There’s a line item sitting on Caterpillar’s financials that does not look like an AI story at first glance. According to Stephen Morris and Andrew Sather on The Investing for Beginners Podcast, Caterpillar generated $10.2 billion in sales last year from generators sold to data centers. That’s the part of the bull case I keep coming back to.
For context, Caterpillar (NYSE:CAT | CAT Price Prediction) is still mentally filed by most investors under construction and mining equipment. When people screen for AI “picks and shovels,” they reach for chip designers, hyperscaler suppliers, or specialty HVAC names. The yellow iron company quietly powering the buildout doesn’t get the same billing.
The Hidden Revenue Stream
The podcast hosts pointed to a separate line item Morris described as “energy slash something” on the cash flow statement, tied directly to data center generator demand. Against total Caterpillar revenue of $67.5 billion, they argued the data center generator tailwind represents over 10%, possibly 15%, of revenue growth.
The Q1 2026 report makes the trend hard to ignore. Power Generation revenue inside the Energy & Transportation segment hit $2.817 billion, up 41% year over year, with management attributing the growth to “large reciprocating engines and turbines for data center applications.” CEO Joe Creed told analysts on the call that “Power generation grew 48%, driven by strong demand for large gensets and turbines used in data center applications with an increasing mix towards prime power.” You can read the earnings exhibit directly on the SEC.
The Backlog Tells the Story
Forward guidance is one thing. A signed order book is another. According to the podcast, Caterpillar’s backlog grew from $30 billion in 2024 to $51.2 billion in 2025, and management estimates they can only meet 60% of demand in 2026.
On the Q1 call, Creed confirmed the trajectory continued: “Backlog grew to a record level of $63 billion, an increase of $28 billion or 79% compared to the first quarter last year.” He added that “since we first announced our initial capacity expansion plans in January of 2024, our large reciprocating engine backlog has grown by more than 3.5x. Customers are committing to longer-term orders with some orders well into 2028.”
Caterpillar is responding by increasing large reciprocating engine capacity from 2x 2024 levels to nearly 3x 2024 levels, adding roughly 15 gigawatts of annual capacity when completed.
Why It Matters Now
Morris framed the macro driver succinctly: “the more powerful our AI gets, the more data centers we’re going to need. The more we need, the more energy we need. And the current energy grid isn’t going to be able to keep up.” Behind-the-meter gas gensets fill that gap on the timeline hyperscalers actually need.
On valuation, the podcast addressed the obvious objection. Forward P/E sits around 32, which Sather described as “not like a rosy PE, but that’s a backlog PE.” Trailing P/E sits at 44, and the stock is up 158% over the trailing year. So the stock isn’t cheap. The setup is that one specific revenue line and a contractual backlog are still under-weighted versus the traditional construction-and-mining narrative.
The Picks and Shovels Lens
The hosts’ framework is worth borrowing. When you screen for AI beneficiaries, look at the line items on the cash flow statement tied to data center or energy infrastructure, then verify demand through backlog rather than press releases. Insider activity is worth watching too: there have been 104 recent insider transactions, with insiders net sellers, which is a real tension point against the bullish setup.
I’ve been watching industrials respond to the AI capex wave for the better part of two years now, and Caterpillar is the clearest case I’ve seen of an old-economy ticker quietly repricing as an energy-infrastructure provider. The question to leave you with is the one the podcast hosts kept circling: when you screen for AI beneficiaries, are you reading the press releases, or are you reading the segment disclosures?
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