What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-13 compared with 2025-02-14 · 298 added, 296 removed, 660 unchanged (47% of the section changed)

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Highlights for the full-year 2025 include:

• Sales and revenues for 2024 were $64.809 billion, a decrease of $2.251 billion, or 3 percent, compared with $67.060 billion for 2023.

In the three primary segments, sales were lower in Construction Industries and Resource Industries and higher in Energy & Transportation .

• Sales and revenues for 2025 were $67.589 billion, an increase of $2.780 billion, or 4 percent, compared with $64.809 billion for 2024.

Sales were higher in Power & Energy , about flat in Resource Industries and slightly lower in Construction Industries .

• Operating profit as a percent of sales and revenues was 16.5 percent in 2025, compared with 20.2 percent in 2024.

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Profit per share for 2024 was $22.05, and excluding the items in the table below, adjusted profit per share was $21.90.

• In order for our results to be more meaningful to our readers, we have separately quantified the impact of several significant items.

A detailed reconciliation of GAAP to non-GAAP financial measures is included on pages 47 - 48.

• Enterprise operating cash flow was $11.7 billion in 2025.

Caterpillar ended 2025 with $10.0 billion of enterprise cash.

In order for our results to be more meaningful to our readers, we have separately quantified the impact of significant items.

Full Year 2025 Full Year 2024

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Profit $ 11,541 $ 18.81 $ 13,373 $ 22.05

Restructuring (income) costs - divestitures of certain non-U.S.

Other restructuring (income) costs

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(294) (0.48) (154) (0.23)

Restructuring (income) costs - divestitures of certain non-U.S.

entities — — 164 0.22

Tax law change related to currency translation

Restructuring costs - Longwall divestiture — — 586 1.14

Deferred tax valuation allowance adjustments — — — (0.21)

Adjusted profit $ 11,692 $ 19.06 $ 13,578 $ 21.90

• Enterprise operating cash flow was $12.0 billion in 2024.

Caterpillar ended 2024 with $6.9 billion of enterprise cash.

Total sales and revenues for 2024 were $64.809 billion, a decrease of $2.251 billion, or 3 percent, compared with $67.060 billion for 2023.

The decrease reflected lower sales volume , partially offset by favorable price realization .

Lower sales volume was primarily driven by lower sales of equipment to end users.

A detailed reconciliation of GAAP to non-GAAP financial measures is included on pages 48 - 49.

Total sales and revenues for 2025 were $67.589 billion, an increase of $2.780 billion, or 4 percent, compared with $64.809 billion for 2024.

The increase reflected higher sales volume , partially offset by unfavorable price realization .

Higher sales volume was primarily driven by higher sales of equipment to end users.

Profit per share was $18.81 in 2025, compared with profit per share of $22.05 in 2024.

Profit was $8.884 billion in 2025, compared with $10.792 billion in 2024.

The profit impact of lower sales volume was more than offset by favorable price realization and the absence of the impact of the divestiture of the company's Longwall business in 2023.

The decrease was mainly due to unfavorable manufacturing costs and unfavorable price realization, partially offset by the profit impact of higher sales volume.

Unfavorable manufacturing costs largely reflected the impact of higher tariffs.

Trends and Economic Conditions

Outlook for Key End Markets

Our results continue to reflect the benefit of the diversity of our end markets.

In Construction Industries, we expect moderately lower sales of equipment to end users in North America in 2025 compared to 2024.

Construction spend in North America remains healthy, primarily driven by large, multi-year projects and government-related infrastructure investments supported by funding from the Infrastructure Investment and Jobs Act (IIJA).

Although we anticipate the combined non-residential and residential construction spend in 2025 to remain similar to 2024 levels, our current planning assumptions reflect lower demand for new equipment in 2025 as compared to 2024.

We also expect lower dealer rental fleet loading in 2025 compared to 2024, although dealer rental revenue is expected to grow.

We remain positive about the medium- and long-term outlook in North America.

In Asia Pacific, outside of China, we expect soft economic conditions to

continue into 2025.

We anticipate China to remain at relatively low levels for the excavator industry above 10-tons.

In EAME , we anticipate that weak economic conditions in Europe will continue, and we anticipate a healthy level of construction activity in Africa and in the Middle East in 2025.

Construction activity in Latin America is expected to moderately decline in 2025 as compared to 2024.

We also anticipate the ongoing benefit of our services initiatives will positively impact Construction Industries in 2025.

In Resource Industries, we anticipate lower sales of equipment to end users in 2025 compared to 2024, partially offset by higher services revenues, including robust rebuild activity.

Customers continue to display capital discipline, although key commodities remain above investment thresholds.

Customer product utilization remains high, the number of parked trucks remains relatively low, the age of the fleet remains elevated, and our autonomous solutions continue to see strong customer acceptance.

We continue to believe the energy transition will support increased commodity demand over time, expanding our total addressable market and providing further opportunities for long-term profitable growth.

In Energy & Transportation, demand is expected to remain strong in Power Generation, as we expect growth for both reciprocating engines and turbines and turbine-related services in 2025 as compared to 2024.

Overall strength in Power Generation, for both prime and backup power applications, continues to be driven by increasing energy demands to support data center growth related to cloud computing and generative artificial intelligence (AI).

Through continued focus on improving manufacturing efficiencies, along with initial stages of our investment to increase large engine output capability, we expect growth in reciprocating engines for Power Generation in 2025.

We also expect growth in turbines and turbine-related services for Power Generation, driven by increased customer demand.

For Oil and Gas, we expect moderate growth in 2025 as compared to 2024.

We expect reciprocating engines and services to be slightly down in 2025 due to continuing capital discipline by our customers, industry consolidation and efficiency improvements in our customers’ operations.

We expect growth for turbines and turbine-related services in Oil & Gas in 2025 as compared to 2024.

For turbines and turbine-related services used in Oil & Gas applications, backlog remains strong, and we see continued healthy order and inquiry activity.

Demand for products in Industrial applications in 2025 is expected to remain at a relatively low level, similar to 2024.

In Transportation, we anticipate growth in 2025, driven by rail services.

In Construction Industries, we expect another year of sales of equipment to end users growth in 2026 compared to 2025, supported by elevated order rates and a robust backlog.

The outlook for North America remains positive, as sales of equipment to end users should grow moderately compared to 2025 with construction spending remaining healthy due to Infrastructure Investment and Jobs Act (IIJA) funding and other critical infrastructure programs.

We also anticipate accelerated investment in data centers, which will further bolster overall construction spending.

In 2026, dealer rental fleet loading and dealer's rental revenue are both projected to increase, compared to 2025.

In EAME , economic conditions in Europe are expected to strengthen, and construction activity in Africa and the Middle East is projected to remain strong.

In Asia Pacific, outside of China, moderate economic conditions are expected in 2026.

We anticipate positive momentum in China from low levels, with growth in the above 10-ton excavator industry in 2026.

Growth in Latin America is expected to continue in 2026 at a similar rate to 2025.

In Resource Industries, sales of equipment to end users is expected to increase in 2026 as compared to 2025, primarily driven by rising demand for copper and gold, and positive growth trends in heavy construction and quarry and aggregates.

In mining, most key commodities remain above investment thresholds, and customer product utilization is high while the age of the fleet remains elevated.

With modest increases in commodity prices projected in 2026, we expect rebuild activity to increase slightly compared to 2025.

In Power & Energy, we anticipate growth in Power Generation for both reciprocating engines and turbines and turbine-related services in 2026, driven by increasing energy demand to support data center build-out related to cloud computing and generative Artificial Intelligence (AI).

Additionally, we are starting to see orders for prime power trend higher as data center customers look for alternative power solutions to keep pace with their growth.

After reaching record levels in 2025, Oil & Gas is expected to see moderate growth in 2026.

Reciprocating engine sales are expected to increase, driven by strong demand in gas compression applications.

For turbines and turbine-related services used in Oil & Gas applications, we expect another year of strong sales in 2026 comparable to our record 2025 performance as backlog remains healthy, with continued solid order and inquiry activity.

Demand for products in Industrial applications is expected to grow moderately in 2026 as we see continued recovery from previous lows.

In Transportation, we anticipate growth in rail services and locomotive deliveries in 2026 compared to 2025.

Full-Year 2026 Company Trends and Expectations

For the full-year 2025, we anticipate sales and revenues will be slightly lower compared to 2024, primarily driven by lower sales volume and unfavorable price realization.

We expect lower sales in Construction Industries and Resource Industries to be partially offset by higher sales in Energy & Transportation.

Currently, we do not anticipate a significant change in machine dealer inventories in 2025.

Services revenues increased in 2024, and we expect services revenues to grow across all three primary segments in 2025.

For Construction Industries, we expect lower sales, including unfavorable price realization.

In Resource Industries, we anticipate slightly lower sales, driven by unfavorable price realization and slightly lower sales volume.

In Energy and Transportation, we expect an increase in sales driven by higher sales volume and favorable price realization.

In 2025, we anticipate unfavorable price realization and higher depreciation costs.

We expect Other income (expense) to be unfavorable in 2025 as compared to 2024, primarily due to lower interest income as well as the absence of favorable foreign currency impacts.

We do not anticipate translation movements in our expectations.

In 2025, we expect restructuring costs of approximately $150 million to $200 million and expect capital expenditures of about $2.5 billion.

We anticipate the annual effective tax rate, excluding discrete items, to be 23.0 percent in 2025.

Our expectations assume the Rail division within Power & Energy, as was the case through year-end 2025.

In March 2026, we will file a Form 8-K recasting historical periods to reflect the movement of the Rail division to Resource Industries.

This will establish an appropriate baseline for evaluating future segment-level performance and expectations.

If necessary, we will also update any segment specific forward-looking assumptions impacted by this change.

There will be no impact on the enterprise-wide assumptions due to the Rail division recast.

For the full-year 2026, we anticipate sales and revenues to grow around the top end of our 5 to 7 percent compound annual growth rate (CAGR) target, as compared to 2025.

The strong backlog coupled with healthy end markets supports our expectations for sales volume growth in all three primary segments, as well as favorable price realization of about 2 percent of sales and revenues.

We expect machine dealer inventory to increase in 2026 and offset the $500 million decrease in 2025.

Services revenues are also expected to grow in 2026 as compared to 2025.

Based on the incremental tariffs announced in 2025 and in place by January 29, 2026, we expect the impact from tariffs to be around $2.6 billion in 2026, which is $800 million higher than incurred in 2025.

If we do not take the mitigating actions we plan to take in 2026, the impact from tariffs could be around 20 percent higher.

We remain confident that we will manage the impact of tariffs over time.

In 2026, we expect restructuring costs of approximately $300 million to $350 million and capital expenditures of around $3.5 billion.

We anticipate our 2026 estimated annual effective tax rate to be 23.0 percent, excluding discrete items.

First-Quarter 2026 Company Trends and Expectations

In the first quarter of 2025, we expect lower sales and revenues as compared to the first quarter of 2024, primarily due to the unfavorable impact from changes in machine dealer inventories and unfavorable machine price realization.

We expect machine dealer inventory to increase less during the first quarter of 2025 as compared to the $1.1 billion increase in the first quarter of 2024.

In a typical year, we see our lowest sales of the year in the first quarter.

In 2025, we anticipate that trend to continue but be more pronounced as sales in the first quarter should account for a lower percentage of full year sales than is typical, mainly due to our expectations for changes in dealer inventories and price realization for machines.

In Energy & Transportation, we expect normal seasonality with sales growing throughout the year.

In the first quarter of 2025 as compared to the first quarter of 2024, we anticipate lower sales in Construction Industries primarily due to lower sales of equipment to end users, an unfavorable impact from changes in dealer inventories and unfavorable price realization.

In Resource Industries, we expect lower sales primarily due to lower sales volume and unfavorable price realization.

In Energy & Transportation, we anticipate similar sales in the first quarter of 2025 as compared to the first quarter of 2024, as continued strength in Power Generation is expected to be offset by lower sales in Oil & Gas and in Transportation.

We expect favorable price realization for Energy & Transportation in the first quarter of 2025.

In the first quarter of 2025, we expect the profit impact from lower machine sales volume and unfavorable machine price realization to be partially offset by favorable price realization in Energy & Transportation.

In Construction Industries and in Resource Industries, we expect an unfavorable profit impact from lower sales volume and unfavorable price realization in the first quarter of 2025 as compared to the first quarter of 2024.

In Energy & Transportation, we expect unfavorable manufacturing costs and the impact of an unfavorable mix of products to be partially offset by favorable price realization.

In the first quarter of 2026 as compared to the first quarter of 2025, we expect stronger sales and revenues primarily due to higher sales volume and favorable price realization.

We expect higher sales volume to be mainly driven by higher sales of equipment to end users and by the impact from changes in machine dealer inventories .

We expect machine dealer inventory to increase in excess of $1.0 billion during the first quarter of 2026, aligning with the seasonal pattern, compared to roughly flat levels in the first quarter of 2025.

In the first quarter of 2026 as compared to the first quarter of 2025, we anticipate strong sales growth in Construction Industries, primarily due to higher sales volume and favorable price realization.

We expect higher sales volume to be driven by higher sales of equipment to end users and by the impact from changes in dealer inventories.

We expect a more typical seasonal dealer inventory build in the first quarter of 2026 as compared to the first quarter of 2025.

In Resource Industries, we anticipate strong sales growth in the first quarter of 2026 as compared to the first quarter of 2025, primarily due to higher sales volume.

We expect higher sales volume to be driven by higher sales of equipment to end users and by the impact from changes in dealer inventories.

We also expect price realization for the first quarter of 2026 to be about flat as compared to the first quarter of 2025.

In Power & Energy, we anticipate sales growth in the first quarter of 2026 as compared to the first quarter of 2025, driven by strength in Power Generation and Oil & Gas, and favorable price realization.

We expect sales in the first quarter of 2026 will be the lowest of the year and lower than the fourth quarter of 2025, aligned with typical seasonal pattern.

We expect the impact from incremental tariffs to be around $800 million in the first quarter of 2026, which is similar to the fourth quarter of 2025.

We anticipate around 50 percent of the incremental tariff costs will be in Construction Industries, 20 percent in Resource Industries and 30 percent in Power & Energy.

In the first quarter of 2026 as compared to the first quarter of 2025, excluding the impact from incremental tariff costs, we expect the profit impact of higher sales volume and favorable price realization will be partially offset by higher manufacturing costs and higher selling, general and administrative (SG&A) and research & development (R&D) expenses.

In the first quarter of 2026 as compared to the first quarter of 2025, in Construction Industries, excluding the impact from incremental tariff costs, we anticipate favorable price realization and the profit impact of higher sales volume will be partially offset by higher manufacturing costs.

In Resource Industries, excluding the impact from incremental tariff costs, we anticipate the profit impact of higher sales volume will be more than offset by unfavorable manufacturing costs and higher SG&A/R&D expenses.

We also anticipate an unfavorable mix of products in Resource Industries.

In Power & Energy, excluding the impact from incremental tariff costs, we anticipate the profit impact of higher sales volume and favorable price realization will be partially offset by higher manufacturing costs.

Global Business Conditions

We continue to monitor a variety of external factors around the world, such as supply chain disruptions, inflationary cost and labor pressures.

We continue to monitor a variety of external factors around the world, such as supply chain disruptions, inflationary cost, labor pressures and the impact of trade policies.

Areas of particular focus include transportation, certain components and raw materials.

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Caterpillar management utilizes these charts internally to visually communicate with the company’s board of directors and employees.

Total sales and revenues for 2024 were $64.809 billion, a decrease of $2.251 billion, or 3 percent, compared with $67.060 billion in 2023.

The decrease was primarily driven by lower sales volume of $3.543 billion, partially offset by favorable price realization of $1.238 billion.

The decrease in sales volume was mainly driven by lower sales of equipment to end users.

In addition, changes in dealer inventories had an unfavorable impact to sales volume.

Dealer inventory increased less during 2024 than during 2023.

In the three primary segments, sales were lower in Construction Industries and Resource Industries and higher in Energy & Transportation.

North America sales decreased 1 percent primarily due to lower sales volume, partially offset by favorable price realization.

The decrease in sales volume was mainly due to the impact from changes in dealer inventories.

Dealer inventory increased less during 2024 than during 2023.

Sales increased 1 percent in Latin America.

Unfavorable currency impacts related to the Brazilian real were more than offset by higher sales volume and favorable price realization.

The increase in sales volume was primarily due to the impact from changes in dealer inventories.

Dealer inventory increased during 2024, compared to a decrease during 2023.

EAME sales decreased 10 percent primarily due lower sales volume.

Total sales and revenues for 2025 were $67.589 billion, an increase of $2.780 billion, or 4 percent, compared with $64.809 billion in 2024.

The increase was primarily driven by higher sales volume of $3.389 billion, partially offset by unfavorable price realization of $817 million.

The increase in sales volume was mainly driven by higher sales of equipment to end users.

Sales were higher in Power & Energy, about flat in Resource Industries and slightly lower in Construction Industries.

North America sales increased 6 percent due to higher sales volume, partially offset by unfavorable price realization.

The increase in sales volume was mainly driven by higher sales of equipment to end users.

Sales increased 4 percent in Latin America primarily due to higher sales volume, partially offset by unfavorable currency impacts related to the Brazilian real.

The increase in sales volume was mainly driven by higher sales of equipment to end users.

EAME sales increased 4 percent mainly due to higher sales volume and favorable currency impacts related to the euro, partially offset by unfavorable price realization.

The increase in sales volume was primarily driven by the impact from changes in dealer inventories.

Dealer inventory increased in 2025, compared to a decrease in 2024.

Asia/Pacific sales decreased 2 percent primarily due to unfavorable currency impacts related to the Australian dollar, and lower sales volume.

The decrease in sales volume was mainly driven by lower sales of equipment to end users.

Asia/Pacific sales decreased 6 percent primarily due to lower sales volume.

The decrease in sales volume was mainly driven by the impact from changes in dealer inventories.

Dealer inventory decreased in 2024, compared to an increase in 2023.

Total dealer inventory increased about $400 million during 2024, compared to an increase of about $2.1 billion during 2023.

Machine dealer inventory decreased about $700 million during 2024, compared to an increase of $700 million during 2023.

Total dealer inventory increased about $900 million during 2025, compared to an increase of about $400 million during 2024.

Machine dealer inventory decreased about $500 million during 2025, compared to a decrease of about $700 million during 2024.

Dealers are independent, and the reasons for changes in their inventory levels vary, including their expectations of future demand and product delivery times.

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Delivery times can vary based on availability of product from Caterpillar factories and product distribution centers.

We do not expect a significant change in machine dealer inventories in 2025.

We expect machine dealer inventory to increase in 2026 and offset the $500 million decrease in 2025.

Sales and Revenues by Segment

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Resource Industries 12,471 403 (272) (46) (82) 12,474 3 — %

Energy & Transportation 28,001 (142) 900 (25) 120 28,854 853 3 %

Power & Energy 28,854 2,401 592 62 292 32,201 3,347 12 %

All Other Segment 344 11 — (1) (27) 327 (17) (5 %)

Corporate Items and Eliminations (5,761) 6 (1) 6 (332) (6,082) (321)

Machinery, Energy & Transportation 63,869 (3,543) 1,238 (201) — 61,363 (2,506) (4 %)

Machinery, Power & Energy 61,363 3,389 (817) 45 — 63,980 2,617 4 %

Financial Products Segment 4,053 — — — 167 4,220 167 4 %

8 unchanged sentences

Resource Industries 4,643 1% 2,292 10% 2,061 14% 3,189 (12%) 12,185 1% 289 (22%) 12,474 — %

Energy & Transportation 13,005 9% 1,763 (11%) 5,787 (2%) 3,533 2% 24,088 3% 4,766 3% 28,854 3 %

Power & Energy 15,558 20% 1,985 13% 5,717 (1%) 3,883 10% 27,143 13% 5,058 6% 32,201 12 %

All Other Segment 26 30% — 100% 6 (14%) 14 27% 46 28% 281 (9%) 327 (5 %)

Corporate Items and Eliminations (164) 1 (11) (20) (194) (5,888) (6,082)

Machinery, Energy & Transportation 32,048 (1%) 6,387 1% 11,893 (10%) 11,035 (6%) 61,363 (4%) — —% 61,363 (4 %)

Machinery, Power & Energy 34,127 6% 6,636 4% 12,368 4% 10,849 (2%) 63,980 4% — —% 63,980 4 %

Financial Products Segment 2,841 5% 442 10% 511 1% 426 (4%) 4,220 1

5 unchanged sentences

Resource Industries 4,597 2,079 1,809 3,615 12,100 371 12,471

Energy & Transportation 11,982 1,983 5,929 3,461 23,355 4,646 28,001

Power & Energy 13,005 1,763 5,787 3,533 24,088 4,766 28,854

All Other Segment 20 (2) 7 11 36 308 344

Corporate Items and Eliminations (150) (6) (25) (24) (205) (5,556) (5,761)

Machinery, Energy & Transportation 32,513 6,326 13,265 11,765 63,869 — 63,869

Machinery, Power & Energy 32,048 6,387 11,893 11,035 61,363 — 61,363

Financial Products Segment 2,702 402 505 444 4,053 1

2 unchanged sentences

Consolidated Sales and Revenues $ 34,397 $ 6,708 $ 12,316 $ 11,388 $ 64,809 $ — $ 64,809

1 Includes revenues from Machinery, Energy & Transportation of $711 million and $690 million in 2024 and 2023, respectively.

1 Includes revenues from Machinery, Power & Energy of $712 million and $711 million in 2025 and 2024, respectively.

CONSOLIDATED OPERATING PROFIT

1 unchanged sentence

Caterpillar management utilizes these charts internally to visually communicate with the company’s board of directors and employees.

The bar entitled Other includes consolidating adjustments and Machinery, Energy & Transportation other operating (income) expenses .

Operating profit was $13.072 billion in 2024, an increase of $106 million, or 1 percent, compared with $12.966 billion in 2023.

The profit impact of lower sales volume of $1.298 billion, higher selling, general and administrative (SG&A) and research and development (R&D) expenses of $201 million, and higher restructuring costs of $165 million were more than offset by favorable price realization of $1.238 billion, the absence of the impact of the divestiture of the company's Longwall business in 2023 of $586 million and favorable manufacturing costs of $246 million.

The increase in SG&A/R&D expenses was primarily driven by investments aligned with strategic initiatives.

Favorable manufacturing costs largely reflected lower freight.

For the twelve months ended December 31, 2024, restructuring costs increased primarily due to the divestitures of certain non-U.S.

The bar entitled Other includes consolidating adjustments and Machinery, Power & Energy other operating (income) expenses .

Operating profit was $11.151 billion in 2025, a decrease of $1.921 billion, or 15 percent, compared with $13.072 billion in 2024.

The decrease was primarily due to unfavorable manufacturing costs of $2.148 billion and unfavorable price realization of $817 million, partially offset by the profit impact of higher sales volume of $1.218 billion.

Unfavorable manufacturing costs largely reflected the impact of higher tariffs.

Operating profit margin was 16.5 percent in 2025, compared with 20.2 percent in 2024.

3 unchanged sentences

Resource Industries 1,988 2,538 (550) (22 %)

Energy & Transportation 5,736 4,936 800 16 %

Power & Energy 6,418 5,736 682 12 %

All Other Segment (8) 43 (51) (119 %)

Corporate Items and Eliminations (2,189) (1,384) (805)

Machinery, Energy & Transportation 13,098 12,659 439 3 %

Machinery, Power & Energy 10,884 13,098 (2,214) (17 %)

Financial Products Segment 966 932 34 4 %

6 unchanged sentences

• Other income (expense) in 2025 was income of $892 million, compared with income of $813 million in 2024.

The change was primarily driven by favorable foreign currency impacts, favorable impacts from pension and other postemployment benefit (OPEB) plan costs and higher mark-to-market gains for remeasurement of pension and OPEB plans.

• The effective tax rate for 2025 was 24.0 percent compared to 19.7 percent for 2024.

Excluding the discrete items discussed below, the annual effective tax rate was 24.1 percent for 2025 compared to 22.2 percent for 2024.

The increase from 2023 was primarily related to changes in the geographic mix of profits from a tax perspective.

The increase from 2024 was primarily due to changes in U.S.

tax incentives.

The company recorded a discrete tax charge of $41 million in 2025, compared to discrete tax benefits of $47 million in 2024, to reflect changes in estimates related to prior years.

The company also recorded a tax charge of $68 million related to $294 million of mark-to-market gains for remeasurement of pension and other postretirement benefit (OPEB) plans in 2025, compared to a tax charge of $43 million related to $154 million of mark-to-market gains in 2024.

In addition, a discrete tax benefit of $50 million was recorded in 2025, compared with a $57 million benefit in 2024, for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S.

GAAP compensation expense.

In 2024, the company recorded a discrete tax benefit of $224 million for a tax law change related to currency translation.

The 2024 annual effective tax rate excludes the impact of losses of $164 million for the divestitures of certain non-U.S.

The 2024 annual effective tax rate excluded the impact of losses of $164 million for the divestitures of certain non-U.S.

entities with related tax benefits of $54 million.

The 2023 annual effective tax rate excludes the impact of the nondeductible loss of $586 million related to the divestiture of the company’s Longwall business.

The company also recorded a tax charge of $43 million related to $154 million of mark-to-market gains for remeasurement of pension and OPEB plans in 2024, compared to a tax charge of $26 million related to $97 million of mark-to-market gains in 2023.

In 2024, the company recorded discrete tax benefits of $47 million to reflect changes in estimates related to prior years.

In addition, a discrete tax benefit of $57 million was recorded in 2024 and 2023 for the settlement of stock-based compensation awards with associated tax deductions in excess of cumulative U.S.

GAAP compensation expense.

In 2023, the company recorded a discrete tax benefit of $88 million due to a change in the valuation allowance for certain non-U.S.

deferred tax assets.

Please see a reconciliation of GAAP to non-GAAP financial measures on pages 48-49.

Construction Industries

Construction Industries’ total sales were $25.455 billion in 2024, a decrease of $1.963 billion, or 7 percent, compared with $27.418 billion in 2023.

The decrease was primarily due to lower sales volume.

The decrease in sales volume was mainly driven by lower sales of equipment to end users.

• In North America, sales decreased due to lower sales volume.

Lower sales volume was primarily driven by the impact from changes in dealer inventories.

Construction Industries’ total sales were $25.060 billion in 2025, a decrease of $395 million, or 2 percent, compared with $25.455 billion in 2024.

The decrease was primarily due to unfavorable price realization of $1.136 billion, partially offset by higher sales volume of $568 million.

The increase in sales volume was mainly driven by higher sales of equipment to end users, partially offset by the impact from changes in dealer inventories.

Dealer inventory decreased during 2025, compared with an increase in 2024.

• In North America, sales decreased due to unfavorable price realization, partially offset by higher sales volume.

Higher sales volume was primarily driven by higher sales of equipment to end users, partially offset by the impact from changes in dealer inventories.

Dealer inventory decreased during 2025, compared with an increase in 2024.

• Sales decreased in Latin America due to lower sales volume, unfavorable price realization and unfavorable currency impacts primarily related to the Brazilian real.

Lower sales volume was mainly driven by the impact from changes in dealer inventories.

Dealer inventory increased less during 2025 than during 2024.

• Sales increased in Latin America primarily due to higher sales volume, partially offset by unfavorable price realization and unfavorable currency impacts primarily related to the Brazilian real.

• In EAME, sales increased due to higher sales volume and favorable currency impacts primarily related to the euro, partially offset by unfavorable price realization.

Higher sales volume was mainly driven by the impact from changes in dealer inventories.

Dealer inventory increased during 2024, compared with a decrease during 2023.

• In EAME, sales decreased primarily due to lower sales volume.

Lower sales volume was mainly due to lower sales of equipment to end users.

• Sales decreased in Asia/Pacific primarily due to lower sales volume and unfavorable currency impacts, primarily related to the Japanese yen.

Lower sales volume was mainly driven by the impact from changes in dealer inventories.

Dealer inventory decreased during 2024, compared with an increase during 2023.

Construction Industries’ profit was $6.165 billion in 2024, a decrease of $810 million, or 12 percent, compared with $6.975 billion in 2023.

The decrease was mainly due to the profit impact of lower sales volume.

Dealer inventory increased during 2025, compared with a decrease in 2024.

• Sales decreased in Asia/Pacific due to unfavorable price realization, lower sales volume and unfavorable currency impacts primarily related to the Australian dollar.

Lower sales volume was mainly driven by lower sales of equipment to end users.

Construction Industries’ profit was $4.675 billion in 2025, a decrease of $1.490 billion, or 24 percent, compared with $6.165 billion in 2024.

The decrease was mainly due to unfavorable price realization of $1.136 billion and unfavorable manufacturing costs of $671 million, partially offset by the profit impact of higher sales volume of $315 million.

Unfavorable manufacturing costs largely reflected the impact of higher tariffs.

Construction Industries’ profit as a percent of total sales was 18.7 percent in 2025, compared with 24.2 percent in 2024.

Resource Industries

Resource Industries’ total sales were $12.389 billion in 2024, a decrease of $1.194 billion, or 9 percent, compared with $13.583 billion in 2023.

The decrease was primarily due to lower sales volume, partially offset by favorable price realization.

Sales volume decreased primarily due to lower sales of equipment to end users.

Resource Industries’ total sales were $12.474 billion in 2025, an increase of $3 million, or about flat, compared with $12.471 billion in 2024.

Higher sales volume of $403 million was mostly offset by unfavorable price realization of $272 million and unfavorable currency impacts of $46 million, primarily related to the Australian dollar.

Higher sales volume was mainly driven by the impact from changes in dealer inventories.

Dealer inventory decreased less during 2025 than during 2024.

Resource Industries’ profit was $1.988 billion in 2025, a decrease of $550 million, or 22 percent, compared with $2.538 billion in 2024.

The decrease was mainly due to the profit impact of lower sales volume of $655 million, partially offset by favorable price realization of $405 million.

The decrease was mainly due to unfavorable manufacturing costs of $302 million and unfavorable price realization of $272 million.

Unfavorable manufacturing costs largely reflected the impact of higher tariffs.

Resource Industries’ profit as a percent of total sales was 15.9 percent for 2025, compared with 20.4 percent for 2024.

Energy & Transportation

Power & Energy

Sales by Application

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Total Sales $ 32,201 $ 28,854 $ 3,347 12 %

Energy & Transportation’s total sales were $28.854 billion in 2024, an increase of $853 million, or 3 percent, compared with $28.001 billion in 2023.

The increase was primarily due to favorable price realization.

• Oil and Gas – Sales were about flat.

Decreased sales in reciprocating engines used in well servicing applications were offset by increased sales in reciprocating engines used in gas compression applications and increased sales for turbines and turbine-related services.

Power & Energy’s total sales were $32.201 billion in 2025, an increase of $3.347 billion, or 12 percent, compared with $28.854 billion in 2024.

The increase was primarily due to higher sales volume of $2.401 billion and favorable price realization of $592 million.

• Oil and Gas – Sales increased in turbines and turbine-related services.

The increase was partially offset by lower sales of reciprocating engines, primarily engines used in gas compression applications.

• Power Generation – Sales increased in large reciprocating engines, primarily data center applications.

Turbines and turbine-related services increased as well.

• Industrial – Sales decreased in EAME and North America.

• Transportation – Sales increased in marine and rail services, partially offset by lower sales of reciprocating engine aftermarket parts.

Energy & Transportation’s profit was $5.736 billion in 2024, an increase of $800 million, or 16 percent, compared with $4.936 billion in 2023.

The increase was mainly due to favorable price realization.

Energy & Transportation’s profit as a percent of total sales was 19.9 percent in 2024, compared with 17.6 percent in 2023.

• Industrial – Sales increased in EAME, partially offset by decreased sales in North America, Latin America and Asia/Pacific.

• Transportation – Sales decreased in marine, partially offset by increased sales in rail services.

Power & Energy’s profit was $6.418 billion in 2025, an increase of $682 million, or 12 percent, compared with $5.736 billion in 2024.

The increase was mainly due to the profit impact of higher sales volume of $972 million and favorable price realization of $592 million, partially offset by unfavorable manufacturing costs of $919 million.

Unfavorable manufacturing costs primarily reflected the impact of higher tariffs.

Power & Energy’s profit as a percent of total sales was 19.9 percent in 2025 and 2024.

Financial Products Segment

Financial Products’ segment revenues were $4.220 billion in 2025, an increase of $167 million, or 4 percent, compared with $4.053 billion in 2024.

The increase was primarily due to a favorable impact from higher average financing rates across all regions of $153 million and a favorable impact from higher average earning assets of $127 million driven by North America.

The increase was primarily due to a favorable impact from higher average earning assets of $222 million driven by North America, partially offset by an unfavorable impact from lower average financing rates of $68 million across all regions except Latin America.

Financial Products’ segment profit was $966 million in 2025, an increase of $34 million, or 4 percent, compared with $932 million in 2024.

The increase was mainly due to a favorable impact from higher average earning assets of $54 million, an insurance settlement of $33 million, and a favorable impact from equity securities of $32 million.

These favorable impacts were partially offset by an increase in SG&A expenses of $54 million and an unfavorable impact from returned or repossessed equipment of $34 million.

The increase was mainly due to a favorable impact from higher average earning assets of $90 million, partially offset by the absence of an insurance settlement of $33 million in 2024, and an unfavorable impact from higher provision for credit losses at Cat Financial of $31 million.

Corporate Items and Eliminations

Expense for corporate items and eliminations was $1.711 billion in 2024, a decrease of $379 million from 2023, primarily driven by the absence of the divestiture of the company's Longwall business in 2023, partially offset by unfavorable impacts of segment reporting methodology differences.

Expense for corporate items and eliminations was $2.291 billion in 2025, an increase of $580 million from 2024, primarily driven by increased expenses due to timing differences, higher corporate costs and unfavorable restructuring income/costs.

2024 COMPARED WITH 2023

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Adjusted Operating Profit Margin – Operating profit excluding restructuring income/costs as a percent of sales and revenues.

Adjusted Profit Per Share – Profit per share excluding restructuring income/costs, a discrete tax benefit for a tax law change related to currency translation, pension and OPEB mark-to-market gains/losses and certain deferred tax valuation allowance adjustments in 2023.

Adjusted Profit Per Share – Profit per share excluding restructuring income/costs, pension and OPEB mark-to-market gains/losses, and a discrete tax benefit for a tax law change related to currency translation in 2024.

All Other Segment – Primarily includes activities such as:

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product management and development;

manufacturing and sourcing of wear and maintenance components primarily for Cat® products;

parts distribution;

integrated logistics solutions;

electronics and control systems;

distribution services responsible for dealer development and administration, including a wholly owned dealer in Japan;

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brand management and marketing strategy;

and digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience.

Consolidating Adjustments – Elimination of transactions between Machinery, Energy & Transportation and Financial Products.

research and development for automation, electronics and software for machines and engines and digital investments for new customer and dealer solutions that integrate data analytics with state-of-the-art digital technologies while transforming the buying experience.

Consolidating Adjustments – Elimination of transactions between Machinery, Power & Energy and Financial Products.

Construction Industries – A segment primarily responsible for supporting customers using machinery in infrastructure and building construction applications.

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With respect to operating profit, currency represents the net translation impact on sales and operating costs resulting from changes in foreign currency exchange rates versus the U.S.

Currency only includes the impact on sales and operating profit for the Machinery, Energy & Transportation line of business;

Currency only includes the impact on sales and operating profit for the Machinery, Power & Energy line of business;

currency impacts on Financial Products revenues and operating profit are included in the Financial Products portions of the respective analyses.

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Earning Assets – Assets consisting primarily of total finance receivables net of unearned income, plus equipment on operating leases net of accumulated depreciation at Cat Financial.

Energy & Transportation – A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related services across industries serving Oil and Gas, Power Generation, Industrial and Transportation applications, including marine- and rail-related businesses as well as product support of on-highway engines.

Responsibilities include business strategy, product design, product management, development and testing, manufacturing, marketing and sales and product support.

The product and services portfolio includes turbines, centrifugal gas compressors, and turbine-related services;

reciprocating engine-powered generator sets;

integrated systems

and solutions used in the electric power generation industry;

reciprocating engines, drivetrain and integrated systems and solutions for the marine and oil and gas industries;

reciprocating engines, drivetrain and integrated systems and solutions supplied to the industrial industry as well as Caterpillar machines;

electrified powertrain and zero-emission power sources and service solutions development;

and diesel-electric locomotives and components and other rail-related products and services, including remanufacturing and leasing.

Responsibilities also include the remanufacturing of Caterpillar reciprocating engines and components and remanufacturing services for other companies.

Financial Products – The company defines Financial Products as our finance and insurance subsidiaries, primarily Caterpillar Financial Services Corporation (Cat Financial) and Caterpillar Insurance Holdings Inc.

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Financial Products’ information relates to the financing to customers and dealers for the purchase and lease of Caterpillar and other equipment.

Financial Products Segment – Provides financing alternatives to customers and dealers around the world for Caterpillar products and services, as well as financing for power generation facilities that, in most cases, incorporate Caterpillar products.

Financing plans include operating and finance leases, revolving charge accounts, installment sale contracts, repair/rebuild financing, working capital loans and wholesale financing plans.

The segment also provides insurance and risk management products and services that help customers and dealers manage their business risk.

The segment also provides insurance and risk management products

and services that help customers and dealers manage their business risk.

Insurance and risk management products offered include physical damage insurance, inventory protection plans, extended service coverage and maintenance plans for machines and engines, and dealer property and casualty insurance.

The various forms of financing, insurance and risk management products offered to customers and dealers help support the purchase and lease of Caterpillar equipment.

The segment also earns revenues from Machinery, Energy & Transportation, but the related costs are not allocated to operating segments.

The segment also earns revenues from Machinery, Power & Energy, but the related costs are not allocated to operating segments.

Financial Products’ segment profit is determined on a pretax basis and includes other income/expense items.

Latin America – A geographic region including Central and South American countries and Mexico.

Machinery, Energy & Transportation (ME&T) – The company defines ME&T as Caterpillar Inc.

Machinery, Power & Energy (MP&E) – The company defines MP&E as Caterpillar Inc.

and its subsidiaries, excluding Financial Products.

ME&T’s information relates to the design, manufacturing and marketing of its products.

Machinery, Energy & Transportation Other Operating (Income) Expenses – Comprised primarily of gains/losses on disposal of long-lived assets, gains/losses on divestitures and legal settlements and accruals.

MP&E’s information relates to the design, manufacturing and marketing of its products.

Machinery, Power & Energy Other Operating (Income) Expenses – Comprised primarily of gains/losses on disposal of long-lived assets, gains/losses on divestitures and legal settlements and accruals.

Manufacturing Costs – Manufacturing costs exclude the impacts of currency and represent the volume-adjusted change for variable costs and the absolute dollar change for period manufacturing costs.

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Pension and Other Postemployment Benefits (OPEB) – The company’s defined-benefit pension and postretirement benefit plans.

Power & Energy – A segment primarily responsible for supporting customers using reciprocating engines, turbines, diesel-electric locomotives and related services across industries serving Oil and Gas, Power Generation, Industrial and Transportation applications, including marine- and rail-related businesses as well as product support of on-highway engines.

Responsibilities include business strategy, product design, product management, development and testing, manufacturing, marketing and sales and product support.

The product and services portfolio includes turbines, centrifugal gas compressors, and turbine-related services;

reciprocating engine-powered generator sets;

integrated systems and solutions used in the electric power generation industry;

reciprocating engines, drivetrain and integrated systems and solutions for the marine and oil and gas industries;

reciprocating engines, drivetrain and integrated systems and solutions supplied to the industrial industry as well as Caterpillar machines;

electrified powertrain and zero-emission power sources and service solutions development;

and diesel-electric and hybrid locomotives and components and other rail-related products and services, including remanufacturing and leasing.

Responsibilities also include the remanufacturing of Caterpillar reciprocating engines and components and remanufacturing services for other companies.

Price Realization – The impact of net price changes excluding currency and new product introductions.

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machinery components;

electronics and control systems and related parts.

In addition to equipment, Resource Industries also develops and sells technology products and services to provide customers fleet management, equipment management analytics, autonomous machine capabilities, safety services and mining performance solutions.

Resource Industries also manages areas that provide services to other parts of the company, including strategic procurement, lean center of excellence, integrated manufacturing, research and development for hydraulic systems, automation, electronics and software for Caterpillar machines and engines.

wear and maintenance components and related parts.

In addition to equipment, Resource Industries also sells technology products and services to provide customers fleet management, equipment management analytics, autonomous machine capabilities, safety services and mining performance solutions.

Resource Industries also manages areas that provide services to other parts of the company, including strategic procurement, lean center of excellence, integrated component design and manufacturing and research and development for hydraulic systems and cabs.

Restructuring income/costs – May include costs for employee separation, long-lived asset impairments, contract terminations and (gains)/losses on divestitures.

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Restructuring costs also include other exit-related costs, which may consist of accelerated depreciation, inventory write-downs, building demolition, equipment relocation and project management costs and LIFO inventory decrement benefits from inventory liquidations at closed facilities, all of which are primarily included in Cost of goods sold.

Sales Volume – With respect to sales and revenues, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation as well as the incremental sales impact of new product introductions, including emissions-related product updates.

With respect to operating profit, sales volume represents the impact of changes in the quantities sold for Machinery, Energy & Transportation combined with product mix as well as the net operating profit impact of new product introductions, including emissions-related product updates.

Product mix represents the net operating profit impact of changes in the relative weighting of Machinery, Energy & Transportation sales with respect to total sales.

Sales Volume – With respect to sales and revenues, sales volume represents the impact of changes in the quantities sold for Machinery, Power & Energy as well as the incremental sales impact of new product introductions, including emissions-related product updates.

With respect to operating profit, sales volume represents the impact of changes in the quantities sold for Machinery, Power & Energy combined with product mix as well as the net operating profit impact of new product introductions, including emissions-related product updates.

Product mix represents the net operating profit impact of changes in the relative weighting of Machinery, Power & Energy sales with respect to total sales.

The impact of sales volume on segment profit includes inter-segment sales.

Services – Machinery, Energy & Transportation services revenues include, but are not limited to, aftermarket parts and other service-related revenues and exclude most Financial Products revenues, discontinued products and captive dealer services.

Services – Machinery, Power & Energy services revenues include, but are not limited to, aftermarket parts and other service-related revenues and exclude most Financial Products revenues, discontinued products and captive dealer services.

LIQUIDITY AND CAPITAL RESOURCES

Sources of funds

We generate significant capital resources from operating activities, which are the primary source of funding for our ME&T operations.

We generate significant capital resources from operating activities, which are the primary source of funding for our MP&E operations.

Funding for these businesses is also available from commercial paper and long-term debt issuances.

Financial Products’ operations are funded primarily from commercial paper, term debt issuances and collections from its existing portfolio.

During 2024, we had positive operating cash flow within both our ME&T and Financial Products' operations.

On a consolidated basis, we ended 2024 with $6.89 billion of cash, a decrease of $89 million from year-end 2023.

In addition, ME&T invests in available-for-sale debt securities and bank time deposits that are considered highly liquid and are available for current operations.

These ME&T securities were $1.98 billion as of December 31, 2024 and are included in Prepaid expenses and other current assets and Other assets in the Consolidated Statement of Financial Position.

During 2025, we had positive operating cash flow within both our MP&E and Financial Products' operations.

On a consolidated basis, we ended 2025 with $9.980 billion of cash, an increase of $3.091 billion from year-end 2024.

In addition, MP&E invests in available-for-sale debt securities and bank time deposits that are considered highly liquid and are available for current operations.

These MP&E securities were $1.230 billion as of December 31, 2025 and are included in Prepaid expenses and other current assets and Other assets in the Consolidated Statement of Financial Position.

We intend to maintain a strong cash and liquidity position.

Consolidated operating cash flow for 2025 was $11.739 billion, down $296 million compared to 2024.

The decrease was primarily due to changes in accrued wages, salaries, and employee benefits, and higher cash taxes paid.

These were partially offset by lower working capital requirements.

Within working capital, changes in accounts payable, customer advances, and receivables favorably impacted cash flow, partially offset by changes in accrued expenses.

Total debt as of December 31, 2024 was $38.41 billion, an increase of $531 million from year-end 2023.

Debt related to ME&T decreased $893 million in 2024.

Debt related to Financial Products increased by $1.54 billion due to portfolio funding requirements.

The decrease was primarily due to lower profit before taxes, adjusted for non-cash items, partially offset by lower cash taxes paid and changes in accrued wages, salaries, and employee benefits.

Total debt as of December 31, 2025 was $43.330 billion, an increase of $4.921 billion from year-end 2024.

Debt related to MP&E increased $2.213 billion in 2025 primarily due to the issuance of new debt in the second quarter of 2025.

MP&E issued $1.700 billion of ten-year bonds at 5.2 percent and $300 million of thirty-year bonds at 5.5 percent.

The proceeds from the offering will be used for general corporate purposes, which may include the repayment of existing indebtedness.

Debt related to Financial Products increased by $3.818 billion, of which $1.000 billion is related to intercompany borrowings with MP&E.

As of December 31, 2025, we had three global credit facilities with a syndicate of banks totaling $11.500 billion (Credit Facility) available in the aggregate to both Caterpillar and Cat Financial for general liquidity purposes.

Based on management’s allocation decision, which can be revised from time to time, the portion of the Credit Facility available to ME&T as of December 31, 2024 was $2.75 billion.

Based on management’s allocation decision, which can be revised from time to time, the portion of the Credit Facility available to MP&E as of December 31, 2025 was $2.875 billion.

Information on our Credit Facility is as follows:

• In August 2025, we entered into a new 364-day facility.

The 364-day facility of $3.15 billion (of which $825 million is available to ME&T) expires in August 2025.

The 364-day facility of $3.500 billion (of which $875 million is available to MP&E) expires in August 2026.

• In August 2025, we amended and extended the three-year facility (as amended and restated, the "three-year facility").

The three-year facility of $2.73 billion (of which $715 million is available to ME&T) expires in August 2027.

The three-year facility of $3.000 billion (of which $750 million is available to MP&E) expires in August 2028.

• In August 2025, we amended and extended the five-year facility (as amended and restated, the "five-year facility").

The five-year facility of $4.62 billion (of which $1.21 billion is available to ME&T) expires in August 2029.

The five-year facility of $5.000 billion (of which $1.250 billion is available to MP&E) expires in August 2030.

At December 31, 2025, Caterpillar’s consolidated net worth was $21.388 billion, which was above the $9.000 billion required under the Credit Facility.

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(Millions of dollars) Consolidated Machinery,

Transportation Financial

Power & Energy Financial

Credit lines available:

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A downgrade of our credit ratings by any of the major credit rating agencies could result in increased borrowing costs and could make access to certain credit markets more difficult.

In the event economic conditions deteriorate such that access to debt markets becomes unavailable, ME&T’s operations would rely on cash flow from operations, use of existing cash balances, borrowings from Cat Financial and access to our committed credit facilities.

In the event economic conditions deteriorate such that access to debt markets becomes unavailable, MP&E’s operations would rely on cash flow from operations, use of existing cash balances, borrowings from Cat Financial and access to our committed credit facilities.

Our Financial Products’ operations would rely on cash flow from its existing portfolio, existing cash balances, access to our committed credit facilities and other credit line facilities of Cat Financial, and potential borrowings from Caterpillar.

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These obligations total $2.399 billion, with $695 million due in the next 12 months.

Machinery, Energy & Transportation

Machinery, Power & Energy

Net cash provided by operating activities was $12.278 billion in 2025, compared with $11.437 billion in 2024.

The decrease was primarily due to changes in accrued wages, salaries, and employee benefits, higher cash taxes paid, and changes in other liabilities.

These were partially offset by decreased working capital requirements.

Within working capital, changes in receivables, accounts payable, and customer advances favorably impacted cash flow partially offset by changes in accrued expenses.

Net cash provided by investing activities in 2024 was $133 million, compared with net cash used of $3.92 billion in 2023.

The change was due to lower new investments in securities and higher proceeds from maturities and sale of securities, primarily due to time deposit maturities in 2024.

The increase was primarily due to lower working capital requirements and lower cash taxes paid.

These were partially offset by lower profit before taxes, adjusted for non-cash items.

Within working capital, changes in customer advances, accounts payable, and accrued wages, salaries, and employee benefits favorably impacted cash flow, partially offset by changes in inventories and receivables.

Net cash used by investing activities in 2025 was $2.870 billion, compared with net cash provided of $133 million in 2024.

The change was primarily due to lower proceeds from maturities and sale of securities, primarily due to time deposit maturities in 2024;

increased activity related to intercompany lending with Financial Products;

and an increase in capital expenditures.

Net cash used for financing activities during 2025 was $6.184 billion, compared with $11.417 billion in 2024.

The change was primarily due to higher payments to repurchase shares and debt repayments in 2024.

While our short-term priorities for the use of cash may vary from time to time as business needs and conditions dictate, our long-term cash deployment strategy is focused on the following priorities.

The change was primarily due to lower payments to repurchase common stock, higher proceeds from debt issued and lower payments on debt in 2025 compared to 2024.

While our short-term priorities for the use of cash may vary from time to time as business needs and conditions dictate, our resource allocation framework is focused on the following priorities.

Our top priority is to maintain a strong financial position in support of a mid-A rating.

Next, we intend to fund operational requirements and commitments.

Then, we intend to fund priorities that profitably grow the company and return capital to shareholders through dividend growth and share repurchases.

Additional information on cash deployment is as follows:

Next, we intend to fund operational commitments and strategic growth initiatives assessed using the Operating & Execution Model.

Then, we intend to return capital to shareholders through dividend growth and share repurchases.

Additional information on the resource allocation framework is as follows:

Strong financial position — Our top priority is to maintain a strong financial position in support of a mid-A rating.

We track a diverse group of financial metrics that focus on liquidity, leverage, cash flow and margins which align with our cash deployment actions and the various methodologies used by the major credit rating agencies.

Operational excellence and commitments — Capital expenditures were $1.99 billion during 2024, compared to $1.66 billion in 2023.

We expect ME&T’s capital expenditures in 2025 to be about $2.5 billion.

We track a diverse group of financial metrics that focus on liquidity, leverage, cash flow and margins which align with our resource allocation framework and the various methodologies used by the major credit rating agencies.

Operating & Execution Model used to assess operational commitments and strategic growth initiatives — Capital expenditures were $2.794 billion during 2025, compared to $1.988 billion in 2024.

We expect MP&E’s capital expenditures in 2026 to be about $3.5 billion.

We made $381 million of contributions to our pension and OPEB plans during 2025.

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We expect to make approximately $360 million of contributions to our pension and OPEB plans in 2026.

Fund strategic growth initiatives and return capital to shareholders — We intend to utilize our liquidity and debt capacity to fund targeted investments that drive long-term profitable growth focused in the areas of expanded offerings, services and sustainability, including acquisitions.

As part of our capital allocation strategy, ME&T free cash flow is a liquidity measure we use to determine the cash generated and available for financing activities including debt repayments, dividends and share repurchases.

We define ME&T free cash flow as cash from ME&T operations less capital expenditures, excluding discretionary pension and other postretirement benefit plan contributions.

A goal of our capital allocation strategy is to return substantially all ME&T free cash flow to shareholders over time in the form of dividends and share repurchases, while maintaining our mid-A rating.

We intend to utilize our liquidity and debt capacity to fund initiatives targeted to drive long term profitable growth focused on our three strategic growth pillars.

Our strategic growth pillars are commercial excellence, advanced technology leadership and transforming how we work.

These pillars work together to drive sustainable growth, innovation and operational efficiency for Caterpillar and our customers.

On February 3, 2026, the Federal Court of Australia approved Caterpillar's acquisition of RPMGlobal Holdings Limited, an Australian based software company.

The transaction is expected to close in the final two weeks of February with a purchase price of approximately $790 million, excluding cash acquired.

RPMGlobal is a leading provider of mining software solutions with deep domain expertise in mining technology enablement and data-driven software solutions at every stage of the mining lifecycle.

Return to shareholders — Our goal is to return substantially all MP&E free cash flow to shareholders over time in the form of dividends and share repurchases, while maintaining our mid-A rating.

MP&E free cash flow is a liquidity measure we use to determine the cash generated and available for financing activities including debt repayments, dividends and share repurchases.

We define MP&E free cash flow as cash from MP&E operations less capital expenditures, excluding discretionary pension and other postretirement benefit plan contributions.

Each quarter, our Board of Directors reviews the company's dividend for the applicable quarter.

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Dividends paid totaled $2.749 billion in 2025.

Our share repurchase plans are subject to the company’s cash deployment priorities and are evaluated on an ongoing basis considering the financial condition of the company, corporate cash flow, the company's liquidity needs, the economic outlook, and the health and stability of global credit markets.

Our share repurchase plans are subject to the company’s resource allocation framework and are evaluated on an ongoing basis considering the financial condition of the company, corporate cash flow, the company's liquidity needs, the economic outlook, and the health and stability of global credit markets.

The timing and amount of future repurchases may vary depending on market conditions and investing priorities.

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In June 2024, the Board approved an additional share repurchase authorization (the 2024 Authorization) of up to $20.0 billion of Caterpillar common stock, effective June 12, 2024, with no expiration.

In 2024, we repurchased $7.7 billion of Caterpillar common stock, with $20.1 billion remaining under the 2022 and 2024 Authorizations as of December 31, 2024.

In 2025, we repurchased $5.190 billion of Caterpillar common stock.

As of December 31, 2025, the 2022 Authorization was fully utilized and $14.937 billion remained under the 2024 Authorization.

Caterpillar's basic shares outstanding as of December 31, 2025 were approximately 465 million.

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Net cash used for investing activities was $3.870 billion in 2025, compared with $2.787 billion used in 2024.

The change was primarily due to portfolio related activity and the divestiture of a non-U.S.

Net cash provided by financing activities was $1.21 billion in 2024, compared with net cash provided of $278 million in 2023.

The change was primarily due to higher net inflows from external borrowings partially offset by higher dividends paid to Caterpillar in 2024.

The change was primarily due to portfolio-related activity.

Net cash provided by financing activities was $2.705 billion in 2025, compared with $1.206 billion in 2024.

The change was primarily due to increased intercompany borrowings from MP&E and external borrowings.

Off-balance sheet arrangements

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Residual values for leased assets — We determine the residual value of Cat Financial’s leased equipment based on its estimated end-of-term market value.

We estimate the residual value of leased equipment at the inception of the lease based on a number of factors, including historical wholesale market sales prices, past remarketing experience and any known significant

market/product trends.

We also consider the following critical factors in our residual value estimates:

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We categorize the fair value determination as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.

We completed our annual assessment of goodwill in the fourth quarter of 2024 and determined that there was no impairment of goodwill.

The Company completed its annual goodwill impairment tests in the fourth quarter of 2025.

Based on those tests, the fair value of each reporting unit was substantially above its respective carrying value, including goodwill, resulting in no impairment charges.

Caterpillar's market capitalization has remained significantly above the net book value of the Company.

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Postretirement benefits — We sponsor defined benefit pension plans and/or other postretirement benefit plans (retirement healthcare and life insurance) to employees in many of our locations throughout the world.

There are assumptions used in the accounting for these defined benefit plans that include discount rate, expected return on plan assets, expected rate of compensation increase, the future health care trend rate, mortality and other economic and demographic assumptions.

There are assumptions used in the accounting for these defined benefit plans that include discount rate, expected return on plan assets, expected rate of compensation increase, the future health care cost trend rate, mortality and other economic and demographic assumptions.

The actuarial assumptions we use may change or differ significantly from actual results, which may result in a material impact to our consolidated financial statements.

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Primary actuarial assumptions were determined as follows:

• We use the assumed discount rate to discount future benefit obligations back to today’s dollars.

• The discount rate is used to discount the future benefit obligations back to today’s dollars.

discount rate is based on a benefit cash flow-matching approach and represents the rate at which our benefit obligations could effectively be settled as of our measurement date, December 31.

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Discount rates are sensitive to changes in interest rates.

• The expected long-term rate of return on plan assets is based on our estimate of long-term returns for equities and fixed income securities weighted by the allocation of our plan assets.

• The expected rate of return on plan assets is based on our estimate of long-term returns for equities and fixed income securities weighted by the allocation of our plan assets.

This rate is impacted by changes in general market conditions, but because it represents a long-term rate, it is not significantly impacted by short-term market swings.

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For example, a shift to more fixed income securities would lower the rate.

The expected return on plan assets is based on the fair value of plan asset allocations as of our measurement date, December 31.

The expected return on plan assets is based on asset allocations as of our measurement date, December 31.

• We use the expected rate of compensation increase to develop benefit obligations using projected pay at retirement.

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This rate is influenced by our long-term compensation policies.

• The assumed health care trend rate represents the rate at which health care costs are assumed to increase and is based on historical and expected experience.

• The assumed health care cost trend rate represents the rate at which costs are assumed to increase and is based on historical and expected experience.

Changes in our projections of future health care costs due to general economic conditions and those specific to health care (e.g., technology driven cost changes) will impact this trend rate.

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Pension Benefits:

Assumed discount rate $ 56 $ (70) $ (1,011) $ 1,187

Expected long-term rate of return on plan assets (123) 123 — —

Discount rate $ 50 $ (62) $ (978) $ 1,144

Expected return on plan assets (114) 114 — —

Pension Benefits:

Assumed discount rate 8 (11) (315) 387

Discount rate 7 (10) (314) 384

Expected rate of compensation increase 4 (4) 34 (29)

Expected long-term rate of return on plan assets (32) 32 — —

Expected return on plan assets (33) 33 — —

What changed 10-K

Item 7. Management’s Discussion and Analysis