CAT's Construction Revenues Up 35% in Q2: Can It Maintain This Pace?

Caterpillar Inc. CAT is witnessing strong momentum in its Construction Industries segment, supported by higher equipment demand, increased sales volumes and favorable pricing. The segment has emerged as a key growth driver for the company, with revenue gains of more than 30% in both the first and second quarters of 2026. 

The Construction Industries segment generated approximately $25.1 billion in sales in 2025, accounting for about 37% of Caterpillar’s total revenues. Momentum accelerated in 2026, with segment revenues rising 38% year over year to $7.16 billion in the first quarter. In the second quarter, revenues increased 34.8% to $8.35 billion, representing roughly 41% of the company’s total revenues.

The segment delivered the strongest year-over-year sales growth among Caterpillar’s segments in the second quarter. The increase was primarily driven by a $1.75 billion benefit from higher sales volumes and $309 million from favorable price realization.

Construction Industries supports customers engaged in infrastructure development and building construction and has generated revenues at a compound annual growth rate of 8.2% between 2020 and 2025. The segment serves more than 700,000 customers across more than 190 countries, giving Caterpillar a broad global footprint and significant exposure to infrastructure and construction activity.

Beyond equipment sales, Caterpillar is working to expand the segment’s recurring and technology-enabled revenue opportunities. Rental offerings, digital capabilities and advanced technology solutions are becoming increasingly important to the company’s strategy. These initiatives are designed to deepen customer engagement, improve equipment utilization and create additional revenue streams over the life of a machine.

Caterpillar also sees substantial long-term growth potential in the segment. The company aims to increase Construction Industries’ sales to end users by 1.25 times by 2030 compared with 2024 levels. This target is supported by its expectation that global construction spending will increase more than 25% between 2024 and 2034.

The company is positioned to benefit from opportunities across both developed and emerging markets. Caterpillar’s competitive advantages extend beyond the breadth of its equipment portfolio. Its extensive dealer network, large connected-machine base and expanding digital ecosystem help customers improve productivity, machine utilization and operating efficiency. 

The company is also investing in autonomous equipment, Artificial Intelligence-enabled jobsite solutions, machine automation and operator-assistance technologies. These capabilities could become increasingly valuable as contractors contend with skilled labor shortages, greater project complexity and the need to improve jobsite productivity.

Caterpillar faces competition from companies pursuing similar strategies around automation, digitalization and intelligent equipment. Komatsu Ltd. KMTUY, for instance, is expanding its Smart Construction platform, autonomous equipment portfolio and digital services while benefiting from global infrastructure and mining investment. Like Caterpillar, Komatsu is seeking to increase the contribution of software-enabled solutions and connected equipment beyond traditional machinery sales.

Deere & Company DE is another key competitor, with its Construction & Forestry segment focused on precision construction technologies, machine guidance systems and autonomous capabilities. Deere is investing in digital workflows designed to improve jobsite efficiency while expanding aftermarket and technology-driven recurring revenue opportunities. Similar to Caterpillar, Deere views connected equipment, intelligent machinery and software integration as important drivers of long-term growth.

CAT’s Price Performance, Valuation & Estimates

Caterpillar shares have gained 91.3% in the past year, outperforming the manufacturing - construction and mining industry's 79.1% growth.

Image Source: Zacks Investment Research

CAT is currently trading at a forward 12-month P/E of 26.52X, a premium compared with the industry’s 24.83X.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for 2026 points to year-over-year earnings growth of 42.4%, while the 2027 estimate implies growth of around 20.6%. 

Image Source: Zacks Investment Research

Earnings estimates for both years have moved up over the past 60 days. 

Image Source: Zacks Investment Research

Caterpillar stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Beyond Nvidia: AI's Second Wave Is Here

The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research