Summary of Key Points from the Conference Call Industry Overview - The focus is on the **data center** industry, particularly the **backup power** segment involving manufacturers like **Caterpillar (CAT)**, **Cummins (CMI)**, and **Rolls-Royce (mtu)** [1][2][5] Core Insights and Arguments - **Earnings Growth Potential**: Backup generators are expected to be a significant driver of earnings growth for CAT and CMI, with potential revenue from US data center generator sales projected to nearly double by 2028, reaching approximately **$1.5 billion** for both companies [2][5] - **Market Dynamics**: The US data center build is anticipated to grow at an **18% CAGR** from 2025 to 2028, with a base of around **8.5 GW** in 2025 [6][19] - **Market Share Estimates**: Market shares are estimated at **50% for CAT**, **35% for CMI**, and **10% for mtu** in the backup generator market [6][44] - **Pricing Trends**: A **5% CAGR** for generator pricing is expected from 2025 to 2028, with an estimated cost of **$650,000 per MW** by 2028 [6][38] Financial Projections - **Revenue Estimates**: - CAT is projected to generate approximately **$1.8 billion** from backup generators in 2025, growing to **$3.4 billion** by 2028 [15] - CMI is expected to see revenue from backup generators rise from **$1.5 billion** in 2025 to **$2.9 billion** by 2028 [15] - **Earnings Per Share (EPS) Impact**: - CAT's power generation business could contribute about **$1** of incremental EPS by 2028, while CMI's backup generator sales could translate to approximately **$4** of incremental EPS [11][12][61] Structural Considerations - **Market Constraints**: There are concerns about capacity constraints for manufacturers, which may lead to market share slippage for leading OEMs [6][45] - **Redundancy Needs**: Data centers require backup power systems with a redundancy multiplier of **0.9**, ensuring operational continuity [31][34] Competitive Landscape - **Behind the Meter vs. Front of the Meter**: There is a debate on whether "behind the meter" generation will cannibalize opportunities for large combined-cycle gas turbine manufacturers like GE Vernova [9][13] - **Production Capacity Expansion**: Both CAT and CMI are expanding their production capacities significantly, with CAT increasing by **125%** and CMI doubling its production for specific engine sizes [48] Risks and Considerations - **Market Risks**: Key risks include rising raw material costs, labor costs, and potential weakness in major markets like China [72] - **Valuation Metrics**: CAT is trading at approximately **25x** consensus 2026 EPS, while CMI is at **17x**. Both companies need to achieve significant growth in other segments to meet market expectations [70][71] Additional Insights - **Long-term Growth**: Despite the robust growth expected in the power generation segment, it will still represent a modest portion of overall revenues for CAT and CMI, estimated at **20%** and **16%** respectively by 2028 [10][66] - **Interactive Model**: An interactive model has been developed to allow investors to test various assumptions regarding the revenue potential from backup generators for US data centers [5][14] This summary encapsulates the critical insights and projections regarding the backup power market within the data center industry, focusing on the key players and their expected financial performance.