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Cummins After Q3: Is the Stock a Buy on AI Data Center Boom?
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Key Takeaways
CMI's Q3 sales rose 13.5% to $9.44B, but earnings lag estimates amid supply and truck market pressures.
CMI's Power Systems sales jumped 15%, with generator orders extending into the second half of 2028.
CMI's AI data center growth prospects remain strong, but supply bottlenecks and truck weakness favor a hold.
Cummins Inc. (CMI - Free Report) is emerging as an important player in the AI data center power boom. While the company remains closely associated with diesel engines for trucks, its power generation business is benefiting from surging demand for backup and prime power as hyperscalers race to build AI infrastructure.
With generator supply tight and orders extending years ahead, the opportunity looks compelling. However, Cummins' latest results also highlight why the stock may not be an outright buy just yet.
Q3 at a Glance
Cummins reported third-quarter 2026 revenues of $9.44 billion, up 13.5% from a year earlier. But the figure fell short of the Zacks Consensus Estimate. Supplier constraints delayed generator shipments, accounting for roughly half of the revenue miss, while weaker pickup truck engine demand contributed the rest. Cummin’s full-year 2026 revenue guidance now sits at roughly 10% growth, the low end of the prior guided range of 10-13%. Adjusted EPS of $7.71 per share also missed the Zacks Consensus Estimate of $8.38.
That said, Cummins' data center business remains a bright spot, with strong demand pointing to significant growth opportunities ahead. The Power Systems segment offers the clearest evidence of this momentum.
CMI’s Power Systems Is the Real Growth Engine
Third-quarter sales from the Power Systems unit rose 15% to $2.29 billion, while EBITDA margin expanded to 25.4% from 22.9% a year earlier. Strong demand and pricing made this the company's most profitable segment.
The opportunity extends beyond generator manufacturing. Cummins' Distribution segment, which sells and installs power equipment, is also benefiting from data center demand. This provides another avenue to capitalize on the infrastructure buildout.
Geographically, North American power generation revenues increased 22%, while power equipment sales in China jumped 42%. Management also indicated that data center orders outside the United States are now roughly equal to domestic orders, with Southeast Asia emerging as the fastest-growing market.
Strong Orders Offer Long-Term Visibility
Cummins' data center opportunity is backed by a strong order pipeline. Quarterly order intake exceeded expectations, while orders for its largest generator sets already extend into the second half of 2028. The company also has commitments with major hyperscale customers beyond its formal order book, including a roughly 2-gigawatt order in Texas.
For 2026, Cummins expects global power generation revenues to grow 15-25%. The broader Power Systems segment is projected to deliver revenue growth of 15-18%, while Distribution revenues are expected to increase 10-13%. Both segments are expected to generate higher sales again in 2027.
Capacity Expansion Could Unlock More Growth
Cummins is investing to address the supply constraints and convert its growing order pipeline into shipments. It recently opened a roughly $100 million cooling-systems plant in Wisconsin, which should more than double output. Additional generator capacity will begin coming online in 2027, with most of the expansion expected around 2028. Capital spending is projected at $1.35-$1.45 billion in 2026.
The company is also expanding into adjacent power solutions. It won its largest battery energy storage project yet, designed to help manage the sharp fluctuations in electricity demand created by AI workloads. Separately, Cummins is developing a large natural gas engine, with pilot units expected around 2028 and meaningful sales projected from 2029.
These initiatives broaden its exposure to data center infrastructure beyond conventional generators.
Truck Weakness Limits the Investment Case
The data center opportunity is compelling, but Cummins remains exposed to traditional truck markets. North American pickup engine shipments fell 16% year over year to 34,000 units in the last reported quarter, as elevated diesel prices and interest rates weighed on demand. The full-year shipment forecast was cut to 118,000-122,000 from 125,000-140,000 units. The medium-duty truck market outlook was also lowered to 125,000-130,000 units from 130,000-140,000. This weakness offsets some of the strength in power generation and explains the reduced 2026 revenue growth outlook.
Cummins’ Price Performance & Valuation
Year to date, shares of CMI have declined 12%, underperforming peers like Caterpillar (CAT - Free Report) and Eaton (ETN - Free Report) . In the same timeframe, shares of Caterpillar have lost 2.5%, while Eaton shares rose 7.3%.
YTD Price Comparison
Image Source: Zacks Investment Research
Cummins trades at 1.52 times forward 12-month sales. That is below Caterpillar’s 2.94 times and Eaton’s 3.64 times. Cummins has a Value Score of A.
CMI’s F12M P/S Vs. CAT & ETN
Image Source: Zacks Investment Research
Is Cummins Stock a Buy After Q3?
Cummins has a strong position in the AI data center power market, and its growing order book offers meaningful long-term growth visibility. However, investors should not confuse a promising industry opportunity with an immediate buying opportunity.
Supply constraints will delay some of the benefits, while weakness in truck markets continues to weigh on overall growth. The long-term story is attractive, but it needs more consistent revenue growth and stronger execution to justify a more bullish stance. Investors can hold for the AI opportunity rather than chase it.
View the Zacks #1 Rank List
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Cummins After Q3: Is the Stock a Buy on AI Data Center Boom?
Key Takeaways
Cummins Inc. (CMI - Free Report) is emerging as an important player in the AI data center power boom. While the company remains closely associated with diesel engines for trucks, its power generation business is benefiting from surging demand for backup and prime power as hyperscalers race to build AI infrastructure.
With generator supply tight and orders extending years ahead, the opportunity looks compelling. However, Cummins' latest results also highlight why the stock may not be an outright buy just yet.
Q3 at a Glance
Cummins reported third-quarter 2026 revenues of $9.44 billion, up 13.5% from a year earlier. But the figure fell short of the Zacks Consensus Estimate. Supplier constraints delayed generator shipments, accounting for roughly half of the revenue miss, while weaker pickup truck engine demand contributed the rest. Cummin’s full-year 2026 revenue guidance now sits at roughly 10% growth, the low end of the prior guided range of 10-13%. Adjusted EPS of $7.71 per share also missed the Zacks Consensus Estimate of $8.38.
Cummins Inc. Price, Consensus and EPS Surprise
Cummins Inc. price-consensus-eps-surprise-chart | Cummins Inc. Quote
That said, Cummins' data center business remains a bright spot, with strong demand pointing to significant growth opportunities ahead. The Power Systems segment offers the clearest evidence of this momentum.
CMI’s Power Systems Is the Real Growth Engine
Third-quarter sales from the Power Systems unit rose 15% to $2.29 billion, while EBITDA margin expanded to 25.4% from 22.9% a year earlier. Strong demand and pricing made this the company's most profitable segment.
The opportunity extends beyond generator manufacturing. Cummins' Distribution segment, which sells and installs power equipment, is also benefiting from data center demand. This provides another avenue to capitalize on the infrastructure buildout.
Geographically, North American power generation revenues increased 22%, while power equipment sales in China jumped 42%. Management also indicated that data center orders outside the United States are now roughly equal to domestic orders, with Southeast Asia emerging as the fastest-growing market.
Strong Orders Offer Long-Term Visibility
Cummins' data center opportunity is backed by a strong order pipeline. Quarterly order intake exceeded expectations, while orders for its largest generator sets already extend into the second half of 2028. The company also has commitments with major hyperscale customers beyond its formal order book, including a roughly 2-gigawatt order in Texas.
For 2026, Cummins expects global power generation revenues to grow 15-25%. The broader Power Systems segment is projected to deliver revenue growth of 15-18%, while Distribution revenues are expected to increase 10-13%. Both segments are expected to generate higher sales again in 2027.
Capacity Expansion Could Unlock More Growth
Cummins is investing to address the supply constraints and convert its growing order pipeline into shipments. It recently opened a roughly $100 million cooling-systems plant in Wisconsin, which should more than double output. Additional generator capacity will begin coming online in 2027, with most of the expansion expected around 2028. Capital spending is projected at $1.35-$1.45 billion in 2026.
The company is also expanding into adjacent power solutions. It won its largest battery energy storage project yet, designed to help manage the sharp fluctuations in electricity demand created by AI workloads. Separately, Cummins is developing a large natural gas engine, with pilot units expected around 2028 and meaningful sales projected from 2029.
These initiatives broaden its exposure to data center infrastructure beyond conventional generators.
Truck Weakness Limits the Investment Case
The data center opportunity is compelling, but Cummins remains exposed to traditional truck markets. North American pickup engine shipments fell 16% year over year to 34,000 units in the last reported quarter, as elevated diesel prices and interest rates weighed on demand. The full-year shipment forecast was cut to 118,000-122,000 from 125,000-140,000 units. The medium-duty truck market outlook was also lowered to 125,000-130,000 units from 130,000-140,000. This weakness offsets some of the strength in power generation and explains the reduced 2026 revenue growth outlook.
Cummins’ Price Performance & Valuation
Year to date, shares of CMI have declined 12%, underperforming peers like Caterpillar (CAT - Free Report) and Eaton (ETN - Free Report) . In the same timeframe, shares of Caterpillar have lost 2.5%, while Eaton shares rose 7.3%.
YTD Price Comparison
Cummins trades at 1.52 times forward 12-month sales. That is below Caterpillar’s 2.94 times and Eaton’s 3.64 times. Cummins has a Value Score of A.
CMI’s F12M P/S Vs. CAT & ETN
Is Cummins Stock a Buy After Q3?
Cummins has a strong position in the AI data center power market, and its growing order book offers meaningful long-term growth visibility. However, investors should not confuse a promising industry opportunity with an immediate buying opportunity.
Supply constraints will delay some of the benefits, while weakness in truck markets continues to weigh on overall growth. The long-term story is attractive, but it needs more consistent revenue growth and stronger execution to justify a more bullish stance. Investors can hold for the AI opportunity rather than chase it.
Cummins stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.