Cummins Q2 Earnings Call Highlights

Key Points

• Cummins reported record Q2 2026 results, with revenue up 9% to $9.5 billion and EBITDA reaching $1.7 billion. The company raised its full-year revenue-growth outlook to 10%–13% and increased the midpoint of its EBITDA-margin forecast to 18.25%.
• Data-center demand was a major growth driver: Power Systems revenue rose 19% to $2.3 billion, supported by strong backup-power demand in the U.S., China and Southeast Asia. A multiyear hyperscaler agreement provides visibility into several gigawatts of future generator demand, though capacity constraints may limit near-term growth.
• Cummins improved its outlook for North American truck production and China, citing stronger orders, fleet profitability and construction activity. Record operating cash flow enabled $501 million in shareholder returns, including a 10% quarterly dividend increase.

Cummins NYSE: CMI reported record second-quarter sales and EBITDA for 2026, driven by continued demand for power generation equipment used in data centers, improving North American truck markets and stronger activity in China.

Second-quarter revenue rose 9% year over year to a record $9.5 billion. EBITDA increased to $1.7 billion, although EBITDA margin declined to 17.5% of sales from 18.4% a year earlier. Net income was $932 million, or $6.73 per diluted share, compared with $890 million, or $6.43 per share, in the prior-year quarter.

Chair and CEO Jennifer Rumsey said higher global power-generation demand, especially from data centers, and international construction-market strength supported the quarter. The company raised its full-year revenue outlook, now expecting 2026 sales growth of 10% to 13%, up from prior guidance for 8% to 11% growth. Cummins also lifted the midpoint of its full-year EBITDA margin outlook to a range of 18% to 18.5%.

Data Center Demand Supports Power Systems

Power Systems revenue climbed 19% to a record $2.3 billion in the quarter, while segment EBITDA margin rose to 24.5% from 22.8% a year earlier. Rumsey said demand remained particularly strong for backup power systems supporting data centers in the U.S., China and Southeast Asia.

The company recently signed a multiyear agreement with an existing global hyperscaler customer, providing visibility into several gigawatts of future backup-power generator demand. Cummins also announced an agreement with Circe Energy to supply natural-gas generator sets and integrated microgrid technology for a behind-the-meter prime-power solution serving a high-performance-computing data center in Texas.

Cummins is expanding its global production capacity and developing a 130-liter natural-gas generator platform for the prime-power market. However, Rumsey said 2026 growth will remain constrained by available capacity for larger generator-set configurations. CFO Mark Smith said the company is generally selling new power-generation equipment into the second half of 2028.

For the full year, Cummins maintained its forecast for Power Systems revenue growth of 14% to 19%. The company expects segment EBITDA margin of 25% to 25.75%, reflecting strong performance as well as higher investments in the second half to develop its natural-gas platform and expand its prime-power position.

Truck and China Outlook Improves

Cummins raised its outlook for North American heavy-duty truck production to 240,000 to 250,000 units in 2026, compared with its previous range of 230,000 to 250,000 units. The company cited stronger recent orders, improved fleet profitability and better visibility into second-half demand.

Its North American medium-duty truck outlook increased to 130,000 to 140,000 units, from a prior range of 125,000 to 135,000 units. Cummins attributed the revision to stronger expected second-half demand, improving OEM outlooks and a modestly higher pre-buy following recent emissions-regulation clarification.

Second-quarter North American revenue rose 8%. Industry heavy-duty truck production declined 4% to 60,000 units, while Cummins’ heavy-duty unit sales increased 2% to 23,000 units. North American Power Systems revenue increased 19%, supported by data-center demand and manufacturing capacity added late in 2025.

International revenue increased 12%, led by China. Revenue in China, including joint ventures, rose 30% to $2.3 billion as data-center demand accelerated and on-highway and construction markets improved. Power-generation equipment sales in China surged 88%.

The company now expects China revenue, including joint ventures, to increase about 15% in 2026, up from its prior outlook for a 10% increase. Cummins also improved its expectation for China medium- and heavy-duty truck demand to a range of down 5% to up 5%, compared with prior guidance of down 10% to flat, citing export demand in Africa and Southeast Asia.

EPA Transition Expected to Smooth 2027 Demand

Rumsey said the Environmental Protection Agency’s proposed rule regarding North American on-highway 2027 emissions requirements provides greater clarity for the industry. Cummins plans to use proposed implementation flexibilities to phase in its new HELM engine platforms while continuing to make certain current products available.

Limited production of the model-year 2027 X15 and X10 engines is expected to begin in January 2027, with full X10 production expected in the third quarter and full X15 production expected in the fourth quarter, based on OEM launch plans. The company expects current X12 and L9 engines used in truck and transit-bus applications to remain available during the transition. Its next-generation B platform remains scheduled for a January 2028 launch, while the current B platform is expected to be available throughout 2027.

Rumsey said the phased approach should produce a smoother demand transition than the company had previously anticipated. Smith said Cummins expects to pass non-conformance penalties associated with current products through to the market and does not anticipate a significant financial impact from them. He added that research and development costs will remain elevated for longer because of the staggered transition.

Cash Returns and Segment Results

Operating cash flow reached a record $1.5 billion for a second quarter, compared with $785 million a year earlier, primarily due to improved working capital. Cummins returned $501 million to shareholders through $225 million in share repurchases and $276 million in dividends. Its board approved a 10% quarterly dividend increase, marking the company’s 17th consecutive year of dividend growth.

• Engine segment revenue rose 6% to $3.1 billion, while EBITDA margin fell to 12.5% from 13.8% amid higher research, development and freight costs.
• Components revenue increased 7% to $2.9 billion, with EBITDA margin declining to 13.2% from 14.7%.
• Distribution revenue rose 9% to a record $3.3 billion, while EBITDA margin decreased to 13.6% from 14.6%, partly due to incentive compensation and freight expenses.
• Accelera revenue increased 38% to $145 million, and its EBITDA loss improved to $69 million from a $100 million loss a year earlier.

Smith said incentive compensation expense increased as Cummins projected record full-year financial performance, but the run rate should be lower in each of the final two quarters than it was in the second quarter. The company expects full-year capital investments of $1.35 billion to $1.45 billion and an effective tax rate of about 23%, excluding discrete items.

About Cummins (NYSE:CMI)

Cummins Inc NYSE: CMI is a global power technology company that designs, manufactures, distributes and services a broad portfolio of diesel and natural gas engines, electrified powertrains, power generation systems and related components. Founded in 1919 and headquartered in Columbus, Indiana, Cummins has grown into one of the world's leading suppliers of internal combustion engines and a provider of technologies that reduce emissions and improve fuel efficiency.

The company's product lineup includes heavy-, medium- and light-duty engines for on-highway and off-highway applications, generator sets and power systems for commercial and industrial use, and key engine components such as turbochargers, fuel systems, air handling, filtration and aftertreatment solutions.

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