Despite declining construction sales in its second quarter amid mounting tariffs and dealer destocking, Caterpillar remains optimistic in its full-year outlook.
For its second quarter, Caterpillar reported $16.6 billion in sales and revenue, down 1% from last year’s second quarter. Cat attributed this primarily to a $414 million hit in price realization over the quarter (price realization measures the net difference between equipment's listed price and the actual selling price).
That negative impact from price realization offset the $237 million sales volume boost Cat saw in the second quarter, driven by higher sales to end users. Total manufacturing costs were $504 million, including the net impact of incremental tariff hikes of around $350 million.
Caterpillar CEO Joe Creed said during an earnings call the company expects tariffs to cost the company between $400 million and $500 million in the third quarter and between $1.3 billion and $1.5 billion for all of 2025.
Construction industry sales specifically came in at $6.2 billion in the second quarter, down 7% year-over-year. Energy and Transportation sales (engines and turbines), a segment that recently became Cat’s largest revenue stream, were up 7% year-over-year to $7.8 billion. The company also announced August 7 an agreement to supply generator sets to power a massive data center campus in Utah.
North America construction sales were down 15% to $3.4 billion in the second quarter, while North America Energy & Transportation sales rose 14% to $3.8 billion.
The drop in North America construction sales was linked by Caterpillar to unfavorable price realization and lower sales volumes from dealer destocking. Caterpillar machinery dealer inventories fell by around $400 million in the quarter.
Consolidated operating profit for the quarter came in at $2.9 billion, down 29% year-over-year and mainly attributed to unfavorable manufacturing costs driven by higher tariffs.
Construction operating profit was down 29% in the quarter to $1.2 billion.
Caterpillar expects third-quarter 2025 sales and revenue to grow modestly year-over-year and also forecasts a net incremental tariffs impact of $400-$500 million.
Consolidated sales for the full year 2025 are now expected to be up slightly year-over-year, though service revenues forecasts fell to coming in flat compared to 2024. Despite a softening global industry, Creed stated during the earnings call that the company remains optimistic full year construction industries sales will grow.
“We're encouraged by another quarter of sales users growth, strong order rates across many of our regions and backlog growth,” Creed said. “Customers continue to be responsive to the attractive rates we're offering through Cat Financial. And as a result, we anticipate full year growth in construction industry sales to users despite softness in the global industry.”
Creed added that Caterpillar now expects North America construction industries sales to end users to grow for the full year 2025, driven by healthy levels of construction spending and continued awarding of federal infrastructure funding.
