Caterpillar's order backlog reached a record $78 billion at the end of September, up about $38 billion from a year earlier, as sales rose 17 per cent to $20.7 billion, the company reported on Thursday. Adjusted profit was $7.20 a share, against $4.95 a year before.
"Our third-quarter results reflect the durability of our end markets, with strong order rates and a record backlog," said Joe Creed, Caterpillar's chairman and chief executive, in the release. The backlog figure itself was given on the earnings call, not in the release. So was the quarter's less comfortable detail: Caterpillar expects its construction dealers to take about $1.6 billion out of their inventories in the fourth quarter.
What is in the backlog?
Mostly engines and turbines for power. Retail sales of power generation equipment rose 75 per cent, driven by turbines and large reciprocating engines bought for data centres, executives said on the call. Creed said Caterpillar is "now taking some large reciprocating orders as far out as 2029 and turbine orders into 2030."
By this publication's arithmetic, $78 billion is about 3.8 times the quarter's sales. Executives said 58 per cent of it should ship within 12 months, against 59 per cent a quarter earlier. That is roughly $45 billion of near-term shipments; the other $33 billion sits further out. Caterpillar does not split its backlog by segment, so how much of it rests on data-centre construction cannot be read from the filings. We covered the limits on that buildout in an earlier analysis.
| Segment, third quarter | 2025 sales | 2026 sales | Change | 2026 profit margin |
|---|---|---|---|---|
| Construction Industries | $6.76 billion | $7.98 billion | +18% | 22.9% |
| Resource Industries | $4.00 billion | $4.62 billion | +15% | 13.5% |
| Power & Energy | $7.46 billion | $8.78 billion | +18% | 24.4% |
Source: Caterpillar third-quarter 2026 results release, 29 October 2026.
Why is construction the worry?
Because its growth this quarter partly came from dealers stocking up, and that is about to reverse. The release says changes in dealer inventories lifted Construction Industries sales in Latin America and Asia-Pacific. For the fourth quarter, Caterpillar expects dealers to cut inventory by about $1.6 billion, against $600 million in the same quarter of 2025. Kyle Epley, the chief financial officer, put the year-on-year effect at about $1 billion of lost sales volume. He also said dealer stocks would still end the year higher than a year earlier.
The segment did well on price. Of $663 million of favourable price realisation across the company, $349 million came from construction. Segment profit rose 33 per cent to $1.83 billion. Caterpillar expects construction volume to fall modestly in the fourth quarter, while Resource Industries, its mining business, grows strongly.
What do tariffs cost Caterpillar?
About $600 million a quarter. Executives said third-quarter tariff costs were about $600 million, roughly flat on a year earlier, and that 2026 costs should total about $2.2 billion. Those figures exclude refunds of tariffs collected under the International Emergency Economic Powers Act (IEEPA), which courts struck down: Caterpillar booked $128 million of such recoveries in the quarter and about $520 million so far this year. Refunds of that kind have been flowing back to importers since the ruling. In Resource Industries, $208 million of unfavourable manufacturing costs mainly reflected higher material costs, including tariffs, the release says.
Caterpillar returned $2.0 billion to shareholders in the quarter, $1.2 billion in buybacks and $0.7 billion in dividends, and $9.8 billion over nine months. For the year it expects sales growth in the mid to high teens and adjusted operating margin, excluding IEEPA recoveries, near the bottom of its target range. It is also still spending: capital expenditure should be about $3.3 billion this year, down from a planned $3.5 billion, and its $1 billion plant in Sanford, North Carolina is part of that programme.
What to watch
The fourth-quarter backlog. If power orders keep arriving faster than Caterpillar can ship them, the number rises again even as construction slows. If it falls, the question becomes whether data-centre customers are pausing or the dealer drawdown is reaching further than one quarter. The 58 per cent shipping share is the other tell: a falling share means the order book is being pushed further into 2029 and 2030.
Sales, profit per share, operating margins, segment results, price realisation, the $128 million of IEEPA recoveries in the quarter, cash and capital returns and Joe Creed's quoted line are from Caterpillar's third-quarter results release filed with the SEC on 29 October 2026. The backlog, the 58 per cent shipping share, the dealer inventory outlook, tariff estimates, the fourth-quarter and full-year outlook and the remarks by Joe Creed and the chief financial officer, Kyle Epley, are from the earnings call on 29 October 2026, as transcribed by The Motley Fool. The backlog-to-sales ratios and the implied 12-month shipments are this publication's arithmetic. The analysis is our own.
Topics marketsCaterpillarearningsbacklogdata centersconstruction equipmenttariffsIEEPA
