Caterpillar shifts focus to AI data center demand, driving strong growth and a $51B backlog.

Caterpillar is undergoing a major transformation, moving away from traditional cyclical markets like construction and mining toward the growing demand for power and energy in AI data centers. The company's Power & Energy division saw a 23% year-over-year revenue increase in Q4 2025, with power generation sales up 44% and strong segment margins of 19.6%. Despite tariff challenges, Caterpillar supports shareholder returns through dividend growth and buybacks. This shift underpins a bullish outlook with a $880 price target, reflecting robust earnings and a $51 billion backlog that signals strong future revenue visibility.