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Caterpillar (CAT) delivered a strong 3Q25 report that exceeded expectations across most key metrics, even as tariffs and higher operating costs weighed on profitability. Adjusted EPS of $4.95 crushed estimates but still declined by 4% yr/yr as elevated SG&A and R&D spending, alongside tariff expenses at the top end of the $500-$600 mln range, pressured margins. Revenue surged 9.5% yr/yr to a record $17.64 bln -- CAT’s fastest pace since 3Q23 -- fueled by broad-based strength across key end markets and robust equipment demand.

• Backlog climbed to an all-time high of $39.8 bln, up $2.3 billion qtr/qtr, supported by continued demand from infrastructure, mining, and data-center power projects as well as extended lead times tied to global industrial and energy investment cycles.
• Energy & Transportation remained the standout performer with 17% revenue growth to $8.4 bln, driven by rapidly expanding demand for power generation solutions tied to AI data-center build-outs, strong oil & gas engine orders, and ongoing growth in industrial power applications.
• Construction Industries rebounded meaningfully with 7% revenue growth to $6.76 bln, reversing last quarter’s 7% drop thanks to stronger end-market equipment sales and favorable FX trends. However, segment profit slid 9% as tariffs inflated manufacturing costs and weighed on margins.
• Resource Industries posted a modest 2% revenue increase to $3.11 bln, supported by resilient mining equipment demand, sustained commodity-driven fleet replacement activity, and continued momentum in heavy-equipment demand for quarry and aggregate markets.
• CAT raised its FY25 revenue outlook, now expecting revenue to be moderately higher than 2024 versus its prior view of slightly higher, reflecting strong order activity and healthy fundamental demand. Tariff guidance was tightened to $1.60-$1.75 bln from $1.50-$1.80 bln, signaling greater clarity on cost impacts entering year-end.

Briefing.com Analyst Insight:

CAT’s record revenue and expanding backlog speak to powerful secular drivers -- infrastructure spending, mining and energy investment, and rapidly rising AI-related power generation needs -- that continue to offset cyclical macro concerns. While EPS slipped yr/yr and tariffs remain a significant profit headwind, the company’s revenue momentum and backlog strength suggest durable demand rather than a one-time spike. The ongoing cost drag from tariffs and R&D spending tempers margin expansion in the near term, yet investments in innovation and capacity position CAT to capitalize on emerging high-growth verticals such as data-center power support. Valuation remains elevated versus historical norms (1-year forward P/E of 23.2x), but with record orders and improving guidance, CAT’s results reinforce its status as a premium industrial positioned at the center of multiple long-cycle growth themes.