Cummins data-center momentum offsets weaker truck outlook

Data-center power demand anchors Cummins growth

Cummins’ third-quarter performance showed how power-generation demand associated with data centers can offset weakness in traditional truck markets. The company reported revenue of $9.4 billion, up 13% year over year, while global power generation remained exceptionally strong and orders for larger engine generator sets extended into the second half of 2028. Management also said third-quarter order intake exceeded expectations, with international data-center order dollars roughly matching US levels and China and Southeast Asia among the fastest-growing regions.

Power Systems revenue reached a record $2.3 billion, up 15%, and its EBITDA margin expanded to 25.4% from 22.9%. Strong global power-generation demand and favorable pricing were identified as the principal drivers. These results establish current sales and an order outlook, but they do not disclose a new procurement process, named supplier selection or the economics of individual data-center deployments.

The power opportunity nevertheless extends beyond current-quarter revenue. Cummins was selected to supply battery energy storage systems for a large US data-center project, described as its largest such deployment to date and designed to manage AI-related power swings, grid stability and reliability. The reviewed reporting does not quantify that contract’s value or establish its relative importance to Cummins’ Power Systems outlook.

Truck recovery is uneven across segments

North American heavy- and medium-duty truck markets provided a substantial counterweight to weaker pickup and China truck demand. North American revenue increased 15%; heavy-duty industry production rose 62% to 70,000 units, while Cummins sales increased 68% to 24,000 units. Medium-duty production climbed 77% to 36,000 units, and Cummins unit sales rose 88% to 33,000.

The recovery was not broad enough to remove near-term risk. Lower-than-expected North American pickup volumes were the principal reason Cummins reduced its 2026 revenue-growth expectation to approximately 10%, the low end of its previous 10% to 13% range. The company cut its pickup-engine shipment forecast to 118,000-122,000 units from 125,000-140,000, citing elevated diesel prices and interest rates. It also reduced its North American medium-duty production forecast to 125,000-130,000 units from 130,000-140,000, while maintaining its heavy-duty market forecast of 240,000-250,000 units.

CEO Jennifer Rumsey said regulatory uncertainty surrounding the anticipated phased transition to EPA 2027 products delayed some customer purchasing decisions. This makes the truck recovery conditional rather than uniform: heavy- and medium-duty volumes improved in the quarter, but pickup weakness and delayed purchasing decisions constrained the full-year outlook.

Record earnings reflect operating leverage and pricing

Cummins’ quarterly EBITDA reached a record $1.8 billion, or 18.9% of sales, compared with $1.2 billion, or 14.3% a year earlier. The comparison was affected by $240 million of prior-year goodwill impairment and inventory charges related to Accelera. Excluding those charges, the EBITDA margin improved by approximately 170 basis points, primarily because of higher volumes.

Gross margin rose to $2.6 billion, or 27.7% of sales, from $2.1 billion, or 25.6% in the prior-year quarter. Net earnings more than doubled to $1.1 billion, or $8.25 per diluted share, from $536 million, or $3.86 per share, supported by stronger volumes and favorable power-generation pricing. The latest quarter also included $75 million of favorable discrete tax items, equivalent to $0.54 per diluted share.

Operating cash flow reached $1.4 billion, compared with $1.3 billion a year earlier. Components revenue rose 23% to $2.9 billion, and its EBITDA margin increased to 14.3% from 12.5%, primarily on higher North American truck volumes. These results show that demand strength translated into higher sales, cash generation and profitability, although the headline earnings comparisons also include nonrecurring tax and Accelera-related effects.

Capacity growth may support a later power ramp

Cummins opened an approximately 500,000-square-foot cooling-systems facility in Somers, Wisconsin, backed by about $100 million of investment. The site is expected to more than double production capacity for the IEA business and improve cooling-system supply for generator sets. This supports potential future output but is not itself evidence of incremental customer orders.

Management said its broader power-generation capacity expansion remains on track. Initial increases are expected in 2027, with most additional capacity coming online in 2028. Orders for larger generator sets already extend into the second half of 2028, but the reviewed reporting does not establish how much of the added capacity is covered by orders. A new 130-liter natural-gas engine is expected to contribute more meaningful revenue beginning in 2029, making the near-term verification signal operating execution rather than immediate engine revenue.

Constraints remain visible despite stronger demand

A Power Systems supplier challenge disrupted production and subsequent Distribution installations. Approximately $200 million of expected third-quarter revenue shifted into the fourth quarter, and Cummins expects to recover most delayed shipments by year-end. Management indicated that the implied fourth-quarter revenue growth of about 15% reflected both delayed-shipment recovery and underlying conditions; the delayed installations themselves were not attributed to a change in customer demand.

The main counter-case to the growth thesis is therefore mix and execution rather than absent demand. Data-center power orders and truck-market volumes are supporting two distinct growth engines, but pickup weakness, EPA-related purchasing delays and supply constraints reduced the third-quarter outlook. The next observable checkpoints are fourth-quarter recovery of most delayed shipments, evidence of capacity coming online in 2027, and whether power-generation revenue remains within the company’s maintained 15% to 25% growth forecast for 2026.

Industry and product implications