Caterpillar Beat Earnings and Still Dropped 9%. The AI Power Trade Just Hit the Same Wall as Software.

Caterpillar (NYSE:CAT | CAT Price Prediction) reported third-quarter results before the open on October 29, 2026. It beat on adjusted EPS, and the stock still fell 9% before the bell to $647.90. Shares were at $716 when the filing came out. Adjusted EPS was $7.20 against a $7.04 consensus. Revenue of $20.68 billion came in just under the $20.69 billion estimate, which is essentially in line.

Other power stocks are falling too. Vertiv (NYSE:VRT) was down 2% premarket and GE Vernova (NYSE:GEV) was down 3%, even though both posted big beats on October 28, 2026.

What Caterpillar Actually Put on Paper

Revenue grew 17.3%. Power Generation sales reached $3.421 billion, up 30%, driven by turbines and large reciprocating engines sold to data centers. Chief Executive Joe Creed said: “Our third-quarter results reflect the durability of our end markets, with strong order rates and a record backlog.”

The release left two things out. It gave no numeric guidance and no dollar figure for the record backlog. Operating profit also included $128 million of IEEPA tariff collections. Those are refunds of tariffs imposed under the International Emergency Economic Powers Act, and they made the beat look better than the underlying business. The stock was also already slipping before the report. It fell 13% in the month leading into it.

How Big the AI Power Business Is at Each Company

Caterpillar

Power Generation brings in a significant portion of Vertiv’s entire quarterly revenue of $4.31B. At Caterpillar, though, it is one product line. Construction Industries alone brought in $7.983B. Data centers help Caterpillar, but construction still drives a larger share of its results.

Vertiv

Vertiv rose 16% on October 28. It beat estimates by a wide margin with $2.21 of adjusted EPS, said organic orders grew more than 100%, and raised its full-year revenue guidance to $14.45-14.85B.

GE Vernova

GE Vernova fell 2% on October 28. That happened even though it reported a $197B backlog and raised its free cash flow guidance to $16-17B.

Why Investors Sold a Beat Anyway

The same thing happened to other stocks on October 29. After its own beat, Fortinet (NASDAQ:FTNT) fell 26% premarket. Alphabet (NASDAQ:GOOGL) dropped 10%. My Alphabet position goes back to April 2012, and I’ve learned that a beat without a higher outlook rarely holds up when a stock is priced for perfection.

Demand still looks strong. Joe Creed said on the August 4 call that backlog had reached $72 billion. He also said lead times for gas prime power, meaning generators that run around the clock, had extended to “the back half of 2028 and into 2029,” with turbines a little further out. Caterpillar can sell everything it can build. What limits growth is factory output.

GE Vernova said only about 20% of its gas turbine customers are data centers. Vertiv also said it will stop reporting orders going forward.

Is the AI Power Trade Broken?

Investors are rewarding companies that raise expectations and selling the ones that only meet them. Vertiv raised its outlook and gained. Caterpillar didn’t, and it fell. Own Caterpillar on the view that its backlog will turn into sales faster than factory limits allow. Pass on the stock if you need a raised outlook before you’ll pay up. The broader setup here, the power, cooling, and networking suppliers behind the data-center expansion, is exactly what we mapped out in a free report on seven AI infrastructure names that aren’t chipmakers.

On its 8:30 a.m. ET call on October 29, 2026, Caterpillar can raise the August outlook for mid- to high-teens revenue growth or put a dollar figure on the backlog above the $72 billion Creed cited. If it does, I expect the stock to work back toward $716. If it does neither, the stock will likely keep getting the same treatment as Fortinet and Alphabet.

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