Aug 4, 2026 earnings call — Data center demand and engine transition
Raised full year revenue outlook to increase 10% to 13% and EBITDA to 18% to 18.5%.
Revenue $9.5B (est $9.3B) · EPS $6.73 (est $7.21)
Key quotes
"We recently signed a multiyear agreement with a global hyperscaler, expanding a long-standing partnership and securing visibility into several gigawatts of future backup power genset demand."
"As a part of our phased transition, we plan to begin limited production of the model year 2027 X15 engine in January 2027 based on individual OEM launch plans."
"In summary, we've raised our full year outlook and now expect total company revenues to increase between 10% and 13% with EBITDA in the range of 18% to 18.5%."
Analyst Q&A 10
2027 setup and distribution margins
Q (Jamie Cook · Truist): Analyst asked how management is thinking about 2027 given the EPA 2027 draft rule and whether back-half earnings set a base for 2027. He also asked why distribution margin guidance was lowered.
A: They expect continued strength in the second half and say the phased EPA transition smooths demand. The growth opportunity in engines and components does not change, and distribution margins were impacted by parts mix and higher incentive compensation this year.
"With the EPA draft rule and with the phased transition that we've announced, the key thing is the destination doesn't change the growth opportunity that will exist for us in engines and components." — Jennifer Rumsey (CEO·CHAIR)
incentive comp reset and power gen range
Q (Stephen Volkmann · Jefferies): He asked how much incentive compensation might reset to next year in dollar terms. He also asked why the power generation target range is wide (15%–25%).
A: They said the incentive comp reset next year could be about $200 million and Q3 and Q4 expense will be about $25 million a quarter lower than Q2. The power gen range reflects capacity constraints on large gensets and variation driven by sales of smaller gensets and stronger-than-expected demand in China.
"Well, next year, it could be in the order of like $200 million." — Mark Smith (CFO)
Power Systems ramp and engine transition
Q (Jerry Revich · Wells Fargo): He asked how much Power Systems can increase deliveries in 2027 versus 2026 and whether the team can sustain teen-type growth. He also asked how the engine product transition will affect operations in 2027.
A: They expect a step-up in capacity coming online next year and a bigger step-up in '28, with added capacity phased through 2030. The phased transition allows selling current product next year while ramping the new product, which should smooth operations and help customers gain confidence in the new platforms.
"So we'd expect some step-up and then the bigger step-up happening in '28." — Jennifer Rumsey (CEO·CHAIR)
power margins and prebuy behavior
Q (Steven Fisher · UBS): He asked why incremental margins in power gen are stronger than prior 25%–30% expectations. He also asked if the phased ramp will reduce prebuy in 2027.
A: They said stronger demand in China and efficiency in ramp and supply chain helped margins, and they expect strong gross margin performance to continue. The staged transition should enable a smoother year-over-year change and some prebuy is occurring and likely to continue into next year amid cautious optimism.
"I think the main driver has probably been stronger demand in China, which helps on the JV earnings side." — Mark Smith (CFO)
pricing, costs, and backup power backlog
Q (Angel Castillo Malpica · Morgan Stanley): He asked whether the phased EPA approach affects pricing, costs, margins, and market share, and whether competitors could use credits. He also asked for color on diesel backup power backlog and regional demand.
A: They expect the powertrain to be the largest contributor to higher truck pricing and expect to be compensated for new-product value, and they expect to pass on NCPs to the market. Backup power backlog is very strong, demand is capacity constrained across U.S., China and Southeast Asia, and they are expanding capacity and feel pressure to move faster.
"And we expect when we're launching new products with new value that we're appropriately compensated for that." — Mark Smith (CFO)
95-liter lead times and pricing
Q (Kyle Menges · Citi): He asked how far out they are booking 95-liter orders and whether lead times for diesel gensets are extending. He also asked about changes in pricing on new agreements.
A: They said demand continues to grow and they are selling out further into the second half of 2028, with no pausing in demand. They expect to raise margin performance over time as they grow and to be paid for the technology and services they provide.
"And so yes, it's -- if you want a new one, it's going to be the second half of 2028." — Mark Smith (CFO)
customer choices and power gen capacity
Q (David Raso · Evercore): He asked whether customers prefer paying NCP penalties to avoid tech change or prefer lower-milligram product using credits, and he asked about power gen capacity next year versus this year.
A: They cautioned final details of credits and product availability are not settled, but customers want both current and new products and will initially buy more of the current offering while starting to ramp new products. On power gen capacity, they declined to give detailed guidance now but said capacity will be higher next year.
"I would anticipate initially, we'll buy more of the current offering, but they want both." — Jennifer Rumsey (CEO·CHAIR)
parts demand and China visibility
Q (Timothy Thein · Raymond James): He asked about parts demand in North America on-highway and visibility into China data center demand and implications for the Chongqing JV.
A: They said parts demand is up and they raised the bottom of their guide a bit, with parts stronger this year than last as the fleet ages and economics improve. Conversations with strategic customers in China and Southeast Asia show similar multiyear demand plans and requests for more supply.
"On the parts, the market is up, as you said, we raised the bottom end of the guide a little bit." — Jennifer Rumsey (CEO·CHAIR)
credits and passing costs
Q (Robert Wertheimer · Melius): He asked whether competitors with credits could avoid passing on costs and whether Cummins will have difficulty passing costs through or suffer margin impact next year.
A: They said how credits will work in the final rule remains to be seen, but generally you can't just use credits to offset NCPs and they do not expect large use of credits to offset NCPs. They would not comment on other companies' plans.
"Well, so how the credits will work in the end, it remains to be seen, but it's not -- generally, you can't just use credits to offset NCPs." — Jennifer Rumsey (CEO·CHAIR)
replacement demand and warranty accruals
Q (Kristen Owen · Oppenheimer & Company): She asked how underlying replacement demand looks outside of EPA-driven prebuy and how warranty accruals will behave with a measured product ramp in 2027.
A: They said underlying replacement demand is improving and the second-half pickup is more market-driven than pure prebuy. Warranty costs are currently running in the low 2% of sales and will likely tick up as new platforms launch, then normalize over time; extended limited production should help catch issues early.
"Our current warranty costs are running in the low 2% of sales range across the entire company, pretty much at historical lows despite what I call historical complexity of the products." — Mark Smith (CFO)