For decades, investors have viewed Cummins (NYSE: CMI) as a bellwether for the heavy-duty truck market and the broader economy.
While that connection to the traditional engine business will always exist, Cummins is undergoing a fundamental shift, fueled by a source of demand that is far less cyclical than truck sales
The company’s power systems segment, which manufactures large diesel and natural gas generators, has become the company’s primary growth driver. This was evident in the first quarter, when Cummins beat earnings estimates and raised its full-year guidance despite a slowdown in its legacy engine business. Powering the AI boom Growth for this segment and its distribution segment is being driven by the need for many more data centers in this artificial intelligence (AI) era.
To ensure continuous uptime and meet regulatory requirements, these facilities require reliable backup power. A typical 100-megawatt data center needs between 120 and 200 megawatts of backup generation, creating plenty of demand for Cummins. In the first quarter, power systems revenue grew 19% year over year to $2 billion.