Caterpillar Inc Earnings - Q4 2025 Analysis & Highlights
Caterpillar Inc. reported a record-breaking Q4 2025 with $19.1 billion in sales and revenues, an 18% increase year-over-year, driven by strong volumes in all primary segments, particularly Power & Energy. The company achieved full-year sales and revenues of $67.6 billion, the highest in its history, and a record backlog of $51 billion. Despite $1.7 billion in incremental tariff headwinds, adjusted operating profit margin was 17.2% and adjusted profit per share was $19.06. MP&E free cash flow reached $9.5 billion, enabling $7.9 billion to be returned to shareholders through share repurchases and dividends. The 2026 outlook anticipates sales and revenues growth around the top of the 5% to 7% long-term compound annual growth rate target, supported by the strong backlog and healthy end markets.
Key Financial Results
Sales and revenues for Q4 2025 were $19.1 billion, an all-time record for a single quarter, representing an 18% increase versus the previous year.
Full-year 2025 sales and revenues reached $67.6 billion, the highest in Caterpillar's history, marking 4% year-over-year growth.
Backlog grew to a record level of $51 billion, an increase of $21 billion, or 71%, compared to last year.
Adjusted operating profit margin for Q4 2025 was 15.6%.
Full-year adjusted operating profit margin was 17.2%.
Adjusted profit per share for Q4 2025 was $5.16.
Full-year adjusted profit per share was $19.06.
Services revenues totaled $24 billion in 2025.
Business Segment Results
Construction Industries' sales increased by 15% in the fourth quarter to $6.9 billion.
Construction Industries' profit decreased by 12% versus the prior year to $1.0 billion, with a segment margin of 14.9%.
Resource Industries' sales increased by 13% in the fourth quarter to $3.4 billion.
Resource Industries' profit decreased by 24% versus the prior year to $360 million, with a segment margin of 10.7%.
Power & Energy sales increased by 23% in the fourth quarter to $9.4 billion.
Power & Energy profit increased by 25% versus the prior year to $1.8 billion, with a segment margin of 19.6%.
Financial Products revenues increased by 7% versus the prior year to about $1.1 billion, with segment profit increasing by 58% to $262 million.
Capital Allocation
MP&E free cash flow was $9.5 billion in 2025.
$7.9 billion was deployed to shareholders through $5.2 billion of share repurchases and $2.7 billion of dividends paid in 2025.
The company expects to enter into a larger accelerated share repurchase in the current quarter compared to the $3 billion ASR executed in early 2025.
Capital expenditures are expected to be around $3.5 billion in 2026.
Industry Trends and Dynamics
Construction Industries' total sales to users grew for the fourth consecutive quarter, rising 11%.
Power & Energy sales to users grew a robust 37%, with double-digit growth across all applications.
Power generation grew 44%, driven by strong demand for large gensets and turbines used in data center applications.
Strong sales to users in oil and gas were driven primarily by turbines and turbine-related services.
Mining sales to users were lower year-over-year due to customers exercising capital discipline in response to weaker coal prices.
Customer interest in autonomous hauling solutions remains strong in Resource Industries.
Demand for products in industrial applications is expected to grow moderately in 2026.
Competitive Landscape
Caterpillar aims to grow Construction Industries 1.25 times the 2024 baseline by 2030.
The company ended 2025 with 827 autonomous haul trucks in operation, up from 690 at the end of 2024.
Power & Energy delivered meaningful progress towards its 2030 goal to more than double power generation sales compared to 2024.
Power generation sales exceeded $10 billion in 2025, representing year-over-year growth of more than 30%.
Caterpillar is on track to double its large engine capacity and more than double its industrial gas turbine capacity by 2030.
The company unveiled the next era of industrial AI and autonomy at CES 2026, highlighting its role in providing critical minerals, reliable power, and physical infrastructure for the digital world.
Caterpillar announced the launch of its new Cat AI Assistant to help customers buy, maintain, manage, and operate equipment more easily.
Macroeconomic Environment
The company faced net incremental tariff headwinds of $1.7 billion in 2025.
Economic conditions in Europe are expected to strengthen, and construction activity in Africa and the Middle East is projected to remain strong in 2026.
Moderate economic conditions are expected in Asia/Pacific outside of China in 2026.
Positive momentum in China is anticipated, with full-year growth in the above 10-ton excavator industry.
Growth in Latin America is expected to continue at a similar rate to 2025.
Net incremental tariff impact was $1.7 billion in 2025.
Incremental tariff costs are expected to be around $2.6 billion in 2026, which is $800 million higher than in 2025.
Growth Opportunities and Strategies
The refreshed enterprise strategy for profitable growth is centered on three pillars: commercial excellence, being the advanced technology leader, and transforming how we work, all built upon a foundation of continued operational excellence.
Caterpillar pledged $25 million to ensure the future workforce has the tools needed to make advanced technology possible.
The company is committed to investing for long-term profitable growth, including capacity investments, which will impact depreciation expense, and higher technology and digital spend.
Financial Guidance and Outlook
Full-year 2026 sales and revenues are anticipated to grow around the top of the 5% to 7% long-term compound annual growth rate target.
Volume growth is expected in all three primary segments, along with positive price realization of about 2% of total sales and revenues, and continued growth in services revenues.
Full-year adjusted operating profit margin should exceed 2025 levels, but remain near the bottom of the target range for expected sales and revenues.
MP&E free cash flow is expected to be slightly lower than 2025, reflecting the increase in capital expenditures.
Capital expenditures are expected to be around $3.5 billion in 2026.
Restructuring costs are expected to be roughly $300 million to $350 million.
The global annual effective tax rate is anticipated to be 23%, excluding discrete items.
First-quarter sales and revenues are expected to be stronger versus the prior year, with stronger volume and a tailwind from machine dealer inventories.
First-quarter adjusted operating profit margin percentage, excluding incremental tariff costs, is expected to be higher year-over-year.