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Can CAT's Power & Energy Segment Sustain Its Rapid Growth Momentum?
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Key Takeaways
CAT's Power & Energy became its largest segment, generating $28.6 billion in sales and revenues in 2025.
Data-center and AI growth is boosting demand for engines, turbines and comprehensive power solutions.
Caterpillar plans major capacity expansions by 2030, supported by strong backlog and service opportunities.
Caterpillar Inc.’s (CAT - Free Report) Power & Energy segment has emerged as a major growth engine and is expected to play an increasingly important role in its long-term strategy. The business is benefiting from structural trends in global energy demand, particularly the rapid expansion of data centers and AI infrastructure, rising electricity consumption, grid constraints and growing demand for distributed and reliable power solutions.
The segment serves three primary end markets, Power Generation, Oil & Gas and Industrial applications, through a broad portfolio of reciprocating engines, gas turbines, generator sets, compression equipment, energy storage systems and related services.
Power & Energy generated $28.6 billion in sales and revenues in 2025, making it Caterpillar's largest operating segment based on sales. Between 2020 and 2025, the segment delivered a compound annual growth rate (CAGR) in revenues of 10.4%. Operating margins have risen from 16.4% in 2020 to 26.3% in 2025.
The momentum continued into 2026, with the segment generating $15.3 billion in revenues in the first half, up 19% year over year. Operating margins were 25.4% in the first quarter of 2026 and a record 29.8% in the second quarter.
Growth is being supported by rising demand for large reciprocating engines, turbines and related services for data center applications. The accelerating buildout of data centers and AI infrastructure represents a significant opportunity. Caterpillar offers reciprocating engines of up to 10 MW and turbines ranging from one MW to 39 MW for primary and backup power applications. Its portfolio also includes switchgear, controls, inverters and energy storage systems, enabling the company to provide comprehensive power solutions as customers seek alternatives to constrained utility grids.
Caterpillar is investing aggressively to capture this opportunity. The company plans to expand large reciprocating engine capacity to nearly three times the 2024 levels and gas turbine capacity by 2.5 times by 2030. It is also targeting Power Generation sales of more than three times 2024 levels by the end of the decade. These investments are supported by a strong backlog and growing demand for both prime and backup power solutions.
Services represent another important growth lever. The increasing use of continuously operating power systems, including data-center primary power and natural gas infrastructure, creates long-duration aftermarket opportunities. Gas turbines can generate service opportunities for 30-40 years, while digital monitoring, long-term service agreements, remanufacturing and turbine exchange programs further strengthen recurring revenue potential.
How Does CAT’s Power & Energy Segment Stack Up Against Peers?
Caterpillar’s Power & Energy segment 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. The segment’s revenues have witnessed a CAGR of 15.5% over 2020-2025. In the first half of 2026, Power Systems’ revenues were $4.2 billion, up 19% year over year, reflecting higher demand for power generation equipment, especially in China and North America. The segment generated 19% of Cummins’ total revenues for the period.
GE Vernova’s Power segment increased 10% to $19.8 billion in 2025, contributing 52% of GE Vernova’s total sales. The electrification segment saw a 26% rise in revenues to $9.6 billion, accounting for 25% of the company’s total revenues. In the first half of 2026, the Power segment generated $10 billion of revenues, up 13% year over year, while the electrification segment’s revenues surged 65% to $6.6 billion.
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Can CAT's Power & Energy Segment Sustain Its Rapid Growth Momentum?
Key Takeaways
Caterpillar Inc.’s (CAT - Free Report) Power & Energy segment has emerged as a major growth engine and is expected to play an increasingly important role in its long-term strategy. The business is benefiting from structural trends in global energy demand, particularly the rapid expansion of data centers and AI infrastructure, rising electricity consumption, grid constraints and growing demand for distributed and reliable power solutions.
The segment serves three primary end markets, Power Generation, Oil & Gas and Industrial applications, through a broad portfolio of reciprocating engines, gas turbines, generator sets, compression equipment, energy storage systems and related services.
Power & Energy generated $28.6 billion in sales and revenues in 2025, making it Caterpillar's largest operating segment based on sales. Between 2020 and 2025, the segment delivered a compound annual growth rate (CAGR) in revenues of 10.4%. Operating margins have risen from 16.4% in 2020 to 26.3% in 2025.
The momentum continued into 2026, with the segment generating $15.3 billion in revenues in the first half, up 19% year over year. Operating margins were 25.4% in the first quarter of 2026 and a record 29.8% in the second quarter.
Growth is being supported by rising demand for large reciprocating engines, turbines and related services for data center applications. The accelerating buildout of data centers and AI infrastructure represents a significant opportunity. Caterpillar offers reciprocating engines of up to 10 MW and turbines ranging from one MW to 39 MW for primary and backup power applications. Its portfolio also includes switchgear, controls, inverters and energy storage systems, enabling the company to provide comprehensive power solutions as customers seek alternatives to constrained utility grids.
Caterpillar is investing aggressively to capture this opportunity. The company plans to expand large reciprocating engine capacity to nearly three times the 2024 levels and gas turbine capacity by 2.5 times by 2030. It is also targeting Power Generation sales of more than three times 2024 levels by the end of the decade. These investments are supported by a strong backlog and growing demand for both prime and backup power solutions.
Services represent another important growth lever. The increasing use of continuously operating power systems, including data-center primary power and natural gas infrastructure, creates long-duration aftermarket opportunities. Gas turbines can generate service opportunities for 30-40 years, while digital monitoring, long-term service agreements, remanufacturing and turbine exchange programs further strengthen recurring revenue potential.
How Does CAT’s Power & Energy Segment Stack Up Against Peers?
Caterpillar’s Power & Energy segment 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. The segment’s revenues have witnessed a CAGR of 15.5% over 2020-2025. In the first half of 2026, Power Systems’ revenues were $4.2 billion, up 19% year over year, reflecting higher demand for power generation equipment, especially in China and North America. The segment generated 19% of Cummins’ total revenues for the period.
GE Vernova’s Power segment increased 10% to $19.8 billion in 2025, contributing 52% of GE Vernova’s total sales. The electrification segment saw a 26% rise in revenues to $9.6 billion, accounting for 25% of the company’s total revenues. In the first half of 2026, the Power segment generated $10 billion of revenues, up 13% year over year, while the electrification segment’s revenues surged 65% to $6.6 billion.
CAT’s Price Performance, Valuation & Estimates
Caterpillar shares have gained 87.7% in the past year, outperforming the manufacturing - construction and mining industry's 76.5% growth.
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CAT is currently trading at a forward 12-month P/E of 25.19X, a premium compared with the industry’s 24.08X.
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The Zacks Consensus Estimate for 2026 points to year-over-year earnings growth of 43.5%, while the 2027 estimate implies growth of around 19.9%.
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Earnings estimates for both years have moved up over the past 60 days.
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Caterpillar stock currently carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.