Caterpillar Inc (NYSE: CAT) This fall 2025 Earnings Name dated Jan. 29, 2026
Company Members:
Alex Kapper — Vice President of Investor Relations
Joseph Creed — Director
Andrew R. Bonfield — Chief Monetary Officer
Analysts:
Mircea Dobre — Analyst
Michael Feniger — Analyst
David Raso — Analyst
Tami Zakaria — Analyst
Charles Albert Dillard — Analyst
Jamie Cook dinner — Analyst
Jerry Revich — Analyst
Robert Wertheimer — Analyst
Kristen Owen — Analyst
Presentation:
operator
Welcome to the fourth quarter 2025 Caterpillar Earnings Convention name. Please be suggested that at this time’s convention is being recorded. I might now like at hand the convention over to your speaker at this time, Alex Capper. Thanks. Please go forward.
Alex Kapper — Vice President of Investor Relations
Thanks, Adra. Good morning everybody and welcome to Caterpillar’s fourth quarter 2025 earnings name. I’m Alex Capper, Vice President of Investor Relations. Becoming a member of me at this time are Joe Creed, CEO Andrew Bonfield, Chief Monetary Officer, Kyle Epley, Senior Vice President of the World Finance Companies Division, and Rob Rengel, Senior Director of ir. Throughout our name, we’ll be discussing the fourth quarter earnings launch we issued earlier at this time. You could find our slides, the information launch and a webcast recap@buyers.caterpillar.com beneath Occasions and Shows. The content material of this name is protected by US and worldwide copyright legislation. Any rebroadcast, retransmission, replica or distribution of all or a part of this content material with out Caterpillar’s prior written permission is prohibited.
Transferring to slip two. Throughout our name at this time, we’ll make ahead wanting statements that are topic to dangers and uncertainties. We’ll additionally make assumptions that would trigger our precise outcomes to be completely different than the knowledge we’re sharing with you on this name. Please discuss with our latest SEC filings and the ahead wanting statements reminder and the information launch for particulars on components that individually or in combination may trigger our precise outcomes to range materially from our forecasts. An in depth dialogue of the numerous components that we imagine could have a fabric impact on our enterprise on an ongoing foundation is contained in our SEC filings.
On at this time’s name, we’ll additionally discuss with non GAAP numbers for a reconciliation of any non GAAP numbers to the suitable US GAAP numbers. Please see the appendix of the earnings name slide for at this time’s agenda. Joe will start by sharing his views about our outcomes and supply an replace on our efficiency towards attaining our Investor Day targets. Then he’ll share our full yr outlook and insights about our finish markets, adopted by an replace on our technique. Lastly, Andrew will present an in depth overview of outcomes and key assumptions. Wanting ahead, we’ll conclude the decision by taking your questions.
Now let’s advance to Slide 3 and switch the decision over to our CEO Joe Creed.
Joseph Creed — Director
All proper, nicely thanks Alex and good morning everybody. Thanks for becoming a member of us at this time. Our centennial yr marked a big milestone and we achieved full yr gross sales and revenues of $67.6 billion, the best in Caterpillar’s historical past. In a dynamic surroundings with web incremental tariff headwinds of $1.7 billion. We delivered full yr adjusted working revenue margin inside the goal vary at 17.2% and adjusted revenue per share of $19.06. We additionally generated strong MP free money movement of $9.5 billion in 2025, permitting us to deploy $7.9 billion to shareholders by way of share repurchases and dividends. Throughout the yr, our backlog grew to a report stage of $51 billion, a rise of $21 billion or 71% in comparison with final yr.
All time excessive gross sales and revenues together with report backlog are proof of the power in our finish markets and powerful execution by our staff. Now let me take a minute to stroll you thru our fourth quarter outcomes. Gross sales and revenues have been $19.1 billion, an all time report for a single quarter. The rise of 18% versus the earlier yr was higher than we anticipated and displays increased volumes in all three of our major segments whereas value realization was about impartial. Particularly, quantity progress was higher than anticipated in energy and vitality as we have been capable of ship extra product than anticipated at yr finish.
Adjusted working Revenue margin was 15.6% and adjusted revenue per share was $5.16. Fourth quarter adjusted working revenue margin and adjusted revenue per share have been higher than we anticipated resulting from stronger than anticipated quantity progress in energy and vitality within the quarter. The online incremental value from tariffs was close to the highest finish of our estimated vary. Strong ordering exercise throughout all three major segments contributed to the very robust backlog progress. Now I’ll evaluation fourth quarter retail statistics for every of our three major segments beginning with Building industries. Building Industries Whole gross sales to customers grew for the fourth consecutive quarter rising 11% which exceeded our expectations.
Will increase in North America have been higher than anticipated resulting from robust progress in non residential and residential development. Rental fleet loading and our sellers rental income additionally grew within the quarter. Gross sales to customers declined barely in EAMI and Asia Pacific consistent with our expectations and we noticed progress in Latin America which was higher than anticipated for useful resource industries. Fourth quarter gross sales to customers declined 7% in line with our expectations. Mining gross sales to customers have been decrease yr over yr as prospects exercised capital self-discipline in response to weaker coal costs in energy and vitality, our largest and quickest rising phase.
Gross sales to customers grew a sturdy 37% with one other quarter of double digit progress throughout all functions. Energy technology grew 44% pushed by robust demand for giant gensets and generators utilized in knowledge heart functions. Sturdy gross sales to customers in oil and gasoline have been pushed primarily by generators and turbine associated companies. Industrial grew from comparatively low ranges with the Enhance pushed by gross sales to customers in electrical energy functions and eventually transportation elevated primarily resulting from worldwide locomotive deliveries. Transferring to slip 4 our full yr 2025 outcomes confirmed significant progress in direction of attaining the 2030 targets we outlined at our latest investor day.
As I discussed, we delivered report gross sales and revenues of $67.6 billion, leading to 4% yr over yr progress. This enhance was led by report gross sales in energy and vitality. Notably, along with report gross sales in energy technology, we additionally achieved report gross sales in oil and gasoline resulting from power in demand for gasoline compression. Regardless of tariff headwinds, full yr adjusted working revenue margin of 17.2% was inside the goal vary for our stage of gross sales and revenues. Full yr companies revenues totaled $24 billion in 2025. We continued to attach extra belongings, rising the fleet to over 1.6 million and made nice progress in different initiatives like situation monitoring, prioritized service occasions, e commerce gross sales and tech enabled machines.
Our digital and expertise initiatives, together with a rising put in base, place us nicely to extend companies revenues in direction of our purpose of $30 billion by 2030. Strong MP and E free money movement allowed US to deploy $7.9 billion to shareholders by way of $5.2 billion of share repurchases and $2.7 billion of dividends paid. We’re pleased with our continued dividend aristocrat standing, paying increased dividends for 32 consecutive years, and stay dedicated to returning considerably all MP and E free money movement over time. Andrew will share extra about our money deployment plans for 2026 in a second. Turning to Slide 5, I’ll spotlight the developments we made in direction of our 2030 targets in our 3 major segments.
In 2025, Building Industries Development outpaced the worldwide business supported by the success of our merchandising applications. In consequence, full yr whole gross sales to customers progress was 5%, advancing our progress in direction of the 2030 purpose of rising 1.25 occasions the 2024 baseline. In useful resource industries. Buyer curiosity in our autonomous hauling answer stays robust and we’re making regular progress in direction of our 2030 purpose to triple the variety of CAT autonomous haul vehicles in operation in comparison with 2024. We ended the yr with 827 autonomous haul vehicles in operation, up from 690 on the finish of 2024. Adoption is anticipated to speed up given our confirmed answer, our growth into quarries and our potential to assist combined fleets.
For instance, final month Caterpillar and SO Observe, our vendor in Brazil, introduced an settlement to supply Vale an autonomy answer for a combined fleet of greater than 90 vehicles. Energy and vitality delivered significant progress in direction of our 2030 purpose to greater than double energy technology gross sales in comparison with 2024. In 2025, energy technology gross sales exceeded $10 billion which is yr over yr progress of greater than 30%. We’re additionally on observe in our multi yr effort to double our massive engine capability and greater than double our industrial gasoline turbine capability. As we’ve mentioned, the extra capability will serve a broad vary of functions and the phasing will happen between now and the top of 2030.
Now on slide 6, I’ll present our 2026 outlook. General, we anticipate full yr gross sales and revenues to develop across the high of the 5% to 7% long run compound annual progress charge goal. As I discussed earlier, our report backlog of $51 billion gives robust momentum to start out the yr. We’re additionally beginning to get multi yr visibility in energy and vitality as we work intently with our prospects to schedule manufacturing facility orders consistent with their undertaking timelines. In consequence, roughly 62% of our backlog is anticipated to ship ship within the subsequent 12 months, which is decrease than our historic common.
Sturdy backlog coupled with wholesome finish markets helps our expectation for quantity progress in all three major segments. We additionally anticipate all three segments to profit from constructive value realization, about 2% of whole gross sales and revenues and continued progress in companies revenues. Full yr adjusted working revenue margin ought to exceed 2025 ranges however stay close to the underside of the goal vary for our anticipated gross sales and income. Our adjusted working revenue margin expectation displays the continuing influence of tariffs in addition to investments we’re making to execute our progress technique. I stay assured that we’ll handle the influence of tariffs over time as we intention to function across the midpoint of our adjusted working revenue margin goal vary.
Capital expenditures are anticipated to be round $3.5 billion, pushed primarily by our capability growth plans and eventually, MP&E free money movement is anticipated to be barely decrease than 2025 reflecting the rise in capital expenditures. Now I’ll focus on our outlook for key finish markets beginning with development industries. One other yr of gross sales to customers progress is anticipated in 2026 supported by elevated order charges and a sturdy backlog. General, the outlook for North America stays constructive as gross sales to customers develop reasonably versus final yr, with development spending remaining wholesome resulting from IIJA funding and different vital infrastructure applications.
We additionally anticipate accelerated funding in knowledge facilities which can additional bolster total development spending. Supplier rental fleet loading and rental income are each projected to extend in comparison with 2025 in EEMI. Financial situations in Europe are anticipated to strengthen and development exercise in Africa and The Center east is projected to stay robust in Asia Pacific. Exterior of China, reasonable financial situations are anticipated in 2026. We anticipate constructive momentum in China off of low ranges with full yr progress within the above 10 ton excavator business. Development in Latin America is anticipated to proceed at an identical charge to 2025.
Useful resource industries had constructive momentum within the fourth quarter with rising backlog supported by wholesome orders throughout a broad vary of merchandise. For 2026, gross sales to customers are anticipated to extend, primarily pushed by rising demand for copper and gold and constructive dynamics in heavy development in quarry and aggregates. Most key commodities stay above funding thresholds and buyer product utilization is excessive. Whereas the age of the fleet stays elevated with modest will increase in commodity costs projected in 2026. We anticipate rebuild exercise to extend barely in comparison with final yr. And eventually, for energy and Vitality, the 2026 outlook is constructive.
Strong backlog progress within the fourth quarter was pushed by continued momentum in each energy technology and oil and gasoline. We anticipate progress in energy technology for each CAT reciprocating engines and photo voltaic generators pushed by rising vitality demand to assist knowledge heart buildout associated to cloud computing and generative AI. Moreover, we’re beginning to see orders for prime energy development increased as knowledge heart prospects search for various energy options to maintain tempo with their progress. For instance, yesterday we introduced an order for two GW of reciprocating generator units for a major energy utility from American Intelligence and Energy Company.
Turbines might be used to assist the preliminary growth section of the Monarch Compute Campus, which has a complete potential of about 8 gigawatts of energy technology. This represents considered one of our largest single orders for full energy options. The worth of the order might be mirrored in our first quarter 2026 backlog and we anticipate to ship the generator beginning in late 2026 by way of 2027. This thrilling announcement is considered one of 4 orders we’ve booked with not less than 1 gigawatt of Caterpillar tools for knowledge heart prime energy. After reaching report ranges in 2025, oil and gasoline is anticipated to see Average progress in 2026.
Reciprocating engine gross sales are anticipated to extend, pushed by robust demand in gasoline compression functions. Photo voltaic generators, oil and gasoline backlog stays wholesome with continued stable order and inquiry exercise, and consequently we anticipate one other yr of robust turbine gross sales akin to our report 2025 efficiency. Demand for merchandise and industrial functions is anticipated to develop reasonably in 2026 as we see continued restoration from earlier lows. And in transportation, we anticipate full yr progress in rail companies and locomotive deliveries. I’ll shut on slide 7 with an replace on our technique. Since our Investor Day in November, the Govt Workplace, Govt Management Group and I’ve engaged our workers and sellers across the globe to launch our refreshed Enterprise Technique for Worthwhile Development.
Our mission assertion Fixing our prospects hardest challenges is creating robust alignment round conserving buyer wants on the heart of all the things we do. The technique is centered on three pillars for worthwhile progress, business excellence, being the Superior Expertise chief and reworking how we work, all constructed upon a basis of continued operational excellence. I look ahead to advancing the technique with regional leaders and sellers all through 2026. And eventually, we have been excited to kick off the yr with a showcase and keynote at CES 2026 in Las Vegas the place we unveiled the following period of business AI in Autonomy.
This was an essential alternative to reveal our superior expertise management by highlighting Caterpillar’s important function in creating the invisible layer of the tech stack, the vital minerals, dependable energy and bodily infrastructure that the digital world depends on to perform. We made thrilling bulletins together with the launch of our new CAT AI Assistant, which can permit prospects to extra simply purchase, preserve, handle and function their tools. We additionally introduced a dedication to crucial a part of the invisible layer folks. Caterpillar pledged $25 million to make sure the longer term workforce has the instruments they should make superior expertise doable.
With that, I’ll flip it over to Andrew for an in depth overview of outcomes and key assumptions. Wanting ahead.
Andrew R. Bonfield — Chief Monetary Officer
Thanks Joe and thanks Joe and good morning everybody. As ordinary, I’ll start with a abstract of the quarter after which present transient feedback on the efficiency of the segments. Subsequent, I’ll focus on the steadiness sheet and free money movement and conclude with feedback on our excessive stage planning assumptions for 2026 in addition to our expectations for the primary quarter. Starting on Slide 8, gross sales and revenues of $19.1 billion mirrored an 18% enhance versus the prior yr. As Joe famous, this was an all time quarterly report. Adjusted working revenue was $3.0 billion and our adjusted working revenue margin was 15.6%.
We generated robust MP and E free money movement of $3.7 billion within the quarter and $9.5 billion for the total yr. This was our third consecutive yr with greater than $9 billion of MP and E free money movement. Transferring to Slide 9, I’ll focus on our high line outcomes for the fourth quarter. Gross sales and revenues of $19.1 billion exceeded our expectations, pushed by stronger than anticipated quantity in energy and vitality versus the prior yr. Stronger gross sales volumes supported the gross sales enhance. Worth was about impartial and roughly consistent with our expectations. Quantity progress mirrored a 15% yr over yr enhance in whole gross sales to customers and a positive influence from adjustments in vendor inventories.
Whole machine vendor stock decreased by about $500 million within the quarter in comparison with a $1.6 billion lower decline final yr. The lower within the fourth quarter was bigger than we had anticipated, primarily resulting from stronger than anticipated gross sales to customers in development industries. Companies Revenues elevated within the quarter in comparison with 2024. Transferring to working revenue on slide 10, working revenue within the fourth quarter decreased by 9% whereas adjusted working revenue of $3.0 billion was about flat versus the prior yr. As I discussed, adjusted working revenue margin for the fourth quarter was 15.6%, barely stronger than we had anticipated, pushed by quantity being higher than anticipated, partially offset by increased incentive compensation expense versus the prior yr.
The 270 foundation factors lower was primarily resulting from increased manufacturing prices pushed by tariffs. Excluding tariffs, our fourth quarter margin was increased than the prior yr. For the total yr excluding the influence of tariffs applied in 2025, margin was within the high half of the goal vary. Transferring to Slide 11, revenue per share was $5.12 within the quarter. Adjusted revenue per share was higher than we had anticipated at $5.16 excluding restructuring prices of $0.52 and mark to market good points of $0.48 for the remeasurement of pension and different put up employment profit plans. Once you exclude the influence of mark to market good points from different revenue and expense, we had a headwind of about $73 million which was primarily pushed by the absence of international change good points associated to MP and E steadiness sheet translation that occurred within the prior yr.
Excluding discrete objects, the supply for revenue taxes within the fourth quarter of 2025 mirrored a worldwide annual efficient tax charge of 20.5 24.1% as in contrast with 22.2% in 2024. This was consistent with our expectations. Lastly, the yr over yr influence from the discount within the common variety of shares excellent primarily resulting from share repurchases resulted in a positive influence on adjusted revenue per share of roughly $0.14 as in comparison with the fourth quarter 2024 and benefited the total yr by about $0.66. Transferring to Slide 12, I’ll now focus on phase outcomes. Building business gross sales elevated by 15% within the fourth quarter to $6.9 billion.
That is roughly consistent with our expectations because the stronger gross sales to customers have been about offset by a bigger than anticipated lower in vendor stock and barely unfavorable value realization in comparison with the prior yr. Greater gross sales quantity mirrored stronger gross sales to finish customers and the constructive influence from adjustments in vendor inventories. Supplier stock decreased much less in the course of the fourth quarter 2025 than in the course of the fourth quarter of 2024. Fourth quarter revenue for Building Industries decreased by 12% versus the prior yr to $1.0 billion. The phase’s margin was 14.9%, a lower of 470 foundation factors versus the prior yr.
The margin lower was primarily resulting from excessive manufacturing prices pushed by tariffs which had an influence of about 600 foundation factors on margins. The margin was decrease than we had anticipated due primarily to increased incentive compensation and the marginally unfavorable value realisation which offset the influence of stronger quantity. Turning to slip 13 useful resource industries gross sales elevated by 13% within the fourth quarter to $3.4 billion which was consistent with our expectations. Gross sales quantity was barely extra favorable than we had anticipated, whereas value realization was a barely bigger headwind than we had anticipated in comparison with the prior yr.
The gross sales enhance was primarily resulting from increased gross sales quantity pushed by the influence from adjustments in vendor inventories. Fourth quarter revenue for Useful resource Industries decreased by 24% versus the prior yr to $360 million. The phase’s margin of 10.7% was a lower of 510 foundation factors versus the prior yr primarily resulting from increased manufacturing prices pushed by tariffs which had an influence of about 490 foundation factors. The margin was decrease than we had anticipated primarily resulting from increased quick time period incentive compensation, increased tariffs and the marginally unfavorable value Realization now on Slide 14 Energy and vitality gross sales elevated by 23% within the fourth quarter to $9.4 billion.
Gross sales exceeded our expectations pushed by a stronger than anticipated quantity, notably in energy technology and oil and gasoline in comparison with the prior yr. Gross sales elevated primarily resulting from increased gross sales quantity and favorable value realization. Fourth quarter revenue for Energy and Vitality elevated by 25% versus prior yr to $1.8 billion. The phase’s margin of 19.6% elevated by 30 foundation factors versus the prior yr. On the upper quantity, the tariff influence was about 220 foundation factors. The margin was stronger than we had anticipated primarily resulting from favorable quantity. Worth was additionally barely extra favorable than we had anticipated.
Transferring to Slide 15 monetary merchandise revenues elevated by 7% versus the prior yr to about $1.1 billion primarily resulting from a positive influence from increased common incomes belongings, partially offset by the influence from decrease common financing charges. Phase revenue elevated by 58% to $262 million. This was due partially to a positive influence from increased margins at insurance coverage companies resulting from decrease loss ratios, increased common earnings and a decrease provision for credit score losses additionally benefited profitability. Our prospects monetary well being stays robust. Previous dues have been 1.37% within the quarter, down 19 foundation factors versus the prior yr and our lowest yr on yr finish.
On report, the allowance charge was 0.86%, the bottom ever reported in any quarter. Enterprise exercise at CAAT Monetary stays wholesome. Retail credit score functions elevated by 6% and our retail new enterprise quantity grew by 10% versus the prior yr. As well as, demand for our used tools stays wholesome on comparatively secure pricing whereas inventories stay at traditionally low ranges. Conversion charges stay above historic averages as extra prospects select to purchase tools on the finish of the lease time period Transferring to Slide 16 as I discussed, we proceed to generate robust MP and E free money movement with $9.5 billion in 2025, which was barely increased than 2024.
Regardless of an $800 million enhance in capital expenditures in 2025, we deployed about $7.9 billion, or 84% of our MP and E free money movement to shareholders. We proceed to anticipate to return considerably all MP and E free money movement to shareholders over time. This quarter we anticipate to enter into a bigger accelerated share repurchase in comparison with the $3 billion ASR we executed in early 2025. Our steadiness sheet stays robust with an enterprise money steadiness of $10.0 billion on the yr finish. As well as, we held $1.2 billion in barely longer dated liquid marketable securities to enhance yields on that money.
Now on slide 17 earlier than I start, I’ll remind you that my feedback at this time assume the Rail Division is inside energy and vitality as was the case by way of yr finish 2025. In March of this yr we’ll file an 8K recasting our historic durations to replicate the motion of our Rail division to useful resource industries. It will set up an acceptable baseline for evaluating future phase stage efficiency and expectations. If mandatory, we will even replace any of our phase particular ahead wanting assumptions impacted by this transformation. Clearly, there might be no influence on the enterprise broad assumptions. Now let me begin with our expectations for the total yr.
As Joe talked about, we anticipate enterprise gross sales and revenues to develop versus the prior yr probably across the high finish of our 5% to 7% CAGR goal on increased quantity and favorable value realization. We anticipate gross sales progress throughout every of our major segments with energy and vitality delivering the strongest yr over yr charge of progress supported by the strong backlog. Development on this phase might be paced by the timing of bringing our capability will increase on-line over the following few years. Our planning assumption is that the $500 million decline in machine vendor stock in 2025 might be offset by a rise by the top of 2026, a tailwind to 2026 gross sales.
As Joe talked about, we anticipate favorable value realization to account for a roughly 2% enhance in gross sales for the total yr. For perspective on the quarterly gross sales cadence, we anticipate the bottom gross sales of the yr to happen within the first quarter, which aligns with their regular seasonable sample on enterprise adjusted working revenue margin excluding the influence of tariff prices, we anticipate to be within the high half of the goal vary at our anticipated gross sales stage, supported by favorable value realization and quantity. Particular to quantity progress, we anticipated the attributable revenue pull by way of or incremental margin to replicate our latest operational efficiency which has been impacted by tariffs in distinction to prior years.
We’re dedicated to investing for long run worthwhile progress which incorporates capability investments which can influence depreciation expense and better expertise and digital spend. We imagine these investments will assist future absolute OPEC greenback technology, which I’ll remind you, is our definition of profitable. Together with the influence of tariffs, we anticipate margin to be close to the underside of the goal vary. I’ll present some perspective, however let me clarify how we intend to report back to you about tariffs as we transfer ahead. Absolutely the greenback worth new tariffs imposed in 2025 was $1.8 billion. Mitigating actions can are available two kinds.
First of those who scale back the direct tariff publicity invoice which can embrace actions like sourcing adjustments. These scale back the precise greenback worth of tariffs paid and second, there are value management actions and pricing which assist scale back the influence on our profitability. A lot of the actions taken in 2025 associated to value controls which could possibly be particularly attributed to tariff mitigation and these amounted to round $100 million, leading to a web incremental tariff influence of $1.7 billion. Wanting ahead, it is going to develop into more and more difficult to move out and observe whether or not value management or value motion is immediately tied to tariff mitigation versus being taken within the regular course of enterprise.
Subsequently, going ahead we report an absolute incremental tariff value which can solely consider these mitigating actions that scale back absolutely the worth of the tariff publicity. As a reminder, the incremental tariffs we report are measured in opposition to the 2024 baselet yr. For the total yr, incremental tariff prices are anticipated to be round $2.6 billion, which is $800 million increased than incurred in 2025. If we didn’t take the actions we plan to absorb 2026, this invoice might be round 20% increased. We anticipate incremental tariff prices of round $800 million within the first quarter, a stage just like the fourth quarter of 2025.
The run charge ought to enhance in direction of the second half of the yr as we take actions to cut back our tariff publicity. Lastly, please keep in mind that tariffs are quantity delicate. We’ll proceed to take actions to handle our prices within the regular course of enterprise and stay dedicated to function inside our adjusted working revenue margin goal vary with the purpose of being across the midpoint of the vary over time. Now concluding our expectations for the yr, we anticipate restructuring prices of roughly 300 to $350 million. Our international annual efficient tax charge is anticipated to be 23% excluding discrete objects MP and E.
Free money movement must be barely decrease than 2025, reflecting the upper CapEx of round $3.5 billion in 2026. Now turning to Slide 18 to help you together with your modeling, I’ll present coloration on the primary quarter. Beginning with the highest line, we might anticipate stronger gross sales and revenues versus the prior yr. We anticipate stronger quantity together with gross sales to customers progress and a tailwind for machine vendor inventories. We anticipate a extra typical machine vendor stock construct this quarter aligning with a seasonable sample which is a primary quarter construct in extra of $1 billion. This compares to flash ranges within the first quarter of 2025.
We additionally anticipate a positive influence from value realization in development industries. Within the first quarter we anticipate robust gross sales progress with the rise versus the prior yr pushed by quantity and favorable value realization. We anticipate continued gross sales to customers progress with our confidence supported by the robust order charges and backlog. As well as, we anticipate a large profit from adjustments in vendor vendor inventories given a extra typical seasonable construct within the first quarter. In useful resource industries, we anticipate robust gross sales progress versus the prior yr pushed by quantity together with wholesome gross sales to customers progress and a positive influence from adjustments in vendor stock.
Worth realization must be comparatively flattish although. We anticipate favorability as we transfer by way of the yr. In energy and vitality, we anticipate gross sales progress versus the prior yr pushed by power in energy technology and oil and gasoline together with favorable value realization. As is typical, we anticipate first quarter gross sales in energy and vitality would be the phase’s lowest of the yr and sequentially decrease than the fourth quarter 2025. This expectation aligns the seasonable sample. Now present some coloration on our first quarter margin expectations excluding incremental tariff prices. We anticipate a better adjusted working revenue margin share yr over yr supported by robust quantity and value realization.
Partially offset by increased manufacturing prices and SGA and RD bills tied to our strategic investments. As a reference, we might anticipate some seasonable margin uplift within the first quarter in comparison with the fourth quarter of 2025, together with incremental tariff prices at a stage just like the fourth quarter or round $800 million margin is anticipated to be decrease than versus the prior yr. Now on to first quarter margin expectations by phase. In development industries, excluding incremental tariff prices, we anticipate a better margin share in comparison with the prior yr on favorable value realization and quantity, partially offset by increased manufacturing prices.
In useful resource industries, excluding incremental tariff prices, we anticipate barely decrease margin share in comparison with the prior yr as favorable quantity is greater than offset by unfavorable manufacturing prices and better SGA and R and D bills, together with spend on strategic investments. In autonomy, we do anticipate some unfavorable combine influence as we anticipate proportionally increased gross sales of authentic tools in comparison with the prior yr. In energy and vitality, excluding incremental tariff prices, we anticipate a better margin share in comparison with the prior yr pushed by favorable quantity and value realization partially offset by increased manufacturing prices, notably spend, together with increased depreciation associated to our capability growth initiatives.
Throughout the first quarter, we anticipate round 50% of the incremental tariff prices might be in development industries, 20% in useful resource industries and 30% in energy and vitality. All phase margins are anticipated to be decrease than they have been within the first quarter 2025 after taking into consideration incremental tariffs. So turning to slip 19, let me summarise. In a yr marked by uncertainty, our staff delivered report gross sales and revenues, maintained adjusted working revenue margin inside our goal vary, and achieved a wholesome adjusted revenue per share of $19.06. We generated $9.5 billion of MP E free money movement our third consecutive yr of producing over $9 billion.
For 2026, we anticipate gross sales progress throughout all three major segments pushed by stronger quantity and value. We additionally anticipate companies income progress excluding the influence of incremental tariffs. We anticipate adjusted working revenue margin to be on the high half of our goal vary however close to the underside together with tariffs and we anticipate MP&E free money movement to be barely decrease than 2025, reflecting barely the upper capital expenditures. We proceed to execute our technique for long run worthwhile progress and with that we’ll take your questions.
Questions and Solutions:
operator
Thanks. We’ll now start the query and reply session. If in case you have dialed in and want to ask a query, please press Star one in your phone keypad to boost your hand and be part of the queue. If you want to withdraw your query, merely press Star. Please notice we’re solely permitting one query per analyst. Your first query comes from the road of Nick Dobright with Baird. Your line is now open.
Mircea Dobre
Thanks for taking the query and good morning everybody. The factor that clearly stood out most within the quarter was simply the very spectacular order progress and backlog progress that you’ve got had. And I assume my query associated to this possibly twofold. First, are you able to remark a little bit bit about what’s occurring in a few of the different segments outdoors of possibly ENT or energy technology? After which as you form of suppose on a go ahead foundation, if I perceive accurately, you’ve acquired roughly $20 billion of backlog that isn’t going to be delivered within the close to time period.
And it appears like this determine would possibly additional develop as we take into consideration Q1. So how do you consider these deliveries that now are stretching into 27 and past? And I’m asking by way of the lens of value prices, ensuring that, you already know, you might be making certain that you’ve got the right margins and the right pricing, given how risky simply the fee image and the tariff image has been. Thanks.
Joseph Creed
Yeah, good morning, Meg, that is Joe. Thanks for that query. There’s quite a bit in there. I’ll attempt to get be certain that I get to most of them. So we’re actually excited. I’m actually enthusiastic about how we completed the yr with our backlog at 51 billion. You understand, that’s 70% increased than yr finish prior and 11 billion increased than the place we completed, you already know, the third quarter. In order you recommend, I’ll discuss it and body it in the best way of order charges that we noticed within the fourth quarter and so they have been robust in all three segments.
It’s not simply energy and vitality. CI had considered one of its greatest quarters from an order standpoint ever, supported by each a rising business that we expect confidence within the business in 26 from US and our sellers, and power in our stews. We’ve continued to outperform the business and we hope to strive to do this once more right here in 2026, I’d say for CI as nicely. Simply have in mind we’re additionally returning to a extra regular seasonal sample. So the promoting season coming within the spring and us preparing for that. We entered 2025 at a a lot slower tempo and so we’re getting again to extra regular seasonal patterns in CI.
RI had an incredible order run charge within the quarter. It’s top-of-the-line quarters since 2021 that we’ve seen and that’s supported by Energy in heavy development in North America in addition to some good mining orders, notably in South America associated to copper mining. After which clearly energy and vitality had a very robust order consumption quarter as nicely. Energy technology continued to be robust. We’re seeing extra offers, a little bit extra combine into prime energy just like the one which we introduced yesterday, which clearly wasn’t on this backlog. Determine it’ll are available. Within the first quarter we’ve had, you already know, 4 now prime energy orders of larger than a gigawatt and we’ve had a handful of different sizable orders that have been lower than a gigawatt.
The opposite factor there’s we’re seeing robust orders in oil and gasoline, notably for gasoline compression. So, you already know, the extra energy that’s wanted on the market, we’re going to maneuver lots of gasoline. We now have to feed generators and engines to proceed to supply that energy. So we had a very, actually robust quarter from an order standpoint. And once more, it was power throughout the board. With regards to visibility farther out, I believe that’s a superb factor for us. One of many issues that we’re making an attempt to do, notably most of that’s in energy and vitality, is figure intently with our prospects to schedule their orders in our manufacturing facility to ship once they want them of their undertaking timing.
And what that enables us to do is be certain that we’re not sending issues forward of time and we will fulfill extra prospects and ensure each order will get to the client once they want it. Clearly, as you recommend, you already know, we’re taking orders farther out for these sort of orders. We now have body agreements for lots of shoppers. These may have inflationary indices tied in there for pricing. And for non body agreements, we often have escalators in the event that they’re out previous the traditional 12 month sort interval. So once more, actually, actually pleased with the order efficiency that we had within the fourth quarter and the outlook that we have now forward of us.
operator
We’ll go subsequent to Michael Feniger at Financial institution of America.
Michael Feniger
Sure, thanks for taking my query. Simply, you already know, the 50 gigawatt of energy by 2030, that quantity you guys supplied Investor day. Are you able to simply give us a way. The place that sort of finishes finish at 26 and 27? And the genesis of the query is there’s at all times worries that with everybody elevating capability, if knowledge heart slows, will we get into an overcapacity sort of market? How a lot of this 50 gigawatt goes into different markets outdoors of knowledge facilities? Vitality, gasoline, compression, downstream if you’re reserving these orders? I do know Mick talked about pricing, however how are you additionally enthusiastic about phrases and situations, service agreements, prime strikes to backup. Simply how are you guys considering of additionally making ready your self for. For down the highway? As you already know, as you’ve seen growth and bust up to now.
Joseph Creed
Thanks everybody. Yeah, thanks Mike. So with regards to the capability enhance, we clearly work all of our industries sort of work with our prospects and determine what the forecast is. So there could be places and takes, forecasts transfer round. However we’ve form of gauged the capability we’d like primarily based on what we see in all industries. We’re going to ensure, like I mentioned, we’re going to maneuver lots of pure gasoline within the subsequent few years. So we’re going to ensure we maintain our oil and gasoline prospects in addition to energy technology.
And I believe rightfully, as you level out in there, you already know, a few of the issues which might be additionally in that capability, it’s not all simply assembling completed product. Proper? There’s provide base and there’s elements machining and part capability for us to ensure we will develop companies. So after we take prime energy or gasoline compression functions that run repeatedly, these will hit overhaul cycles and people are nice companies enterprise for us. And we’d like to ensure we have now capability in place to do this as nicely. So all that’s considered, you already know, we have now, we’re on schedule.
We have been capable of ship a little bit bit extra at yr finish in our massive engine facility than we anticipated, which is a good factor. We want to have the ability to maintain that all through 2026. And we anticipate a giant chunk of capability. The primary actual large step as much as come in direction of the top of this yr, heading into 2027. After which the turbine funding began a little bit later. It’ll begin to come on a little bit bit after that. So we proceed to remain near our prospects. I imply we speak to hyperscalers and huge knowledge heart prospects weekly and ensure we keep consistent with their plans.
And like I mentioned, we’re beginning to take orders farther out and I believe that’s a superb factor.
operator
We’ll go to our subsequent query from David rasso@evercore isi hello, thanks for the time.
David Raso
I’m making an attempt to reconcile the gross sales information for 26. Proper. The roughly 7%. For those who take a look at the backlog that ships the following 12 months on a yr over yr foundation, it’s up about 44%. The orders for backlog that ships within the subsequent 12 months are up 36%. And your view of retail being up in 26. Simply making an attempt to know why such A low gross sales progress given the order momentum, the dimensions of the backlog and also you see retail up in 26. And for those who indulge me, only a clarification, possibly I missed it. The tariff influence, the 800 million, does that embrace anticipated pricing for 26 netting in opposition to a gross quantity or is it earlier than any pricing actions? Thanks.
Joseph Creed
Yeah, David, so first let me reply the second a part of your query. That’s it doesn’t consider any pricing actions. The two% pricing motion we talked about is totally separate. So that is simply the incremental value that we greenback value that we are going to truly incur or pay for tariffs in 2026. After which if you speak concerning the backlog and the gross sales information, the one factor I’d simply level out to you and Joe talked about it was final yr, for those who keep in mind, we truly did particularly in development, there was a really low, there was no, just about no enhance in vendor stock within the first quarter, which was uncommon.
So one of many components that it’s important to consider if you’re taking a look at backlog is the truth that clearly SEI’s backlog is stronger. However a part of that’s for the and machines for the billion greenback plus enhance in vendor stock that we anticipate within the first quarter, which is a distinction versus the prior yr. In order that’s one issue total. Simply remind you that in energy and vitality we’re capability constrained. Clearly we’re basing our estimates primarily based on the capability we have now at this time. As Joe talked about, we’re clearly making an attempt and we’ve managed to construct deliver a little bit bit earlier on-line however clearly that isn’t sure at this stage.
So clearly if we’re capable of deliver one thing on there might be some upside within the second half of the yr.
operator
We’ll go subsequent to Tammy Zakaria at JP Morgan.
Tami Zakaria
Hello, good morning. Thanks a lot. So the AIP announcement final evening, may you give some coloration on what the battery vitality storage system alternative could possibly be for an order of that magnitude along with recip engines, may it’s half and half, 25, 75, 75, 25 or any coloration on the income combine with engines and DES could be useful. And associated to that, do you might have sufficient capability for greatest merchandise? Ought to there be extra offers like this?
Joseph Creed
Good morning Tammy. Most of that order goes to be you already know, in turbines and pure gasoline turbines, you already know such as you noticed as a part of the joule. It’s an entire system, similar just like Juul. So after we do have batteries in there it’s a, it’s a small portion of the general whole. So most of it’s Gasoline generator units. And so far as capability goes, that’s all a part of our capability planning. So we really feel like we will proceed to maintain up with the expansion in prime energy and hopefully proceed to see extra combine shift that approach as a result of as we mentioned that may assist from a companies standpoint and we’ll have to take a look at elements farther out as a result of would clearly even imply extra upside to companies, you already know, within the sort of three to 5 years after supply of these gensets.
So thrilling alternatives for certain.
operator
Our subsequent query comes from Chad Dillard at Bernstein.
Charles Albert Dillard
Hey, good morning guys. A pair questions for you on Prime Energy. So for that utility, what’s the longer term function of backup diesel turbines versus Bess? You understand, if you’re speaking to the shoppers like how are they enthusiastic about how that evolves over the following a number of years? After which additionally with regard to your capability ramp and energy gen, do you suppose you may preserve the income momentum rising in 26 versus 25? I believe it goes up in 30%. Or ought to we be anchoring extra in direction of that 20% gig that you just’ve laid out for energy Gen?
Joseph Creed
Sure, a few questions there.
I believe the final one first. As Andrew said, it’s not a requirement subject for us. It’s actually going to be can we deliver on provide sooner? Type of what we have now in that income information now’s what we have now excessive confidence in. If all the things turns up heads, keep in mind it’s not simply us. We now have to deliver our provide base together with us. We’re going to get out as a lot product as we will and clearly that would offer a little bit little bit of upside if we will proceed to outpace our present plans for bringing the capability on-line. With regards to these Prime Energy functions, most of what we’re seeing to date remains to be having backup energy and so they’re additionally with gensets, not with batteries.
In reality, in these they’re utilizing our quick begin gasoline gensets for backup energy versus diesel once they do a few the massive orders we’ve seen for gasoline prime energy. So proper now we’re not seeing, you already know, 100% battery backup. It’s principally turbines.
operator
We’ll transfer subsequent to Jamie Cook dinner at Belief Securities.
Jamie Cook dinner
Hello, good morning and congratulations. Sorry Joe, one other query on backlog. Simply given the power, was there something form of one time in that backlog progress quantity or pull ahead maybe, you already know, an announcement that you just weren’t capable of press launch. You understand, me understanding the AIP that goes into subsequent quarter, however simply questioning if there’s a pull ahead in your understanding there’ll be Lumpiness, quarter to quarter. However do you continue to see an expectation the place you may develop your backlog double digit as we exit 2026 for the total yr after which simply once more the expansion you’re seeing, is there any approach, do you suppose you’re outgrowing the marketplace for no matter cause? Aggressive positioning, product vendor? I’m simply questioning for those who’re getting a larger share of the market relative to your friends.
Thanks.
Joseph Creed
Yeah, thanks, Jamie. And good morning. You understand, so far as orders within the quarter, in your first query, I believe nothing of serious notice the place we had one thing that we couldn’t announce. I might, you already know, there are a pair issues outdoors of energy and vitality. We talked about CI and the seasonality. I might additionally say, you already know, the robust orders in Rihanna, once more, these are ri. Could be a lumpy enterprise and people orders are available, in large orders and it’s not, you already know, regular. So we’re blissful to see the orders that got here in. You understand, I don’t know which you can rely on repeat each quarter of that as we exit.
We’ll see the place we exit this yr. Proper. We wish to ship lots of product and, you already know, I admire you requested this query final time as nicely. The backlog is a nuanced quantity. We want it to go up as a result of we’re including capability and different issues. But when I can gradual that progress within the backlog as a result of I can considerably get extra product out whereas orders are nonetheless rising, that’s clearly a superb factor as nicely. So we’re targeted on profitable as a lot of the enterprise as we will. We outpace the business in CI. I believe we’re undoubtedly a market chief in energy and vitality for what we offer in that house, simply from a scale standpoint.
So. And we have now the widest providing under 38 megawatts between generators and engines and burn lots of gasoline. So we really feel actually good in our aggressive place. From a lead time standpoint, they’re prolonged, however nonetheless, you already know, we’re ready. We’re one of many quickest options on the market for knowledge facilities who’re making an attempt to rise up and operating shortly. So we’ll see how the yr performs out. However we have now nice momentum and hopefully I’m planning on and anticipate the momentum to proceed all through this yr.
operator
Our subsequent query comes from Jerry Rivich at Wells Fargo.
Jerry Revich
Sure, Hello. Good morning, everybody. I’m questioning, Joe, for those who may simply discuss, for the turbine enterprise, you had spoken about potential for it for use in some peaker vegetation, plant functions by utilities. Any replace on how these conversations are monitoring after we would possibly See these use instances. After which, you already know, within the ready remarks, you of us spoke about comparable shipments in 26 versus 25 for generators. However you’re ramping up actually important deliveries in Titan 350s, I assumed in 26 versus 25. So I simply wish to be certain that I’m not lacking any outdoors shipments within the fourth quarter or another transferring items there.
Thanks.
Joseph Creed
Yeah, I imply we’re, we’re seeing most, you already know, the 351st models have gone out and we’re making an attempt to ramp 350. So it’s comparatively new product that’s going on the market. So, you already know, photo voltaic had a report yr in 2025. We anticipate one thing comparable in 2026. We introduced the capability enhance for photo voltaic, however once more we simply introduced that center of final yr, late final yr. In order that’s not going to essentially have a big influence into 2026 outcomes. I believe we’ll see a combination to the bigger frames just like the 350 as we’re delivery a couple of extra of these in 2026 as nicely.
After which we proceed to work all of the offers that we will for energy. And we’re seeing historically photo voltaic’s enterprise been very heavy, weighted in direction of oil and gasoline. That enterprise remains to be actually robust, however now we’re beginning to see extra of the combination shift into energy gen as nicely. So we’re anxious to get that capability program transferring alongside and we’ll present updates as we transfer all through it. We’d like to get extra product out, however proper now that’s what we have now line of sight to in 2020.
operator
Our subsequent query comes from Rob Wertheimer at Melius Analysis.
Robert Wertheimer
Thanks.
Joseph Creed
Good morning. Rob.
Robert Wertheimer
So the undertaking scope on the Monarch Knowledge heart seems to be attention-grabbing and I’m wondering for those who may give us a mini schooling. I believe that they’re going to make use of the waste warmth from the CAT engines to supply cooling to energy chillers. You understand, there’s been an argument that mixed cycle and conjunction, you already know, mixed cycle generators with steam turbine hooked up or increased effectivity. I don’t fairly know tips on how to examine the effectivity with this, however clearly utilizing the waste warmth is nice. And at Juul, I believe there was backup diesel with prime recips and gasoline. On this case, I believe you’re.
Are you simply over form of overbuilding the gasoline recipes and there’s no diesel concerned. And final query, simply, you already know, do you get lots of inquiries on this form of factor or is there’s a strong, you already know, sort of quoting in and exercise pipeline behind it? Thanks.
Joseph Creed
Rob. I would like My engineers or Jason to speak to you on the technical specs of it. However you already know, as you’re taking a look at prospects who’re wanting velocity to market, bringing your individual energy is unquestionably one of many ways in which they will try this and we will assist them. And I believe when you make that call to go to gasoline prime energy and sort of have your individual mini energy plant there with the gensets, we’ve been capable of sit with them and say okay, let’s make it as environment friendly as doable. So clearly if we will use the warmth to assist with the cooling and use that vitality on web site, it makes the entire undertaking extra environment friendly and the competitiveness of it a lot better from a monetary standpoint.
So we proceed to work with all of our prospects on that and I believe we’ll proceed to make headways. You understand, we additionally, you already know, announce partnerships with Vertiv. We’re looking for methods to make these options as value efficient and environment friendly as doable for our prospects and we’re having lots of these discussions. Juul I believe within the early days if I’m not mistaken was diesel backup however then switched to really gasoline fired quick begin backup energy as nicely. So all pure gasoline and I believe you already know, the newest one is pure gasoline as nicely.
So you already know that’s one of many nice issues about our portfolio. You understand we as much as 38 megawatts, we have now all types of various options and we will configure it nevertheless is greatest for that buyer web site, what sort of gasoline availability they’ve and the dimensions and what they’re making an attempt to do to make it essentially the most environment friendly. So you already know we have now a staff that actually sits with prospects and has turbine consultants and recip consultants on it. You understand we have now lots of micro grid expertise and basically that’s what these are. So we’re working with prospects to place the most effective answer ahead and I believe it’s going to be thrilling.
We now have an increasing number of discussions round it every day.
Alex Kapper
Audra, we have now time for another query.
operator
Thanks. In the present day’s closing query comes from the road of Kristin Owen with Oppenheimer.
Kristen Owen
Good morning. Thanks a lot for taking the query. I’m going to ask a uncommon query on development industries and simply assist us unpack a few of the demand drivers that you just’re seeing there. How a lot of that is simply only a return to a normalized substitute stage? How a lot of that is truly supported by knowledge heart exercise and the way a lot ought to we anticipate is embedded in your market share progress for 2026? Thanks.
Joseph Creed
So I’ll make some feedback. Andrew, you may chime in right here however you already know we anticipate North America to proceed to be robust. Clearly, you already know the info heart construct out isn’t just good for for energy and vitality. That drives lots of development exercise as nicely. There are a variety of different development initiatives transferring alongside and as we mentioned in our ready remarks, we proceed to see that power right here in North America. IIJA spending nonetheless persevering with to go on. The Center east particularly continues to be actually robust after which we anticipate China has been actually low and we’ll hopefully see some positivity there in above 10 ton excavators coming off low ranges as we enter into this yr from a aggressive standpoint, we made nice progress and have been capable of outperform the business final yr with the power of our merchandising applications.
We now have thrilling issues to proceed to roll out. We proceed to work on our rental technique with our sellers. We’ll have some issues to share at Conexpo as nicely with regards to our, you already know, BCP tools within the smaller a part of the CI lineup which has a ton of momentum within the business. So we really feel fairly good about our potential in CI. It’s a few of that order power is getting again to that extra regular seasonal sample. However we have now nice confidence across the business and the place it’s heading. So with that I wish to thanks all for becoming a member of us at this time and we admire your questions.
An curiosity in Caterpillar. I’m actually pleased with our staff. We had distinctive efficiency in 2025 as they delivered report gross sales and revenues, adjusted working revenue margin that was inside our vary and strong MP and E free money movement. These outcomes reveal the power of our finish markets and our staff’s disciplined execution. So with a report backlog, we enter the brand new yr with robust momentum and a continued give attention to delivering long run worth for our prospects and our shareholders. Now I’ll flip it again to Alex.
Alex Kapper
Thanks Joe, Andrew and everybody who joined us at this time. A replay of our name might be obtainable on-line later this morning. We’ll additionally put up a transcript on our investor relations web site as quickly because it’s obtainable. You’ll additionally discover a fourth quarter outcomes video with our CFO and an SEC submitting with our gross sales to customers knowledge. Click on on buyers.caterpillar.com after which click on on Financials to view these supplies. If in case you have any questions, please attain out to me or Rob Rengel. The Investor Relations Journal. Telephone quantity is 309-675-4549. Now let’s flip it again to Audra.
operator
To conclude our name that concludes our name. Thanks for becoming a member of. You might all disconnect. Sa.
Commercial
Caterpillar Inc (NYSE: CAT) This fall 2025 Earnings Name dated Jan. 29, 2026
Company Members:
Alex Kapper — Vice President of Investor Relations
Joseph Creed — Director
Andrew R. Bonfield — Chief Monetary Officer
Analysts:
Mircea Dobre — Analyst
Michael Feniger — Analyst
David Raso — Analyst
Tami Zakaria — Analyst
Charles Albert Dillard — Analyst
Jamie Cook dinner — Analyst
Jerry Revich — Analyst
Robert Wertheimer — Analyst
Kristen Owen — Analyst
Presentation:
operator
Welcome to the fourth quarter 2025 Caterpillar Earnings Convention name. Please be suggested that at this time’s convention is being recorded. I might now like at hand the convention over to your speaker at this time, Alex Capper. Thanks. Please go forward.
Alex Kapper — Vice President of Investor Relations
Thanks, Adra. Good morning everybody and welcome to Caterpillar’s fourth quarter 2025 earnings name. I’m Alex Capper, Vice President of Investor Relations. Becoming a member of me at this time are Joe Creed, CEO Andrew Bonfield, Chief Monetary Officer, Kyle Epley, Senior Vice President of the World Finance Companies Division, and Rob Rengel, Senior Director of ir. Throughout our name, we’ll be discussing the fourth quarter earnings launch we issued earlier at this time. You could find our slides, the information launch and a webcast recap@buyers.caterpillar.com beneath Occasions and Shows. The content material of this name is protected by US and worldwide copyright legislation. Any rebroadcast, retransmission, replica or distribution of all or a part of this content material with out Caterpillar’s prior written permission is prohibited.
Transferring to slip two. Throughout our name at this time, we’ll make ahead wanting statements that are topic to dangers and uncertainties. We’ll additionally make assumptions that would trigger our precise outcomes to be completely different than the knowledge we’re sharing with you on this name. Please discuss with our latest SEC filings and the ahead wanting statements reminder and the information launch for particulars on components that individually or in combination may trigger our precise outcomes to range materially from our forecasts. An in depth dialogue of the numerous components that we imagine could have a fabric impact on our enterprise on an ongoing foundation is contained in our SEC filings.
On at this time’s name, we’ll additionally discuss with non GAAP numbers for a reconciliation of any non GAAP numbers to the suitable US GAAP numbers. Please see the appendix of the earnings name slide for at this time’s agenda. Joe will start by sharing his views about our outcomes and supply an replace on our efficiency towards attaining our Investor Day targets. Then he’ll share our full yr outlook and insights about our finish markets, adopted by an replace on our technique. Lastly, Andrew will present an in depth overview of outcomes and key assumptions. Wanting ahead, we’ll conclude the decision by taking your questions.
Now let’s advance to Slide 3 and switch the decision over to our CEO Joe Creed.
Joseph Creed — Director
All proper, nicely thanks Alex and good morning everybody. Thanks for becoming a member of us at this time. Our centennial yr marked a big milestone and we achieved full yr gross sales and revenues of $67.6 billion, the best in Caterpillar’s historical past. In a dynamic surroundings with web incremental tariff headwinds of $1.7 billion. We delivered full yr adjusted working revenue margin inside the goal vary at 17.2% and adjusted revenue per share of $19.06. We additionally generated strong MP free money movement of $9.5 billion in 2025, permitting us to deploy $7.9 billion to shareholders by way of share repurchases and dividends. Throughout the yr, our backlog grew to a report stage of $51 billion, a rise of $21 billion or 71% in comparison with final yr.
All time excessive gross sales and revenues together with report backlog are proof of the power in our finish markets and powerful execution by our staff. Now let me take a minute to stroll you thru our fourth quarter outcomes. Gross sales and revenues have been $19.1 billion, an all time report for a single quarter. The rise of 18% versus the earlier yr was higher than we anticipated and displays increased volumes in all three of our major segments whereas value realization was about impartial. Particularly, quantity progress was higher than anticipated in energy and vitality as we have been capable of ship extra product than anticipated at yr finish.
Adjusted working Revenue margin was 15.6% and adjusted revenue per share was $5.16. Fourth quarter adjusted working revenue margin and adjusted revenue per share have been higher than we anticipated resulting from stronger than anticipated quantity progress in energy and vitality within the quarter. The online incremental value from tariffs was close to the highest finish of our estimated vary. Strong ordering exercise throughout all three major segments contributed to the very robust backlog progress. Now I’ll evaluation fourth quarter retail statistics for every of our three major segments beginning with Building industries. Building Industries Whole gross sales to customers grew for the fourth consecutive quarter rising 11% which exceeded our expectations.
Will increase in North America have been higher than anticipated resulting from robust progress in non residential and residential development. Rental fleet loading and our sellers rental income additionally grew within the quarter. Gross sales to customers declined barely in EAMI and Asia Pacific consistent with our expectations and we noticed progress in Latin America which was higher than anticipated for useful resource industries. Fourth quarter gross sales to customers declined 7% in line with our expectations. Mining gross sales to customers have been decrease yr over yr as prospects exercised capital self-discipline in response to weaker coal costs in energy and vitality, our largest and quickest rising phase.
Gross sales to customers grew a sturdy 37% with one other quarter of double digit progress throughout all functions. Energy technology grew 44% pushed by robust demand for giant gensets and generators utilized in knowledge heart functions. Sturdy gross sales to customers in oil and gasoline have been pushed primarily by generators and turbine associated companies. Industrial grew from comparatively low ranges with the Enhance pushed by gross sales to customers in electrical energy functions and eventually transportation elevated primarily resulting from worldwide locomotive deliveries. Transferring to slip 4 our full yr 2025 outcomes confirmed significant progress in direction of attaining the 2030 targets we outlined at our latest investor day.
As I discussed, we delivered report gross sales and revenues of $67.6 billion, leading to 4% yr over yr progress. This enhance was led by report gross sales in energy and vitality. Notably, along with report gross sales in energy technology, we additionally achieved report gross sales in oil and gasoline resulting from power in demand for gasoline compression. Regardless of tariff headwinds, full yr adjusted working revenue margin of 17.2% was inside the goal vary for our stage of gross sales and revenues. Full yr companies revenues totaled $24 billion in 2025. We continued to attach extra belongings, rising the fleet to over 1.6 million and made nice progress in different initiatives like situation monitoring, prioritized service occasions, e commerce gross sales and tech enabled machines.
Our digital and expertise initiatives, together with a rising put in base, place us nicely to extend companies revenues in direction of our purpose of $30 billion by 2030. Strong MP and E free money movement allowed US to deploy $7.9 billion to shareholders by way of $5.2 billion of share repurchases and $2.7 billion of dividends paid. We’re pleased with our continued dividend aristocrat standing, paying increased dividends for 32 consecutive years, and stay dedicated to returning considerably all MP and E free money movement over time. Andrew will share extra about our money deployment plans for 2026 in a second. Turning to Slide 5, I’ll spotlight the developments we made in direction of our 2030 targets in our 3 major segments.
In 2025, Building Industries Development outpaced the worldwide business supported by the success of our merchandising applications. In consequence, full yr whole gross sales to customers progress was 5%, advancing our progress in direction of the 2030 purpose of rising 1.25 occasions the 2024 baseline. In useful resource industries. Buyer curiosity in our autonomous hauling answer stays robust and we’re making regular progress in direction of our 2030 purpose to triple the variety of CAT autonomous haul vehicles in operation in comparison with 2024. We ended the yr with 827 autonomous haul vehicles in operation, up from 690 on the finish of 2024. Adoption is anticipated to speed up given our confirmed answer, our growth into quarries and our potential to assist combined fleets.
For instance, final month Caterpillar and SO Observe, our vendor in Brazil, introduced an settlement to supply Vale an autonomy answer for a combined fleet of greater than 90 vehicles. Energy and vitality delivered significant progress in direction of our 2030 purpose to greater than double energy technology gross sales in comparison with 2024. In 2025, energy technology gross sales exceeded $10 billion which is yr over yr progress of greater than 30%. We’re additionally on observe in our multi yr effort to double our massive engine capability and greater than double our industrial gasoline turbine capability. As we’ve mentioned, the extra capability will serve a broad vary of functions and the phasing will happen between now and the top of 2030.
Now on slide 6, I’ll present our 2026 outlook. General, we anticipate full yr gross sales and revenues to develop across the high of the 5% to 7% long run compound annual progress charge goal. As I discussed earlier, our report backlog of $51 billion gives robust momentum to start out the yr. We’re additionally beginning to get multi yr visibility in energy and vitality as we work intently with our prospects to schedule manufacturing facility orders consistent with their undertaking timelines. In consequence, roughly 62% of our backlog is anticipated to ship ship within the subsequent 12 months, which is decrease than our historic common.
Sturdy backlog coupled with wholesome finish markets helps our expectation for quantity progress in all three major segments. We additionally anticipate all three segments to profit from constructive value realization, about 2% of whole gross sales and revenues and continued progress in companies revenues. Full yr adjusted working revenue margin ought to exceed 2025 ranges however stay close to the underside of the goal vary for our anticipated gross sales and income. Our adjusted working revenue margin expectation displays the continuing influence of tariffs in addition to investments we’re making to execute our progress technique. I stay assured that we’ll handle the influence of tariffs over time as we intention to function across the midpoint of our adjusted working revenue margin goal vary.
Capital expenditures are anticipated to be round $3.5 billion, pushed primarily by our capability growth plans and eventually, MP&E free money movement is anticipated to be barely decrease than 2025 reflecting the rise in capital expenditures. Now I’ll focus on our outlook for key finish markets beginning with development industries. One other yr of gross sales to customers progress is anticipated in 2026 supported by elevated order charges and a sturdy backlog. General, the outlook for North America stays constructive as gross sales to customers develop reasonably versus final yr, with development spending remaining wholesome resulting from IIJA funding and different vital infrastructure applications.
We additionally anticipate accelerated funding in knowledge facilities which can additional bolster total development spending. Supplier rental fleet loading and rental income are each projected to extend in comparison with 2025 in EEMI. Financial situations in Europe are anticipated to strengthen and development exercise in Africa and The Center east is projected to stay robust in Asia Pacific. Exterior of China, reasonable financial situations are anticipated in 2026. We anticipate constructive momentum in China off of low ranges with full yr progress within the above 10 ton excavator business. Development in Latin America is anticipated to proceed at an identical charge to 2025.
Useful resource industries had constructive momentum within the fourth quarter with rising backlog supported by wholesome orders throughout a broad vary of merchandise. For 2026, gross sales to customers are anticipated to extend, primarily pushed by rising demand for copper and gold and constructive dynamics in heavy development in quarry and aggregates. Most key commodities stay above funding thresholds and buyer product utilization is excessive. Whereas the age of the fleet stays elevated with modest will increase in commodity costs projected in 2026. We anticipate rebuild exercise to extend barely in comparison with final yr. And eventually, for energy and Vitality, the 2026 outlook is constructive.
Strong backlog progress within the fourth quarter was pushed by continued momentum in each energy technology and oil and gasoline. We anticipate progress in energy technology for each CAT reciprocating engines and photo voltaic generators pushed by rising vitality demand to assist knowledge heart buildout associated to cloud computing and generative AI. Moreover, we’re beginning to see orders for prime energy development increased as knowledge heart prospects search for various energy options to maintain tempo with their progress. For instance, yesterday we introduced an order for two GW of reciprocating generator units for a major energy utility from American Intelligence and Energy Company.
Turbines might be used to assist the preliminary growth section of the Monarch Compute Campus, which has a complete potential of about 8 gigawatts of energy technology. This represents considered one of our largest single orders for full energy options. The worth of the order might be mirrored in our first quarter 2026 backlog and we anticipate to ship the generator beginning in late 2026 by way of 2027. This thrilling announcement is considered one of 4 orders we’ve booked with not less than 1 gigawatt of Caterpillar tools for knowledge heart prime energy. After reaching report ranges in 2025, oil and gasoline is anticipated to see Average progress in 2026.
Reciprocating engine gross sales are anticipated to extend, pushed by robust demand in gasoline compression functions. Photo voltaic generators, oil and gasoline backlog stays wholesome with continued stable order and inquiry exercise, and consequently we anticipate one other yr of robust turbine gross sales akin to our report 2025 efficiency. Demand for merchandise and industrial functions is anticipated to develop reasonably in 2026 as we see continued restoration from earlier lows. And in transportation, we anticipate full yr progress in rail companies and locomotive deliveries. I’ll shut on slide 7 with an replace on our technique. Since our Investor Day in November, the Govt Workplace, Govt Management Group and I’ve engaged our workers and sellers across the globe to launch our refreshed Enterprise Technique for Worthwhile Development.
Our mission assertion Fixing our prospects hardest challenges is creating robust alignment round conserving buyer wants on the heart of all the things we do. The technique is centered on three pillars for worthwhile progress, business excellence, being the Superior Expertise chief and reworking how we work, all constructed upon a basis of continued operational excellence. I look ahead to advancing the technique with regional leaders and sellers all through 2026. And eventually, we have been excited to kick off the yr with a showcase and keynote at CES 2026 in Las Vegas the place we unveiled the following period of business AI in Autonomy.
This was an essential alternative to reveal our superior expertise management by highlighting Caterpillar’s important function in creating the invisible layer of the tech stack, the vital minerals, dependable energy and bodily infrastructure that the digital world depends on to perform. We made thrilling bulletins together with the launch of our new CAT AI Assistant, which can permit prospects to extra simply purchase, preserve, handle and function their tools. We additionally introduced a dedication to crucial a part of the invisible layer folks. Caterpillar pledged $25 million to make sure the longer term workforce has the instruments they should make superior expertise doable.
With that, I’ll flip it over to Andrew for an in depth overview of outcomes and key assumptions. Wanting ahead.
Andrew R. Bonfield — Chief Monetary Officer
Thanks Joe and thanks Joe and good morning everybody. As ordinary, I’ll start with a abstract of the quarter after which present transient feedback on the efficiency of the segments. Subsequent, I’ll focus on the steadiness sheet and free money movement and conclude with feedback on our excessive stage planning assumptions for 2026 in addition to our expectations for the primary quarter. Starting on Slide 8, gross sales and revenues of $19.1 billion mirrored an 18% enhance versus the prior yr. As Joe famous, this was an all time quarterly report. Adjusted working revenue was $3.0 billion and our adjusted working revenue margin was 15.6%.
We generated robust MP and E free money movement of $3.7 billion within the quarter and $9.5 billion for the total yr. This was our third consecutive yr with greater than $9 billion of MP and E free money movement. Transferring to Slide 9, I’ll focus on our high line outcomes for the fourth quarter. Gross sales and revenues of $19.1 billion exceeded our expectations, pushed by stronger than anticipated quantity in energy and vitality versus the prior yr. Stronger gross sales volumes supported the gross sales enhance. Worth was about impartial and roughly consistent with our expectations. Quantity progress mirrored a 15% yr over yr enhance in whole gross sales to customers and a positive influence from adjustments in vendor inventories.
Whole machine vendor stock decreased by about $500 million within the quarter in comparison with a $1.6 billion lower decline final yr. The lower within the fourth quarter was bigger than we had anticipated, primarily resulting from stronger than anticipated gross sales to customers in development industries. Companies Revenues elevated within the quarter in comparison with 2024. Transferring to working revenue on slide 10, working revenue within the fourth quarter decreased by 9% whereas adjusted working revenue of $3.0 billion was about flat versus the prior yr. As I discussed, adjusted working revenue margin for the fourth quarter was 15.6%, barely stronger than we had anticipated, pushed by quantity being higher than anticipated, partially offset by increased incentive compensation expense versus the prior yr.
The 270 foundation factors lower was primarily resulting from increased manufacturing prices pushed by tariffs. Excluding tariffs, our fourth quarter margin was increased than the prior yr. For the total yr excluding the influence of tariffs applied in 2025, margin was within the high half of the goal vary. Transferring to Slide 11, revenue per share was $5.12 within the quarter. Adjusted revenue per share was higher than we had anticipated at $5.16 excluding restructuring prices of $0.52 and mark to market good points of $0.48 for the remeasurement of pension and different put up employment profit plans. Once you exclude the influence of mark to market good points from different revenue and expense, we had a headwind of about $73 million which was primarily pushed by the absence of international change good points associated to MP and E steadiness sheet translation that occurred within the prior yr.
Excluding discrete objects, the supply for revenue taxes within the fourth quarter of 2025 mirrored a worldwide annual efficient tax charge of 20.5 24.1% as in contrast with 22.2% in 2024. This was consistent with our expectations. Lastly, the yr over yr influence from the discount within the common variety of shares excellent primarily resulting from share repurchases resulted in a positive influence on adjusted revenue per share of roughly $0.14 as in comparison with the fourth quarter 2024 and benefited the total yr by about $0.66. Transferring to Slide 12, I’ll now focus on phase outcomes. Building business gross sales elevated by 15% within the fourth quarter to $6.9 billion.
That is roughly consistent with our expectations because the stronger gross sales to customers have been about offset by a bigger than anticipated lower in vendor stock and barely unfavorable value realization in comparison with the prior yr. Greater gross sales quantity mirrored stronger gross sales to finish customers and the constructive influence from adjustments in vendor inventories. Supplier stock decreased much less in the course of the fourth quarter 2025 than in the course of the fourth quarter of 2024. Fourth quarter revenue for Building Industries decreased by 12% versus the prior yr to $1.0 billion. The phase’s margin was 14.9%, a lower of 470 foundation factors versus the prior yr.
The margin lower was primarily resulting from excessive manufacturing prices pushed by tariffs which had an influence of about 600 foundation factors on margins. The margin was decrease than we had anticipated due primarily to increased incentive compensation and the marginally unfavorable value realisation which offset the influence of stronger quantity. Turning to slip 13 useful resource industries gross sales elevated by 13% within the fourth quarter to $3.4 billion which was consistent with our expectations. Gross sales quantity was barely extra favorable than we had anticipated, whereas value realization was a barely bigger headwind than we had anticipated in comparison with the prior yr.
The gross sales enhance was primarily resulting from increased gross sales quantity pushed by the influence from adjustments in vendor inventories. Fourth quarter revenue for Useful resource Industries decreased by 24% versus the prior yr to $360 million. The phase’s margin of 10.7% was a lower of 510 foundation factors versus the prior yr primarily resulting from increased manufacturing prices pushed by tariffs which had an influence of about 490 foundation factors. The margin was decrease than we had anticipated primarily resulting from increased quick time period incentive compensation, increased tariffs and the marginally unfavorable value Realization now on Slide 14 Energy and vitality gross sales elevated by 23% within the fourth quarter to $9.4 billion.
Gross sales exceeded our expectations pushed by a stronger than anticipated quantity, notably in energy technology and oil and gasoline in comparison with the prior yr. Gross sales elevated primarily resulting from increased gross sales quantity and favorable value realization. Fourth quarter revenue for Energy and Vitality elevated by 25% versus prior yr to $1.8 billion. The phase’s margin of 19.6% elevated by 30 foundation factors versus the prior yr. On the upper quantity, the tariff influence was about 220 foundation factors. The margin was stronger than we had anticipated primarily resulting from favorable quantity. Worth was additionally barely extra favorable than we had anticipated.
Transferring to Slide 15 monetary merchandise revenues elevated by 7% versus the prior yr to about $1.1 billion primarily resulting from a positive influence from increased common incomes belongings, partially offset by the influence from decrease common financing charges. Phase revenue elevated by 58% to $262 million. This was due partially to a positive influence from increased margins at insurance coverage companies resulting from decrease loss ratios, increased common earnings and a decrease provision for credit score losses additionally benefited profitability. Our prospects monetary well being stays robust. Previous dues have been 1.37% within the quarter, down 19 foundation factors versus the prior yr and our lowest yr on yr finish.
On report, the allowance charge was 0.86%, the bottom ever reported in any quarter. Enterprise exercise at CAAT Monetary stays wholesome. Retail credit score functions elevated by 6% and our retail new enterprise quantity grew by 10% versus the prior yr. As well as, demand for our used tools stays wholesome on comparatively secure pricing whereas inventories stay at traditionally low ranges. Conversion charges stay above historic averages as extra prospects select to purchase tools on the finish of the lease time period Transferring to Slide 16 as I discussed, we proceed to generate robust MP and E free money movement with $9.5 billion in 2025, which was barely increased than 2024.
Regardless of an $800 million enhance in capital expenditures in 2025, we deployed about $7.9 billion, or 84% of our MP and E free money movement to shareholders. We proceed to anticipate to return considerably all MP and E free money movement to shareholders over time. This quarter we anticipate to enter into a bigger accelerated share repurchase in comparison with the $3 billion ASR we executed in early 2025. Our steadiness sheet stays robust with an enterprise money steadiness of $10.0 billion on the yr finish. As well as, we held $1.2 billion in barely longer dated liquid marketable securities to enhance yields on that money.
Now on slide 17 earlier than I start, I’ll remind you that my feedback at this time assume the Rail Division is inside energy and vitality as was the case by way of yr finish 2025. In March of this yr we’ll file an 8K recasting our historic durations to replicate the motion of our Rail division to useful resource industries. It will set up an acceptable baseline for evaluating future phase stage efficiency and expectations. If mandatory, we will even replace any of our phase particular ahead wanting assumptions impacted by this transformation. Clearly, there might be no influence on the enterprise broad assumptions. Now let me begin with our expectations for the total yr.
As Joe talked about, we anticipate enterprise gross sales and revenues to develop versus the prior yr probably across the high finish of our 5% to 7% CAGR goal on increased quantity and favorable value realization. We anticipate gross sales progress throughout every of our major segments with energy and vitality delivering the strongest yr over yr charge of progress supported by the strong backlog. Development on this phase might be paced by the timing of bringing our capability will increase on-line over the following few years. Our planning assumption is that the $500 million decline in machine vendor stock in 2025 might be offset by a rise by the top of 2026, a tailwind to 2026 gross sales.
As Joe talked about, we anticipate favorable value realization to account for a roughly 2% enhance in gross sales for the total yr. For perspective on the quarterly gross sales cadence, we anticipate the bottom gross sales of the yr to happen within the first quarter, which aligns with their regular seasonable sample on enterprise adjusted working revenue margin excluding the influence of tariff prices, we anticipate to be within the high half of the goal vary at our anticipated gross sales stage, supported by favorable value realization and quantity. Particular to quantity progress, we anticipated the attributable revenue pull by way of or incremental margin to replicate our latest operational efficiency which has been impacted by tariffs in distinction to prior years.
We’re dedicated to investing for long run worthwhile progress which incorporates capability investments which can influence depreciation expense and better expertise and digital spend. We imagine these investments will assist future absolute OPEC greenback technology, which I’ll remind you, is our definition of profitable. Together with the influence of tariffs, we anticipate margin to be close to the underside of the goal vary. I’ll present some perspective, however let me clarify how we intend to report back to you about tariffs as we transfer ahead. Absolutely the greenback worth new tariffs imposed in 2025 was $1.8 billion. Mitigating actions can are available two kinds.
First of those who scale back the direct tariff publicity invoice which can embrace actions like sourcing adjustments. These scale back the precise greenback worth of tariffs paid and second, there are value management actions and pricing which assist scale back the influence on our profitability. A lot of the actions taken in 2025 associated to value controls which could possibly be particularly attributed to tariff mitigation and these amounted to round $100 million, leading to a web incremental tariff influence of $1.7 billion. Wanting ahead, it is going to develop into more and more difficult to move out and observe whether or not value management or value motion is immediately tied to tariff mitigation versus being taken within the regular course of enterprise.
Subsequently, going ahead we report an absolute incremental tariff value which can solely consider these mitigating actions that scale back absolutely the worth of the tariff publicity. As a reminder, the incremental tariffs we report are measured in opposition to the 2024 baselet yr. For the total yr, incremental tariff prices are anticipated to be round $2.6 billion, which is $800 million increased than incurred in 2025. If we didn’t take the actions we plan to absorb 2026, this invoice might be round 20% increased. We anticipate incremental tariff prices of round $800 million within the first quarter, a stage just like the fourth quarter of 2025.
The run charge ought to enhance in direction of the second half of the yr as we take actions to cut back our tariff publicity. Lastly, please keep in mind that tariffs are quantity delicate. We’ll proceed to take actions to handle our prices within the regular course of enterprise and stay dedicated to function inside our adjusted working revenue margin goal vary with the purpose of being across the midpoint of the vary over time. Now concluding our expectations for the yr, we anticipate restructuring prices of roughly 300 to $350 million. Our international annual efficient tax charge is anticipated to be 23% excluding discrete objects MP and E.
Free money movement must be barely decrease than 2025, reflecting the upper CapEx of round $3.5 billion in 2026. Now turning to Slide 18 to help you together with your modeling, I’ll present coloration on the primary quarter. Beginning with the highest line, we might anticipate stronger gross sales and revenues versus the prior yr. We anticipate stronger quantity together with gross sales to customers progress and a tailwind for machine vendor inventories. We anticipate a extra typical machine vendor stock construct this quarter aligning with a seasonable sample which is a primary quarter construct in extra of $1 billion. This compares to flash ranges within the first quarter of 2025.
We additionally anticipate a positive influence from value realization in development industries. Within the first quarter we anticipate robust gross sales progress with the rise versus the prior yr pushed by quantity and favorable value realization. We anticipate continued gross sales to customers progress with our confidence supported by the robust order charges and backlog. As well as, we anticipate a large profit from adjustments in vendor vendor inventories given a extra typical seasonable construct within the first quarter. In useful resource industries, we anticipate robust gross sales progress versus the prior yr pushed by quantity together with wholesome gross sales to customers progress and a positive influence from adjustments in vendor stock.
Worth realization must be comparatively flattish although. We anticipate favorability as we transfer by way of the yr. In energy and vitality, we anticipate gross sales progress versus the prior yr pushed by power in energy technology and oil and gasoline together with favorable value realization. As is typical, we anticipate first quarter gross sales in energy and vitality would be the phase’s lowest of the yr and sequentially decrease than the fourth quarter 2025. This expectation aligns the seasonable sample. Now present some coloration on our first quarter margin expectations excluding incremental tariff prices. We anticipate a better adjusted working revenue margin share yr over yr supported by robust quantity and value realization.
Partially offset by increased manufacturing prices and SGA and RD bills tied to our strategic investments. As a reference, we might anticipate some seasonable margin uplift within the first quarter in comparison with the fourth quarter of 2025, together with incremental tariff prices at a stage just like the fourth quarter or round $800 million margin is anticipated to be decrease than versus the prior yr. Now on to first quarter margin expectations by phase. In development industries, excluding incremental tariff prices, we anticipate a better margin share in comparison with the prior yr on favorable value realization and quantity, partially offset by increased manufacturing prices.
In useful resource industries, excluding incremental tariff prices, we anticipate barely decrease margin share in comparison with the prior yr as favorable quantity is greater than offset by unfavorable manufacturing prices and better SGA and R and D bills, together with spend on strategic investments. In autonomy, we do anticipate some unfavorable combine influence as we anticipate proportionally increased gross sales of authentic tools in comparison with the prior yr. In energy and vitality, excluding incremental tariff prices, we anticipate a better margin share in comparison with the prior yr pushed by favorable quantity and value realization partially offset by increased manufacturing prices, notably spend, together with increased depreciation associated to our capability growth initiatives.
Throughout the first quarter, we anticipate round 50% of the incremental tariff prices might be in development industries, 20% in useful resource industries and 30% in energy and vitality. All phase margins are anticipated to be decrease than they have been within the first quarter 2025 after taking into consideration incremental tariffs. So turning to slip 19, let me summarise. In a yr marked by uncertainty, our staff delivered report gross sales and revenues, maintained adjusted working revenue margin inside our goal vary, and achieved a wholesome adjusted revenue per share of $19.06. We generated $9.5 billion of MP E free money movement our third consecutive yr of producing over $9 billion.
For 2026, we anticipate gross sales progress throughout all three major segments pushed by stronger quantity and value. We additionally anticipate companies income progress excluding the influence of incremental tariffs. We anticipate adjusted working revenue margin to be on the high half of our goal vary however close to the underside together with tariffs and we anticipate MP&E free money movement to be barely decrease than 2025, reflecting barely the upper capital expenditures. We proceed to execute our technique for long run worthwhile progress and with that we’ll take your questions.
Questions and Solutions:
operator
Thanks. We’ll now start the query and reply session. If in case you have dialed in and want to ask a query, please press Star one in your phone keypad to boost your hand and be part of the queue. If you want to withdraw your query, merely press Star. Please notice we’re solely permitting one query per analyst. Your first query comes from the road of Nick Dobright with Baird. Your line is now open.
Mircea Dobre
Thanks for taking the query and good morning everybody. The factor that clearly stood out most within the quarter was simply the very spectacular order progress and backlog progress that you’ve got had. And I assume my query associated to this possibly twofold. First, are you able to remark a little bit bit about what’s occurring in a few of the different segments outdoors of possibly ENT or energy technology? After which as you form of suppose on a go ahead foundation, if I perceive accurately, you’ve acquired roughly $20 billion of backlog that isn’t going to be delivered within the close to time period.
And it appears like this determine would possibly additional develop as we take into consideration Q1. So how do you consider these deliveries that now are stretching into 27 and past? And I’m asking by way of the lens of value prices, ensuring that, you already know, you might be making certain that you’ve got the right margins and the right pricing, given how risky simply the fee image and the tariff image has been. Thanks.
Joseph Creed
Yeah, good morning, Meg, that is Joe. Thanks for that query. There’s quite a bit in there. I’ll attempt to get be certain that I get to most of them. So we’re actually excited. I’m actually enthusiastic about how we completed the yr with our backlog at 51 billion. You understand, that’s 70% increased than yr finish prior and 11 billion increased than the place we completed, you already know, the third quarter. In order you recommend, I’ll discuss it and body it in the best way of order charges that we noticed within the fourth quarter and so they have been robust in all three segments.
It’s not simply energy and vitality. CI had considered one of its greatest quarters from an order standpoint ever, supported by each a rising business that we expect confidence within the business in 26 from US and our sellers, and power in our stews. We’ve continued to outperform the business and we hope to strive to do this once more right here in 2026, I’d say for CI as nicely. Simply have in mind we’re additionally returning to a extra regular seasonal sample. So the promoting season coming within the spring and us preparing for that. We entered 2025 at a a lot slower tempo and so we’re getting again to extra regular seasonal patterns in CI.
RI had an incredible order run charge within the quarter. It’s top-of-the-line quarters since 2021 that we’ve seen and that’s supported by Energy in heavy development in North America in addition to some good mining orders, notably in South America associated to copper mining. After which clearly energy and vitality had a very robust order consumption quarter as nicely. Energy technology continued to be robust. We’re seeing extra offers, a little bit extra combine into prime energy just like the one which we introduced yesterday, which clearly wasn’t on this backlog. Determine it’ll are available. Within the first quarter we’ve had, you already know, 4 now prime energy orders of larger than a gigawatt and we’ve had a handful of different sizable orders that have been lower than a gigawatt.
The opposite factor there’s we’re seeing robust orders in oil and gasoline, notably for gasoline compression. So, you already know, the extra energy that’s wanted on the market, we’re going to maneuver lots of gasoline. We now have to feed generators and engines to proceed to supply that energy. So we had a very, actually robust quarter from an order standpoint. And once more, it was power throughout the board. With regards to visibility farther out, I believe that’s a superb factor for us. One of many issues that we’re making an attempt to do, notably most of that’s in energy and vitality, is figure intently with our prospects to schedule their orders in our manufacturing facility to ship once they want them of their undertaking timing.
And what that enables us to do is be certain that we’re not sending issues forward of time and we will fulfill extra prospects and ensure each order will get to the client once they want it. Clearly, as you recommend, you already know, we’re taking orders farther out for these sort of orders. We now have body agreements for lots of shoppers. These may have inflationary indices tied in there for pricing. And for non body agreements, we often have escalators in the event that they’re out previous the traditional 12 month sort interval. So once more, actually, actually pleased with the order efficiency that we had within the fourth quarter and the outlook that we have now forward of us.
operator
We’ll go subsequent to Michael Feniger at Financial institution of America.
Michael Feniger
Sure, thanks for taking my query. Simply, you already know, the 50 gigawatt of energy by 2030, that quantity you guys supplied Investor day. Are you able to simply give us a way. The place that sort of finishes finish at 26 and 27? And the genesis of the query is there’s at all times worries that with everybody elevating capability, if knowledge heart slows, will we get into an overcapacity sort of market? How a lot of this 50 gigawatt goes into different markets outdoors of knowledge facilities? Vitality, gasoline, compression, downstream if you’re reserving these orders? I do know Mick talked about pricing, however how are you additionally enthusiastic about phrases and situations, service agreements, prime strikes to backup. Simply how are you guys considering of additionally making ready your self for. For down the highway? As you already know, as you’ve seen growth and bust up to now.
Joseph Creed
Thanks everybody. Yeah, thanks Mike. So with regards to the capability enhance, we clearly work all of our industries sort of work with our prospects and determine what the forecast is. So there could be places and takes, forecasts transfer round. However we’ve form of gauged the capability we’d like primarily based on what we see in all industries. We’re going to ensure, like I mentioned, we’re going to maneuver lots of pure gasoline within the subsequent few years. So we’re going to ensure we maintain our oil and gasoline prospects in addition to energy technology.
And I believe rightfully, as you level out in there, you already know, a few of the issues which might be additionally in that capability, it’s not all simply assembling completed product. Proper? There’s provide base and there’s elements machining and part capability for us to ensure we will develop companies. So after we take prime energy or gasoline compression functions that run repeatedly, these will hit overhaul cycles and people are nice companies enterprise for us. And we’d like to ensure we have now capability in place to do this as nicely. So all that’s considered, you already know, we have now, we’re on schedule.
We have been capable of ship a little bit bit extra at yr finish in our massive engine facility than we anticipated, which is a good factor. We want to have the ability to maintain that all through 2026. And we anticipate a giant chunk of capability. The primary actual large step as much as come in direction of the top of this yr, heading into 2027. After which the turbine funding began a little bit later. It’ll begin to come on a little bit bit after that. So we proceed to remain near our prospects. I imply we speak to hyperscalers and huge knowledge heart prospects weekly and ensure we keep consistent with their plans.
And like I mentioned, we’re beginning to take orders farther out and I believe that’s a superb factor.
operator
We’ll go to our subsequent query from David rasso@evercore isi hello, thanks for the time.
David Raso
I’m making an attempt to reconcile the gross sales information for 26. Proper. The roughly 7%. For those who take a look at the backlog that ships the following 12 months on a yr over yr foundation, it’s up about 44%. The orders for backlog that ships within the subsequent 12 months are up 36%. And your view of retail being up in 26. Simply making an attempt to know why such A low gross sales progress given the order momentum, the dimensions of the backlog and also you see retail up in 26. And for those who indulge me, only a clarification, possibly I missed it. The tariff influence, the 800 million, does that embrace anticipated pricing for 26 netting in opposition to a gross quantity or is it earlier than any pricing actions? Thanks.
Joseph Creed
Yeah, David, so first let me reply the second a part of your query. That’s it doesn’t consider any pricing actions. The two% pricing motion we talked about is totally separate. So that is simply the incremental value that we greenback value that we are going to truly incur or pay for tariffs in 2026. After which if you speak concerning the backlog and the gross sales information, the one factor I’d simply level out to you and Joe talked about it was final yr, for those who keep in mind, we truly did particularly in development, there was a really low, there was no, just about no enhance in vendor stock within the first quarter, which was uncommon.
So one of many components that it’s important to consider if you’re taking a look at backlog is the truth that clearly SEI’s backlog is stronger. However a part of that’s for the and machines for the billion greenback plus enhance in vendor stock that we anticipate within the first quarter, which is a distinction versus the prior yr. In order that’s one issue total. Simply remind you that in energy and vitality we’re capability constrained. Clearly we’re basing our estimates primarily based on the capability we have now at this time. As Joe talked about, we’re clearly making an attempt and we’ve managed to construct deliver a little bit bit earlier on-line however clearly that isn’t sure at this stage.
So clearly if we’re capable of deliver one thing on there might be some upside within the second half of the yr.
operator
We’ll go subsequent to Tammy Zakaria at JP Morgan.
Tami Zakaria
Hello, good morning. Thanks a lot. So the AIP announcement final evening, may you give some coloration on what the battery vitality storage system alternative could possibly be for an order of that magnitude along with recip engines, may it’s half and half, 25, 75, 75, 25 or any coloration on the income combine with engines and DES could be useful. And associated to that, do you might have sufficient capability for greatest merchandise? Ought to there be extra offers like this?
Joseph Creed
Good morning Tammy. Most of that order goes to be you already know, in turbines and pure gasoline turbines, you already know such as you noticed as a part of the joule. It’s an entire system, similar just like Juul. So after we do have batteries in there it’s a, it’s a small portion of the general whole. So most of it’s Gasoline generator units. And so far as capability goes, that’s all a part of our capability planning. So we really feel like we will proceed to maintain up with the expansion in prime energy and hopefully proceed to see extra combine shift that approach as a result of as we mentioned that may assist from a companies standpoint and we’ll have to take a look at elements farther out as a result of would clearly even imply extra upside to companies, you already know, within the sort of three to 5 years after supply of these gensets.
So thrilling alternatives for certain.
operator
Our subsequent query comes from Chad Dillard at Bernstein.
Charles Albert Dillard
Hey, good morning guys. A pair questions for you on Prime Energy. So for that utility, what’s the longer term function of backup diesel turbines versus Bess? You understand, if you’re speaking to the shoppers like how are they enthusiastic about how that evolves over the following a number of years? After which additionally with regard to your capability ramp and energy gen, do you suppose you may preserve the income momentum rising in 26 versus 25? I believe it goes up in 30%. Or ought to we be anchoring extra in direction of that 20% gig that you just’ve laid out for energy Gen?
Joseph Creed
Sure, a few questions there.
I believe the final one first. As Andrew said, it’s not a requirement subject for us. It’s actually going to be can we deliver on provide sooner? Type of what we have now in that income information now’s what we have now excessive confidence in. If all the things turns up heads, keep in mind it’s not simply us. We now have to deliver our provide base together with us. We’re going to get out as a lot product as we will and clearly that would offer a little bit little bit of upside if we will proceed to outpace our present plans for bringing the capability on-line. With regards to these Prime Energy functions, most of what we’re seeing to date remains to be having backup energy and so they’re additionally with gensets, not with batteries.
In reality, in these they’re utilizing our quick begin gasoline gensets for backup energy versus diesel once they do a few the massive orders we’ve seen for gasoline prime energy. So proper now we’re not seeing, you already know, 100% battery backup. It’s principally turbines.
operator
We’ll transfer subsequent to Jamie Cook dinner at Belief Securities.
Jamie Cook dinner
Hello, good morning and congratulations. Sorry Joe, one other query on backlog. Simply given the power, was there something form of one time in that backlog progress quantity or pull ahead maybe, you already know, an announcement that you just weren’t capable of press launch. You understand, me understanding the AIP that goes into subsequent quarter, however simply questioning if there’s a pull ahead in your understanding there’ll be Lumpiness, quarter to quarter. However do you continue to see an expectation the place you may develop your backlog double digit as we exit 2026 for the total yr after which simply once more the expansion you’re seeing, is there any approach, do you suppose you’re outgrowing the marketplace for no matter cause? Aggressive positioning, product vendor? I’m simply questioning for those who’re getting a larger share of the market relative to your friends.
Thanks.
Joseph Creed
Yeah, thanks, Jamie. And good morning. You understand, so far as orders within the quarter, in your first query, I believe nothing of serious notice the place we had one thing that we couldn’t announce. I might, you already know, there are a pair issues outdoors of energy and vitality. We talked about CI and the seasonality. I might additionally say, you already know, the robust orders in Rihanna, once more, these are ri. Could be a lumpy enterprise and people orders are available, in large orders and it’s not, you already know, regular. So we’re blissful to see the orders that got here in. You understand, I don’t know which you can rely on repeat each quarter of that as we exit.
We’ll see the place we exit this yr. Proper. We wish to ship lots of product and, you already know, I admire you requested this query final time as nicely. The backlog is a nuanced quantity. We want it to go up as a result of we’re including capability and different issues. But when I can gradual that progress within the backlog as a result of I can considerably get extra product out whereas orders are nonetheless rising, that’s clearly a superb factor as nicely. So we’re targeted on profitable as a lot of the enterprise as we will. We outpace the business in CI. I believe we’re undoubtedly a market chief in energy and vitality for what we offer in that house, simply from a scale standpoint.
So. And we have now the widest providing under 38 megawatts between generators and engines and burn lots of gasoline. So we really feel actually good in our aggressive place. From a lead time standpoint, they’re prolonged, however nonetheless, you already know, we’re ready. We’re one of many quickest options on the market for knowledge facilities who’re making an attempt to rise up and operating shortly. So we’ll see how the yr performs out. However we have now nice momentum and hopefully I’m planning on and anticipate the momentum to proceed all through this yr.
operator
Our subsequent query comes from Jerry Rivich at Wells Fargo.
Jerry Revich
Sure, Hello. Good morning, everybody. I’m questioning, Joe, for those who may simply discuss, for the turbine enterprise, you had spoken about potential for it for use in some peaker vegetation, plant functions by utilities. Any replace on how these conversations are monitoring after we would possibly See these use instances. After which, you already know, within the ready remarks, you of us spoke about comparable shipments in 26 versus 25 for generators. However you’re ramping up actually important deliveries in Titan 350s, I assumed in 26 versus 25. So I simply wish to be certain that I’m not lacking any outdoors shipments within the fourth quarter or another transferring items there.
Thanks.
Joseph Creed
Yeah, I imply we’re, we’re seeing most, you already know, the 351st models have gone out and we’re making an attempt to ramp 350. So it’s comparatively new product that’s going on the market. So, you already know, photo voltaic had a report yr in 2025. We anticipate one thing comparable in 2026. We introduced the capability enhance for photo voltaic, however once more we simply introduced that center of final yr, late final yr. In order that’s not going to essentially have a big influence into 2026 outcomes. I believe we’ll see a combination to the bigger frames just like the 350 as we’re delivery a couple of extra of these in 2026 as nicely.
After which we proceed to work all of the offers that we will for energy. And we’re seeing historically photo voltaic’s enterprise been very heavy, weighted in direction of oil and gasoline. That enterprise remains to be actually robust, however now we’re beginning to see extra of the combination shift into energy gen as nicely. So we’re anxious to get that capability program transferring alongside and we’ll present updates as we transfer all through it. We’d like to get extra product out, however proper now that’s what we have now line of sight to in 2020.
operator
Our subsequent query comes from Rob Wertheimer at Melius Analysis.
Robert Wertheimer
Thanks.
Joseph Creed
Good morning. Rob.
Robert Wertheimer
So the undertaking scope on the Monarch Knowledge heart seems to be attention-grabbing and I’m wondering for those who may give us a mini schooling. I believe that they’re going to make use of the waste warmth from the CAT engines to supply cooling to energy chillers. You understand, there’s been an argument that mixed cycle and conjunction, you already know, mixed cycle generators with steam turbine hooked up or increased effectivity. I don’t fairly know tips on how to examine the effectivity with this, however clearly utilizing the waste warmth is nice. And at Juul, I believe there was backup diesel with prime recips and gasoline. On this case, I believe you’re.
Are you simply over form of overbuilding the gasoline recipes and there’s no diesel concerned. And final query, simply, you already know, do you get lots of inquiries on this form of factor or is there’s a strong, you already know, sort of quoting in and exercise pipeline behind it? Thanks.
Joseph Creed
Rob. I would like My engineers or Jason to speak to you on the technical specs of it. However you already know, as you’re taking a look at prospects who’re wanting velocity to market, bringing your individual energy is unquestionably one of many ways in which they will try this and we will assist them. And I believe when you make that call to go to gasoline prime energy and sort of have your individual mini energy plant there with the gensets, we’ve been capable of sit with them and say okay, let’s make it as environment friendly as doable. So clearly if we will use the warmth to assist with the cooling and use that vitality on web site, it makes the entire undertaking extra environment friendly and the competitiveness of it a lot better from a monetary standpoint.
So we proceed to work with all of our prospects on that and I believe we’ll proceed to make headways. You understand, we additionally, you already know, announce partnerships with Vertiv. We’re looking for methods to make these options as value efficient and environment friendly as doable for our prospects and we’re having lots of these discussions. Juul I believe within the early days if I’m not mistaken was diesel backup however then switched to really gasoline fired quick begin backup energy as nicely. So all pure gasoline and I believe you already know, the newest one is pure gasoline as nicely.
So you already know that’s one of many nice issues about our portfolio. You understand we as much as 38 megawatts, we have now all types of various options and we will configure it nevertheless is greatest for that buyer web site, what sort of gasoline availability they’ve and the dimensions and what they’re making an attempt to do to make it essentially the most environment friendly. So you already know we have now a staff that actually sits with prospects and has turbine consultants and recip consultants on it. You understand we have now lots of micro grid expertise and basically that’s what these are. So we’re working with prospects to place the most effective answer ahead and I believe it’s going to be thrilling.
We now have an increasing number of discussions round it every day.
Alex Kapper
Audra, we have now time for another query.
operator
Thanks. In the present day’s closing query comes from the road of Kristin Owen with Oppenheimer.
Kristen Owen
Good morning. Thanks a lot for taking the query. I’m going to ask a uncommon query on development industries and simply assist us unpack a few of the demand drivers that you just’re seeing there. How a lot of that is simply only a return to a normalized substitute stage? How a lot of that is truly supported by knowledge heart exercise and the way a lot ought to we anticipate is embedded in your market share progress for 2026? Thanks.
Joseph Creed
So I’ll make some feedback. Andrew, you may chime in right here however you already know we anticipate North America to proceed to be robust. Clearly, you already know the info heart construct out isn’t just good for for energy and vitality. That drives lots of development exercise as nicely. There are a variety of different development initiatives transferring alongside and as we mentioned in our ready remarks, we proceed to see that power right here in North America. IIJA spending nonetheless persevering with to go on. The Center east particularly continues to be actually robust after which we anticipate China has been actually low and we’ll hopefully see some positivity there in above 10 ton excavators coming off low ranges as we enter into this yr from a aggressive standpoint, we made nice progress and have been capable of outperform the business final yr with the power of our merchandising applications.
We now have thrilling issues to proceed to roll out. We proceed to work on our rental technique with our sellers. We’ll have some issues to share at Conexpo as nicely with regards to our, you already know, BCP tools within the smaller a part of the CI lineup which has a ton of momentum within the business. So we really feel fairly good about our potential in CI. It’s a few of that order power is getting again to that extra regular seasonal sample. However we have now nice confidence across the business and the place it’s heading. So with that I wish to thanks all for becoming a member of us at this time and we admire your questions.
An curiosity in Caterpillar. I’m actually pleased with our staff. We had distinctive efficiency in 2025 as they delivered report gross sales and revenues, adjusted working revenue margin that was inside our vary and strong MP and E free money movement. These outcomes reveal the power of our finish markets and our staff’s disciplined execution. So with a report backlog, we enter the brand new yr with robust momentum and a continued give attention to delivering long run worth for our prospects and our shareholders. Now I’ll flip it again to Alex.
Alex Kapper
Thanks Joe, Andrew and everybody who joined us at this time. A replay of our name might be obtainable on-line later this morning. We’ll additionally put up a transcript on our investor relations web site as quickly because it’s obtainable. You’ll additionally discover a fourth quarter outcomes video with our CFO and an SEC submitting with our gross sales to customers knowledge. Click on on buyers.caterpillar.com after which click on on Financials to view these supplies. If in case you have any questions, please attain out to me or Rob Rengel. The Investor Relations Journal. Telephone quantity is 309-675-4549. Now let’s flip it again to Audra.
operator
To conclude our name that concludes our name. Thanks for becoming a member of. You might all disconnect. Sa.
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