Cummins Inc. (CMI) delivered a fourth quarter that was simultaneously impressive and complicated. The industrial giant posted revenue of $8.54 billion, up 1% year-over-year and well above Wall Street's $8.13 billion estimate. Adjusted earnings per share came in at $5.81, crushing the analyst consensus of $5.11.
So naturally, the stock dropped nearly 9%.
The culprit? A $458 million charge tied to what the company diplomatically calls "a strategic shift" in its Accelera segment, which houses its hydrogen electrolyzer business. Translation: the hydrogen revolution isn't happening as quickly as everyone hoped, and Cummins is adjusting accordingly. The charges were primarily non-cash and dragged GAAP diluted earnings down to $4.27 for the quarter and $20.50 for the full year.
"Cummins delivered strong operational results in the fourth quarter and full year despite continued weakness in North America truck markets," said Jennifer Rumsey, Chair and CEO. "Our Distribution and Power Systems segments achieved record full-year sales and profitability as a result of disciplined execution and robust demand for data center backup power."
That data center story is the real headline here. While tech companies race to build AI infrastructure, someone needs to keep the lights on when the grid hiccups. Cummins is cashing in on that need.
The Segment Breakdown
Power Systems was the star performer, with revenue jumping 11% to $1.9 billion and an EBITDA margin of 21.7%. Global data center demand drove those numbers, and it's not slowing down anytime soon.
The Distribution segment generated $3.3 billion in revenue, up 7%, fueled by a 10% increase in North American demand for power generation equipment and aftermarket parts.
On the flip side, the Engine segment saw sales decline 4% to $2.6 billion, with North American revenue down 5% as the truck market remained soft. Components sales fell 7% to $2.4 billion, weighed down by a 15% drop in North American demand that offset gains elsewhere.
Then there's Accelera, which increased revenue 31% to $131 million but posted an EBITDA loss of $374 million due to those restructuring charges. Rumsey explained: "In the fourth quarter, we recorded charges related to our electrolyzer business within the Accelera segment, reflecting actions taken as part of a strategic review initiated in response to shifts in hydrogen adoption expectations. These decisions were aimed at streamlining operations and reducing ongoing costs in light of the weaker outlook for demand."
Despite the Accelera headwinds, Cummins generated $1.5 billion in operating cash flow during the quarter and closed the year with $2.8 billion in cash.
Looking Ahead
Cummins isn't standing still. The company completed its acquisition of First Mode assets, adding retrofit hybrid systems for mining and rail to its portfolio. It also advanced its HELM multi-fuel engine platforms with new B7.2 and X10 engines, supporting its "Destination Zero" decarbonization strategy.
For 2026, management expects revenue growth of 3% to 8% and EBITDA margins between 17.0% and 18.0%.
"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," Rumsey said. "Cummins remains well-positioned to invest in future growth, deliver strong financial results and return cash to shareholders in 2026."
Price Action: Cummins shares were down 8.91% at $551.68 at the time of publication on Thursday.
