Caterpillar sinks 9% despite record $78 billion backlog and earnings beat

The quarter itself was strong: Sales and revenues rose 17% to $20.7 billion from $17.6 billion a year earlier, with $2.2 billion of the gain from higher sales volume and $663 million from higher prices, the Irving, Texas, company said. Adjusted profit came to $7.20 a share, up from $4.95, and the adjusted operating margin widened to 20.6% from 17.5%. Caterpillar generated $4.4 billion in operating cash, ended the quarter with $7.9 billion in cash, and returned about $1.9 billion to shareholders through $1.2 billion in buybacks and $0.7 billion in dividends. "Our third-quarter results reflect the durability of our end markets, with strong order rates and a record backlog," CEO Joe Creed said.

Why the stock fell anyway: Caterpillar kept its forecast for 2026 revenue growth in the mid- to high-teens percent, while analysts were expecting about 18%, Reuters reported. Its order backlog hit a record $78.1 billion, up $6 billion from the prior quarter, but that increase was smaller than in previous periods and was likely below bullish expectations of about $80 billion, according to J.P. Morgan. The company also kept its estimate of roughly $2.2 billion in tariff costs this year and said fourth-quarter growth will slow as tariffs and record diesel prices raise freight costs.

The AI angle: Caterpillar has become one of the industrial companies most tied to the data-center boom, selling generators, engines and turbines for backup and on-site power. On its call, executives said demand for backup power remains strong but that adding factory capacity takes time and is limiting how fast it can grow, Reuters reported. Creed said the company has "a line of sight (on demand) past the backlog" stretching to 2030. Reuters noted that growing local opposition to data centers and calls to slow AI development have weighed on investor sentiment toward companies like Caterpillar.

What Caterpillar delivered vs. what Wall Street wanted: On profit, it beat, with $7.20 a share against $7.08 expected by analysts tracked by LSEG. On sales, $20.7 billion topped the roughly $20.53 billion consensus cited by Investing.com. On the full-year outlook, it held steady rather than raising it, when analysts were looking for about 18% growth. On orders, the backlog rose to a record, but by less than in past quarters and short of the $80 billion some bulls expected. On costs, fourth-quarter tariffs are expected to run about $600 million, and capital spending is now planned at about $3.3 billion, down from $3.5 billion, per Investing.com's call summary.

The strongest case each way: Bulls point to 17% sales growth, a profit beat, a record backlog that Investing.com's call summary put up about 96% from a year earlier, and management's view that demand runs out to 2030. Caterpillar has topped profit estimates by at least 40 cents a share in each of the last four quarters, Reuters reported. Skeptics say the quality of this beat was weaker; Oppenheimer analyst Kristen Owen called it "a chink in the CAT armor," per Reuters. Even before the report, Wells Fargo had cut its price target to $840 from $1,155, UBS to $750 from $925 and BofA to $850 from $989, according to Investing.com.

What's still unknown: Whether Caterpillar can add engine and turbine capacity fast enough to turn its backlog into sales, whether data-center spending holds up amid local pushback, and how much tariffs and diesel costs eat into fourth-quarter margins. The shares were little changed after hours, at $644.39 as of 7:58 p.m. ET, per Stock Analysis. Caterpillar's fourth-quarter report, expected early next year, is the next check.

Sourcing: Caterpillar's third-quarter 2026 results release and SEC exhibit (Oct. 29, primary documents) for sales, margins, profit per share, cash flow, buybacks and the Joe Creed quote; Reuters via Investing.com (Nathan Gomes and Nandan Mandayam, Oct. 29) for the forecast, backlog, LSEG estimate, tariff cost, data-center context, the J.P. Morgan and Oppenheimer views and the size of the drop; Investing.com's earnings-call summary for the consensus figures, fourth-quarter tariff cost, capital spending and 52-week range; Investing.com for analyst price-target changes; stockanalysis.com for the closing and after-hours prices and market value; AP and CNBC for the broader market. Analyst estimates vary by data provider. Company forecasts are goals, not guarantees. This is not investment advice.