Caterpillar Q3 Profit Rises 38% as Backlog Hits $78.1 Billion

Caterpillar Inc. (NYSE: CAT) reported a 38% increase in third-quarter operating profit as higher sales volumes and favorable pricing lifted results across its major equipment businesses. The company maintained its full-year 2026 outlook, while a record $78.1 billion order backlog provided evidence of strong order activity despite significant tariff costs.

Sales and revenues for the quarter ended Sept. 30 rose 17% year over year to $20.68 billion from $17.64 billion. The increase included a $2.21 billion contribution from higher sales volume and $663 million from price realization, supported by higher equipment sales to end users.

Operating profit increased to $4.21 billion from $3.05 billion, and the operating profit margin rose to 20.4% from 17.3%. Adjusted operating profit was $4.26 billion, up 38%, with an adjusted operating profit margin of 20.6%, compared with 17.5% a year earlier.

Profit per share advanced 46% to $7.13, while adjusted profit per share increased 45% to $7.20. Adjusted results excluded restructuring costs of $0.07 per share in both periods.

Third-quarter results included $128 million of IEEPA tariff recoveries, equivalent to about $0.21 per share. Excluding those recoveries, tariff costs were approximately $600 million, in line with Caterpillar’s expectations. Higher manufacturing costs partly offset the benefits of volume and pricing.

Equipment Segments Post Double-Digit Sales Growth

Power & Energy generated total sales of $8.8 billion, up 18%, as higher volume and favorable pricing supported growth. Segment profit climbed 31% to $2.14 billion, and the profit margin increased to 24.4% from 21.9%. Retail sales rose 36%, including a 75% increase in power generation and 5% growth in oil and gas, while industrial retail sales declined 3%.

Construction Industries sales increased 18% to $8.0 billion, reflecting higher volume, stronger equipment sales to end users and favorable price realization. Segment profit rose 33% to $1.83 billion, with the margin reaching 22.9% from 20.4%. Favorable volume and pricing more than offset unfavorable manufacturing costs.

Construction retail sales grew 20%. North America recorded a 27% increase, Latin America rose 13%, and Europe, Africa and the Middle East gained 16%. Asia-Pacific retail sales declined 2%.

Resource Industries sales advanced 15% to $4.6 billion, while segment profit increased 14% to $622 million. Its profit margin was 13.5%, compared with 13.6% a year earlier, as unfavorable manufacturing costs weighed against higher volume and pricing. Retail sales increased 4%, with an 8% rise in mining, heavy construction and quarry and aggregates partly offset by a 70% decline in rail.

Financial Products revenue rose 9% to $1.18 billion, helped by higher average earning assets and lower average financing rates. Segment profit increased 10% to $264 million. The benefit from earning assets was partly offset by a higher provision for credit losses at Cat Financial.

Backlog Reaches Record Level

Caterpillar ended the quarter with a record order backlog of $78.1 billion, up $38.2 billion, or 96%, from the prior-year period and $6.0 billion from the second quarter of 2026. Total dealer inventory increased by $0.8 billion during the quarter and was $0.1 billion higher than a year earlier. Dealers are independent businesses and control their own inventories.

Machinery, Power & Energy operating cash flow rose 16% to $4.5 billion. MP&E free cash flow, defined as operating cash flow less capital expenditures and excluding discretionary pension contributions, increased 19% to $3.8 billion, mainly because of stronger profit.

The company returned about $2.0 billion to shareholders during the quarter, including $1.2 billion of share repurchases and nearly $750 million in dividends. Caterpillar reported an enterprise cash balance of $7.9 billion and an additional $1.6 billion held in slightly longer-dated liquid marketable securities.

Full-Year Outlook Maintained

Caterpillar continues to expect full-year sales and revenues to grow in the mid-to-high teens from 2025. Adjusted operating profit margin is expected to be higher than last year and near the bottom of the company’s annual target range, excluding IEEPA tariff recoveries.

Management expects full-year MP&E free cash flow to fall in the top half of its $6 billion-to-$15 billion annual target range. Tariff costs implemented since the beginning of 2025 are projected at around $2.2 billion for the year, excluding IEEPA tariff recoveries. The company also expects approximately $3.3 billion of MP&E capital expenditures, about $300 million of restructuring costs and a 23% global annual effective tax rate excluding discrete items.

For the fourth quarter, Caterpillar expects moderate sales growth from a year earlier and a higher adjusted operating profit margin. Tariff costs are projected at about $600 million, roughly $200 million below the fourth quarter of 2025.

The outlook remains subject to uncertainty from economic conditions, commodity and material prices, product demand, tariffs and trade policy, currency movements, dealer inventory decisions, supply conditions and credit risks within Financial Products. Caterpillar also identified higher credit-loss provisions at Cat Financial and unfavorable manufacturing costs as current pressures in parts of the business.