CMI Cummins 10-Q 2026-09-30 section summaries

Cummins (CMI) — Q3 2026

Consolidated results

Amounts in $ millions, except per-share data.

Q3 sales increased 13.5%, while 9M sales rose 8.6%. Gross margin expanded to 27.7% from 25.6% in Q3, and to 26.8% from 26.1% for 9M. The Q3 effective tax rate was 17.7% versus 32.7%; it included $75 million of net favorable discrete items, mainly uncertain-tax-position and return-to-provision adjustments. The 9M rate was 22.8% versus 26.3%, reflecting $53 million of net favorable discrete items and the tax impact of a $199 million fuel-cell-business sale loss for which no tax benefit was recognized.

Segment results

External sales and segment EBITDA; $ millions. 9M sales are included where growth differed from the quarter by at least 3 percentage points.

Engine growth was led by heavy-duty truck sales ($803 million versus $540 million); light-duty automotive sales declined ($496 million versus $583 million). Components growth included drivetrain/braking sales of $1.107 billion versus $916 million and emission-solutions sales of $837 million versus $702 million. Distribution’s Q3 sales included $2.302 billion in North America versus $2.200 billion; Latin America declined to $46 million from $98 million. Power Systems power-generation sales rose to $742 million from $623 million.

Q3 segment EBITDA reconciled to pretax income as follows:

For 9M, segment EBITDA was $4.878 billion versus $4.257 billion and pretax income was $3.647 billion versus $3.172 billion. Accelera remained loss-making, though its Q3 EBITDA loss narrowed; its 9M loss included the fuel-cell-business charge.

Balance sheet and cash flow

Amounts in $ millions. Balance-sheet dates are September 30, 2026 and December 31, 2025; cash-flow figures are 9M.

Cummins shareholders’ equity was $13.331 billion; derived tangible common equity, after subtracting goodwill and other intangible assets, was $9.098 billion. Cash and securities exceeded short- and long-term debt by $3.334 billion. Shares outstanding fell from approximately 138.1 million at December 31, 2025 to 137.0 million at September 30, 2026; 9M repurchases were $827 million, while dividends were $854 million versus $778 million.

Higher net income and cash inflows from accounts payable supported operating cash flow. These were partly offset by cash uses from receivables ($851 million versus $466 million) and inventory ($1.030 billion versus $446 million). Debt’s estimated fair value was $6.836 billion versus $7.337 billion at year-end. During 9M, Cummins converted $550 million of 5.45% notes due 2054 from fixed to floating SOFR-based rates, increasing floating-rate exposure. It had $4.0 billion of revolving facilities with no borrowings; $348 million of commercial paper left $3.7 billion available.

Business developments and risks

Long-term customer contracts, excluding extended warranties, represented $8.1 billion of transaction price at September 30, 2026: $4.8 billion expected to be recognized within 12 months, with the remainder over periods up to 10 years. Deferred revenue was $2.857 billion versus $2.660 billion.

Cummins and its Amplify Cell Technologies partners agreed to complete facility construction but delay installing manufacturing capacity amid changing commercial EV demand expectations; production timing remains uncertain. Cummins had contributed $464 million, had $366 million of future contributions contractually committed with uncertain timing, and carried the investment at $398 million net of operating losses. No current impairment was identified, though future developments could lead to one.

In September 2026, Hydrogenics recommended customers stop using HyLYZER electrolyzers after reviewing fleet data. No recall had been initiated, and required modifications and costs remained undetermined, with potential material effects on results or cash flows. The 2024 emissions settlement followed a $2.0 billion charge in 2023 and required $1.9 billion of payments in 2024; noncompliance could bring further penalties. Warranty accruals, including extended-warranty deferred revenue, increased to $2.885 billion from $2.778 billion. Minimum-purchase contracts could result in about $537 million of penalties if purchases ceased, although Cummins did not expect penalties. Other exposures included $235 million of customer performance guarantees and $53 million maximum potential loss on guarantees.

Accounting

Cummins does not expect newly issued accounting standards to materially affect financial results. Environmental-credit guidance effective January 1, 2028 will require gross balance-sheet presentation of related assets and obligations, rather than the company’s current net presentation; its impact remains under evaluation.

Cummins Inc. — Q3 and nine months ended September 30, 2026

Consolidated results

Gross margin grew 23% in Q3 and 12% in 9M; margin rates rose to 27.7% from 25.6% in Q3 and 26.8% from 26.1% in 9M. Higher volumes and favorable pricing drove improvement, partly offset by compensation costs. Operating income increased 69% in Q3, helped by $217 million lower other operating expense—principally the absence of the prior-year Accelera goodwill impairment. 9M other operating expense was $331 million versus $321 million: the current period’s $199 million net charge for the low-pressure fuel-cell business sale and customer-obligation settlement was offset by the absence of the prior-year impairment.

R&D expense was $400 million versus $345 million in Q3 and $1,143 million versus $1,046 million in 9M; SG&A was $868 million versus $789 million and $2,606 million versus $2,339 million, respectively. Increases primarily reflected compensation, with R&D also reflecting prototypes and consulting. Q3 and 9M effective tax rates were 17.7% and 22.8%, versus 32.7% and 26.3%. Favorable discrete tax items were $75 million in Q3 and $53 million in 9M; the 9M rate also reflected an unfavorable tax impact from the fuel-cell sale, for which no tax benefit was recognized. Full-year tax-rate guidance was approximately 23%, excluding discrete items and that sale-related impact.

Segment results

Segment sales include intersegment sales; EBITDA is the company’s segment performance measure. 9M values are included where year-to-date growth differs materially from the quarter’s trend.

Engine and Components benefited from higher volumes, although compensation costs weighed on results; Engine 9M EBITDA declined despite sales growth. Distribution Q3 EBITDA fell on compensation expense, while 9M benefited from mix and volume. Power Systems growth and margin expansion reflected higher volumes and favorable pricing, particularly in power generation. Accelera’s prior-year Q3 EBITDA included a $210 million goodwill impairment and $30 million inventory write-down; its 9M 2026 result included the $199 million sale and settlement charge.

Power-generation demand, especially data-center applications in North America and China, was a major growth driver. Distribution power-generation sales were $1,328 million versus $1,247 million in Q3 and $3,981 million versus $3,537 million in 9M. Engine sales also benefited from strong North American truck demand: Q3 heavy-duty sales rose 32% to $1,016 million and medium-duty/bus sales rose 33% to $1,045 million. Total engine shipments rose 21% to 163,700 in Q3 and 11% to 469,200 in 9M; light-duty shipments declined in both periods. Accelera’s Q3 sales declined mainly on lower electrolyzer sales, while 9M sales rose on improved electrolyzer sales and favorable foreign exchange. Slower zero-emissions adoption has reduced near-term revenue expectations; restructuring and focused investment are intended to improve costs gradually, though priority-technology investment is expected to sustain near-term losses.

Geography

For 9M, U.S. and Canada sales were $16,098 million versus $15,215 million, while international sales were $11,195 million versus $9,919 million, including a favorable 3% foreign-exchange contribution. International demand reflected China, Asia Pacific, Europe and Latin America; 9M gains also included construction-equipment demand.

Cash flow, liquidity and capital allocation

Improved working-capital requirements—$926 million better year over year—were the principal driver of higher operating cash flow. Financing outflow increased mainly because of lower borrowing proceeds and higher share repurchases. Full-year capex guidance is $1.35–$1.45 billion, about 60% in North America, for product development and targeted capacity expansion.

Cash and cash equivalents were $3.571 billion and marketable securities $614 million, totaling $4.185 billion; $2.586 billion was held internationally. Available revolving-credit capacity was $3.652 billion after $348 million of commercial paper outstanding; committed revolvers total $4.0 billion, with no facility borrowings. The company repurchased $833 million of stock (1.4 million shares) during 9M, paid $854 million in dividends, and raised its quarterly dividend 10% to $2.20 per share. It also swapped $550 million of 2054 senior notes from a fixed 5.45% rate to floating SOFR plus a spread. Maximum supply-chain financing outstanding was $564 million, including $244 million owed to financial intermediaries within accounts payable.

Outlook, risks and other matters

Management expected strong Power Systems and North American medium- and heavy-duty truck demand, with stable aftermarket demand, through the remainder of 2026. Tariffs, export controls, geopolitics, inflation and supply-chain disruption create uncertainty around costs, demand and production. Tariff effects net of mitigation and government refunds were immaterial to Q3 and 9M profitability and operating cash flow, but continued costs or supply constraints could materially affect future results. Mitigation includes alternative sourcing and customer cost-recovery efforts.

The company sold its low-pressure fuel-cell business on March 31, 2026, making a $175 million net payment, cancelling future commitments and resolving customer claims. Regulatory and technology changes could affect Accelera’s competitiveness and investment recovery. Following EPA rescission of the 2009 GHG Endangerment Finding and repeal of on-highway GHG standards, future rulemaking could eliminate emissions-credit compliance; credits were valued at $89 million at September 30, 2026, and could face a noncash write-off up to their value. Legal challenges are likely. Other risks include emissions-compliance obligations, recalls and liability, cyclicality, OEM production schedules, competition, currency, cybersecurity and talent retention.

Critical accounting estimates include warranty liabilities, goodwill impairment, income taxes and pensions; management identified no known circumstances reasonably likely to change its policies or estimates in the first nine months of 2026.

Cummins reported no material changes in its quantitative or qualitative market-risk disclosures since its 2025 Form 10-K. The detailed discussion of market risks remains in Item 7A of that filing.

As of September 30, 2026, the CEO and CFO concluded that Cummins’ disclosure controls and procedures were effective. No changes during the quarter materially affected, or were reasonably likely to materially affect, internal control over financial reporting.

Cummins’ quarterly report provides no new, section-specific risk-factor details or financial metrics. It refers readers to the risk factors in its 2025 Form 10-K and its cautionary language regarding forward-looking statements. The company emphasizes that the risks described are not exhaustive; risks that are currently unknown or considered immaterial could still materially adversely affect its business, financial condition, or operating results.

Rule 10b5-1 Trading Arrangements

During Q3 2026, no directors or executive officers adopted or terminated trading arrangements other than Amy R. Davis, Vice President and President—Accelera and Components. On August 25, 2026, Davis adopted a Rule 10b5-1 arrangement intended to satisfy the rule’s affirmative-defense conditions. It permits sales through December 24, 2026, or until all sales are completed, whichever occurs first, and covers up to 11,292 shares, including shares subject to vesting of restricted stock unit and performance share unit awards. The actual number of shares sold may vary based on tax withholding and performance conditions.