Cummins Sells the Power Solutions That Keep Data Centers Running. Does That Make the Stock a Buy?

Founded in 1919, Cummins (NYSE: CMI) was focused on a breakthrough technology at the time: diesel engines. Cummins still serves the automotive industry today, but it's found a new revenue opportunity in data centers thanks to artificial intelligence (AI).

In part due to that growing revenue source that has fueled more investor interest, Cummins shares have climbed some 42% in value over the past 12 months. In comparison, the S&P 500 is up a bit of over 18% in the same period. While AI power demand shows no signs of slowing, there's still more to consider about Cummins as a potential investment.

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Multiple data center power solutions

Cummings offers a variety of power solutions, ranging from truck engines and vehicle components to generators and power systems. It's the generators and power systems that have investors excited about this stock, as energy demands from power-hungry data centers show no signs of slowing down.

According to research from Goldman Sachs Group, the share of total U.S. peak summer power demand from data centers is expected to climb from 4.1% in 2025 to 8.5% by 2027. U.S. data center power demand is forecast to increase from 31 gigawatts (GW) in 2025 to 66 GW by 2027. That can allow Cummins to continue to benefit from increasing demand, and it's currently capturing opportunities that are in front of it.

In June, Cummins announced a deal with Circe Energy to serve as the primary power solution for its West Texas AI data center campus. It will provide natural gas generator sets for behind-the-meter power solutions, allowing power to flow directly to the data center campus and helping bypass reliance on the traditional grid.

Cummins announced in August that it had been selected to supply battery energy storage systems (BESS) for a large U.S. data center project. While few specifics were provided, this is a win for the company's BESS division, which was launched in May 2025. "The future of data center growth depends on finding smarter, faster ways to deploy and manage power. BESS is quickly becoming a critical part of the modern data center power strategy," Jenny Bush, president of Cummins' Power Systems business, said in a press release.

That demand for power generation solutions is also not just about future deals, as it is currently showing up in the earnings results. For Cummins' 2026 second-quarter earnings, it reported record revenue of $9.5 billion. In addition, it boosted its 2026 full-year revenue guidance.

"We're raising our financial outlook for 2026 as demand continues to outpace expectations across several key markets," CEO Jennifer Rumsey said. She added, "North American truck markets continue to improve, while demand for data center power generation remains robust." The company expects 2026 full-year sales to climb between 10% to 13%, up from previous guidance of 8% to 11%.

The investment considerations

The business opportunities in data centers are compelling, but anyone investing in Cummins is investing in more than just that. While sales for its power system segment grew 19% in the quarter, other areas of the business, such as its engine, components, and distribution segments, are growing sales more slowly. The power system segment only accounted for 18% of the company's total revenue in the quarter, so a slowdown in any of its other segments can offset any of the positive results it's seeing within its power system segment.

In addition, the company's zero-emissions business segment, Accelera, has yet to become a major revenue contributor. In Q2, the segment reported sales of just $145 million.

That said, for investors willing to accept the various pieces that form the company's whole, it could still be a worthwhile pick-and-shovel play for more conservative investors looking for exposure to the AI market. Cummins is not only profitable, it also makes shareholder-friendly moves, such as dividend payouts and stock buybacks.

While it's not the largest payout, Cummins' dividend yields 1.5% as of this writing. In the first six months of 2026, the company also repurchased $468 million in common stock. On top of that, there's potential for more stock price appreciation. Over the next 12 months, the 25 analysts who cover the stock have a median price target of $782, according to CNN. That would represent a roughly 40% gain from the Sept. 4 closing price of $560.75.

Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cummins and Goldman Sachs Group. The Motley Fool has a disclosure policy.