Caterpillar flags $2.6 billion tariff hit in 2026, power equipment demand lifts quarter

Jan 29 (Reuters) - Caterpillar warned of a $2.6 billion hit from tariffs in 2026, even as it reported a rise in fourth-quarter revenue and profit on sustained demand for its power-generation equipment amid a rapid build-out of data centers.

 

The world’s largest construction and mining equipment maker reported an adjusted profit of $5.16 per share for the quarter ended December 31, up from $5.14 per share a year earlier. Revenue rose to $19.1 billion from $16.2 billion.

 

The company had said in October 2025 it expects annual tariff costs between $1.6 billion and $1.75 billion.

Caterpillar said its operating profit fell 9% in the quarter to $2.66 billion, driven mainly by $1.03 billion of unfavorable manufacturing costs, largely tied to higher tariffs.

 

The surge in artificial intelligence adoption is driving demand for computing power and pushing tech heavyweights to invest billions in new data-center infrastructure, boosting demand for Caterpillar’s back-up power generators.

 

The company, seen as a bellwether for the global industrial economy, has also raised prices on its industrial equipment, supporting margins and countering a softness from a recovering construction equipment business.

 

Analysts expect the construction segment to return to growth in 2026, supported by stronger dealer orders, stabilizing non-residential construction activity, and increased rental fleet demand.

 

(Reporting by Abhinav Parmar in Bengaluru; Editing by Sriraj Kalluvila)