Caterpillar shares surged 5.3% in afternoon trading to $1,047.33, setting a new record high as investors digested details of a landmark long-term power arrangement that links the company directly to large-scale AI data-center power needs.
The market response followed Chevron's announcement of a 20-year power purchase agreement with Microsoft to build Project Kilby, a co-located power facility in West Texas. Additional generation for the project will be supplied by Solar Turbines, which is a wholly owned subsidiary of Caterpillar. The facility is planned to deliver about 2.67 gigawatts of capacity through a phased, modular rollout.
Those contractual details feed into a larger re-rating story that has been developing through 2026. Caterpillar reported first-quarter 2026 sales of $17.4 billion, a 22% increase versus the prior year, led in part by demand for data-center power products. The company also reported a near-record backlog of roughly $63 billion, up 79% year over year, providing multi-year visibility into revenue streams in a way that is uncommon for heavy-equipment makers.
Wall Street has moved to reflect this shift in expectations. JPMorgan raised its price target to $1,165, the highest on the Street, Evercore ISI set a target of $1,103, and Wells Fargo increased its target to $1,050. Meanwhile, the company's board approved an 8% increase to the quarterly dividend, raising it to $1.63 per share in June and continuing Caterpillar's status as a Dividend Aristocrat.
Market-wide moves that day were modest by comparison: the S&P 500 rose 0.3% and the Dow Jones Industrial Average gained 0.5%, while Caterpillar's advance notably outpaced both indices.
Investors and analysts are increasingly interpreting Caterpillar not just as a traditional cyclical equipment manufacturer but as a supplier of essential components for AI infrastructure. Caterpillar's Power and Energy segment provides the generators and turbines that support data-center operations, backup power and other energy-intensive applications. The company has signaled adjustments to its capacity plans to match demand: Power and Energy Group President Jason Kaiser said the company raised its large engine target from 2x to 3x growth, and that turbine capacity is being expanded 2.5x to serve the surge in demand across data centers, backup power and gas compression.
Taken together, the high-profile Project Kilby contract, the record backlog figures, elevated analyst price targets and a broadly constructive market backdrop combined to drive Caterpillar shares to an intraday record. Proponents of the bullish case contend that the structural shift toward AI-related power demand is enduring and supports a premium valuation. Critics point to the tensions inherent in applying a high multiple to a machinery business that may face margin pressures, suggesting that much of the positive outlook may already be priced in.
Investors will get another critical data point when Caterpillar reports second-quarter earnings in early August, which will test whether the Power and Energy growth trajectory can sustain current market expectations.
Key financial and operational facts cited in this report
- Shares rose 5.3% to $1,047.33, a record high.
- Chevron announced a 20-year PPA with Microsoft for Project Kilby in West Texas; Solar Turbines (a Caterpillar subsidiary) will supply additional generation capacity.
- The Project Kilby facility is expected to deliver roughly 2.67 gigawatts via a phased, modular approach.
- Q1 2026 sales rose 22% year over year to $17.4 billion; backlog near $63 billion, up 79% year over year.
- Analyst targets: JPMorgan $1,165; Evercore ISI $1,103; Wells Fargo $1,050.
- Quarterly dividend raised 8% to $1.63 per share in June; company remains a Dividend Aristocrat.
- Company guidance adjustments: large engine target increased from 2x to 3x; turbine capacity expanded 2.5x.