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Fortune 500

The 300 companies on this year’s list brought in over $12.5 trillion in revenue for the latest 12 months, with the median revenue figure at $24 billion.

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F500-2023-068-Caterpillar

The 100-year-old construction equipment company rose five spots in 2023 from No. 73 last year. In the 2022 fiscal year, Caterpillar’s sales and revenue rose 16.6% to $59.4 billion, marking one of the best years in company history. 
<ul> 
 	<li>Caterpillar moved its global headquarters from Deerfield, Ill., to Irving, Texas, in 2022.</li> 
 	<li>To cope with inflation and increasing costs, Caterpillar raised its equipment prices, which helped boost its sales.</li> 
 	<li>But the heavy-machinery maker still had its fair share of struggles in 2022 in the form of COVID-era supply-chain snarls, inflationary forces, and slow pickup in Chinese demand.</li> 
 	<li>In October 2022, Caterpillar waived an internal policy that would have required CEO Jim Umpleby to retire when he turns 65, allowing him to continue as the top executive.</li> 
 	<li>The company is the world’s leading manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives, and now has roughly 60% of its operations outside the U.S.</li> 
</ul>

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This year’s Fortune 500 marks the 68th running of the list.

F500-2022-073-Caterpillar

Caterpillar recovered some of the ground it lost in 2020 after the pandemic brought construction to a near standstill worldwide. The company climbed five spots on the list this year, with 2021 revenue increasing 22% to $51 billion. Its profits increased dramatically as well, more than doubling. The gains reflected the pent-up demand for Caterpillar’s heavy machinery as construction projects picked up.

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Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;The 96-year-old construction machinery giant continued to slide in the Fortune 500 rankings, dropping 16 spots in 2020. Caterpillar’s bottom line suffered across all regions throughout the pandemic owing to lower demand. But the manufacturing sector has seen recovery start to pick up as more businesses reopen, and total industrial production rose 2.5% year over year in 2020. That, combined with improved commodity prices, hints at a better year ahead for the world’s largest construction-equipment manufacturer.&quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri, Arial&quot;,&quot;16&quot;:11}" data-sheets-textstyleruns="{&quot;1&quot;:0}{&quot;1&quot;:71,&quot;2&quot;:{&quot;6&quot;:1}}{&quot;1&quot;:78}">The 96-year-old construction machinery giant continued to slide in the Global 500 rankings, dropping 79 spots in 2020. Caterpillar’s bottom line suffered across all regions throughout the pandemic owing to lower demand. But the manufacturing sector has seen recovery start to pick up as more businesses reopen, and total industrial production rose 2.5% year over year in 2020. That, combined with improved commodity prices, hints at a better year ahead for the world’s largest construction-equipment manufacturer.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-78-Caterpillar

<span data-sheets-value="{&quot;1&quot;:2,&quot;2&quot;:&quot;The 96-year-old construction machinery giant continued to slide in the Fortune 500 rankings, dropping 16 spots in 2020. Caterpillar’s bottom line suffered across all regions throughout the pandemic owing to lower demand. But the manufacturing sector has seen recovery start to pick up as more businesses reopen, and total industrial production rose 2.5% year over year in 2020. That, combined with improved commodity prices, hints at a better year ahead for the world’s largest construction-equipment manufacturer.&quot;}" data-sheets-userformat="{&quot;2&quot;:12673,&quot;3&quot;:{&quot;1&quot;:0},&quot;10&quot;:2,&quot;11&quot;:4,&quot;15&quot;:&quot;Calibri, Arial&quot;,&quot;16&quot;:11}" data-sheets-textstyleruns="{&quot;1&quot;:0}{&quot;1&quot;:71,&quot;2&quot;:{&quot;6&quot;:1}}{&quot;1&quot;:78}">The 96-year-old construction machinery giant continued to slide in the Fortune 500 rankings, dropping 16 spots in 2020. Caterpillar’s bottom line suffered across all regions throughout the pandemic owing to lower demand. But the manufacturing sector has seen recovery start to pick up as more businesses reopen, and total industrial production rose 2.5% year over year in 2020. That, combined with improved commodity prices, hints at a better year ahead for the world’s largest construction-equipment manufacturer.

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-204-Caterpillar

After a stellar 2018, the 95-year-old construction and farm machinery maker slipped a bit in 2019. Total revenue for fiscal 2019 came in at $53.8 billion, down 2% from the year prior. Tensions between the U.S. and China, one of Caterpillar's biggest markets, have hurt sales, and the broader economic slowdown presents an even more daunting near-term challenge. But Caterpillar has given investors incentives to stick with it during a slow patch: The manufacturer returned more than $6 billion in capital to shareholders in 2019, and increased its dividend by 20%.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-062-Caterpillar

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This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Sector

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Caterpillar is a global manufacturer of construction and mining equipment, industrial turbines, engines, and diesel-electric locomotives. Formed from the merger of two competitors in 1925, Caterpillar traces its origins to the fertile San Joaquin Valley, California’s agricultural heartland. The company’s name stems from one of the founders’ inventions, which replaced a steam tractor’s rear wheels with a track system that observers likened to a caterpillar as the machine crawled across soggy terrain. Caterpillar has seen its bright yellow machines become a familiar sight at construction sites around the world, while its employees develop products for industries ranging from oil and gas drilling and power generation to marine and rail technology.

Q2 2026

Q1 2026

Q4 2025

Q2 2025

Q1 2025

Q4 2024

Caterpillar (CAT): Company Profile, Stock Price, News, Rankings

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Caterpillar

caterpillar

Welcome to the second quarter 2026 Caterpillar earnings conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alex Kapper. Thank you. Please go ahead.

Thank you, Audra. Good morning, everyone, and welcome to Caterpillar's second quarter of 2026 earnings call. I'm Alex Kapper, Vice President of Investor Relations. Joining me today are Joe Creed, Chairman and CEO, Kyle Epley, Chief Financial Officer, Stephanie Baughman, Senior Vice President of the Global Finance Services Division, and Ryan Coleman, Senior Director of IR. During our call, we'll be discussing the second quarter earnings release we issued earlier today. You can find our slides, the news release, and a webcast recap at investors.caterpillar.com under Events and Presentation. The content of this call is protected by U.S. and international copyright law. Any rebroadcast, retransmission, reproduction, or distribution of all or part of this content without Caterpillar's prior written permission is prohibited. Moving to slide two. During our call today, we'll make forward-looking statements which are subject to risks and uncertainties.

We'll also make assumptions that could cause our actual results to be different than the information we're sharing with you on this call. Please refer to our recent SEC filings and the forward-looking statements reminder in the news release for details on factors that individually or in aggregate could cause our actual results to vary materially from our forecast. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. On today's call, we'll also refer to non-GAAP numbers. For a reconciliation of any non-GAAP numbers to the appropriate U.S. GAAP numbers, please see the appendix of the earnings call slides. For today's agenda, Joe will begin by sharing his perspectives about our results and highlighting initiatives across our segments.

He'll discuss our full year outlook and insights about our end markets, followed by a strategy highlight. Kyle will provide a detailed overview of results and will share key assumptions looking forward. We will conclude by taking your questions. Now, let's advance to slide three and turn the call over to Joe Creed.

All right. Thanks, Alex, and good morning, everyone. Thanks for joining us today. In the second quarter, sales and revenues were better than expected at $20.5 billion, up 24% versus the prior year, driven by strong end market demand in all three of our primary segments. This is the first time in company history that we've generated over $20 billion of sales and revenues in a single quarter. This milestone underscores both the essential work our customers do every day and the dedication of Caterpillar employees worldwide to solving our customers' toughest challenges. We delivered adjusted profit per share of $8.17, an increase of 73% versus last year. Our backlog grew sequentially by $9 billion to $72 billion. This is an increase of approximately $35 billion or 92% compared to second quarter last year. All three primary segments contributed to both the year-over-year and sequential backlog growth.

Strong order rates and a growing backlog reflect broadening momentum across our business. In the quarter, we generated robust MP&E free cash flow of $5.1 billion and deployed $2.2 billion to shareholders through share repurchases and dividends. Now I'll discuss second quarter results in more detail. As I mentioned, sales and revenues were $20.5 billion, and the increase versus prior year was primarily driven by strong growth in sales volume from higher sales to users in all three primary segments and favorable price realization. Second quarter sales and revenues were better than expected due to strong sales volume growth in Construction Industries and Resource Industries. While Power & Energy was broadly in line with our expectations. Adjusted operating profit margin was 21.9%. Second quarter adjusted operating profit margin was better than we anticipated, primarily due to IEEPA tariff recoveries of $392 million and lower than expected tariff costs.

The margin benefit from better than expected sales volume was mostly offset by higher SG&A and R&D expense. For tariffs introduced since the beginning of 2025, excluding IEEPA recoveries, costs were about $400 million in the quarter. This was lower than the estimate we provided in April due to favorable adjustments to the computation of tariffs previously incurred. Kyle will explain in more detail in a moment, including the impact to each segment. Now I'll review second quarter retail statistics. Sales to users grew in all three of our primary segments. In Power & Energy, sales to users grew a robust 33%. Power generation grew 72%, driven by very strong demand for large gen sets and turbines used in data center applications. Sales to users in oil and gas increased 6% and were driven by reciprocating engines, turbines, and turbine-related services sold into gas compression applications.

Industrial sales to users were down due to a decline in engines sold into marine applications. Construction Industries total sales to users grew for the sixth consecutive quarter, up 22%. Increases in North America were better than we anticipated as the growth was driven by very strong rental fleet loading and equipment sold into non-residential and residential construction. Dealers' rental revenue continues to grow in North America, requiring more investment in their equipment fleets. This quarter, rental loading was a positive contributor to sales to user growth as compared to second quarter last year when rental loading was a headwind. Sales to users increased in EAME due to strength in Europe and Africa, but were lower than we anticipated due to softness in the Middle East. In Asia Pacific, growth was driven by China. The softness outside of China kept the overall region below our expectations.

Latin America grew as we anticipated. For Resource Industries, second quarter sales to users increased 17%, which was in line with our expectations. Sales to users were higher year-over-year in mining, as well as heavy construction and quarry and aggregates. Rail growth was driven by international locomotive deliveries. Turning to slide four, I will cover a few highlights since our last earnings call, starting with Power & Energy. To support the demand growth in power generation and oil and gas applications, we are excited to resume production of our 10 MW medium-speed gas reciprocating engine platform. This highly efficient platform is well-suited for prime power generation, and its power rating fits between our high-speed gas reciprocating engines and industrial gas turbines. In 2022, we stopped manufacturing this product and focused on supporting aftermarket sales and services, given the limited industry opportunity at that time.

Now, without significant investment, we are able to restart production by leveraging our existing supply base, along with our internal capacity and capability. We plan to bring about 1.5 GW of capacity back online, and shipments are expected to begin in the fourth quarter. This is a clear example of how our agility and diverse portfolio help us stay ahead of customer needs, respond quickly, and turn opportunities into profitable growth. Moving on to Construction Industries. In the second quarter, we delivered our first units to Major Projects, which is a specialized, fully Cat dealer-owned rental joint venture focused on supporting customers with multibillion-dollar projects across North America. Major Projects will serve customers developing large-scale infrastructure, including transportation, energy, manufacturing, and data center builds.

It is a supplemental national rental solution to help deliver larger size class construction equipment and capabilities where existing individual dealer rental fleets are not sufficient to execute at scale. We believe Major Projects will expand our presence in the rental industry and make it easier for large contractors to do business with us and our dealers. Finally, Resource Industries completed the acquisition of Skycatch in July, further enhancing our capabilities following the recent acquisition of RPMGlobal. Skycatch's technology captures high-frequency, high-precision, large-scale spatial data and pairs it with a suite of AI capabilities. That allows customers to identify, measure, and interact with the data, resulting in improved decision-making, reduced delays, and greater confidence in daily operations. This is another example of investment in technology-enabled growth that will help our mining customers operate more efficiently and achieve better outcomes. On slide five, I will provide an update on our outlook.

We continue to see strong momentum in our end markets, despite ongoing uncertainty due to geopolitical events. We are increasing our full-year 2026 sales and revenues expectations to mid to high teens growth based on the healthy demand we are seeing across all three of our primary segments. We are also progressing in our capacity expansion plans, and we expect to increase our throughput in the second half of the year. As a result, we anticipate stronger full-year growth across all three primary segments compared to the outlook we gave in April. Services revenues are also expected to grow at a higher rate for the full year compared to our previous outlook. The improved outlook is also supported by the breadth and duration of our record backlog. As I mentioned, all three of our primary segments contributed to backlog growth.

Power & Energy customers continue planning with us by sharing their long-term forecasts. Some are placing orders as far out as 2030. Currently, 59% of our $72 billion backlog is expected to be delivered over the next 12 months. This percentage has been fairly stable over the past three quarters, which demonstrates the momentum in all three primary segments. Moving on to adjusted operating profit margin. We expect the full-year adjusted operating profit margin to be higher than we expected during our last earnings call, reflecting the improved sales and revenues outlook. Excluding the favorable impact from IEEPA tariff recoveries in the second quarter, we expect full-year adjusted operating profit margin to be near the bottom of the target range. Our full-year margin expectation reflects the strategic investments we are making to execute our growth strategy, as well as the ongoing impact of tariffs.

While the situation around tariffs remains fluid, we continue to execute our mitigation plans. Kyle will provide more detail on a revised full-year estimate for tariffs in a moment. I'm confident that we'll manage the impact of tariffs over time as we aim to operate around the midpoint of our adjusted operating profit margin target range. We are also increasing our MP&E free cash flow expectations to be in the top half of our annual target range, reflecting our improved outlook. I'll now discuss our key end markets, starting with Power & Energy. Our positive outlook for 2026 continues to reflect strong demand in power generation and oil and gas. Strong second quarter performance has set a solid foundation for continued growth for the remainder of the year.

We continue to anticipate full-year growth in power generation for both Cat reciprocating engines and Solar Turbines, driven by increasing energy demand to support data center build-out related to cloud computing and generative AI. Additionally, prime power demand continues to trend higher as customers look to Caterpillar's turbine and reciprocating engine products and services to support their need for power solutions. After a record year for sales in 2025, oil and gas is expected to grow moderately again this year. Reciprocating engine sales are anticipated to increase, driven by strong demand in gas compression applications. We also see continued momentum in demand for reciprocating engine aftermarket parts. Solar Turbines oil and gas sales are expected to grow while the backlog remains healthy as we continue to see solid order and inquiry activity. Demand for products in industrial applications is expected to grow moderately in 2026.

For Construction Industries, we continue to expect full-year sales to users growth supported by strong order rates. Overall, the outlook for North America remains positive as sales to users are anticipated to grow versus last year. Construction spending remains at healthy levels, supported by the IIJA, with the remaining funds to be spent over the next few years. Non-residential investment in critical infrastructure programs, heavy construction, and data centers is contributing to overall construction spending levels. We expect dealer rental fleet loading will continue to grow, including additional fleet loading for Major Projects in the third quarter. In EAME, Europe is expected to remain stable, supported by non-residential construction, and construction activity in Africa is projected to remain strong. While the Middle East continues to be challenged, we currently anticipate only a limited impact on EAME sales to users. In Asia Pacific, outside of China, softer economic conditions are expected.

In China, we anticipate moderate conditions with full-year growth in the above 10-ton excavator industry off of low levels of activity. We expect full-year growth in Latin America. We're seeing continued positive momentum in Resource Industries with robust order rates and strong backlog growth. For 2026, sales to users are expected to increase, primarily driven by rising demand for copper and gold and positive dynamics in heavy construction in quarry and aggregates. Most key commodities remain above investment thresholds. Customer product utilization is high, and the age of the fleet remains elevated. While some commodity prices have increased recently, customers remain focused on the long term. We now expect rebuild activity to increase moderately compared to last year. Rail services and locomotive deliveries are both anticipated to grow for the year. Now let's turn to slide seven for a strategy highlight.

Our refreshed enterprise strategy was built on our strong foundation of operational excellence. We continue to operate under the discipline of the Operating and Execution Model. As we invest in our capacity to meet customers' increasing needs, we're finding creative ways to reallocate resources and optimize our operations as we grow to record levels. Let me share an example. Last November, we announced an increase in our new turbine capacity of 2.5x 2024 levels. This capacity will serve oil and gas and power generation applications and be leveraged to provide rebuilds and services for our growing installed base for decades to come. To help bring some of this capacity online sooner, we were able to repurpose an existing 250,000 sq ft facility in Wamego, Kansas, which previously produced work tools for Cat construction equipment.

We converted the facility in under 12 months for substantially less than building a new factory. From Wamego, we now package and ship our PGM130 product that is popular for data center power generation. This is one of many examples of how we are continuing to manage our business with discipline and maximize the use of our existing footprint to serve our customers and grow profitably. With that, I'll turn it over to Kyle.

Thank you, Joe. Good morning, everyone. I'm going to take a few minutes to walk you through our overall second quarter results, including details about segment performance as well as the balance sheet and cash flow. I will then conclude with remarks on our expectations for the remainder of the year, including third quarter and current full year assumptions. Beginning on slide seven, sales and revenues were $20.5 billion, up 24% versus the prior year, which was better than our expectations. Adjusted operating profit was $4.5 billion and our adjusted operating profit margin was 21.9%, both better than we anticipated. Moving to slide eight. The 24% increase in sales and revenues compared to the second quarter of 2025 was primarily driven by strong growth in sales volume and favorable price realization.

The stronger sales volume was mainly driven by higher sales of equipment to end users across all three primary segments. Dealer inventory increased by $400 million in Construction Industries compared to a decrease in the second quarter of 2025. The increase was higher than we originally anticipated, supported by our expectation of stronger sales to users the rest of the year, which reflects strong end market demand. Sales and revenues were above our expectations, mainly driven by stronger than expected sales volume in Construction Industries and Resource Industries. Power & Energy was generally in line with expectations. Moving to operating profit on slide nine. Operating profit in the second quarter increased by 50% to $4.3 billion. Adjusted operating profit of $4.5 billion increased by 54% versus the prior year, mainly due to the profit impact of higher sales volume.

The adjusted operating profit margin was 21.9%, which was a 430 basis point increase compared to the prior year. Margin was better than we anticipated, primarily due to expected IEEPA tariff recoveries and lower than expected tariff costs. The margin benefit from better-than-expected sales volume was mostly offset by higher SG&A and R&D expense. In the quarter, we recognized $392 million in expected IEEPA tariff recoveries, with the majority of this amount reflected in corporate items. For the tariffs introduced since the beginning of 2025, excluding IEEPA recoveries, the second quarter tariff costs were approximately $400 million. This was favorable compared to the $700 million estimate we provided in April. This favorability was primarily driven by adjustments to the computation of tariffs previously incurred. The $400 million of tariff costs were recognized within the segments and corporate items.

Segment margins were impacted by 90 basis points in Power & Energy, 340 basis points within Construction Industries, and 260 basis points in Resource Industries. Within corporate items, there was a favorable adjustment for tariffs. Moving to slide 10, profit per share was $7.77 in the quarter. Adjusted profit per share was higher than we had anticipated at $8.17. Restructuring costs in the quarter were $0.40 versus $0.10 last year. Excluding discrete items, the provision for income tax in the second quarter of 2026 reflected a global estimated annual effective tax rate of 23%. The year-over-year impact from the reduction in the average number of shares outstanding due to share repurchases resulted in a favorable impact on adjusted profit per share of approximately $0.15 compared to the second quarter of 2025.

On slide 11, I will now review the second quarter performance of the segments, starting with Power & Energy. For Power & Energy, sales of $8.2 billion increased by 17% versus the prior year, which was generally in line with our expectations. The sales increase versus the prior year was mainly due to higher sales volume and favorable price realization. Second quarter profit for Power & Energy increased by 30% versus the prior year to $2 billion. The segment's margin of 24.6% was an increase of 250 basis points versus the prior year. The increase was mainly due to the profit impact of higher sales volume and favorable price realization, which was partially offset by unfavorable manufacturing costs. Higher manufacturing costs were impacted by spend related to our capacity expansion, including a higher depreciation. Segment margin was higher than anticipated, primarily due to lower than expected manufacturing costs, including tariffs.

Moving to slide 12. Construction Industries sales increased by 35% in the second quarter to $8.3 billion, primarily due to higher sales volume and favorable price realization. Higher sales volume was mainly driven by higher sales of equipment to end users. The $400 million of dealer inventory increase and services revenue growth resulted in sales volume to be better than we expected. Second quarter profit for Construction Industries was $1.9 billion, a 57% increase versus the prior year. The segment's margin of 23.3% was an increase of 320 basis points versus the prior year, mainly driven by the profit of higher sales volume. Price was also favorable in the quarter. Segment margin was higher than anticipated, primarily due to the profit impact of stronger sales volume, partially offset by higher manufacturing costs, including freight.

Turning to slide 13, Resource Industries sales increased by 20% in the second quarter to $4.6 billion, primarily driven by higher sales volume. Price was also favorable versus the prior year. Sales were better than we anticipated due to higher sales volume driven by favorable services revenues growth. Second quarter profit for Resource Industries increased by 23% versus the prior year to $693 million. The segment's margin of 14.9% was an increase of 40 basis points versus the prior year. This was mainly driven by the profit impact of higher sales volume, partially offset by unfavorable manufacturing costs. Segment margin was higher than anticipated, primarily due to the higher sales volume. Moving to slide 14, Financial Products revenues increased by 10% versus the prior year to $1.1 billion, mainly due to higher average earning assets across all regions. Segment profit increased by 32% to $328 million.

The increase was primarily due to higher average earning assets and favorable impacts from equity securities and margins at Insurance Services, partially offset by a higher provision for credit losses at Cat Financial. Our customers' financial health remains strong. Past dues were 1.31% in the quarter, down 31 basis points versus the prior year, the lowest we have recorded since 1998. The allowance rate of 0.84%, surpassing the first quarter of 2026 as our lowest level ever reported in any quarter. Business activity at Cat Financial remains healthy. Retail new business volume grew by 9% versus the prior year. In addition, used equipment inventory levels continue to remain low, and conversion rates remain above historical averages as customers choose to convert their leases into buying the equipment at the end of their lease term. Moving to slide 15.

MP&E free cash flow was a record at $5.1 billion in the second quarter. This was about $2.8 billion increase versus the prior year, mainly driven by stronger profit. CapEx spend was about $600 million in the quarter. Moving to capital deployment. We deployed $2.2 billion to shareholders in the second quarter. Share repurchases accounted for about $1.5 billion, with the remainder reflecting our quarterly dividend payment. In June, we announced an 8% dividend increase, our sixth consecutive year with a high single-digit quarterly increase. Our balance sheet remains strong. We have ample liquidity with an enterprise cash balance of $6.7 billion. In addition, there is a $1.5 billion in slightly longer-dated liquid marketable securities to improve yields on that cash. Let's go through our outlook assumptions. Turning to slide 16, I will start with the third quarter.

We are continuing to monitor the environment as geopolitical conditions remain fluid and complex. Based on what we see today for the third quarter, we anticipate another strong quarter of sales growth versus the prior year. We expect volume increases and favorable price realization in each of our three primary segments. We anticipate volume growth will be driven by higher sales to users across all three primary segments versus the prior year. If we look at the segments, we anticipate strong sales growth in Power & Energy in the third quarter versus the prior year, driven by continued strength in power generation and in oil and gas, modest growth in industrial applications as it continues to recover, and favorable price realization.

In Construction Industries, we expect strong sales growth in the third quarter versus the prior year, mainly due to higher sales volume on strong sales to users and favorable price realization. We expect a slight increase in dealer inventory in the third quarter, but modestly lower than last year. As a result, the year-over-year impact from dealer inventory is expected to be a modest headwind to sales volume in the quarter. In Resource Industries, we also expect strong sales growth in the third quarter versus the prior year, primarily due to higher sales to users and services growth. We also anticipate favorable price realization, but to a lesser extent than the second quarter. Now, I will provide some color on our third quarter margin expectations versus the prior year.

We expect higher adjusted operating profit margin at the enterprise level versus the prior year, primarily due to favorable price realization and higher sales volume, partially offset by unfavorable manufacturing costs, including depreciation expense and freight, along with higher SG&A and R&D expenses due to the continued investment in strategic investments aligned with our 2030 goals that we rolled out at last year's Investor Day. We anticipate tariff costs of around $600 million, which is similar to what we incurred in the third quarter of 2025. We expect about 50% of the tariffs to be incurred in Construction Industries and 25% in both Power & Energy and Resource Industries. Now on the third quarter margin by segment. In Power & Energy, we anticipate a higher margin percentage compared to the prior year on stronger volume and favorable price realization.

This is partially offset by higher manufacturing costs, including depreciation and expenses related to our capacity expansion projects. SG&A and R&D expenses are also expected to be higher. In Construction Industries, we anticipate a higher margin percentage compared to the prior year, primarily due to favorable price realization and higher sales volume. This is partially offset by higher manufacturing costs, including tariff and freight costs. Strategic investments related to technology are expected to increase SG&A and R&D expenses versus the prior year. In Resource Industries, we anticipate a similar margin percentage compared to the prior year due to higher sales volume and favorable price realization, partially offset by higher manufacturing costs, including tariff costs and SG&A and R&D expenses. Higher compensation expense and strategic investments related to technology, including autonomy, are driving the higher SG&A and R&D expenses versus the prior year. Now on slide 17.

Let me provide a few comments on the full year. As Joe mentioned, we now anticipate sales and revenues growth in the mid to high teens for the full year of 2026. This is an increase versus our expectations from last quarter. The increase in our full-year sales and revenue expectations is supported by strong sales and revenues growth across all three primary segments, driven by healthy end markets, strong order rates across all three primary segments, driving backlog growth, and increased throughput from our capacity expansion plans in the second half. We expect strong sales growth across each of our primary segments, mainly driven by volume and price. For the enterprise, we typically see higher sales and revenues in the second half as compared to the first, and we expect to follow that trend this year.

We also expect a more typical reduction in Construction Industries dealer inventory of over $1 billion in the fourth quarter. We plan to end the year higher than last year in anticipation of future end market growth. As a result, the year-over-year impact from dealer inventory is expected to be a headwind to Construction Industries sales volume in the second half of the year. Now on to adjusted operating profit margin for the full year. Due to the increased sales and revenues outlook, full-year adjusted operating profit margin will be higher than we expected in April. Excluding the expected IEEPA tariff recoveries, our full-year adjusted operating margin would be near the bottom of the range at the higher sales level.

Compared to last year, higher adjusted operating profit margin will reflect favorable price realization, higher sales volume, partially offset by higher manufacturing costs, including tariffs, depreciation expense, and freight, and higher SG&A and R&D driven by compensation expense and strategic investment spend. Excluding the expected IEEPA tariff recoveries of approximately $400 million reported in the second quarter, we now expect full-year 2026 tariff costs of around $2.2 billion, or at the low end of the range we previously provided. Our outlook does not include any additional IEEPA tariff recoveries in the second half of the year. As we lap incremental tariff costs, the tariff impact to the second half adjusted operating profit and margins is not expected to be significant. Moving on, we continue to expect restructuring costs of approximately $300 million-$350 million in 2026.

Our estimated global annual effective tax rate remains approximately 23% for 2026, excluding discrete items. With the improved sales and revenues and adjusted operating margin outlook, we now expect MP&E free cash flow to be in the top half of our annual target range of $6 billion-$15 billion. We expect second half MP&E free cash flow to be slightly higher than the first half, despite higher CapEx spend. Our CapEx spend for 2026 is anticipated to be approximately $3.5 billion, similar to our previous expectations. Now turning to slide 18. To summarize, we delivered a strong first half with better than expected sales and revenues and earnings. In this dynamic operating environment, we now anticipate mid to high teen sales and revenues growth in 2026 and anticipate adjusted operating profit margin and MP&E free cash flow to be better than we had previously expected.

We remain disciplined and committed to operational excellence and the O&E model. We will continue to look for ways to optimize our footprint and invest efficiently. We are maintaining a strong balance sheet. We will continue to return substantially all of our MP&E free cash flow to our shareholders through dividends and share repurchases over time. Finally, we will continue to execute our strategy for profitable growth. With that, we will take your questions.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Please note we are only allowing one question per analyst. First question comes from the line of Michael Feniger from Bank of America. Your line is now open.

Thanks, everyone. Quick clarification, the 10 MW recip that you're bringing back online and can ramp to 1.5 GW, is that part of the 65 GW target by 2030, or is this additive? Joe, my core question is that there is a concern on AI and data center demand in the out years. When we think of that 65 GW capacity target by Cat by 2030, are you more or less confident today on the visibility that there will be enough demand in the out years, even within the P&E segment? Are you seeing order rates for engines and turbines outside of data centers, like pipelines and gas compression, move higher and demand broadening out? What are you hearing in recent conversations that's shaping your view on the staying power through 2028, 2029, and 2030? Thank you.

Good morning, Mike. Thanks for the questions. Maybe I'll take the first one pretty quickly. The 65 GW is a round number. We'll move it around a little bit on mix. The 10 MW unit, that's the old MaK business that it was primarily marine focused in the past and wasn't performing the way after many years with low industry demand, but it's well-suited, and we did the gas engine development for power generation, and we went and we'll bring that back. It was not included in the 65. Again, it's a lower volume, but well-suited for this application and kind of fits nicely between the top end of our high-speed reciprocating offering and the low end of our industrial turbine offering. That's how you should think about that.

We were able to bring it back quickly because we just stopped production just a few years ago. There is a lot of discussion around AI demand. We have constant discussions with our customers, and all I can tell you is what our discussions with them is no one is slowing down at the moment. In fact, if we can get more units out, they're asking us to give them more units. I think what you also point out is really important, I think, and may be a little different for us is we took a broad view when we analyzed putting this capacity in and took a measured approach. We said last time we will have cash payback by the end of this decade, and as I mentioned, we're starting to take orders into 2029 and 2030 already.

We did this not just based on data center demand. That's obviously a big driver of it, but we have aftermarket growth objectives to take care of our growing install base on large engines and turbines. These are used, as you pointed out, also in oil and gas. Remember, oil and gas had a record year last year, and we're on track for another increase this year. When you look at the backlog, our oil and gas at the end of the second quarter backlog compared to where it was a year ago, second quarter a year ago is not quite but nearly two times bigger.

We are seeing great demand for oil and gas, particularly around gas compression. I think we're going to move a lot of natural gas in the next few years. Our large engines are also used in our mining equipment, and marine applications as well. We feel pretty good where we sit today and we haven't seen any customers back off of demand. In fact, we're starting to get even more extended when you look at the backlog.

We'll move next to Tami Zakaria at JPMorgan.

Hi, good morning. Thank you so much. Question on your sales to end users up about 20% for the first half. What do you expect for the full year in terms of STUs? I know you're guiding to mid to high teens revenue growth for the year. Do you plan to produce to retail demand this year? How should we think about channel restocking as it relates to the back half of this year?

Good morning, Tami. We expect STU growth momentum. I think that's reflected by both strong orders in RI and CI. Also in the second quarter, we mentioned dealer inventory was a little higher than we expected, and that's really due to the momentum we continue to see in STU growth. When it comes to dealer inventory, we do think we'll have a more normal seasonal pattern. We'll have a drawdown in the fourth quarter on CI dealer inventory. Last year, we didn't quite see as big of a drawdown, which was a little bit unusual. We'll have those dynamics when you look at the back half of this year compared to the back half of last year. We're seeing strong STUs in all three segments. I think that's a good thing. We've also seen services continue to increase.

Where we sit today and the backlog increasing, you rightly also point out when it comes to the backlog, particularly in RI and CI, the backlog growth is great to see. We're not in a constrained environment there. The backlog really there is somewhat of a function of us being able to produce to demand. I'd like to see us produce more, keep up with STUs. When we can get that production in line with STUs, you would see some of that backlog actually come in. I think that's a good thing as long as we continue to see positive sales to users. We're pretty bullish on the back half of this year.

We'll go next to David Raso at Evercore ISI.

Hi. Thank you. I'm just trying to think through Construction Industries versus Power & Energy in the sense of just given we've kind of gone through the inventory swing from destock to restock a bit in Construction Industries. It looks like the volume growth there, understandably from these high levels, was better than I would've thought in 2Q, will slow. The Power & Energy volume was a little less than I would've thought, and with the capacity coming on, you would think that might be able to ramp up. Can you just take us through your thoughts when you look out the next two, three, four quarters, the Construction Industries volume growth slowing and can P&E volume growth pick up? Because, I mean, they're roughly now the same size external sales, even the margins are pretty similar. Just that sort of trade-off a little bit. Thank you.

Yeah, David, I think you have to look at the seasonality of those two segments is much different. As I mentioned, the inventory drawdown we expect to see in the fourth quarter. We do expect dealer inventory. Right now, our planning assumption is that we'll end this year higher than it ended last year, because as you point out, we have strong momentum here, but the base keeps getting higher on the growth. We'll keep an eye on that. Power & Energy continues to ramp. I'm really pleased with the way that team's continued to get more production out of our existing asset base, as well as bringing the capacity online. I think the capacity's not coming online in massive cliff events. We're trying to get as many units out as we can.

We've been a little bit ahead of schedule, where we think we'll be able to increase our production moving forward. The percentage of increase in Power & Energy, as you rightly state, it's not a demand issue right now. It's just going to be a matter of how fast we can continue to increase production.

David, this is Kyle. Just one reminder on the CI perspective. We kind of had a slow start to the first half of 2025, then it started picking up in the back half of 2025 into the first half of this year. That'll be part of your comparison when you start looking at the second half of CI compared to the second half of 2025.

We'll now take a question from Jamie Cook with Truist Securities.

Hi, good morning, and congrats on a nice quarter. Joe, I was just hoping if you could talk through the composition of the backlog growth in the quarter, which was fairly impressive, how much of it was large, chunky, big awards like prime power versus broad based. Just the follow-up question is the incremental margins in Power & Energy were fairly impressive given we're adding capacity, I think at like 39%. Is that reflective of pricing or capacity coming on quicker? I'm just trying to think of the setup for incremental margins in Power & Energy, just given how strong they are with everything we have going on with capacity additions. Thanks.

Yeah. Thanks, Jamie. I think I'll start with the first part. One of the things we were really happy about with the backlog was seeing it increase in all three segments. You guys, we don't really talk about the specifics in there, but as you look at the percentage delivered in the next 12 months, Power & Energy is much more extended. It kind of shows on a percentage basis they continue to increase.

As I mentioned, inside Power & Energy as well, we saw continued strong demand for oil and gas come in orders that are also contributing to the backlog. As far as when it comes to the machine side of the business, CI is definitely much more broad based. As you know, when we take orders, RI can come in a little bit lumpy and also the way deliveries work for RI, that can move around the backlog.

In Power & Energy, the industrial side continues to come in in a pretty steady basis, but most of the growth was in oil and gas and power generation. In power generation, they tend to be big orders when they come in, and you see a difference when these prime power orders come in, can move it. We have a lot of customers asking for power, and the months have been pretty consistent for us. As far as the margins, on your other question, I think tariffs were a little better than maybe we expected, you wouldn't expect that to continue. We might see a little pressure on freight in the back half and some of the costs, just with everything going on in the world. We're also installing capacity that puts pressure on depreciation and maybe some of the efficiencies we see.

We are seeing great operating leverage and the P&E team continues to perform really well.

We'll take our next question from Rob Wertheimer at Melius Research.

Thank you. You've seen obviously some power gen providers being sold out, you touched on taking orders into 2029 and 2030, and some folks are maybe even sold out that far. I guess I'm not sure if you're willing to say whether you are sold out for 2027 and 2028, but my question is also how you're approaching it strategically is, maybe gas recip becomes more attractive for either prime or flex power, but maybe backup is tight as well, and you could do backup with gas, it could flex to prime. How are you approaching it? Are you saving any slots? Do you have slots open for the next couple of years? Maybe you could just talk generally about the mood towards gas recip prime, how it's evolving. Thank you.

Thanks, Rob. We've seen, obviously lead times start to extend here. When it comes to gas prime, we're pretty extended. We're towards the back half of 2028 and into 2029. On turbines, maybe just a little bit farther than that. A little less on maybe diesel standby. We're constantly working with customers, and again, one of the things I think that we've been able to do is, the closer we plan with customers, getting them the power they need when they need it, and making sure we schedule deliveries appropriately, allows us to take care of the maximum number of customers. We're moving schedules around occasionally where we can to help customers. We do try to protect our longtime oil and gas customers who don't necessarily have the same level of planning horizon.

We are trying to plan farther out with them, but making sure that we take care of that customer base that's been with us for a really long time. We have some flexibility, but as you state, I think particularly large engines, we're into 2028 in gas prime, late 2028 for sure, and then turbines a little bit longer than that.

We'll move to our next question from Steve Volkmann at Jefferies.

Good morning. I'm wondering if we can talk a little bit about CI. Joe, I think you talked about rental fleet loading and this Major Projects that you're doing as well. Just trying to see if I can think about breakdown sort of between what's going out to end users and what's going into the various rental fleets and sort of how you think about that going forward. Thank you.

We've seen strong STUs, and this has been the momentum we've had for, I think you said the sixth quarter in a row, really strong STUs for CI. I'm really pleased with the way that team is performing and our dealers are performing in CI, particularly in North America. We have other regions we're doing really well as well. The rental fleet loading has really picked up this year as opposed to last year. It was a stronger portion of our STU growth in the second quarter. I expect it to be a pretty healthy piece of STU growth in the third quarter as we really just started loading the Major Projects fleet. That will continue to grow, and we'll see how many projects we can get lined up with the new dealer JV and Major Projects.

Rental loading has definitely become a bigger piece of the STU growth for the moment, but we have great momentum. Started early last year when we put the merchandising programs in. We've been able to outperform the industry, and we've just carried that momentum through the first half of this year.

Moving next, we'll go to Kristen Owen at Oppenheimer.

Hi. Good morning. Thank you for the question. Just a follow-up on that last one. Since you talked about the rental loading and the mega projects, those tend to go hand in hand. Could you help us understand what's happening in the rest of the construction backdrop, maybe private non-res, resi? What's still lingering out there and any sign of improvement in those pockets of construction? Thank you.

I mean, Kyle can comment maybe on the second quarter, what's driving it, but we continue to see large infrastructure projects drive some of the growth. Obviously, data center demand as well has ancillary effect on CI. The rental fleet loading, we think will continue, particularly with major projects. As you said, you have a little bit of line of sight to major projects as they get rolled out. One of the things as well, one of the positives here is when you get to residential and other parts of CI, they aren't particularly strong. To me, that provides some potential upside for us into the future. Right now, it's pretty heavily focused on non-residential and major infrastructure projects.

Yeah. That question is to add some color, this is Kyle, just by region. We talked about North America continues to be strong, and Joe talked about it from a construction spend standpoint and non-resi investment. EAME is strong, especially in Africa. That's been a real positive for us, and we expect that to continue. Even in other parts of the globe, Latin America has been strong, and even in China, off low levels, China, we continue to see growth now for quite a few quarters in China above the 10-ton excavator off low levels. Really, as Joe mentioned, a really positive across the board from a CI perspective on sales to users growth.

Our next question comes from Mig Dobre at Baird.

Good morning. Thanks for taking the question. I'm curious if you'd be willing to comment at all in Power & Energy on the service and aftermarket component of that business. Not only sort of maybe where we currently are from a mix standpoint or sizing the business specifically, but as we look at this significant backlog and the deliveries that you have kind of stretching now into 2029+, how do you think this portion of the business, the aftermarket, the service component of the business, will scale up over time?

Good morning, Mig. I think Power & Energy generally has had a stronger services component to it than maybe Construction Industries where we have a lot of opportunity to grow services and continue to work on it. As you think about the way this is evolving and the prime power opportunities that are coming online, those will continue to create services growth opportunities for us. By the time those get in place, you go through top-end overhauls, you get to end frames and overhauls and major overhauls. That's going to be mostly 2030, beyond 2030 growth opportunities for us in services. That's how we think about it. Oil and gas is, we don't have the sort of prime and standby type of nomenclature when we talk about oil and gas, but it all functions more like prime. It's heavy-duty applications, drives great services opportunities for us.

As we grow the install base, it definitely gives us great services growth opportunities. There'll be some between now and 2030, but the lion's share of that will be beyond 2030. Which is why having this capacity in place is also a good thing. The capacity is not just for full assembly and finished turbines and gensets and engines. A lot of that capacity goes into supply base as well as our internal component manufacturing and machining that allows us to support that aftermarket growth that we expect.

We'll go next to Angel Castillo at Morgan Stanley.

Good morning. Thanks for taking my question. Just wanted to go back to the orders. You mentioned 4Q deliveries of the 10 MW recip engine. I assume that means you already have some orders for this product. Just could you talk about the magnitude of that and just also any kind of incremental costs in delivering or getting this capacity ramped up? Then just more broadly, you also talked about diesel engine orders out to 2028, nat gas recip orders out to, I think, late 2028 and turbines beyond that, 2029 and 2030. Just any color on how the pricing backdrop on orders out that far is kind of shaping up and kind of evolving, just given, again, supply and capacity additions from others?

Yeah. Thanks, Angel. The 10 MW units, we have taken our first orders on that, we wanted to make sure we had orders before we actually made the decision to bring that engine platform back online, because as I mentioned, we had made the decision to sort of shut that production down and really just support customers in the aftermarket. We do have our first orders. We expect to deliver here in the fourth quarter. We'll ramp over the next 18 months to that one and a half sort of gigawatt number. We're pretty confident that we're going to have the orders in those, at least in the next couple of years, or we wouldn't have made the decision to bring it back online and the investment to do it, given we are supporting customers in the aftermarket.

Key components we've had available, the supply base is available, we've been able to use our existing internal capability and capacity to get that brought back online, which I'm really excited about. Pretty minimal investment, really, in the rounding to do that, which has sort of made it an easy decision once customers were willing to commit. As far as the extended orders, each one of them is a little bit different, but we do typically have price escalators on those, and they can be tied to economic indicators. We feel like pricing will be in line with kind of how we've been pricing in the past. We do have escalators for those orders that are farther out.

We'll go next to Kyle Menges at Citigroup.

Great. Thank you. I wanted to focus on the diesel standby business. There's been some debate out there on the redundancy needed for training versus inference data centers, and then also if you're using behind-the-meter power versus grid connection. I'm curious what you're seeing as far as redundancy between those different applications and prime power infrastructures. Also just a quick follow-up. Are lead times also increasing for the diesel gen sets?

Yeah. Our diesel gen sets are extended as well. We're taking orders out well into 2028 on diesel gen sets. In fact, when it comes to diesel standby, we're actually seeing some customers ask us, inquire about moving down to the C32 platform, which is a bit of a smaller unit, just because we have product availability there. Each data center is a little bit different, particularly now when you're moving to behind the meter. We're not hearing a whole lot of customers tell us they're just going to go to no backup or no redundancy. How they choose to do that, traditional hookups to the grid and data centers are still moving heavily down the diesel recip for backup. Demand continues to grow for that. When you go behind the meter with gas solutions, sometimes they'll have gas recips also, have some redundancy there.

Hi, Audra. We have time for one more question.

Thank you. Today's final question comes from the line of Jerry Revich from Wells Fargo.

Yes. Hi, good morning, everyone. Joe, I'm wondering if you could just talk about your vision for Cat Rentals. We're hearing from your dealers plans to double the fleet over the next five years. They have 30%-50% makes of Alliance products. How do you see it playing out longer term in terms of the mix of business going forward? Do you see their mix looking more like the national rental companies that we see? Just talk a little bit about where you envision the service offering for Cat Rentals, five-plus years out and the opportunity from a market share standpoint, since obviously it's been a smaller part of the mix for you folks historically.

Yeah. It's one of the keys to our CI growth strategy is to be successful in rental with our dealers. I think our dealers are a great asset and great partners for us to help grow in the rental business. There are disparities in performance between some dealers or some regions, but our goal is to continue to work with them to capture a lot of this rental opportunity. Our dealer rental revenues continue to grow, and we're confident they can continue to grow that. That will lead to more fleet loading. If they're going to be successful in rental, they're going to have to have the full suite of equipment to support customers. Customers, I don't think are going to rush to Cat dealers for our equipment if they can't also get the other rental equipment that they need.

That will continue to be part of the mix for our dealers and part of that strategy. The Major Projects fleet really, it's a national fleet and allows us to move that fleet around to really supplement dealers where, if a dealer has a major project, infrastructure project in their territory for a couple of years or three years, it's tough for them to invest in the fleet that size to keep up at that scale or knowing that job may be somewhere else a few years from now. This Major Projects fleet's going to really help us supplement the dealers, which should allow them also to grow because they'll be the ones that are working on that project in their local territory, and then we'll use the Major Projects fleet to supplement their existing fleet.

Rental's a great opportunity for us and we're going to continue to push forward with the strategy. With that, thank you all for joining us, and I really appreciate your questions. I'm really proud of our team and the record performance this quarter and, in particular, the sales and revenues milestone we achieved the first time in our company history to exceed $20 billion in a quarter. With broadening momentum across all three of our primary segments, we'll remain focused on operational excellence and delivering for our customers to create long-term value for our shareholders. With that, I'll turn it back to Alex.

Thank you, Joe, Kyle, Stephanie, and everyone who joined us today. A replay of our call will be available online later this morning. We'll also post a transcript on our investor relations website as soon as it is available. You'll also find a second quarter results video with our CFO and an SEC filing of our sales to users data. Visit investors.caterpillar.com and then click on Financials to view those materials. If you have any questions, please reach out to me or Ryan Coleman. The investor relations phone number is 309-675-4549. Let's turn it back to Audra to conclude our call.

Thank you. That concludes our call. We thank you for joining. You may all now disconnect.

Caterpillar (CAT) Q2 2026 Earnings Call Transcript

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