Cummins
Designs, manufactures and services diesel/natural-gas engines, gensets, power-generation systems, and emissions/drivetrain components; sells to truck/equipment OEMs and end-users, monetizing a large installed base through a high-margin aftermarket parts + service (Distribution) annuity.
Earnings, margins, COGS & capex
FY2025 revenue was roughly flat at $33.7B (-1%) as strength in Distribution and record Power Systems demand for data-center backup power offset softer North America truck/Engine and Components volumes and the Atmus filtration split-off. GAAP net income was $2.8B (8.4% of sales), diluted EPS $20.50, dented by $458M ($3.28/sh, mostly non-cash) of Accelera electrolyzer/hydrogen charges. Momentum accelerated into Q1 2026 (+3% revenue, Power Systems surging), prompting a mid-year guidance raise.
Income statement — where each revenue dollar goes
% of revenueOf every $1 of revenue, ~75¢ is cost of goods and ~14¢ operating expense, leaving ~11¢ of operating profit (~8¢ net).
Revenue trend
Margins
stable/improving with mix shift to Power Systems
guided 17.75%-18.50% for FY2026 (raised from 17.0%-18.0%, ex-charges); FY2025 down from 18.6% in 2024 on Accelera charges
depressed by Accelera charges
rising; Q1 2026 actual 29.5%, FY2026 guided ~25%-26% — the profit engine
record; guided 13.7%-14.7% FY2026
soft on N.A. truck cyclicality
COGS structure
~74.7% of sales (FY2025 gross margin 25.3%). Cost base is heavy on steel/aluminum/castings, purchased components (turbos, electronics, fuel systems), and manufacturing labor across North America, India, China and Europe; emissions-compliance content and warranty accruals are meaningful swing factors. Aftermarket parts (via Distribution) carry structurally higher margins than first-fit engines.
Capex
~$1.235B in FY2025 (~3.7% of revenue) — moderate, asset-heavy but not capital-intensive vs. pure manufacturers; directed at Power Systems capacity for large gensets, engine platform updates (HELM fuel-agnostic platform), and select Accelera/battery investments.
Latest earnings
Operationally strong beat; GAAP net income $654M / $4.71 diluted EPS was reduced by a $199M charge on divesting the low-pressure fuel-cell business and settling related obligations, but underlying results plus raised guidance were received positively
FY2026 raised: total revenue +8% to +11% (from +3% to +8%); EBITDA margin 17.75%-18.50% ex-charges (from 17.0%-18.0%); Power Systems revenue +14% to +19% (~25%-26% EBITDA margin); Distribution revenue +9% to +14% (13.7%-14.7% EBITDA)
- Q1 2026 revenue
- $8.4B (+3% y/y)
- Q1 2026 diluted EPS
- $4.71 (incl. $199M fuel-cell divestiture charge)
- Q1 2026 Power Systems
- $2.0B sales (+19%), 29.5% EBITDA margin
- Power Systems FY2026 guide
- +14% to +19% revenue, ~25%-26% EBITDA margin
- North America power generation demand
- ~+23% y/y (Q1 2026, data-center-led)
Growth drivers
- Data-center backup power — AI/hyperscale campuses driving record demand for large gensets; Cummins reported ~+23% y/y North America power generation demand in Q1 2026 (data-center-led), with large-node engines like the QSK95 at the tip of the spear — the single biggest 2025-2026 catalyst
- Power Systems mix shift — fastest-growing, highest-margin segment (22.7% FY2025 EBITDA), guided +14% to +19% revenue in FY2026
- Distribution aftermarket annuity — parts + service on a huge global installed base, record 2025 sales, less cyclical than first-fit engines
- HELM fuel-agnostic engine platform (diesel, natural gas, hydrogen-ready) extending internal-combustion relevance
- International power generation strength, particularly outside North America
- Pending 2027 EPA emissions cycle and pre-buy dynamics in the heavy-truck market
Reported financials — SEC EDGAR
Audited GAAP figures pulled from SEC filings · latest filing 2026-02-10. The audited primary-source spine — not financial advice.
Revenue — annual (GAAP)
Margins & balance sheet — FY’25
Bull & bear
Cummins has quietly become an AI-infrastructure play: its highest-margin segment (Power Systems, 22.7% FY2025 EBITDA, 29.5% in Q1 2026) is the go-to backup power for hyperscale data centers, North America power generation demand surged ~23% y/y in Q1 2026, and management just raised full-year guidance mid-year — all while the aftermarket annuity and fortress balance sheet fund a 16-year dividend-growth streak.
- Power Systems is a genuine data-center secular grower with 25%+ EBITDA margins and a raised +14-19% revenue guide — re-rates CMI from cyclical toward a structural-growth multiple
- Distribution aftermarket provides a recurring, high-margin, lower-cyclicality earnings floor on a huge installed base
- HELM fuel-agnostic platform means Cummins wins whether the transition fuel is diesel, natural gas, or hydrogen — optionality without betting the company
- Mid-year 2026 guidance raise (revenue to +8-11%, EBITDA to 17.75-18.50%) signals real demand acceleration, not financial engineering
- Best-in-class scale, service network, and brand create durable pricing power and OEM lock-in
- Consistent capital return: 16 straight years of dividend increases (raised to $2.00/quarter) plus buybacks
Strip out the data-center hype and CMI is still a cyclical diesel-engine maker with flat-to-down 2025 revenue, a chronically loss-making zero-emissions arm that keeps writing off hydrogen bets, and a ~34x trailing P/E that already prices in the Power Systems boom — leaving little margin of safety if truck demand rolls over or genset competition compresses margins.
- ~34x trailing P/E (on ~$19.25 TTM diluted EPS at the Jul 2 $661.70 close) is a rich multiple for a business whose FY2025 revenue fell 1% — the market is extrapolating the data-center surge
- Engine + Components remain deeply cyclical and tied to North America Class 8 truck demand, which can fall sharply in a freight recession
- Accelera is a serial value-destroyer: $458M of 2025 charges plus a $199M Q1 2026 fuel-cell divestiture charge show the zero-emissions strategy is still unsettled
- Long-term EV/battery-electric truck adoption threatens the diesel first-fit franchise that still funds the company
- Data-center genset demand is itself cyclical and could normalize once AI capex digestion sets in; Caterpillar and Rolls-Royce mtu are attacking the same large-genset segment
- Customer concentration among a few large OEMs adds order-timing volatility
What it is worth
Peer-relative multiples cross-checked with a reverse-DCF read on the Jul 2, 2026 ~$91.3B market cap / ~$661.70 price.
~$450-500
if a freight/truck down-cycle hits Engine + Components, data-center order growth normalizes, and the multiple de-rates back toward a mid-teens cyclical-industrial forward P/E, with continued Accelera drag.
~$650-700
roughly the current level: mid-to-high-single-digit revenue growth, EBITDA margin trending to ~18%, multiple holding near ~22-24x forward as the market credits Power Systems but discounts cyclical Engine/Components.
~$800+
if Power Systems sustains 25%+ EBITDA margins and data-center orders compound, pulling the blended multiple toward a structural-growth ~26-28x forward and EBITDA margin durably above 18%.
At ~34x trailing (on ~$19.25 TTM diluted EPS) / ~23x forward earnings, CMI trades at a premium to its historical cyclical-industrial multiple, reflecting the market re-rating Power Systems toward a data-center-growth multiple. The reverse-DCF implies the market is pricing sustained high-single/low-double-digit revenue growth and EBITDA-margin expansion into the ~18%+ range — i.e. the raised FY2026 guide holding for several years, not a one-off AI-order spike. Achievable if data-center genset demand is structural, but it leaves little cushion if the Engine/Components truck cycle rolls over or genset competition compresses margins.
SWOT
Strengths
- Global scale leader in independent engines/power systems with an unmatched service + distribution network
- High-margin, less-cyclical aftermarket (Distribution) annuity on a massive installed base
- Power Systems franchise positioned squarely in the AI-data-center backup-power boom (22.7% FY2025 EBITDA, surging orders)
- Fuel-agnostic HELM platform hedges the powertrain-transition timing risk
- Fortress balance sheet, 16 consecutive years of dividend increases (raised to $2.00/quarter in 2025), disciplined capital returns
Weaknesses
- Core Engine/Components segments are cyclical and exposed to North America Class 8 truck demand swings
- Accelera (zero-emissions) is a persistent loss-maker — repeated hydrogen/electrolyzer/fuel-cell write-downs ($458M in 2025, $199M in Q1 2026) signal strategy churn
- Revenue was flat-to-down in 2025; growth is narrowly concentrated in Power Systems/Distribution
- Heavy exposure to emissions regulation, warranty risk, and commodity/steel input costs
- Meaningful revenue tied to a small number of large OEM customers (e.g., PACCAR, Stellantis Ram, Daimler Truck)
Opportunities
- Structural, multi-year data-center power demand from AI buildouts (largest single tailwind)
- Natural-gas and hydrogen-ready engines as a bridge fuel where zero-emission adoption lags
- 2027 EPA emissions pre-buy cycle boosting near-term truck engine demand
- Grid-support / distributed-generation and prime-power beyond backup as electricity demand rises
- International power-gen expansion and India (Tata Cummins) growth
Threats
- Class 8 truck cyclicality and a potential freight-recession downturn in Engine/Components
- EV/battery-electric truck adoption eroding long-term diesel first-fit demand
- Intensifying data-center genset competition from Caterpillar and Rolls-Royce (mtu)
- Chinese engine makers (Weichai and others) competing on price in emerging markets
- Regulatory/tariff and warranty shocks; further hydrogen strategy reversals denting Accelera credibility
Moats, dependencies & bottlenecks
Moats
Largest independent engine maker; the Cummins name carries pricing power with OEMs and end-users, especially in heavy-duty diesel and large gensets.
Distribution segment monetizes a vast installed base through parts and service — sticky, high-margin, and expensive for rivals to replicate at scale.
Decades of emissions-certification and drivetrain integration expertise raise the bar for new entrants each regulatory cycle.
Large-node engines (e.g. QSK95) in high-density backup power build switching costs at hyperscale sites, but the segment is newly contested by CAT and mtu.
Dependencies
The marginal growth driver and multiple support; a slowdown in AI infrastructure spend would hit Power Systems' momentum.
Engine/Components volumes swing with freight and OEM build rates; a truck down-cycle pressures the largest revenue base.
Customer concentration Large share of first-fit engine revenue rides on a handful of truck OEM relationships and their build schedules.
Drives pre-buy demand and compliance cost; adverse or delayed rules alter product economics and warranty exposure.
Input-cost inflation and semiconductor availability affect COGS and delivery.
Advantages
- Diversified across engines, components, distribution and power generation — offsets single-market cyclicality
- Highest-margin segment (Power Systems) aligned with the strongest secular demand (AI power)
- Recurring aftermarket cash flows fund R&D and dividends through cycles
- Fuel-agnostic HELM platform preserves relevance across fuel transitions
- Strong balance sheet and 16-year dividend-growth record
Weaknesses
- Core engine business remains structurally cyclical and diesel-dependent
- Accelera zero-emissions segment loss-making with repeated write-downs and strategy shifts
- Growth narrowly concentrated; ex-Power Systems the portfolio is flat
- Exposure to a few large OEM customers and to emissions-regulation timing
Bottlenecks
- Power Systems manufacturing capacity for large gensets vs. surging data-center order book
- Skilled-labor and supply-chain constraints on ramping high-margin genset output
- Warranty/quality reserves on emissions-compliant engines
- Timing and cost of the internal-combustion-to-zero-emissions transition (Accelera cash burn)
Top signals & trends
Top signals
Leading indicator of Power Systems revenue and margin; watch for order-growth deceleration.
Management confidence in demand acceleration.
Ongoing zero-emissions cash burn and strategy churn; watch for a clean line under hydrogen losses.
Governs Engine + Components; a rollover would offset Power Systems strength.
Bullish (near-term) · Could pull forward heavy-truck engine demand into 2026-2027.
Trends
High positive · Structural multi-year tailwind for Power Systems; the core bull case.
Long-term negative to diesel first-fit · Erodes engine franchise over 10+ years; Cummins hedges via HELM + Accelera but the segment loses money today.
HELM natural-gas engines gain where zero-emission adoption lags, especially heavy-duty.
Drives pre-buy demand and compliance content but raises warranty/cost risk.
Rising baseline electricity demand supports prime and distributed generation beyond backup.
Ecosystem & competitor graph
Suppliers feed the company; customers pull from it. Line thickness shows the strength of each tie (supply-chain dependency, customer earnings contribution). Hover to isolate a tie.
Steel input for engine blocks, castings and gensets.
Steel and specialty metals feedstock.
Turbocharging/thermal and drivetrain components (Cummins also produces its own turbos via Cummins Turbo Technologies — partial overlap).
Turbocharger technology supplier to the broader engine industry.
Sensors and electrical protection for engines/powertrains.
Fuel-injection and electronics; large private/foreign supplier to diesel engine makers (not publicly listed).
Kenworth/Peterbilt install Cummins engines — a major first-fit customer.
Cummins 6.7L Turbo Diesel powers Ram Heavy Duty pickups — a marquee long-running program.
Freightliner/Western Star engine supply relationship; non-US listing.
Representative hyperscaler driving data-center backup-genset demand.
Hyperscale data-center operator; end-demand for large gensets.
Hyperscale data-center backup power demand.
Off-highway/construction OEM using Cummins engines; non-US listing.
Primary rival in large data-center gensets and power generation; also off-highway engines.
mtu-brand high-density gensets gaining traction in hyperscale/AI power; direct Power Systems competitor.
Backup/standby power generation, stronger in residential/commercial but expanding into larger industrial/data-center backup.
Both a large Cummins customer (Kenworth/Peterbilt) and a competitor via PACCAR's own MX engines — a make-vs-buy threat to first-fit engine share.
Truck OEM with in-house engine programs; customer and competitor. Non-US listing; context only.
Truck OEM group with in-house engines; customer/competitor overlap. Non-US listing; context only.
Chinese heavy-duty engine maker competing on price in emerging markets; mainland-China name, analysis/context only, not a buy/own call.
Off-highway/industrial engines (John Deere Power Systems) overlap in select applications.
Rail/large engine power overlap in select industrial segments.