Caterpillar's Energy Segment Surpasses Construction with 14% Revenue Growth

Caterpillar, the renowned construction equipment manufacturer, is celebrating its centennial anniversary in 2025 with a significant shift in its business focus. The company, which has traditionally been associated with construction industries, is now seeing substantial growth in its energy and transportation segment, particularly in powering data centers.

In 2024, the energy and transportation segment of Caterpillar generated $28.9 billion in annual revenues, surpassing the $25.5 billion from the construction industries segment. This shift is driven by the increasing demand for energy, with power generation, which includes data centers, being a significant contributor to this growth. Jason Kaiser, Caterpillar group president for energy and transportation, highlighted that the energy part of the business has been consistently outpacing construction since the fourth quarter of 2023. This period coincided with the rising demand for data centers and the need for equipment to electrify oil and gas production activities.

Caterpillar is investing heavily in manufacturing capacity, particularly for gas-fired turbines at its California facilities. The company's engine manufacturing capacity for data centers is set to increase by 125% from 2023 levels. This expansion is in response to the growing demand for both primary power generation and backup power for data centers, which are essential for the AI revolution. Caterpillar provides turbines for on-site primary power, generator sets for backup power, and microgrids that combine fossil fuel-based power with solar, battery storage, and more.

Data centers require substantial power, with some demanding up to 125 megawatts, equivalent to the electricity needs of 100,000 homes. Caterpillar's generator sets for backup power range from 2 to 4 megawatts, highlighting the extensive power requirements of these facilities. In cases where data centers lack a utility feed, Caterpillar can mobilize industrial gas turbines to provide 24/7 on-site power until a utility connection is established. The most popular on-site turbines for data centers are 38-megawatt, gas-fired models, which are well-suited for the AI construction boom.

One of the challenges in the data center industry is the long queue to acquire gas-fired turbines for power. Caterpillar is addressing this issue by investing in its supply chain and working closely with its hyperscaler clients on long-term planning. This collaboration helps ensure that Caterpillar can meet the growing demand for power generation equipment. The company has multi-year views of its clients' demand and plans on a weekly or monthly basis to stay ahead of the curve.

Power generation makes up one-third of Caterpillar's energy and transportation segment, with the oil and gas business being the next largest component at 29%. The oil and gas segment is closely linked to power generation, as much of the growth in this area is driven by natural gas production for data center power and liquefied natural gas exports. Caterpillar provides equipment for powering oil and gas drills, gas compression for transportation, and the generation of electricity from natural gas. The shift towards more electric power and less diesel-fired generation in the oil and gas sector has also increased demand for Caterpillar's equipment.

Caterpillar's participation in the value stream, from drilling wells to burning natural gas to make electricity, positions the company as a key player in the energy and transportation sector. As the demand for data centers continues to grow, driven by the AI revolution and increasing electricity demand, Caterpillar is well-positioned to capitalize on this trend and continue its growth in the energy and transportation segment.