CUMMINS (CMI)·Q4 2025 Earnings Summary
Cummins Beats on Revenue as Data Centers Power Growth, But Electrolyzer Exit Weighs on EPS
February 5, 2026 · by Fintool AI Agent
Cummins delivered a solid Q4 2025, beating revenue estimates by 5.4% as data center demand powered record results in Distribution and Power Systems segments. However, the headline EPS of $4.27 was impacted by $218 million ($1.54 per share) of charges related to the company's decision to exit the electrolyzer business within its Accelera segment.
The company guided 2026 revenue to grow 3% to 8% with EBITDA margins of 17.0% to 18.0%, reflecting expectations for slightly better North America truck markets and continued strength in data center power generation.
Did Cummins Beat Earnings?
*Values retrieved from S&P Global
The Electrolyzer Impact: Q4 results included $218 million of charges ($1.54 per diluted share) related to the electrolyzer business within Accelera, of which $175 million were non-cash charges. Excluding these charges, adjusted EBITDA margin was 16.0%, beating consensus.
Full Year 2025:
- Revenue: $33.7 billion (-1% YoY)
- Net Income: $2.8 billion
- Diluted EPS: $20.50 (includes $3.28 of electrolyzer charges)
- EBITDA: $5.4 billion (16.0% of sales)
Ask Fintool AI AgentWhat Did Management Guide?
Cummins provided 2026 guidance that was largely in line with expectations:
*Values retrieved from S&P Global
CEO Jennifer Rumsey's outlook: "In 2026, we anticipate that demand will be slightly better in the North America on-highway truck markets, particularly in the second half of the year, paired with continued strength in data center power generation markets."
End Market Assumptions for 2026:
- Heavy-duty trucks (NA): 220,000-240,000 units (flat to +10% YoY)
- Medium-duty trucks (NA): 110,000-120,000 units (flat to +10% YoY)
- Pickup truck engine shipments: 125,000-140,000 units (-5% to +5% YoY)
- Global power generation: +10% to +20%
- Mining engines: Flat to +10%
- Aftermarket: +2% to +8%
The guidance implies Cummins sees the challenging truck market environment persisting through H1 2026, with recovery expected in the back half of the year.
Segment-Level 2026 Guidance:
Power Systems stands out with guidance for 23-24% EBITDA margins—the highest of any segment—reflecting continued data center strength and operational leverage.
What Changed From Last Quarter?
The Big Shift — Electrolyzer Exit: The most significant change is Cummins' decision to stop new commercial activity in the electrolyzer space, subject to local legal requirements. The company will continue to fulfill existing customer commitments but is effectively winding down this business.
Why? Rapidly deteriorating conditions in electrolyzer and hydrogen markets, combined with significant uncertainty in alternative power markets from reductions in government incentives.
Total 2025 Electrolyzer Charges: $458 million, including:
- Goodwill impairment: $210M
- Inventory write-downs: $119M
- Property, plant & equipment impairments: $55M
- Contract termination costs: $34M
- Intangible asset impairments: $27M
- Severance: $13M
This is a stark reversal from just a year ago when Cummins was investing heavily in hydrogen technology. The pivot reflects broader industry headwinds in the green hydrogen space.
How Did Each Segment Perform?
Winners:
- Power Systems was the star performer with 21.7% EBITDA margin—the highest of any segment—driven by data center markets in North America, China, and Asia Pacific.
- Distribution achieved record profitability with 15.1% EBITDA margin, up from 13.0% a year ago, on strong power generation demand for data center applications.
Laggards:
- Engine margins compressed 340 bps as North America heavy-duty and medium-duty truck demand remained soft.
- Components faced 15% revenue decline in North America offset partially by Europe and China strength.
Ask Fintool AI AgentQ&A Highlights
The earnings call Q&A revealed several important details:
Data Center Demand Is Exceptional:
"We had record order intake in Q4 for power generation, and we're taking orders now well into 2028. So the demand remains very strong for diesel backup power."
Data Center Revenue Quantified: Total company data center revenue reached $3.5 billion in 2025, up 35% from $2.6 billion in 2024. This is split between Power Systems and Distribution segments.
Tariff Headwinds Persist: CFO Mark Smith noted tariffs are approximately 50 basis points dilutive to EBITDA margin in 2026, even after recovery efforts. The company has been largely successful recovering tariff costs on a dollar basis, but the pass-through inflates both revenue and COGS, diluting margins.
EPA 2027 Clarity: EPA's confirmation of the 2027 Low NOx rule provides regulatory certainty. ACT Research estimates $10,000-$15,000 content add per heavy-duty truck, with the majority in Cummins' Engine and Components segments.
Pre-Buy Embedded in Guidance: Management expects some pre-buy activity in H2 2026 ahead of EPA 2027 implementation:
"We are assuming we'll see some pre-buy in the second half of next year. There's a combination of the natural coming out of the down cycle for the truck market... and then pre-buy in the second half of the year."
Capital Allocation Flexibility: The balance sheet is strong with debt-to-EBITDA below 1x. Management has flexibility to deploy more capital to shareholders going forward.
Analyst Day Announced: May 21, 2026 in New York City—expect updates on long-term financial targets.
Ask Fintool AI AgentHow Did the Stock React?
CMI shares are up approximately 64% from the $368 level a year ago, reflecting the market's recognition of Cummins' strong positioning in data center power generation—a secular growth theme.
The muted after-hours reaction suggests the market largely expected these results. The electrolyzer exit, while a significant strategic shift, may actually be viewed positively as it removes a cash-burning business with uncertain prospects.
Key context: CMI hit an all-time high of $617.98 intraday on February 4, 2026, the day before earnings, suggesting expectations were elevated heading into the print.
Key Highlights From 2025
Cummins called 2025 "a historic year" with several notable achievements:
- 16th consecutive dividend increase — returned $1.055 billion to shareholders through dividends
- New engine platforms launched — B7.2 and X10 engines as part of Cummins HELM™ platforms
- First Mode acquisition — acquired hybrid mining and rail product lines and IP portfolio
- CEO recognition — Jennifer Rumsey named one of Barron's Top CEOs of 2025
- Strong cash generation — $3.6 billion operating cash flow
Balance Sheet & Cash Flow
The significant improvement in operating cash flow ($3.6B vs $1.5B) reflects strong working capital management and improved profitability across core businesses.
What Should Investors Watch?
1. Data Center Demand Durability: Power Systems and Distribution are now the growth engines. Any signs of cooling in data center capex would be a concern.
2. Truck Market Recovery: Management expects H2 2026 improvement in North America trucks. Watch for signs this materializes.
3. Accelera Restructuring Execution: The electrolyzer exit should reduce cash burn. Cummins committed to "pacing and focusing its zero-emissions investments on the most promising paths."
4. Margin Sustainability: The 17-18% EBITDA margin guide for 2026 would represent continued improvement from the 16% achieved in 2025.
5. Analyst Day (May 21, 2026): Management will provide updated long-term financial targets at the NYC event. Expect more detail on capacity expansion plans for power generation and outlook for EPA 2027 content opportunity.
6. EPA 2027 Pre-Buy: Watch for accelerating truck orders in H2 2026 as fleets prepare for the new emissions standards. Content add of $10-15K per heavy-duty truck represents meaningful revenue opportunity.
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