Caterpillar’s $78 billion backlog was the standout figure in its fiscal Q3 2026 report, even though the headline numbers landed close to Wall Street’s expectations. Sales of $20.7 billion came in just under the $20.8 billion consensus, and adjusted earnings per share of $7.20 edged past the $7.16 forecast. Yet the stock fell 9.3% on October 29, the day of the release, while the S&P 500 dipped only 0.3%.
Why the Backlog Deserves Attention
The backlog represents orders customers have placed but Caterpillar has not yet fulfilled. On the October 29 earnings call, management said it reached a record $78 billion at quarter’s end, roughly double the year-earlier level. That growth matters because a backlog only becomes revenue as equipment is built and shipped.
Management expects 58% of the backlog to convert into sales within the next 12 months, nearly matching the 59% guidance given a quarter earlier. The remainder stretches further out. Executives noted the company is now booking some large engine orders for delivery as late as 2029, meaning the record order book will feed revenue over several years rather than all at once.
Sales Growth Decelerated Despite Rising Orders
Revenue climbed 17.3% year over year in fiscal Q3 2026, a slowdown from 24.0% growth in fiscal Q2 2026. Management said the quarter’s sales met its own expectations. Executives pointed to capacity constraints as the main obstacle to growth in Power & Energy, the segment that builds large engines and turbines, including those used in data centers.
For the fourth quarter, management guided toward moderate year-over-year sales growth, measured against what it described as a strong quarter in 2025. Over the trailing twelve months, revenue rose 20.3%, following a 1.5% decline in the prior twelve-month period. The latest quarter marks the first slowdown within a year of strong growth.
How Caterpillar Is Expanding Capacity
Caterpillar is working to free up room for more large-engine production. Management plans to use part of its Winston-Salem, North Carolina plant, currently making locomotive engines, as a second location to assemble and test one of its large engines. The initiative is part of a broader plan to nearly triple large-engine capacity by 2030 compared with 2024 levels.
Management also acknowledged operational challenges and inefficiencies during the ramp-up, and said it would provide more detail about 2027 in January.
Stock Reaction and Valuation
Between the close before the report and November 5, Caterpillar shares lost 22.4%, while the S&P 500 fell 5.0%. The stock now trades at 21.5 times trailing twelve-month earnings, versus a multiple of 22.9 for the S&P 500.
The next key data point will be fourth-quarter sales growth, due when Caterpillar reports in January 2027.