Caterpillar CAT-N topped third-quarter profit and revenue estimates on Wednesday as a boom in AI technologies drove demand for its energy equipment, sending its shares up 12 per cent.

The industrial equipment maker’s energy and transportation unit has fueled much of the company’s growth in recent quarters as AI-driven investments in power-hungry data centers have boosted demand for its power-generation systems.

President Donald Trump’s focus on energy projects has also aided the segment, which also makes mining equipment such as excavators and giant shovels and contributes 40 per cent to Caterpillar’s overall revenue.

“Power-generation sales are expected to continue sustainably growing as CAT maintains their market leadership in backup power generation for data center applications,” said Third Bridge analyst Ryan Keeney.

The unit posted a 17-per-cent rise in third-quarter sales to about US$7.2-billion.

However, industrial machinery makers including Caterpillar are grappling with higher costs from Trump’s expansive tariffs on imports, while weak demand and elevated interest rates are limiting their ability to pass on the burden to customers.

The company said on Wednesday it expects annual tariff costs between US$1.6-billion and US$1.75-billion, compared with its prior expectation of US$1.5-billion to US$1.8-billion.

Tariff headwinds are expected to be larger in the final quarter of the year, compared to the third quarter, finance chief Andrew Bonfield told analysts in an earnings call.

During the second quarter, companies across the globe flagged a combined annual financial hit of between US$16.2-billion and US$17.9-billion and nearly US$15-billion for 2026, according to a Reuters tariff tracker.

The company, seen as a bellwether for the global industrial economy, reported quarterly revenue of US$17.6-billion, beating Wall Street’s expectation of US$16.77-billion, according to data compiled by LSEG.

Its mainstay construction segment posted a 7-per-cent rise in revenue to US$6.76-billion, helped by price hikes.

The company reported a quarterly adjusted per share profit of US$4.95, topping the average estimate of US$4.52.

Caterpillar’s shares are up about 60 per cent so far this year, outperforming the S&P 500 Industrials index’s 17-per-cent rise.