Caterpillar reported higher fourth-quarter revenue and adjusted earnings per share, while warning that tariffs will hit the company for $2.6 billion in 2026. For the quarter ended December 31, adjusted profit was $5.16 per share, up from $5.14 per share a year earlier, and revenue rose to $19.1 billion from $16.2 billion.
Despite the topline gains, the company recorded a 9% decline in operating profit for the quarter, which fell to $2.66 billion. Management attributed that drop primarily to $1.03 billion of unfavorable manufacturing costs, costs that the company said were largely linked to higher tariffs.
The company highlighted the role of power-generation equipment in supporting results. A rapid build-out of data centers - driven by increased adoption of artificial intelligence - has pushed demand for computing power and prompted major technology companies to invest heavily in new data-center infrastructure. That surge in data-center construction has lifted demand for Caterpillar's backup generators, providing a notable offset to softness elsewhere.
Caterpillar has raised prices on its industrial equipment, a move that management says has supported margins and helped counter a weak patch in the construction equipment business. Observers cited within the company context expect the construction segment to return to growth in 2026, with supporting factors including stronger dealer orders, stabilizing non-residential construction activity, and increased rental fleet demand.
The company had previously disclosed in October 2025 an expectation of annual tariff costs in the range of $1.6 billion to $1.75 billion. The newly flagged $2.6 billion tariff impact for 2026 represents a substantial increase from that earlier estimate, and the company has tied a significant portion of this to manufacturing cost pressures during the quarter.
While adjusted earnings and revenue rose year-over-year, the combination of higher tariff exposure and related manufacturing costs produced a tangible drag on operating profitability. At the same time, demand dynamics in the power-generation business, linked to data-center expansion and rising computing needs, provided a meaningful revenue driver for the period.
The company continues to be viewed as a bellwether for global industrial activity, balancing price increases and product demand against cost pressures from tariffs and manufacturing. Analysts cited in the company's outlook expect improvement in construction equipment volumes next year, though Caterpillar's margins and operating performance remain sensitive to tariff developments and manufacturing cost trends.
Note: Some market-oriented commentary and promotional language that can appear around stock valuation tools was present in prior reporting, but this article focuses strictly on Caterpillar's reported financial results, tariff guidance, and underlying demand signals mentioned by the company.