Caterpillar gets a big AI sales boost as tariffs drag

Core Insights - Caterpillar's fourth-quarter results reflect the global economy, with sales boosted by increased spending on artificial intelligence, despite anticipating over $2 billion in tariff impacts in the coming year [1][4] - The company's power and energy segment, which produces generators, experienced a sales increase of over 20%, becoming its largest business by sales, surpassing the construction unit [1][2] Financial Performance - Caterpillar's shares rose approximately 60% over the past year, significantly outperforming the S&P 500, which saw gains of about 15% during the same period [2] - The company reported an adjusted profit per share of $5.16 for the quarter ending December 31, slightly up from $5.14 a year ago, with revenue increasing to $19.1 billion from $16.2 billion [6] Market Dynamics - There is a rising demand for "prime power" systems, as data-center customers seek additional on-site power to support rapid growth [3] - Despite better-than-expected sales, tariff-related costs are limiting margin expansion, with expectations that these headwinds will continue through 2026 [5] Tariff Implications - Caterpillar warned of tariff-related costs projected at $2.6 billion for 2026, with last year's tariffs amounting to $1.8 billion [4] - The company has set an adjusted operating profit margin target of 15% to 19% through 2024, increasing to 21% to 25% by 2030, contingent on sales levels [6]