In this article: By Abhinav Parmar and Nathan Gomes Jan 29 (Reuters) - Caterpillar's fourth-quarter results reflected trends in the global economy, with sales driven by a surge in artificial intelligence-related spending, even as the equipment giant warned investors of a tariff impact exceeding $2 billion in the upcoming year. The world's largest construction equipment company reported quarterly sales in its power and energy segment, which produces generators, increased by more than 20%. Similar to major Big Tech companies, Caterpillar and several other industrial firms have leveraged AI to boost investor confidence. Its stock price has risen approximately 60% over the past year, roughly four times the gains of the S&P 500 during the same period. The AI-driven boom has transformed Caterpillar's power and energy segment into its largest sales business, overtaking its traditional construction unit. Orders for "prime power" systems—large generators that provide continuous, 24/7 electricity—are growing, CEO Joe Creed said on a post-earnings call, as data-center clients seek additional on-site power to meet rapid expansion demands. Shares of Caterpillar, often seen as an indicator of the global industrial economy, were up about 4. 4% in early trading. TARIFF CHALLENGES The company forecasted tariff-related expenses of roughly $2. 6 billion in 2026. Last year, the total tariffs imposed amounted to $1. 8 billion. Industrial firms were among those most adversely affected by President Donald Trump's broad tariffs last year, resulting in reduced forecasts and increased costs.

While many U. S. companies have described tariffs as "manageable" to investors this year, early earnings reports indicate profits are being squeezed. "Better-than-expected sales across business segments were offset by tariff challenges, which limited margin growth for the quarter, " stated Jefferies analyst Stephen Volkmann. Volkmann also noted the expectation that these tariff pressures will continue through 2026. Caterpillar presented two projections for annual operating profit margin, continuing a pattern seen last year. Factoring in tariffs, the company anticipates adjusted annual operating profit margins near the lower end of its target range. At its November investor event, Caterpillar revealed an adjusted operating profit margin goal of 15% to 19% through 2024, rising to 21% to 25% by 2030, contingent on sales performance. On an adjusted basis, the company earned $5. 16 earnings per share for the quarter ending December 31, slightly up from $5. 14 the prior year. Revenue increased to $19. 1 billion from $16. 2 billion. Analysts had forecasted an average quarterly profit of $4. 68 per share and revenue of $17. 86 billion, according to data from LSEG. Wall Street anticipates growth in the construction segment in 2026, supported by stronger dealer orders, stabilization in non-residential construction activity, and rising demand for rental fleets. (Reporting by Abhinav Parmar in Bengaluru; Editing by Sriraj Kalluvila) Recommended Stories