Caterpillar's Earnings Outlook Clouded by AI Data Center Uncertainty

Caterpillar (CAT) has been back in focus due to its role in AI data center construction, which is intersecting with the company's upcoming earnings report. The stock's share price has been under pressure ahead of earnings, down 17.81% over the past 30 days and 8.41% over the past 90 days, but it has still seen a year-to-date return of 36.16% and a 1-year total shareholder return of 91.78%. The AI data center story is gaining attention for Caterpillar, with some analysts expecting firm revenue expansion, rising margins, and a richer earnings base.

According to Simply Wall St's analysis, Caterpillar's current fair value is $970.37, which would represent an undervaluation of 16% compared to the stock's current price of $814.81. The company's record backlog growth across all three primary segments, driven by strong global infrastructure demand, positions it for above-trend sales growth in late 2025 and into 2026.

However, there are some potential risks to this narrative, including smooth execution in the face of potential tariff costs and possible pressure on pricing power that could weigh on margins. The market multiples also indicate that Caterpillar trades richer than both its peer average and the US Machinery industry.