environments.
In a contrasting market move, Microsoft shares fell despite reporting a 40 per cent year-on-year increase in Azure and cloud services revenue. Investors expressed concerns regarding supply constraints expected to persist through 2026 and the heavy reliance of the company's $627 billion cloud backlog on OpenAI. This divergence highlights a split in sentiment between hardware suppliers benefiting from the build-out and cloud service providers facing operational headwinds.
Looking ahead, Caterpillar expects the tariff costs under the Trump administration to range between $2.2 billion and $2.4 billion this year. This estimate is lower than the previously expected figure of $2.6 billion, suggesting a more favourable cost environment than initially anticipated for the remainder of the fiscal year.
The company has emerged as a clear beneficiary of the AI trade by supplying the massive power infrastructure necessary to keep data centres running. With the Power & Energy segment leading the charge, Caterpillar's results underscore the critical role of traditional industrial equipment in supporting the next phase of technological expansion.
