How is AI Demand Shaping Engine Production?

On August 4, Caterpillar Inc said demand tied to artificial intelligence (AI) data centers is reshaping its Power & Energy business, prompting the company to restart production of a gas engine platform it had discontinued four years ago. 

The industrial equipment maker said it has taken its first orders for the restarted platform and expects sustained demand for large engines and turbines in the years ahead.

Caterpillar disclosed the decision during its second-quarter 2026 earnings call after reporting continued growth in its Power & Energy business. According to the company, demand for large engines and turbines used to supply electricity to data centers continues to increase, with customers across its Power & Energy business placing orders several years into the future.

The company said sales to users in its Power & Energy segment increased 33% during the quarter, while power generation sales to users rose 72%, driven primarily by demand for large generator sets and turbines used in data center applications. 

It also reported second-quarter sales and revenues of $20.5 billion, up 24% year over year. Caterpillar raised its full-year 2026 revenue growth outlook to the mid-to-high teens.

10 MW Engine Production Resumed

To support growing demand, Caterpillar said it will resume production of its 10 megawatt (MW) medium-speed gas reciprocating engine platform, a product line the company exited four years ago because market demand at the time did not justify continued production. 

The company expects to restore approximately 1.5 gigawatts (GW) of manufacturing capacity, with the first shipments scheduled for the fourth quarter.

According to Caterpillar, the engine fills the gap between its gas reciprocating engines and industrial gas turbines. Strong customer demand enabled production to restart using existing factories and suppliers.

Caterpillar Chairman and CEO Joe Creed reported during the earnings call that AI-driven demand remains intense, with customers consistently pushing for increased production to meet their ongoing requirements.

Customers Place Power Orders Years in Advance

Caterpillar said Power & Energy customers, which include data center, oil and gas, and marine customers, are sharing long-term forecasts and placing equipment orders through 2030, extending production schedules for several of its power generation products. 

During the earnings call, executives said orders for gas prime power systems now extend into late 2028 and 2029, while turbine orders stretch even further.

Creed said the decision to restart the discontinued engine platform reflects broader market demand beyond AI data centers. He explained that the decision to restart the engine platform was driven by both data center demand and a strategic goal to support the company's expanding base of large engines and turbines, which also serve the oil, gas, marine, and mining sectors.

Caterpillar also disclosed that demand remains strong across its diesel standby generator business. Responding to analyst questions, Creed said Caterpillar is accepting diesel generator orders well into 2028 and that some customers are choosing smaller generator platforms because of product availability.

"We're taking orders out well into 2028 on diesel gen sets,” Creed said, noting that the redundancy requirements continue to vary by project, particularly as more facilities incorporate behind-the-meter power systems.

Skycatch Brings AI Analytics to Mining

Beyond power generation, Caterpillar also highlighted AI-related developments in its Resource Industries business. The company completed its acquisition of Skycatch in July, following its earlier acquisition of RPMGlobal.

Skycatch's technology combines high-frequency spatial data with AI capabilities that allow mining customers to identify, measure, and interact with operational information, the company said. 

Caterpillar expects the technology to improve decision-making and reduce delays in mining operations. Separately, the company said its Resource Industries segment is increasing research and development spending tied to autonomy technology as part of its broader strategic investment plans.

Data Centers Cited Among Drivers of Construction Demand

Caterpillar also said non-residential investment in critical infrastructure, heavy construction, and data center projects continues to support activity in its Construction Industries segment. 

According to the company, its Major Projects rental joint venture delivered its first equipment during the quarter and is expected to support large infrastructure developments, including data center construction.

Looking ahead, Caterpillar said cloud computing and generative AI infrastructure buildouts are expected to continue supporting demand for both its reciprocating engines and Solar Turbines business through the remainder of 2026. 

The company also said most of the long-term services opportunity associated with its expanding installed base of prime power equipment is expected to emerge after 2030, when those engines and turbines begin reaching their major overhaul cycles.

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