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From Bulldozers to Big Data: Caterpillar's Bull Case Gets a Lift
Written by Jeffrey Neal Johnson. Published 10/16/2025.
Key Points
- The company's recent acquisition of a mining software firm signals a strategic move toward creating high-margin, recurring technology-based revenues.
- Caterpillar's Energy & Transportation segment is experiencing substantial growth by providing essential power generation for the expanding AI data center market.
- A record-setting order backlog provides exceptional revenue visibility, supporting the company's long-standing commitment to shareholder returns.
Shares of Caterpillar (NYSE: CAT) have surged in 2025, climbing more than 41% year-to-date to a new all-time high and signaling strong investor confidence. Just as the market was celebrating that milestone, the industrial giant announced a move that points to a deeper strategic shift.
Caterpillar confirmed an agreement to acquire RPMGlobal (ASX: RUL), an Australian mining software firm, for approximately $728 million. The timing appears deliberate: the deal underscores Caterpillar's pivot from a traditional equipment manufacturer toward a technology-centric industrial company, positioning it on a more durable and higher-margin path for future growth.
Caterpillar's Record Backlog Signals Real Demand
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Before looking ahead, it's important to recognize the company's current strength. A key indicator is Caterpillar’s order backlog — the total value of orders received but not yet fulfilled. According to the second quarter 2025 earnings report, that backlog reached a record $37.5 billion, up $2.5 billion from the prior quarter.
For investors, a sizeable backlog improves visibility into future revenue and reduces near-term uncertainty. It confirms sustained demand for Caterpillar's equipment and services across core segments. That strength gave management the confidence to raise its full-year 2025 sales outlook, now expecting sales to be slightly higher than in 2024 — an upgrade from earlier forecasts that had projected flat performance.
CAT's Double Play: Mining Software and AI Power
The long-term bull case for Caterpillar rests on a two-pillar technology strategy that leverages its industrial scale to capture secular growth trends and shift the company toward higher-margin, recurring revenue streams.
Pillar 1: The Software Play – Integrating Mining Intelligence
The RPMGlobal acquisition is concrete evidence of this approach. RPMGlobal provides mine-planning, simulation, and financial modeling software — effectively the digital brain of a mining operation. Integrating that software with Caterpillar's autonomous and conventional equipment can create a unified ecosystem that ties machine performance to the mine plan. The result is a stickier product offering, deeper customer relationships and more predictable, high-margin software revenue to complement heavy-equipment sales.
Pillar 2: The Infrastructure Play – Powering the AI Revolution
The second pillar is Caterpillar's growing role in building AI infrastructure. In its recent earnings, the Energy & Transportation segment stood out, with Power Generation sales up 28% year over year. That growth is linked to rising demand for backup and continuous power for hyperscale data centers. As AI workloads drive ever-larger data-center footprints, reliable power becomes essential — and Caterpillar is a leading provider. That positions the company as a semi-critical picks-and-shovels beneficiary of the long-term AI investment cycle.
The New Caterpillar: Built for Stability and Growth
Caterpillar is evolving beyond its cyclical industrial roots. The RPMGlobal deal and the expanding data-center business are complementary pillars of a strategy designed to create a more predictable, higher-margin enterprise. That diversification should help offset headwinds such as the forecasted $1.3 to $1.5 billion tariff-related impact in 2025.
This transformation is underpinned by strong financial fundamentals. Caterpillar’s financials show a robust return on equity (ROE) of 48.95% and a debt-to-equity ratio (D/E) of 1.50. Its Dividend Aristocrat status, supported by 30 consecutive years of dividend increases, together with an active $20 billion share buyback program, demonstrates a clear commitment to returning capital to shareholders.
The investment case for Caterpillar has broadened. It is no longer just a maker of heavy machinery; it's becoming an integrated industrial-technology company that offers stability and exposure to high-growth trends. The bull case now centers on both moving dirt and providing the sophisticated technology and essential services that power modern industry.
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