Caterpillar is the largest construction equipment manufacturer in the world, but construction equipment is no longer the company’s largest and fastest-growing segment.
That honor now goes to the Energy & Transportation division, which produces engines and turbines.
Growth in recent years has been due to the tech industry’s drive for data centers to power AI, cloud computing and other high-energy services. Demand from the oil and gas industry has also driven growth.
“Many people are familiar with our yellow iron, but would it surprise you to know that Caterpillar Inc.’s largest and fastest-growing segment is currently Energy & Transportation?” wrote Cat CEO Joe Creed in a recent LinkedIn post.
“As the AI industry drives the need for power, our engines and turbines (like the G3520K and Titan 350) offer efficient, fuel-flexible solutions for diverse industries like mining, oil & gas, marine, and, of course, power generation.”
Creed noted that to meet the growing demand for data centers, distributed generation and natural gas, the company is “modernizing and investing to expand capacity, automation and lean manufacturing in facilities like our Lafayette, Indiana, Large Engine Center.”
Caterpillar broke ground in August 2024 on a $725 million Lafayette plant expansion to increase capacity for both new engines and aftermarket parts.
“This expansion, the largest investment in Lafayette since the facility opened in 1982, will support a growing need for backup and prime power for data centers globally, driven in part by cloud computing and generative artificial intelligence,” Caterpillar said in a news release at the time.
The expansion is expected to create 100 new jobs on the 1,900-employee campus, with construction completed in 2026.
Cat's New Biggest Segment
This chart shows Energy & Transportation surpassing Construction Industries in sales and revenues in 2023.Caterpillar 2023 Annual Report
The segment grew 18% that year to $28 billion total sales and revenues. That compares to Construction Industries’ $27.4 billion and 9% growth that year.
The trend has continued:
- Last year, Energy & Transportation grew 3% to $28.9 billion in sales and revenues, while Construction Industries dropped 7% in annual revenue to $24.5 billion.
- For the first-quarter 2025, Energy & Transportation revenue dropped 2% to $6.6 billion from first-quarter 2024, while Construction Industries dropped 7% in revenue to $5.2 billion.
In their first-quarter earnings call, Cat officials expected Energy & Transportation to continue to outpace Construction Industries in the second quarter. Construction Industries is expected to see another drop in sales, while Energy & Transportation should see higher sales over the previous year “driven by continued strength in power generation and in oil and gas driven by solar turbines.”
Caterpillar’s Energy & Transportation segment consists of reciprocating engines, turbines, diesel-electric locomotives and related services across such industries as oil and gas, power generation, and industrial and transportation applications, including marine- and rail-related businesses as well as product support of on-highway engines.
Here’s a breakdown of the Energy & Transportation segment’s 2024 annual sales:
Caterpillar 2024 Annual Report
Data Centers Boost Construction Industry
Caterpillar is not the only company benefitting from the data center boom. Recent economic reports for the construction industry show it has been a bright spot for contractors, thanks to projects over $100 million by the likes of Amazon, Meta, Microsoft and Google.
“The strongest looking markets continue to be data centers and with that a related investment in dedicated power sources in giant battery storage for the data centers,” said Ken Simonson, chief economist for the Associated General Contractors, in his mid-year forecast June 23.
The Associated Builders & Contractors cited data centers as a major contributor to its backlog indicator rebounding in June to 8.7 months.
“The durability of contractor backlog is partially due to the ongoing boom in data center construction,” ABC Chief Economist Anirban Basu said July 15. “One in seven ABC members is currently under contract to perform work on a data center.”
Data center construction is expected to continue, according to the latest Dodge Momentum Index.
The June DMI for nonresidential construction projects in planning phase grew 6.8% over the month.
“Nonresidential planning steadily improved in June, alongside strength in warehouse, recreational and data center planning,” said Sarah Martin, associate director of forecasting at Dodge Construction Network, of the July 8 report.
Dodge noted that the largest commercial projects in planning include:
- Meadow Brook Technology Park Data Center Campus in Middletown, Virginia, $500 million project.
- Project Blue Data Center (Phase 3) in Tucson, Arizona, $300 million.
- Data City Data Center in Laredo, Texas, $300 million.
