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    CMI
    Earnings call· Jun 2026(Q2 FY26)

    CUMMINS Q2 FY26 earnings call CMI

    Aug 4, 2026 Source

    Executive summary

    Cummins Q2 FY26 — Record Sales and Raised Full-Year Outlook Driven by Power Generation and China Demand

    Cummins delivered record Q2 FY26 results, driven by robust global power generation demand, particularly from data centers, and strong performance in China. The company raised its full-year revenue and EBITDA guidance, reflecting improved North America on-highway markets and continued strength in power generation. A phased transition plan for EPA 2027 emissions regulations is expected to smooth the product launch cycle, while capacity constraints continue to limit power generation growth.

    Highlights

    5

    • Record second quarter sales of $9.5 billion, an increase of 9% compared to Q2 FY25.

    • Record EBITDA of $1.7 billion, or 17.5% of sales.

    • Full-year revenue outlook raised to 10%-13% growth (from 8%-11%).

    • Full-year EBITDA guidance midpoint raised to 18%-18.5%.

    • Quarterly cash dividend increased by 10% for the 17th consecutive year.

    Concerns

    4

    • EBITDA margin decreased to 17.5% from 18.4% YoY, partially due to higher variable compensation and tariffs.

    • Power Systems growth constrained by capacity, despite strong demand.

    • Elevated inventory levels in some mining markets expected to moderate demand, lowering FY26 sales guidance to down 5% to up 5%.

    • R&D costs expected to remain elevated longer due to the staggered EPA 2027 transition.

    Guidance & targets

    16
    CategoryTargetConfidence
    Full-year 2026 total company revenues
    increase 10% to 13%
    high materiality
    High
    Full-year 2026 EBITDA margin
    18% to 18.5%
    high materiality
    High
    Full-year 2026 North America heavy-duty truck forecast
    240,000 to 250,000 units
    medium materiality
    High
    Full-year 2026 North America medium-duty truck forecast
    130,000 to 140,000 units
    medium materiality
    High
    Full-year 2026 North America pickup truck engine shipments
    125,000 to 140,000 units
    medium materiality
    High
    Full-year 2026 China total revenue (incl. JVs)
    increase approximately 15%
    medium materiality
    High
    Full-year 2026 China heavy and medium-duty truck demand
    down 5% to up 5%
    medium materiality
    High
    Full-year 2026 India total revenue (incl. JVs)
    increase 2%
    medium materiality
    High
    Full-year 2026 Global Construction demand
    flat to up 10%
    medium materiality
    High
    Full-year 2026 Global Power Generation revenues
    increase 15% to 25%
    high materiality
    High
    Full-year 2026 Mining engine sales
    down 5% to up 5%
    medium materiality
    Medium
    Full-year 2026 Aftermarket growth
    3% to 8%
    medium materiality
    Medium
    Full-year 2026 Accelera revenues
    $350 million to $400 million
    medium materiality
    High
    Full-year 2026 Accelera net losses
    $260 million to $290 million
    medium materiality
    High
    Full-year 2026 effective tax rate
    approximately 23%
    low materiality
    High
    Full-year 2026 capital investments
    $1.35 billion to $1.45 billion
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Engine
    Projected 2026 revenues for the engine business to be at 9% to 14%, EBITDA 12.5% to 13.25%.
    EBITDA decreased from 13.8% YoYHigher research and development and freight costs were partially offset by stronger North American medium-duty truck volumes, China construction demand and improved tariff recovery
    		$3.1 billion6%—12.5%
    Components
    Projected 2026 revenues for Components to be up 8% to 13%, EBITDA 13.5% to 14.25%.
    EBITDA decreased from 14.7% YoYHigher product coverage costs were partially offset by stronger North American truck volumes, higher China on and off-highway volumes, favorable pricing
    		$2.9 billion7%—13.2%
    Distribution
    Projected 2026 revenues for Distribution to be up 9% to 14%, EBITDA 13.5% to 14.25%.
    EBITDA decreased from 14.6% YoYDriven by higher incentive compensation and freight expenses, which were partially offset by higher power generation volumes
    		$3.3 billion9%—13.6%
    Power Systems
    Projected 2026 revenues for Power Systems to grow 14% to 19%, EBITDA 25% to 25.75%.
    EBITDA increased from 22.8% YoYPrimarily driven by strong global power generation demand, especially in the U.S. and China
    		$2.3 billion19%—24.5%
    Accelera
    Projected 2026 revenues for Accelera to be $350 million to $400 million, net losses $260 million to $290 million.
    EBITDA improved from a loss of $100 million YoYDriven by higher electrified powertrain and electrolyzer salesReflecting targeted cost reduction actions
    		$145 million38%—loss of $69 million

    Operational metrics

    25
    EBITDA
    $1.7 billionup from $1.6 billion YoY
    Q2 FY26

    Record for a second quarter.

    EBITDA Margin
    17.5%down from 18.4% YoY
    Q2 FY26

    Primarily due to higher variable compensation expenses associated with projections for record full year earnings.

    Gross Margin
    26.1%down from 26.4% YoY
    Q2 FY26

    Increase in dollars driven by higher volumes, JV earnings, positive pricing, partially offset by tariffs and higher incentive compensation.

    Selling, Administrative and Research Expenses
    $1.3 billionup from $1.1 billion YoY
    Q2 FY26

    Driven primarily by higher development cost to support upcoming on-highway platform launches, new mining and natural gas power generation programs.

    Joint Venture Income
    $154 millionincreased $36 million YoY
    Q2 FY26

    Primarily due to stronger performance in China joint ventures, benefiting Engine and Power Systems segments.

    Interest Expense
    $80 milliondecrease of $7 million YoY
    Q2 FY26
    Effective Tax Rate
    25.1%
    Q2 FY26

    Included $29 million of unfavorable discrete items or $0.21 per diluted share.

    Net Earnings
    $932 millionup from $890 million YoY
    Q2 FY26
    Diluted EPS
    $6.73up from $6.43 YoY
    Q2 FY26
    Capital Returned to Shareholders
    $501 million
    Q2 FY26

    Consistent with commitment to return approximately 50% of operating cash flow.

    Share Repurchases
    $225 million
    Q2 FY26
    Cash Dividends Paid
    $276 million
    Q2 FY26
    North America Heavy-Duty Truck Industry Production
    60,000 unitsdown 4% from 2025 levels
    Q2 FY26
    North America Heavy-Duty Unit Sales
    23,000 unitsup 2% YoY
    Q2 FY26
    North America Medium-Duty Truck Industry Production
    32,000 unitsincrease of 8% from 2025 levels
    Q2 FY26
    North America Medium-Duty Unit Sales
    29,000 unitsup 19% YoY
    Q2 FY26
    Stellantis Engine Shipments
    33,000 enginesdown 2% YoY
    Q2 FY26

    For use in ramp pickups.

    China Medium- and Heavy-Duty Truck Industry Demand
    378,000 unitsincrease of 24% from last year
    Q2 FY26

    Driven by strong export demand, particularly in Africa and Southeast Asia, as well as improving domestic replacement demand and increase in battery electric powered trucks.

    China Medium- and Heavy-Duty Truck Unit Sales
    53,000 unitsincrease of 2%
    Q2 FY26
    China Excavator Industry Demand
    79,000 unitsincrease of 34% from 2025 levels
    Q2 FY26
    China Excavator Unit Sales
    15,000 unitsup 35%
    Q2 FY26

    Driven by export demand associated with mining investments in Africa and Indonesia, and OEM inventory stocking.

    India Truck Industry Production
    increased 5%from 2025
    Q2 FY26

    Driven by increased freight availability, infrastructure and mining activity.

    Incentive Compensation Expense
    lower by $25 millionvs Q2 FY26
    Q3/Q4 FY26

    Per quarter, compared to Q2 expense.

    Incentive Compensation Reset
    around $200 million
    FY27

    Potential tailwind from resetting plans at target for the current year.

    Warranty Accrual Rate
    low 2%
    current

    Pretty much at historical lows despite historical complexity of products.

    Industry KPIs

    5
    MetricValueDetails
    Capacity expansion20 gigawattincremental capacity
    Tariff cost impactimmaterialUSD
    Parts aftermarket business3% to 8%% growth
    Data center prime power demandaccelerating demand
    Industry production market size forecasts240,000 to 250,000 unitsunits

    Orderbook & backlog

    2
    Power Generation Backup Power Genset Demandseveral gigawattsQ2 FY26

    Secured through a multiyear agreement with a global hyperscaler, providing visibility into future demand.

    Power Generation Backlogvery strongQ2 FY26

    Demand for backup power is ahead of industry supply availability, leading to extended lead times into H2 2028 for new orders.

    Product announcements

    4
    ProductTypeDetails
    130-liter natural gas gensetlaunch
    Model Year 2027 X15 enginelaunch
    Model Year 2027 X10 enginelaunch
    Next-generation B platformlaunch

    Deals & partnerships

    2
    Global HyperscalerMultiyear agreement for backup power genset demandseveral gigawatts of future demandmultiyear

    Expanding a long-standing partnership, securing visibility into future backup power genset demand.

    Circe EnergyProvide QSK60 and HSK78 natural gas generator sets and integrated microgrid technology

    For a behind-the-meter prime power solution, supporting a high-performance computing data center in Texas.

    Capital programs

    1
    Global Power Generation Capacity Expansionunderway
    Start: end of 2025 (North America capacity)

    Benefit: 20 gigawatt incremental capacity

    In response to growing global investments in data centers, expanding global capacity across all plants and supply chain. Growth in 2026 will continue to be constrained by capacity, with some capacity coming online in 2027 and bigger step-ups in 2028.

    Risks & headwinds

    6
    Higher variable compensation expensesQ2 FY26

    Partially offset EBITDA margin decrease from 18.4% to 17.5% YoY in Q2 FY26.

    Mitigation: Expected to be lower in H2 FY26 and reset for FY27.

    TariffsQ2 FY26

    Partially offset gross margin increase in dollars in Q2 FY26.

    Mitigation: Net impact was immaterial to EBITDA dollars in the quarter; improved tariff recovery in Engine segment.

    Power Generation Capacity ConstraintsFY26

    Constrains 2026 growth despite 15-25% revenue increase.

    Mitigation: Ongoing global capacity expansion investments (20 GW incremental capacity) phasing in through 2030.

    Elevated Mining Inventory LevelsRemainder of FY26

    Expected to moderate demand for mining engine sales to down 5% to up 5% (from flat to up 10%).

    Mitigation: Fleet replacement activity remains supportive in other markets.

    Elevated R&D CostsFY27

    R&D cost will stay elevated for a little bit longer.

    Mitigation: Offset by lower product coverage costs for 2027 compared to a full January 1 launch, due to phased EPA 2027 transition.

    Higher Warranty Accruals for New PlatformsFY27 and beyond

    Expected to go up as more new products are mixed in North America.

    Mitigation: Phased transition allows for addressing issues quickly as volume ramps, which should provide a positive from a quality perspective over the long term.

    What to watch in Q3 FY26

    5

    EPA 2027 Engine Transition Smoothness

    Next quarter and into FY27
    CurrentPhased transition announced, limited production of X15/X10 in Jan 2027.
    TargetSmooth ramp-up of new products, continued availability and demand for current products, minimal disruption.

    Why it matters

    The success of this transition impacts market share, profitability, and customer satisfaction for a critical product line.

    So it's going to smooth that overall transition and really, I think, make less variation of what year-to-year demand looks like, more driven just by the fundamental economics.

    Q&A highlights

    5

    How does the EPA 2027 clarity impact the 2027 outlook, especially given prior expectations for a down H1? Also, why were distribution margins lowered in guidance?

    The phased EPA 2027 transition will smooth demand, making 2027 less abrupt than previously anticipated, with current products available longer. Distribution margins were impacted by higher incentive compensation (due to record full-year projections) and mix, but underlying growth is strong.

    “So it's going to smooth that overall transition and really, I think, make less variation of what year-to-year demand looks like, more driven just by the fundamental economics.”

    asked by Jamie Cook · answered by Jennifer Rumsey

    2 min read6 chapters

    Detailed Narrative

    01

    EPA 2027 Emissions Regulations Transition

    Cummins announced a phased transition plan for the North America On-Highway 2027 emissions regulations, leveraging implementation flexibilities outlined by the EPA. This approach aims for a smoother transition, with limited production of the model year 2027 X15 and X10 engines beginning in January 2027, and full production ramping progressively through Q3/Q4 2027. The current X12 and L9 engines will remain available under the proposed rule, and the next-generation B platform is set for a January 2028 launch, with the current B platform available throughout 2027.

    02

    Data Center Market Expansion and Agreements

    The company is significantly expanding its presence in the data center market, driven by growing global investments. This includes plans to broaden its power generation portfolio with integrated solutions and the development of a 130-liter natural gas genset. A multiyear agreement was signed with a global hyperscaler, securing visibility into several gigawatts of future backup power demand, reinforcing confidence in growth and supporting ongoing capacity expansion. Additionally, an agreement with Circe Energy will provide natural gas generator sets and microgrid technology for a high-performance computing data center in Texas.

    03

    Record Q2 Financial Performance

    Cummins delivered record second-quarter sales of $9.5 billion, a 9% increase year-over-year, and record EBITDA of $1.7 billion (17.5% of sales). This performance was primarily driven by higher global demand in power generation markets, particularly from data centers, and international construction markets. Increased joint venture earnings and positive pricing also contributed, partially offset by tariffs and higher variable compensation expenses.

    04

    Raised Full-Year Outlook

    The company raised its full-year 2026 revenue growth outlook to 10-13% and increased the midpoint of its EBITDA guidance to 18-18.5%. This improved outlook reflects stronger North America on-highway markets, continued power generation strength, and improved on- and off-highway demand in China. Management expects improving operating performance in the second half of the year, entering with positive momentum and greater regulatory clarity.

    05

    Strategic Capital Allocation

    Cummins returned over $0.5 billion to shareholders in Q2 FY26, comprising $225 million in share repurchases and $276 million in cash dividends, consistent with its long-standing commitment to return approximately 50% of operating cash flow. The Board of Directors also approved a 10% increase in the quarterly cash dividend, marking the 17th consecutive year of dividend growth, signaling confidence in future performance.

    06

    China Market Rebound

    Revenues in China, including joint ventures, increased 30% year-over-year to $2.3 billion, driven by accelerating data center demand and improving on-highway and construction markets. Industry demand for medium- and heavy-duty trucks in China rose 24%, supported by strong export demand (Africa, Southeast Asia) and domestic replacement, alongside an increase in battery electric powered trucks. Excavator demand in China also increased 34%, driven by exports and rural development projects.

    AI-generated summary of the company’s earnings call. Not investment advice.