Caterpillar: Sizing the Power Gen Service Opportunity

Research evidence excerpt

Caterpillar: Sizing the Power Gen Service Opportunity

Equity Research

U.S. Machinery & Construction

9 July 2026

Caterpillar

Sizing the Power Gen Service

Opportunity

The debate has largely shifted to sizing the incremental CAT EQUAL WEIGHT

POSITIVEopportunity that Power Gen Services is worth today. Our U.S.ConstructionMachinery &

model suggests the opp. is large with meaningful earnings a Price Target USD 800.00

decade away. At ~40x P/E, CAT's priced in much of that upside Price (08-Jul-26) USD 948.08 Potential Upside/Downside -15.6%

Source: Bloomberg, Barclays Researchbut the tail, if recognized, could reshape their LT EPS profile.

The valuation debate around CAT is increasingly centered on whether investors are willing U.S. Machinery & Construction

to underwrite CAT’s power generation service opportunity post 2030. The bulls argue that Adam Seiden, CFA

+1 212 526 2212the growing install base of data center power generation equipment should create a high-

adam.seiden@barclays.com

quality, higher-margin service annuity that deserves a premium multiple. Bears on the other

BCI, US

hand push back that service monetization curve is long dated, uncertain and the stock is

already pricing in a significant valuation premium limiting upside potential. Below we lay out a Vraj Patel

+1 212 526 2773model to better frame this debate and seize the potential opportunity to CAT. Our model

vraj.patel1@barclays.com

assumes that of CAT’s ~65GW in 2030, ~45GW is allocated to reciprocating engines and ~20GW is

allocated to turbines. Of that we assume that 90% of the total capacity is installed/sold to data

center markets, a 30-year asset life, and a 5-year warranty period where CAT earns no service Tyler Russell

+1 212 526 7584revenue (Figure 5).