Caterpillar Inc.

Record quarter performance + strong cash generation - Caterpillar reported Q2 2026 sales/revenues of $20.5B, +24% YoY, driven mainly by higher sales volumes to end users across all three segments and favorable price realization. - Adjusted EPS: $8.17 (+73% YoY). Adjusted operating margin: 21.9% (better than expected; +430 bps YoY). - Backlog increased to $72B (+$9B sequentially; +$35B, +92% YoY). Backlog supports demand visibility. - Free cash flow (MP&E): $5.1B in the quarter (record), and $2.2B returned to shareholders via $1.5B share repurchases + dividends.

What drove profitability (good + a “tailwind” that may fade) - Margin beat was primarily due to tariff dynamics: - IEEPA tariff recoveries: $392M (major positive contribution; majority recorded in corporate items). - Tariff costs for tariffs introduced since beginning of 2025 (ex-IEEPA): ~ $400M in Q2, which was favorable vs the $700M estimate from April (from updated tariff computations). - Mgmt noted Q2 margin lift from stronger volume, but partially offset by higher SG&A and R&D and higher manufacturing costs (including capacity expansion-related depreciation and freight).

Segment highlights: broad-based demand (with pockets of weakness) - Power & Energy - Sales $8.2B (+17% YoY); profit $2.0B (+30% YoY); margin 24.6% (+250 bps YoY). - Strength: power generation up 72% (notably large gensets/turbines for data centers); oil & gas services/engines +6% YoY. - Construction Industries - Sales $8.3B (+35% YoY); profit $1.9B (+57% YoY); margin 23.3% (+320 bps YoY). - Key driver: strong rental fleet loading and equipment sold to nonresidential/residential construction (North America especially). - Surprise detail/possible “watch item”: dealer inventory rose ~$400M in Q2, faster than originally anticipated. - Resource Industries - Sales $4.6B (+20% YoY); profit $693M (+23% YoY); margin 14.9% (+40 bps YoY). - Strength: mining + heavy construction/quarry/aggregates; services growth supported results.