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Is Caterpillar's Power & Energy Segment Its Next Big Growth Engine?
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Key Takeaways
CAT's Power & Energy segment generated $28.6B in 2025 revenues, up at a 10.4% CAGR since 2020.
Caterpillar raised its 2030 engine capacity target to nearly 3x 2024 levels amid AI power demand.
CAT signed its sixth 1 gigawatt prime power deal, supplying gas generator sets over five years.
Caterpillar Inc.’s (CAT - Free Report) Power & Energy segment has emerged as a key growth driver and is expected to gain even greater importance in the coming years. The shift is being driven by structural trends across power generation, oil and gas, and industrial applications, particularly the accelerating need for distributed and backup power solutions supporting data centers, electrification and Artificial Intelligence (AI)-led computing demand.
The segment supports customers using reciprocating engines, turbines and related services across industries serving Power Generation, Oil and Gas and Industrial applications, including marine applications and product support of on-highway engines.
In 2025, the segment generated $28.6 billion in revenues, accounting for 42% of Caterpillar’s total revenues and 45% of the Machinery, Power & Energy (MP&E) segment. Between 2020 and 2025, the segment witnessed a compound annual growth rate (CAGR) of 10.4%. Operating margins have risen from 16.4% in 2020 to 26.3% in 2025.
The 2026 outlook remains constructive, supported by strong backlog growth across both Power Generation and Oil & Gas markets. In Power Generation, demand for both reciprocating engines and turbines and turbine-related services will be supported by increasing energy demand to support data center build-out related to cloud computing and generative AI.
The segment is also expected to see solid demand for prime power as data center customers look for alternative power solutions to keep pace with their growth. Oil & Gas is expected to deliver moderate growth in 2026 compared with 2025. Reciprocating engine sales are projected to increase, driven by strong demand in gas compression applications.
In turbines and turbine-related services, another year of strong sales is anticipated, supported by a healthy backlog and steady order activity. Service revenues in Oil & Gas are also expected to trend higher, while industrial applications are projected to see modest growth.
Caterpillar increased its large reciprocating engine capacity plan for 2030 from 2x to nearly 3x from 2024 levels. The company has also revised its target of growing Power Generation sales to more than 3.0x from the earlier stated 2.0x target by 2030. It recently announced another agreement to provide PROPWR up to 2.1 gigawatts of large gas generator sets for prime power generation in support of data center, oil and gas and industrial applications. It will deliver generator sets over the next five years, with additional scope of long-term services growth opportunities in the future. This represents the sixth agreement with at least one gigawatt of Caterpillar equipment for prime power applications.
How CAT’s Power & Energy Segment Stacks Up Against Peers
Caterpillar’s E&T business competes with Cummins Inc.’s (CMI - Free Report) Power Systems segment and GE Vernova Inc.’s (GEV - Free Report) Power and Electrification segment.
Cummins’ Power Systems segment contributed 18% of its total sales in 2025. The segment’s sales were $7.46 billion in 2025, up 16% year over year, primarily due to higher demand in power generation markets, especially in North America and China. The segment’s revenues have witnessed a CAGR of 15.5% over 2020-2025.
At its recently held investor day, Cummins said that through disciplined investment, expanded capacity, deep vertical integration and expansion into prime power, it will scale up to meet surging demand for reliable power. It is projecting 2-3% CAGR growth for the Power Systems segment by 2030, aided by data center power generation growth.
GE Vernova’s Power segment generated $19.8 billion (52% of its total sales) in fiscal 2025, which marked a 10% increase year over year. The electrification segment saw a 26% rise in revenues to $9.6 billion (25% of total revenues).
In the first quarter of 2026, GE Vernova invested $0.4 billion in capital expenditures to increase production in Power and Electrification, as part of its commitment to invest $6 billion in capex from 2025 through 2028. For 2026, GE Vernova expects the Power segment’s organic growth at 16-18% and the electrification segment’s revenues at $14.0-$14.5 billion
CAT’s Price Performance, Valuation & Estimates
CAT shares have gained 152.2% over the past year compared with the industry’s 130.2% growth.
Image Source: Zacks Investment Research
Caterpillar is currently trading at a forward 12-month price/earnings (P/E) ratio of 32.39X compared with the industry average of 30.33X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CAT’s 2026 earnings indicates year-over-year growth of 29.4%. The earnings estimate for 2027 indicates 23.75% growth.
Image Source: Zacks Investment Research
Earnings estimates for Caterpillar for both years have moved up over the past 60 days.
Image Source: Zacks Investment Research
Caterpillar stock currently carries a Zacks Rank #3 (Hold).
View the Zacks #1 Rank List
Image: Bigstock
Is Caterpillar's Power & Energy Segment Its Next Big Growth Engine?
Key Takeaways
Caterpillar Inc.’s (CAT - Free Report) Power & Energy segment has emerged as a key growth driver and is expected to gain even greater importance in the coming years. The shift is being driven by structural trends across power generation, oil and gas, and industrial applications, particularly the accelerating need for distributed and backup power solutions supporting data centers, electrification and Artificial Intelligence (AI)-led computing demand.
The segment supports customers using reciprocating engines, turbines and related services across industries serving Power Generation, Oil and Gas and Industrial applications, including marine applications and product support of on-highway engines.
In 2025, the segment generated $28.6 billion in revenues, accounting for 42% of Caterpillar’s total revenues and 45% of the Machinery, Power & Energy (MP&E) segment. Between 2020 and 2025, the segment witnessed a compound annual growth rate (CAGR) of 10.4%. Operating margins have risen from 16.4% in 2020 to 26.3% in 2025.
The 2026 outlook remains constructive, supported by strong backlog growth across both Power Generation and Oil & Gas markets. In Power Generation, demand for both reciprocating engines and turbines and turbine-related services will be supported by increasing energy demand to support data center build-out related to cloud computing and generative AI.
The segment is also expected to see solid demand for prime power as data center customers look for alternative power solutions to keep pace with their growth. Oil & Gas is expected to deliver moderate growth in 2026 compared with 2025. Reciprocating engine sales are projected to increase, driven by strong demand in gas compression applications.
In turbines and turbine-related services, another year of strong sales is anticipated, supported by a healthy backlog and steady order activity. Service revenues in Oil & Gas are also expected to trend higher, while industrial applications are projected to see modest growth.
Caterpillar increased its large reciprocating engine capacity plan for 2030 from 2x to nearly 3x from 2024 levels. The company has also revised its target of growing Power Generation sales to more than 3.0x from the earlier stated 2.0x target by 2030. It recently announced another agreement to provide PROPWR up to 2.1 gigawatts of large gas generator sets for prime power generation in support of data center, oil and gas and industrial applications. It will deliver generator sets over the next five years, with additional scope of long-term services growth opportunities in the future. This represents the sixth agreement with at least one gigawatt of Caterpillar equipment for prime power applications.
How CAT’s Power & Energy Segment Stacks Up Against Peers
Caterpillar’s E&T business competes with Cummins Inc.’s (CMI - Free Report) Power Systems segment and GE Vernova Inc.’s (GEV - Free Report) Power and Electrification segment.
Cummins’ Power Systems segment contributed 18% of its total sales in 2025. The segment’s sales were $7.46 billion in 2025, up 16% year over year, primarily due to higher demand in power generation markets, especially in North America and China. The segment’s revenues have witnessed a CAGR of 15.5% over 2020-2025.
At its recently held investor day, Cummins said that through disciplined investment, expanded capacity, deep vertical integration and expansion into prime power, it will scale up to meet surging demand for reliable power. It is projecting 2-3% CAGR growth for the Power Systems segment by 2030, aided by data center power generation growth.
GE Vernova’s Power segment generated $19.8 billion (52% of its total sales) in fiscal 2025, which marked a 10% increase year over year. The electrification segment saw a 26% rise in revenues to $9.6 billion (25% of total revenues).
In the first quarter of 2026, GE Vernova invested $0.4 billion in capital expenditures to increase production in Power and Electrification, as part of its commitment to invest $6 billion in capex from 2025 through 2028. For 2026, GE Vernova expects the Power segment’s organic growth at 16-18% and the electrification segment’s revenues at $14.0-$14.5 billion
CAT’s Price Performance, Valuation & Estimates
CAT shares have gained 152.2% over the past year compared with the industry’s 130.2% growth.
Image Source: Zacks Investment Research
Caterpillar is currently trading at a forward 12-month price/earnings (P/E) ratio of 32.39X compared with the industry average of 30.33X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CAT’s 2026 earnings indicates year-over-year growth of 29.4%. The earnings estimate for 2027 indicates 23.75% growth.
Image Source: Zacks Investment Research
Earnings estimates for Caterpillar for both years have moved up over the past 60 days.
Image Source: Zacks Investment Research
Caterpillar stock currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.