Caterpillar (CAT): AI Is Adding a Powerful New Growth Engine
Caterpillar (CAT) has long been tied to construction and other cyclical industries. But the AI infrastructure boom is starting to change that story, giving the company a major new source of demand and considerably more visibility into future revenue.
The evidence is showing up in Caterpillar’s numbers. Second-quarter 2026 revenue jumped 24% year over year to $20.5 billion, while profit reached $7.77 per share. More importantly, the company’s backlog has climbed to a record $72 billion.
That’s an increase of $35 billion in just one year.
A major force behind that surge is AI-related demand. Building the infrastructure needed to support AI requires far more than chips and servers. The enormous data center build-out is also creating demand for the heavy equipment and power solutions Caterpillar provides.
For investors, that could represent an important shift in the company’s business. Caterpillar has traditionally been highly exposed to the construction cycle. AI infrastructure spending is adding another source of demand, and the record backlog provides multiyear revenue visibility that can make future results less dependent on traditional construction activity.
The strength of the business hasn’t gone unnoticed. Caterpillar shares have gained more than 70% over the past year and currently trade around $805 per share. Even after that run, the average analyst price target stands at $975, roughly 21% above the current price.
The biggest consideration here is valuation. Caterpillar’s trailing P/E has climbed above 35, well above both industry averages and the company’s own historical average. Investors are clearly paying a premium for the growth story.
But the underlying business has also changed considerably. A $72 billion backlog, 24% quarterly revenue growth and increasing exposure to the multiyear AI infrastructure build-out give Caterpillar growth drivers that weren’t part of the traditional cyclical story.
We wouldn’t expect another 70% gain to come easily from here. But we do think Caterpillar’s record backlog and expanding role in AI infrastructure make the current valuation easier to justify. With analysts targeting an average of $975 and AI-related demand providing greater visibility into future revenue, we think Caterpillar remains an attractive industrial stock even after its impressive run.
