Cummins Inc. has repositioned its Power Systems segment from a cyclical engine supplier to a structural beneficiary of the AI data center buildout. In the past year, the division secured over 150 megawatts of on-site generation orders specifically designed for hyperscale data centers, representing a 35% increase in unit volumes versus the prior year. Recurring revenues from service contracts now account for roughly 25% of segment sales, up from 18% two years ago, as customers sign multi-year maintenance agreements to ensure uninterrupted operation of critical AI workloads. Management forecasts that demand from data centers will contribute 40% of total Power Systems revenue by 2028, compared with 15% in 2023, driven by the exponential growth of generative AI applications and their relentless computing power requirements.

Cummins benefits from regulatory-driven pre-buying ahead of the U.S. Environmental Protection Agency’s 2027 emissions standards for heavy-duty engines. Customers are front-loading purchases to meet stricter nitrogen oxide and particulate limits, resulting in a near-term order backlog valued at approximately $2.4 billion, up 20% year-over-year. This buildup provides downside protection for the company as traditional freight volumes soften; while Class 8 truck builds are expected to decline by 8% in 2026, Cummins’ engine shipments tied to pre-2027 compliant models are projected to grow by 12%. The order visibility through late 2025 allows the company to optimize factory utilization and preserve gross margins in Power Systems and Engine segments despite broader industrial cycle headwinds.