By Nathan Gomes and Nandan Mandayam
Oct 29 (Reuters) - Caterpillar stuck to its annual sales growth forecast on Thursday despite strong demand for its power equipment from data centers, amid cost pressures and growing investor skepticism over the AI boom.
Shares of the company sank 8%, putting them on track for the biggest single-day drop since last April. The stock was the second-biggest laggard on the Dow Jones Industrial Average, which was down 0.24%.
The company, best known for its yellow bulldozers,
has benefited from the expansion of power-hungry data centers across the US, which boosted demand for its construction equipment and generators.
However, growing opposition to data centers and calls to slow AI development have weakened investor sentiment.
On a post-earnings call with analysts, Caterpillar executives reassured investors about demand for backup power systems, but said bringing additional capacity online remained a drag on growth.
The company said it was boosting engines and turbine production, but added that the time required to build up the manufacturing capacity was limiting how quickly it could meet growing demand.
Caterpillar expects its 2026 revenue to grow in the mid- to high-teens percentage, while analysts expected growth in the high teens range, or roughly 18%.
CHINK IN CAT'S ARMOR
Caterpillar CEO Joe Creed said the company has "a line of sight (on demand) past the backlog," stretching up to 2030, and beyond that in some cases.
Its quarterly order backlog swelled to a record $78.1 billion, up $6 billion from the prior quarter. But the increase was smaller than previous periods, and according to J.P. Morgan, was likely below bullish expectations of $80 billion.
Oppenheimer analyst Kristen Owen said the quality of the company's earnings beat gave investors "a chink in the CAT armor" despite broad-based growth.
It expects its current-quarter revenue growth to moderate from last year's 18% level, as tariffs and record diesel prices raise freight costs.
Caterpillar also kept the annual tariff cost forecast of around $2.2 billion unchanged.
On an adjusted basis, its third-quarter profit per share rose to $7.20, compared with analysts' expectation of $7.08, according to data compiled by LSEG.
Over the last four quarters, the company has topped Wall Street's earnings expectations by at least 40 cents, and last quarter it beat profit estimates by nearly $2 per share.
(Reporting by Nandan Mandayam and Nathan Gomes in Bengaluru; Editing by Shinjini Ganguli)
