Q2 2026 Cummins Inc Earnings Call

August 4, 2026

Speaker #1: Greetings and welcome to the second quarter 2026 Cummins, Inc. earnings conference call. At this time, all participants are in a listen-only mode; a question-and-answer session will follow a formal presentation.

Operator: Greetings, welcome to the Q2 2026 Cummins Inc. earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nicholas Arens, Executive Director of Investor Relations. Please go ahead.

Speaker #1: If anyone should require operator assistance, please press *0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nick Ahrens, Executive Director of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Paul. Good morning, everyone, and welcome to our teleconference today to discuss Cummins' results for the second quarter of 2026. Participating with me today are Jennifer Rumsey, our Chair, and Chief Executive Officer; and Mark Smith, our Chief Financial Officer.

Nick Arens: Thank you, Paul. Good morning, everyone, welcome to our teleconference today to discuss Cummins results for the Q2 2026. Participating with me today are Jennifer Rumsey, our Chair and Chief Executive Officer, and Mark Smith, our Chief Financial Officer. We will all be available to answer questions at the end of the teleconference. Before we start, please note that some of the information that you will hear or be given today will consist of forward-looking statements within the meaning of the Securities Exchange Act of 1934. Such statements express our forecasts, expectations, hopes, beliefs, and intentions on strategies regarding the future. Our actual future results could differ materially from those projected in such forward-looking statements because of the several risks and uncertainties.

Speaker #2: We will all be available to answer questions at the end of the teleconference. Before we start, please note that some of the information that you will hear or be given today will consist of forward-looking statements within the meaning of the securities exchange act of 1934.

Speaker #2: Such statements express our forecasts, expectations, hopes, beliefs, and intentions on strategies regarding the future. Our actual future results could differ materially from those projected, and such forward-looking statements because of the several risks and uncertainties.

Nick Arens: Such statements express our forecasts, expectations, hopes, beliefs, and intentions on strategies regarding the future. Our actual future results could differ materially from those projected in such forward-looking statements because of the several risks and uncertainties. More information regarding such risks and uncertainties is available in the forward-looking disclosure statement in the slide deck and our filings with the Securities and Exchange Commission, particularly the Risk Factors section of our most recently filed annual report on Form 10-K, and any subsequently filed quarterly reports on Form 10-Q. During this call, we will be discussing certain non-GAAP financial measures.

Speaker #2: More information regarding such risks and uncertainties is available in the forward-looking disclosure statement in the slide deck and our filings with the Securities and Exchange Commission.

Nick Arens: More information regarding such risks and uncertainties is available in the forward-looking disclosure statement in the slide deck and our filings with the Securities and Exchange Commission, particularly the Risk Factors section of our most recently filed annual report on Form 10-K, and any subsequently filed quarterly reports on Form 10-Q. During this call, we will be discussing certain non-GAAP financial measures. We will refer you to our website for the reconciliation of those measures to GAAP financial measures. Our press release with a copy of the financial statements and a copy of today's webcast presentation are available on our website within the investor relations section at cummins.com. With that out of the way, I will turn you over to our Chair and CEO, Jennifer Rumsey, to kick us off.

Speaker #1: Greetings and welcome to the second quarter 2026 CUMMINS INC earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow a formal presentation.

Speaker #2: Particularly the risk factors section of our most recently filed annual report on Form 10-K, and any subsequently filed quarterly reports on Form 10-Q. During this call, we will be discussing certain non-GAAP financial measures, and we will refer you to our website for the reconciliation of those measures to GAAP financial measures.

Nick Arens: We will refer you to our website for the reconciliation of those measures to GAAP financial measures. Our press release with a copy of the financial statements and a copy of today's webcast presentation are available on our website within the investor relations section at cummins.com. With that out of the way, I will turn you over to our Chair and CEO, Jennifer Rumsey, to kick us off.

Speaker #2: Our press release, with a copy of the financial statements and a copy of today's webcast presentation, is available on our website within the Investor Relations section at cummins.com.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Paul. Good morning, everyone, and welcome to our teleconference today to discuss Cummins' results for the second quarter of 2026. Participating with me today are Jennifer Rumsey, our Chair and Chief Executive Officer, and Mark Smith, our Chief Financial Officer.

Speaker #2: With that out of the way, I will turn you over to our Chair and CEO, Jennifer Rumsey, to kick us off.

Speaker #3: Thank you, Nick. Good morning. I'll start with a summary of our second quarter accomplishments and financial results. Then discuss our sales and end-market trends by region.

Jennifer Rumsey: Thank you, Nick. Good morning. I'll start with a summary of our Q2 accomplishments and financial results, discuss our sales and end market trends by region. I will finish with a discussion of our outlook for 2026. Mark will walk you through additional details on our Q2 performance and our full-year forecast. Before getting into the details of our performance, I want to highlight a few major events from the quarter. In May, we hosted our 2026 Analyst Day, where we raised our 2030 financial targets and reinforced our commitment to returning capital to shareholders. This reflects that our strategy is working. We are advancing our position in key markets and experiencing increasing demand for our products.

Speaker #2: We will all be available to answer questions at the end of the teleconference. Before we start, please note that some of the information you will hear or be given today will consist of forward-looking statements within the meaning of the Securities Exchange Act of 1934.

Speaker #3: I will finish with a discussion of our outlook for 2026. Mark will then walk you through additional details on our second quarter performance and our full-year forecast.

Speaker #3: Before getting into the details of our performance, I want to highlight a few major events from the quarter. In May, we hosted our 2026 Analyst Day, where we raised our 2030 financial targets and reinforced our commitment to returning capital to shareholders.

Speaker #2: Such statements express our forecasts, expectations, hopes, beliefs, and intentions on strategies regarding the future. Our actual future results could differ materially from those projected in such forward-looking statements because of several risks and uncertainties.

Speaker #3: This reflects that our strategy is working. We are advancing our position in key markets and experiencing increasing demand for our products. In response to growing global investments in data centers, we also announced plans to further expand our global capacity and broaden our power generation portfolio with integrated power solutions and the development of a 130-liter natural gas genset, extending our reach into the growing prime power market.

Jennifer Rumsey: This reflects that our strategy is working. We are advancing our position in key markets and experiencing increasing demand for our products. In response to growing global investments in data centers, we also announced plans to further expand our global capacity and broaden our power generation portfolio with integrated power solutions and the development of 130-liter natural gas genset, extending our reach into the growing prime power market. Since Analyst Day, we have continued to build momentum in the data center market.

Speaker #2: More information regarding such risks and uncertainties is available in the forward-looking disclosure statement in the slide deck and our filings with the securities and exchange commission.

Jennifer Rumsey: In response to growing global investments in data centers, we also announced plans to further expand our global capacity and broaden our power generation portfolio with integrated power solutions and the development of 130-liter natural gas genset, extending our reach into the growing prime power market. Since Analyst Day, we have continued to build momentum in the data center market. We recently signed a multi-year agreement with a global hyperscaler, expanding a long-standing partnership and securing visibility into several gigawatts of future backup power genset demand. This agreement reinforces our confidence in our growth outlook and supports the capacity expansion already underway. In June, we announced an agreement with Circe Energy to provide QSK60 and HSK78 natural gas generator sets and integrated microgrid technology for a behind-the-meter prime power solution supporting a high-performance computing data center in Texas.

Speaker #2: Particularly, the risk factors section of our most recently filed annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q. During this call, we will be discussing certain non-GAAP financial measures and will refer you to our website for the reconciliation of those measures to GAAP financial measures.

Speaker #3: Since Analyst Day, we have continued to build momentum in the data center market. We recently signed a multi-year agreement with a global hyperscaler, expanding a long-standing partnership and securing visibility into several gigawatts of future backup power genset demand.

Jennifer Rumsey: We recently signed a multi-year agreement with a global hyperscaler, expanding a long-standing partnership and securing visibility into several gigawatts of future backup power genset demand. This agreement reinforces our confidence in our growth outlook and supports the capacity expansion already underway. In June, we announced an agreement with Circe Energy to provide QSK60 and HSK78 natural gas generator sets and integrated microgrid technology for a behind-the-meter prime power solution supporting a high-performance computing data center in Texas.

Speaker #2: With that out of the way, I will turn you over to our Chair and CEO, Jennifer Rumsey, to kick us off.

Speaker #3: This agreement reinforces our confidence in our growth outlook and supports the capacity expansion already underway. In June, we announced an agreement with Thursday Energy to provide QSK 60 and HSK 78 natural gas generator sets and integrated microgrid technology for a behind-the-meter prime power solution supporting a high-performance computing data center in Texas.

Speaker #3: Thank you, Nick. Good morning. I'll start with a summary of our second quarter accomplishments and financial results. Then discuss our sales and end-market trends by region.

Speaker #3: I will finish with the discussion of our outlook for 2026. Mark will then walk you through additional details on our second quarter performance and our full-year forecast.

Speaker #3: The project highlights our ability to deliver integrated power solutions, deepen customer partnerships, and expand our presence in the growing prime power market. Finally, the EPA released its much-awaited proposed rule last month that provides greater clarity on the implementation of the North America on Highway 2027 emissions regulations for our industry.

Jennifer Rumsey: The project highlights our ability to deliver integrated power solutions, deepen customer partnerships, and expand our presence in the growing prime power market. The EPA released its much-awaited proposed rule last month that provides greater clarity on the implementation of the North America On-Highway 2027 emissions regulations for our industry. Based on the proposed rule, we announced our intention to use the implementation flexibilities outlined by the EPA to support a measured transition to our new HELM engine platforms. This approach is designed to satisfy the proposed regulatory framework and support OEM customer production schedules while providing additional real-world operating experience to help build end-user confidence in our new engines. This balanced approach also helps maintain product availability, continue bringing new, innovative products to market, and support a successful industry transition.

Speaker #3: Based on the proposed rule, we announced our intention to use the implementation flexibilities outlined by the EPA to support a measured transition to our new HELM engine platforms.

Speaker #3: This approach is designed to satisfy the proposed regulatory framework and support OEM customer production schedules. While providing additional real-world operating experience to help build end-user confidence in our new engines.

Jennifer Rumsey: This approach is designed to satisfy the proposed regulatory framework and support OEM customer production schedules while providing additional real-world operating experience to help build end-user confidence in our new engines. This balanced approach also helps maintain product availability, continue bringing new, innovative products to market, and support a successful industry transition.

Speaker #3: Since Analyst Day, we have continued to build momentum in the data center market. We recently signed a multi-year agreement with a global hyperscaler, expanding and securing visibility into several gigawatts of future backup power genset demand.

Speaker #3: This balanced approach also helps maintain product availability, continue bringing new, innovative products to market, and support a successful industry transition. As a part of our phased transition, we plan to begin limited production of the model year 2027 X15 engine in January 2027.

Speaker #3: This agreement reinforces our confidence in our growth outlook and supports the capacity expansion already underway. In June, we announced an agreement with Thursday Energy to provide QSK60 and HSK78 natural gas generator sets and integrated microgrid technology for a behind-the-meter prime power solution, supporting a high-performance computing data center in Texas.

Jennifer Rumsey: As a part of our phased transition, we plan to begin limited production of the model year 2027 X15 engine in January 2027, based on individual OEM launch plans, with production ramping progressively and full production expected to begin in Q4 2027. We also plan to begin limited production of the model year 2027 X10 in January 2027, with full production expected by Q3 2027, based on OEM launch plans. During the transition, the current X12 and L9 engines used in truck and transit bus applications are expected to remain available under EPA's proposed rule. Consistent with our previous announcement, our next generation B platform is expected to launch in January 2028, and the current B platform will be available for all of 2027.

Speaker #3: Based on individual OEM launch plans. With production ramping progressively and full production expected to begin in the fourth quarter of 2027. We also plan to begin limited production of the model year 2027 X10 in January 2027.

Speaker #3: With full production expected by the third quarter of 2027. Based on OEM launch plans. During the transition, the current X12 and L9 engines used in truck and transit bus applications are expected to remain available under EPA's proposed rule.

Speaker #3: Consistent with our previous announcement, our next-generation B platform is expected to launch in January 2028, and the current B platform will be available for all of 2027.

Jennifer Rumsey: Consistent with our previous announcement, our next generation B platform is expected to launch in January 2028, and the current B platform will be available for all of 2027. As we execute this phased transition, we will continue to work closely with our OEM partners, dealers, fleets, and other end customers to align product availability and launch timing. We will also continue to stay actively engaged with the EPA and monitor its rulemaking and implementation flexibilities to support a successful transition for our customers and the industry.

Speaker #3: Based on the proposed rule, we announced our intention to use the implementation flexibilities outlined by the EPA to support a measured transition to our new HELM engine platforms.

Speaker #3: As we execute this phased transition, we will continue to work closely with our OEM partners, dealers, fleets, and other end customers to align product availability and launch timing.

Speaker #3: This approach is designed to satisfy the proposed regulatory framework and support OEM customer production schedules, while also providing additional real-world operating experience to help build end-user confidence in our new engines.

Jennifer Rumsey: As we execute this phased transition, we will continue to work closely with our OEM partners, dealers, fleets, and other end customers to align product availability and launch timing. We will also continue to stay actively engaged with the EPA and monitor its rulemaking and implementation flexibilities to support a successful transition for our customers and the industry. Together, these actions reflect our commitment to deliver for our customers, execute with discipline, and invest in products and technologies that will support long-term profitable growth. Now I will turn to our overall company performance for Q2 2026 and cover some of our key markets. We delivered record Q2 sales of $9.5 billion, an increase of 9% compared to Q2 2025. Growth was driven primarily by higher global demand in power generation markets, particularly from data centers and international construction markets.

Speaker #3: We will also continue to stay actively engaged with the EPA and monitor its rulemaking and implementation flexibilities to support a successful transition for our customers and the industry.

Speaker #3: This balanced approach also helps maintain product availability, continue bringing new innovative products to market, and support a successful industry transition. As a part of our phase transition, we plan to begin limited production of the model year 2027 X15 engine in January 2027.

Speaker #3: Together, these actions reflect our commitment to deliver for our customers and execute with discipline and invest in products and technologies that will support long-term profitable growth.

Jennifer Rumsey: Together, these actions reflect our commitment to deliver for our customers, execute with discipline, and invest in products and technologies that will support long-term profitable growth. Now I will turn to our overall company performance for Q2 2026 and cover some of our key markets. We delivered record Q2 sales of $9.5 billion, an increase of 9% compared to Q2 2025. Growth was driven primarily by higher global demand in power generation markets, particularly from data centers and international construction markets.

Speaker #3: Now I will turn to our overall company performance for the second quarter of 2026 and cover some of our key markets. We delivered record second-quarter sales of 9.5 billion dollars, an increase of 9% compared to the second quarter of 2025.

Speaker #3: Based on individual OEM launch plans, production will ramp up progressively, with full production expected to begin in the fourth quarter of 2027. We also plan to begin limited production of the model year 2027 X10 in January 2027.

Speaker #3: Growth was driven primarily by higher global demand and power generation markets, particularly from data centers, and international construction markets. EBITDA for the quarter was a record 1.7 billion dollars, or 17.5% of sales, compared to 1.6 billion dollars, or 18.4% of sales a year ago.

Jennifer Rumsey: EBITDA for the quarter was a record $1.7 billion, or 17.5% of sales, compared to $1.6 billion, or 18.4% of sales a year ago. The increase in EBITDA was primarily due to higher volumes, increased joint venture earnings, and positive pricing, partially offset by tariffs and higher variable compensation expenses associated with our projections for record full-year earnings. Our Q2 revenues in North America increased 8% compared to the Q2 of 2025. Industry production of heavy-duty trucks in the Q2 was 60,000 units, down 4% from 2025 levels, while our heavy-duty unit sales were 23,000, up 2% year over year. Industry production of medium-duty trucks was 32,000 units in the Q2 of 2026, an increase of 8% from 2025 levels, while our unit sales were up 29,000, up 19% year over year.

Speaker #3: Consistent with our previous announcement, our next-generation B platform is expected to launch in January 2028, and the current B platform will be available for all of 2027.

Speaker #3: EBITDA was primarily due to higher volumes, increased joint venture earnings, and positive pricing, partially offset by tariffs and higher variable compensation expenses, The increase in full-year earnings.

Speaker #3: As we execute this phase transition, we will continue to work closely with our OEM partners, dealers, fleets, and other end customers to align product availability and launch timing.

Speaker #3: Our second quarter revenues in North America increased 8% compared to the second quarter of 2025. Industry production of heavy-duty trucks in the second quarter was 60,000 units, down 4% from 2025 levels, while our heavy-duty unit sales were 23,000, up 2% year over year.

Jennifer Rumsey: Industry production of heavy-duty trucks in the Q2 was 60,000 units, down 4% from 2025 levels, while our heavy-duty unit sales were 23,000, up 2% year over year. Industry production of medium-duty trucks was 32,000 units in the Q2 of 2026, an increase of 8% from 2025 levels, while our unit sales were up 29,000, up 19% year over year. We shipped 33,000 engines to Stellantis for use in the Ram pickups in the Q2 of 2026, down 2% from a year ago.

Speaker #3: Together, these actions reflect our commitment to deliver for our customers, execute with discipline, and invest in products and technologies that will support long-term, profitable growth.

Speaker #3: Industry production of medium-duty trucks was 32,000 units in the second quarter of 2026, an increase of 8% from 2025 levels, while our unit sales were up 29,000, up 19% year over year.

Speaker #3: Now I will turn to our overall company performance for the second quarter of 2026 and cover some of our key markets. We delivered record second quarter sales of $9.5 billion, an increase of 9% compared to the second quarter of 2025.

Speaker #3: We shipped 33,000 engines to Stellantis for use in their ramp pickups in the second quarter of 2026, down 2% from a year ago. Revenues for North America power generation increased by 19%, driven primarily by continued strong data center demand and supported by the additional manufacturing capacity we brought online at the end of 2025 to meet that growing customer demand.

Jennifer Rumsey: We shipped 33,000 engines to Stellantis for use in the Ram pickups in the Q2 of 2026, down 2% from a year ago. Revenues for North America power generation increased by 19%, driven primarily by continued strong data center demand and supported by the additional manufacturing capacity we brought online at the end of 2025 to meet that growing customer demand. Our international revenues increased 12% during the Q2 compared to a year ago. Q2 revenues in China, including joint ventures, were $2.3 billion, an increase of 30% year over year, driven by accelerating data center demand, as well as improving on-highway and construction markets.

Jennifer Rumsey: Revenues for North America power generation increased by 19%, driven primarily by continued strong data center demand and supported by the additional manufacturing capacity we brought online at the end of 2025 to meet that growing customer demand. Our international revenues increased 12% during the Q2 compared to a year ago. Q2 revenues in China, including joint ventures, were $2.3 billion, an increase of 30% year over year, driven by accelerating data center demand, as well as improving on-highway and construction markets.

Speaker #3: Growth was driven primarily by higher global demand in power generation markets, particularly from data centers, and international construction markets. EBITDA for the quarter was a record $1.7 billion, or 17.5% of sales, compared to $1.6 billion, or 18.4% of sales a year ago.

Speaker #3: Our international revenues increased 12% during the second quarter, compared to a year ago. Second quarter revenues in China including joint ventures were 2.3 billion dollars, an increase of 30% year over year, driven by accelerating data center demand as well as improving on highway and construction markets.

Speaker #3: The increase in EBITDA was primarily due to higher volumes, increased joint venture earnings, and positive pricing, partially offset by tariffs and higher variable compensation expenses, associated with our projections for record full-year earnings.

Speaker #3: Industry demand for medium and heavy-duty trucks in China was 378,000 units, an increase of 24% from last year. Driven by strong export demand, particularly in Africa and Southeast Asia, as well as improving domestic replacement demand and increase in battery electric power trucks.

Jennifer Rumsey: Industry demand for medium and heavy-duty trucks in China was 378,000 units, an increase of 24% from last year, driven by strong export demand, particularly in Africa and Southeast Asia, as well as improving domestic replacement demand and increase in battery electric-powered trucks. Our sales in units, including joint ventures, were 53,000 units, an increase of 2%. Industry demand for excavators in China in the Q2 was 79,000 units, an increase of 34% from 2025 levels. We sold 15,000 units, up 35%, driven by export demand associated with mining investments in Africa and Indonesia. Results also benefited from OEM inventory stocking to mitigate potential logistics risks in the Middle East, as well as continued domestic demand supported by rural development projects. Sales of power generation equipment in China increased 88% in the Q2 due to accelerating data center demand.

Speaker #3: Our billion units, including joint ventures, were 53,000 units, an increase of 2%. Industry demand for excavators in China in the second quarter was 79,000 units, an increase of 34% from 2025 levels.

Speaker #3: Industry production of medium-duty trucks was 32,000 units in the second quarter of 2026, an increase of 8% from 2025 levels, while our unit sales were 29,000, up 19% year over year.

Speaker #3: We sold 15,000 units, up 35%, driven by export demand associated with mining investments in Africa and Indonesia. Results also benefited from OEM inventory stocking to mitigate potential logistics risks in the Middle East, as well as continued domestic demand supported by rural, development projects.

Jennifer Rumsey: We sold 15,000 units, up 35%, driven by export demand associated with mining investments in Africa and Indonesia. Results also benefited from OEM inventory stocking to mitigate potential logistics risks in the Middle East, as well as continued domestic demand supported by rural development projects. Sales of power generation equipment in China increased 88% in the Q2 due to accelerating data center demand. Q2 revenues in India, including joint ventures, was $742 million, an increase of 6% from a year ago.

Speaker #3: We shipped 33,000 engines to Stellantis for use in the ramp pickups in the second quarter of 2026, down 2% from a year ago. Revenues for North America power generation increased by 19%, driven primarily by continued strong data center demand and supported by the additional manufacturing capacity we brought online at the end of 2025 to meet that growing customer demand.

Speaker #3: Sales of power generation equipment in China increased 88% in the second quarter due to accelerating data center demand. Second quarter revenues in India including joint ventures was 742 million dollars, an increase of 6% from a year ago.

Speaker #3: Our international revenues increased 12% during the second quarter compared to a year ago. Second quarter revenues in China, including joint ventures, were $2.3 billion, an increase of 30% year over year, driven by accelerating data center demand as well as improving on-highway and construction markets.

Jennifer Rumsey: Q2 revenues in India, including joint ventures, was $742 million, an increase of 6% from a year ago. Industry truck production increased 5% from 2025, driven by increased freight availability, infrastructure, and mining activity. Now let me provide our outlook for 2026, including comments on several of our key markets. We have raised our full year outlook once again, as demand continues to build across several key markets. We now expect total company revenues to increase 10% to 13% in 2026 compared to our prior guidance of 8% to 11%. This improved outlook reflects higher demand in North America on-highway markets, continued strength in power generation driven by data center markets, and improved on- and off-highway demand in China.

Speaker #3: Industry truck production increased 5% from 2025, driven by increased freight availability, infrastructure, and mining activity. Now let me provide our outlook for 2026, including comments on several of our key markets.

Jennifer Rumsey: Industry truck production increased 5% from 2025, driven by increased freight availability, infrastructure, and mining activity. Now let me provide our outlook for 2026, including comments on several of our key markets. We have raised our full year outlook once again, as demand continues to build across several key markets. We now expect total company revenues to increase 10% to 13% in 2026 compared to our prior guidance of 8% to 11%.

Speaker #3: We have raised our full-year outlook once again, as demand continues to build across several key markets. We now expect total company revenues to increase 10 to 13% in 2026, compared to our prior guidance of 8 to 11%.

Speaker #3: Our sales in units, including joint ventures, were 53,000 units, an increase of 2%. Industry demand for excavators in China in the second quarter was 79,000 units, an increase of 34% from 2025 levels.

Speaker #3: This improved outlook reflects higher demand in North America on highway markets, continued strength in power generation driven by data center markets, and improved on and off highway demand in China.

Jennifer Rumsey: This improved outlook reflects higher demand in North America on-highway markets, continued strength in power generation driven by data center markets, and improved on- and off-highway demand in China. We are raising the midpoint of our 2026 North America heavy-duty truck forecast to a range of 240,000 to 250,000 units, up from our prior guidance of 230,000 to 250,000 units. This reflects strong recent order activity and improving fleet profitability, which drove better than expected Q2 production and improved visibility into demand in the H2 of the year.

Speaker #3: We are raising the midpoint of our 2026 North America heavy-duty truck forecast to a range of 240,000 to 250,000 230,000 to 250,000 units. This reflects strong recent order activity and improving fleet profitability.

Jennifer Rumsey: We are raising the midpoint of our 2026 North America heavy-duty truck forecast to a range of 240,000 to 250,000 units, up from our prior guidance of 230,000 to 250,000 units. This reflects strong recent order activity and improving fleet profitability, which drove better than expected Q2 production and improved visibility into demand in the H2 of the year. In the North America medium-duty truck market, we are increasing our forecast to 130,000 to 140,000 units in 2026 compared to our prior guidance of 125,000 to 135,000 units. This reflects stronger than expected demand in the H2 of the year, supported by improving OEM outlooks and a modestly higher pre-buy following the recent regulatory clarification. For both heavy and medium-duty trucks, we anticipate that industry production is largely set for the H2 of this year.

Speaker #3: Which drove better-than-expected second-quarter production and improved visibility into demand in the second half of the year. In the North America medium-duty truck market, we are increasing our forecast to 130 to 140 thousand units in 2026, compared to our prior guidance of 125 to 135 thousand units.

Jennifer Rumsey: In the North America medium-duty truck market, we are increasing our forecast to 130,000 to 140,000 units in 2026 compared to our prior guidance of 125,000 to 135,000 units. This reflects stronger than expected demand in the H2 of the year, supported by improving OEM outlooks and a modestly higher pre-buy following the recent regulatory clarification. For both heavy and medium-duty trucks, we anticipate that industry production is largely set for the H2 of this year.

Speaker #3: This reflects stronger-than-expected demand in the second half of the year, supported by improving OEM outlooks and a modestly higher pre-buy following the recent regulatory clarification.

Speaker #3: For both heavy and medium-duty trucks, we anticipate that the industry production is largely set for the second half of this year. Consistent with our prior guidance, our engine shipments for pickup trucks in North America are expected to be 125 to 140 thousand units in 2026.

Speaker #3: We have raised our full-year outlook once again, as demand continues to build across several key markets. We now expect total company revenues to increase 10% to 13% in 2026, compared to our prior guidance of 8% to 11%.

Jennifer Rumsey: Consistent with our prior guidance, our engine shipments for pickup trucks in North America are expected to be 125,000 to 140,000 units in 2026. In China, we now expect total revenue, including joint ventures, to increase approximately 15% in 2026, an improvement from our prior outlook of up 10%. The higher outlook reflects stronger than expected on- and off-highway demand, particularly during the Q2. While we expect normal seasonal moderation during the H2 of the year, we continue to expect full year demand to exceed our prior expectations. For China heavy and medium-duty truck demand, we now expect a range of -5% to +5% compared to our prior guidance of -10% to flat. This reflects stronger than expected export demand, particularly in Africa and Southeast Asia. In India, consistent with our prior guidance, we expect total revenue, including joint ventures, to increase 2% in 2026.

Speaker #3: In China, we now expect total revenue including joint ventures to increase approximately 15% in 2026, an improvement from our prior outlook of up 10%.

Speaker #3: The higher outlook reflects stronger-than-expected on and off highway demand, particularly during the second quarter. While we expect normal seasonal moderation during the second half of the year, we continue expect full-year demand to exceed our prior expectations.

Speaker #3: We are raising the midpoint of our 2026 North America heavy-duty truck forecast to a range of 240,000 to 250,000 units. Up from our prior guidance of 230,000 to 250,000 units.

Speaker #3: This reflects strong recent order activity and improving fleet profitability, which drove better-than-expected second quarter production and improved visibility into demand in the second half of the year.

Speaker #3: For China heavy and medium-duty truck demand, we now expect a range of down 5 to up 5%, compared to our prior guidance of down 10% to flat.

Jennifer Rumsey: For China heavy and medium-duty truck demand, we now expect a range of -5% to +5% compared to our prior guidance of -10% to flat. This reflects stronger than expected export demand, particularly in Africa and Southeast Asia. In India, consistent with our prior guidance, we expect total revenue, including joint ventures, to increase 2% in 2026. This includes our expectation for industry demand for trucks to be flat at the midpoint of our guidance, supported by tax rate reductions, improving underlying demands.

Speaker #3: This reflects stronger-than-expected export demand, particularly in Africa and Southeast Asia. In India, consistent with our prior guidance, we expect total revenue including joint ventures to increase 2% in 2026.

Speaker #3: In the North America medium-duty truck market, we are increasing our forecast to 130 to 140,000 units in 2026. Compared to our prior guidance of 125 to 135,000 units.

Speaker #3: This includes our expectation for industry demand for trucks to be flat at the midpoint of our guidance. Supported by tax rate reductions, improving underlying demands.

Jennifer Rumsey: This includes our expectation for industry demand for trucks to be flat at the midpoint of our guidance, supported by tax rate reductions, improving underlying demands. For global construction, we now expect demand to range from flat to +10%, an improvement from our prior outlook of -10% to flat. In China construction, export demand is stronger than we previously anticipated, with relatively flat domestic demand. In North America, we expect demand to remain largely flat given ongoing tariff and interest rate uncertainty. We expect our major global high horsepower markets to remain strong in 2026. Consistent with our prior outlook, we continue to expect global power generation revenues to increase 15% to 25%. While customer demand remains exceptionally strong, particularly for data center applications, our growth in 2026 will continue to be constrained by capacity.

Speaker #3: For global construction, we now expect demand to range from flat to up 10%, an improvement from our prior outlook of down 10% to flat.

Jennifer Rumsey: For global construction, we now expect demand to range from flat to +10%, an improvement from our prior outlook of -10% to flat. In China construction, export demand is stronger than we previously anticipated, with relatively flat domestic demand. In North America, we expect demand to remain largely flat given ongoing tariff and interest rate uncertainty. We expect our major global high horsepower markets to remain strong in 2026. Consistent with our prior outlook, we continue to expect global power generation revenues to increase 15% to 25%.

Speaker #3: For both heavy- and medium-duty trucks, we anticipate that industry production is largely set for the second half of this year. Consistent with our prior guidance, our engine shipments for pickup trucks in North America are expected to be 125,000 to 140,000 units in 2026.

Speaker #3: In China construction, export demand is stronger than we previously anticipated, with relatively flat domestic demand. In North America, we expect demand to remain largely flat given ongoing tariff and interest rate uncertainty.

Speaker #3: In China, we now expect total revenue, including joint ventures, to increase approximately 15% in 2026, an improvement from our prior outlook of up 10%.

Speaker #3: We expect our major global high-horsepower markets to remain strong in 2026. Consistent with our prior outlook, we continue to expect global power generation revenues to increase 15 to 25%.

Speaker #3: The higher outlook reflects stronger-than-expected on- and off-highway demand, particularly during the second quarter. While we expect normal seasonal moderation during the second half of the year, we continue to expect full-year demand to exceed our prior expectations.

Speaker #3: While customer demand remains exceptionally strong, particularly for data center applications, our growth in 2026 will continue to be constrained by capacity. Our outlook reflects the capacity we brought online in North America at the end of 2025, continued international growth, particularly in China, and the broader Asia-Pacific region, an increased demand for lower output generator sets as customers seek solutions amid ongoing capacity constraints for larger configurations.

Jennifer Rumsey: While customer demand remains exceptionally strong, particularly for data center applications, our growth in 2026 will continue to be constrained by capacity. Our outlook reflects the capacity we brought online in North America at the end of 2025, continued international growth, particularly in China and the broader Asia-Pacific region, and increased demand for lower output generator sets as customers seek solutions amid ongoing capacity constraints for larger configurations.

Speaker #3: For China heavy and medium-duty truck demand, we now expect a range of down 5 to up 5%, compared to our prior guidance of down 10% to flat.

Jennifer Rumsey: Our outlook reflects the capacity we brought online in North America at the end of 2025, continued international growth, particularly in China and the broader Asia-Pacific region, and increased demand for lower output generator sets as customers seek solutions amid ongoing capacity constraints for larger configurations. The sustained strength in customer demand continues to support our long-term investments in expanding our power generation portfolio and global capacity, as we discussed in May. In mining, we now expect engine sales to range from -5% to +5% for the year, compared with our prior guidance of flat to +10%. While fleet replacement activity remains supportive in several markets, elevated inventory levels in others are expected to moderate demand through the remainder of the year.

Speaker #3: The sustained strength in customer demand continues to support our long-term investments in expanding our power generation portfolio and global capacity as we discussed in May.

Jennifer Rumsey: The sustained strength in customer demand continues to support our long-term investments in expanding our power generation portfolio and global capacity, as we discussed in May. In mining, we now expect engine sales to range from -5% to +5% for the year, compared with our prior guidance of flat to +10%. While fleet replacement activity remains supportive in several markets, elevated inventory levels in others are expected to moderate demand through the remainder of the year.

Speaker #3: This includes our expectation for industry demand for trucks to be flat at the midpoint of our guidance. Supported by tax rate reductions, improving underlying demands.

Speaker #3: In mining, we now expect engine sales to range from down 5% to up 5% for the year, compared with our prior guidance of flat to up 10%.

Speaker #3: For global construction, we now expect demand to range from flat to up 10%, an improvement from our prior outlook of down 10% to flat.

Speaker #3: While fleet replacement activity remains supportive in several markets, elevated inventory levels in others are expected to moderate demand through the remainder of the year.

Speaker #3: For aftermarket reflecting the slight adjustment in our prior guidance, we expect growth of 3% to 8% for 2026, supported by aging fleets and higher parts consumption.

Jennifer Rumsey: For aftermarket, reflecting the slight adjustment in our prior guidance, we expect growth of 3% to 8% for 2026, supported by aging fleets and higher parts consumption. In summary, we delivered a strong Q2 and are raising our full year revenue growth outlook to 10% to 13% up while increasing the midpoint of our EBITDA guidance to a range of 18% to 18.5%. Our outlook reflects our expectation for improving operating performance in the H2 of the year, led by stronger North America on highway markets and continued high demand in power generation. We enter the H2 of the year with positive momentum and greater regulatory clarity, we remain focused on executing our strategy, investing for long-term growth, and helping our customers succeed in a rapidly evolving market.

Speaker #3: In summary, we delivered a strong second quarter and are raising our full-year revenue growth outlook to 10 to 13% up, while increasing the midpoint of our EBITDA guidance to a range of 18 to 18.5%.

Speaker #3: While customer demand remains exceptionally strong, particularly for data center applications, our growth in 2026 will continue to be constrained by capacity. Our outlook reflects the capacity we brought online in North America at the end of 2025, continued international growth—particularly in China and the broader Asia-Pacific region—and increased demand for lower output generator sets as customers seek solutions amid ongoing capacity constraints for larger configurations.

Speaker #3: Our outlook reflects our expectation for improving operating performance in the second half of the year, led by stronger North America on highway markets and continued high demand in power generation.

Speaker #3: We enter the second half of the year with positive momentum and greater regulatory clarity. And we remain focused on executing our strategy: investing for long-term growth, helping our customers succeed in a rapidly evolving market.

Jennifer Rumsey: We enter the H2 of the year with positive momentum and greater regulatory clarity, we remain focused on executing our strategy, investing for long-term growth, and helping our customers succeed in a rapidly evolving market. I want to thank our employees and leaders around the world for their commitment to our customers and each other. Their dedication, teamwork, and focus on execution continues to differentiate Cummins and position us to deliver for our customers while creating long-term value for our shareholders. Now let me turn it over to Mark.

Speaker #3: I want to thank our employees and leaders around the world for their commitment to our customers and each other. Their dedication, teamwork, and focus on execution continues to differentiate Cummins and position us to deliver for our customers while creating long-term value for our shareholders.

Speaker #3: The sustained strength in customer demand continues to support our long-term investments and expanding our power generation portfolio and global capacity as we discussed in May.

Jennifer Rumsey: I want to thank our employees and leaders around the world for their commitment to our customers and each other. Their dedication, teamwork, and focus on execution continues to differentiate Cummins and position us to deliver for our customers while creating long-term value for our shareholders. Now let me turn it over to Mark.

Speaker #3: In mining, we now expect engine sales to range from down 5% to up 5% for the year, compared with our prior guidance of flat to up 10%.

Speaker #3: Now, let me turn it over to Mark.

Speaker #2: Thank you, Jen, and good morning, everyone. Our second quarter financial performance, another important business development built on the themes from our recent analyst day.

Mark Smith: Thank you, Jen, good morning, everyone. Our Q2 financial performance and other important business developments built on the themes from our recent Analyst Day. We delivered record quarterly sales, EBITDA dollars, and strong operating cash flow in the Q2, extending our track record of raising performance cycle over cycle. We returned over half a billion dollars of cash to shareholders in the form of share repurchases and cash dividends. The Power Systems business was awarded new prime power business here in the US, and we significantly expanded our opportunities for growth in data center backup power with one of our existing global hyperscaler customers, as Jen summarized. Having reflected on our strong performance in Q2 and the record demand for Cummins products globally, we've raised our full year forecast from 3 months ago.

Speaker #3: While fleet replacement activity remains supportive in several markets, elevated inventory levels in others are expected to moderate demand through the remainder of the year.

Speaker #2: We delivered record quarterly sales and EBITDA dollars and strong operating cash flow in the second quarter. Extending our track record of raising performance cycle over cycle.

Speaker #3: For aftermarket reflecting the slight adjustment in our prior guidance, we expect growth of 3% to 8% for 2026, supported by aging fleets and higher parts consumption.

Speaker #2: We returned over half a billion dollars of cash to shareholders in the form of share repurchases and cash dividends. The power systems business was awarded new prime power business here in the US, and we significantly expanded our opportunities for growth in data center backup power, with one of our existing global Hyperscaler customers as Jen.

Speaker #3: In summary, we delivered a strong second quarter and are raising our full-year revenue growth outlook to up 10% to 13%, while increasing the midpoint of our EBITDA guidance to a range of 18% to 18.5%.

Speaker #2: Right. Our performance in Q2 and the record demand for Cummins products globally, we've raised our full-year forecast from three months ago. In another sign of confidence, our board of directors approved a 10% increase in our quarterly cash dividend, a 17th straight year of dividend growth.

Mark Smith: Having reflected on our strong performance in Q2 and the record demand for Cummins products globally, we've raised our full year forecast from 3 months ago. In another sign of confidence, our board of directors approved a 10% increase in our quarterly cash dividend, the 17th straight year of dividend growth. Q2 revenues were $9.5 billion, up 9% from a year ago. Sales in North America increased 8%, while international revenues grew 12%, led by China. EBITDA was $1.7 billion, or 17.5%, compared to $1.6 billion or 18.4% a year ago.

Mark Smith: In another sign of confidence, our board of directors approved a 10% increase in our quarterly cash dividend, the 17th straight year of dividend growth. Q2 revenues were $9.5 billion, up 9% from a year ago. Sales in North America increased 8%, while international revenues grew 12%, led by China. EBITDA was $1.7 billion, or 17.5%, compared to $1.6 billion or 18.4% a year ago. The increase in EBITDA dollars was primarily driven by higher global power generation volumes and stronger international construction demand. The net impact of tariffs was immaterial to EBITDA dollars in the quarter. Now let's go into each line item with a little more detail. Gross margin for the quarter was $2.5 billion, or 26.1% of sales, up from $2.3 billion or 26.4% last year.

Speaker #2: Second quarter revenues were 9.5 billion, up 9% from a year ago. Sales in North America increased 8%, while international revenues grew 12%, led by China.

Speaker #3: Now, let me turn it over to Mark.

Speaker #2: EBITDA was 1.7 billion, or 17.5%, compared to 1.6 billion, or 18.4% a year ago. The increase in EBITDA dollars was primarily driven by higher global power generation volumes and stronger international construction demand.

Speaker #2: Thank you, Jen, and good morning, everyone. Our second quarter financial performance and another important business development build on the themes from our recent Analyst Day.

Mark Smith: The increase in EBITDA dollars was primarily driven by higher global power generation volumes and stronger international construction demand. The net impact of tariffs was immaterial to EBITDA dollars in the quarter. Now let's go into each line item with a little more detail. Gross margin for the quarter was $2.5 billion, or 26.1% of sales, up from $2.3 billion or 26.4% last year. The increase in dollars was primarily driven by higher volumes, an increase in joint venture earnings, and positive pricing, partially offset by tariffs and an increase in higher incentive compensation, which is related to our projections for record full-year financial performance this year.

Speaker #2: We delivered record quarterly sales and EBITDA dollars and strong operating cash flow in the second quarter, extending our track record of raising performance cycle over cycle.

Speaker #2: The net impact of tariffs was immaterial to EBITDA dollars in the quarter. Now, let's go into each line item with a little more detail.

Speaker #2: We returned over half a billion dollars in cash to shareholders in the form of share repurchases and cash dividends. The Power Systems business was awarded new prime power business here in the U.S., and we significantly expanded our opportunities for growth in data center backup power with one of our existing global hyperscaler customers, as Jen summarized.

Speaker #2: Gross margin for the quarter was 2.5 billion dollars, or 26.1% of sales, up from 2.3 billion, or 26.4%, last year. The increase in dollars was primarily driven by higher volumes, an increase in joint venture earnings, a positive pricing partially offset by tariffs, and an increase in higher incentive compensation, which is related to our projections for record full-year financial performance this year.

Mark Smith: The increase in dollars was primarily driven by higher volumes, an increase in joint venture earnings, and positive pricing, partially offset by tariffs and an increase in higher incentive compensation, which is related to our projections for record full-year financial performance this year. To avoid me repeating myself several times, I will simply note that the higher incentive compensation impacts cost of sales and operating expenses for all of our operating segments. The run rate for incentive compensation should be lower for H2 than we incurred in Q2 based on our current forecast. Selling, administrative, and research expenses were $1.3 billion, or 13.5% of sales, compared to $1.1 billion or 13.1% a year ago. Driven primarily by higher development costs to support our upcoming on-highway platform launches in North America and new mining and natural gas power generation programs.

Speaker #2: Having reflected on our strong performance in Q2 and the record demand for Cummins products globally, we've raised our full-year forecast from three months ago.

Speaker #2: In another sign of confidence, our Board of Directors approved a 10% increase in our quarterly cash dividend, marking the 17th straight year of dividend growth.

Speaker #2: To avoid me repeating myself several times, I will simply note that the higher incentive compensation impacts cost of sales and operating expenses for all of our operating segments.

Mark Smith: To avoid me repeating myself several times, I will simply note that the higher incentive compensation impacts cost of sales and operating expenses for all of our operating segments. The run rate for incentive compensation should be lower for H2 than we incurred in Q2 based on our current forecast. Selling, administrative, and research expenses were $1.3 billion, or 13.5% of sales, compared to $1.1 billion or 13.1% a year ago. Driven primarily by higher development costs to support our upcoming on-highway platform launches in North America and new mining and natural gas power generation programs.

Speaker #2: Second quarter revenues were $9.5 billion, up 9% from a year ago. Sales in North America increased 8%, while international revenues grew 12%, led by China.

Speaker #2: The run rate for incentive compensation should be lower for the second half of the year than we incurred in the second quarter, based on our current forecast.

Speaker #2: EBITDA was 1.7 billion, or 17.5%, compared to 1.6 billion or 18.4% a year ago. The increase in EBITDA dollars was primarily driven by higher global power generation volumes and stronger international construction demand.

Speaker #2: Selling administrative and research expenses were 1.3 billion dollars, or 13.5% of sales, compared to 1.1 billion dollars, or 13.1% a year ago. The increase was driven primarily by higher development cost to support our upcoming on highway platform launches in North America and new mining and natural gas power generation programs.

Speaker #2: The net impact of tariffs was immaterial to EBITDA dollars in the quarter. Now, let's go into each line item with a little more detail.

Speaker #2: Joint venture income of 154 million dollars increased 36 million dollars from the prior year, primarily due to stronger performance in our China joint ventures benefiting the engine and power systems segments.

Mark Smith: Joint venture income of $154 million, increased $36 million from the prior year, primarily due to stronger performance in our China joint ventures, benefiting the Engine and Power Systems segments. Other income was $32 million compared to $49 million from the prior year. Interest expense was $80 million, a decrease of $7 million from a year ago. The all-in effective tax rate in Q2 was 25.1%, which included $29 million of unfavorable discrete items, or $0.21 per diluted share. All-in net earnings for the quarter were $932 million, or $6.73 per diluted share, compared to $890 million or $6.43 per diluted share a year ago. Our operating cash flow was $1.5 billion, a record for a Q2. Compares favorably to $785 million a year ago, driven primarily by improved working capital.

Speaker #2: Gross margin for the quarter was 2.5 billion dollars, or 26.1% of sales, up from 2.3 billion or 26.4% last year. The increase in dollars was primarily driven by higher volumes and increase in joint venture earnings, a positive pricing partially offset by tariffs, and an increase in higher incentive compensation, which is related to our projections for record full-year financial performance this year.

Speaker #2: Other income was 32 million dollars, compared to 49 million, from the prior year. Interest expense was 80 million dollars, a decrease of 7 million from a year ago.

Speaker #2: The all-in effective tax rate in the second quarter was 25.1%, which is included 29 million dollars of unfavorable discrete items or 21 cents per diluted share.

Speaker #2: To avoid repeating myself several times, I will simply note that the higher incentive compensation impacts cost of sales and operating expenses for all of our operating segments.

Speaker #2: All-in net earnings for the quarter were 932 million dollars, or 6 dollars 73 per diluted share, compared to 890 million, or 6 dollars and 43 cents per diluted share, a year ago.

Speaker #2: The run rate for incentive compensation should be lower for the second half of the year than we incurred in the second quarter, based on our current forecast.

Speaker #2: Our operating cash flow was 1.5 billion dollars, a record for a second quarter. It compares favorably to 785 million dollars a year ago driven primarily by improved working capital.

Mark Smith: Our operating cash flow was $1.5 billion, a record for a Q2. Compares favorably to $785 million a year ago, driven primarily by improved working capital. During the quarter, we returned $501 million to shareholders, consistent with our longstanding commitment to return approximately 50% of operating cash flow. This included $225 million of share repurchases and $276 million in cash dividends. I'll now comment on the segment performance and our guidance for the full year 2026. For the Engine segment, Q2 revenues were $3.1 billion, an increase of 6% from a year ago.

Speaker #2: During the quarter, we returned 501 million dollars to shareholders, consistent with our longstanding commitment to return approximately 50% of operating cash flow. This included a 225 million dollars of share repurchases and 276 million in cash dividends.

Mark Smith: During the quarter, we returned $501 million to shareholders, consistent with our longstanding commitment to return approximately 50% of operating cash flow. This included $225 million of share repurchases and $276 million in cash dividends. I'll now comment on the segment performance and our guidance for the full year 2026. For the Engine segment, Q2 revenues were $3.1 billion, an increase of 6% from a year ago. EBITDA was 12.5%, a decrease from 13.8% a year ago, as higher research and development and freight costs were partially offset by stronger North American medium-duty truck volumes, China construction demand, and improved tariff recovery. In 2026, we project revenues for the Engine business to be up 9% to 14%, up from our prior guide of up 7% to 12%, driven primarily by higher expectations for North America heavy and medium-duty trucks.

Speaker #2: Joint venture income of $154 million increased $36 million from the prior year, primarily due to stronger performance in our China joint ventures, benefiting the Engine and Power Systems segments.

Speaker #2: I'll now comment on the segment performance and our guidance for the full year 26. For the engine segment, second quarter revenues were 3.1 billion dollars, an increase of 6% from a year ago.

Speaker #2: Other income was 32 million dollars, compared to 49 million from the prior year. Interest expense was 80 million dollars, a decrease of 7 million from a year ago.

Speaker #2: EBITDA was 12.5%, a decrease from 13.8% a year ago, higher research and development and freight costs were partially offset by stronger North American medium-duty truck volumes, China construction demand, and improved tariff recovery.

Mark Smith: EBITDA was 12.5%, a decrease from 13.8% a year ago, as higher research and development and freight costs were partially offset by stronger North American medium-duty truck volumes, China construction demand, and improved tariff recovery. In 2026, we project revenues for the Engine business to be up 9% to 14%, up from our prior guide of up 7% to 12%, driven primarily by higher expectations for North America heavy and medium-duty trucks.

Speaker #2: The all-in effective tax rate in the second quarter was 25.1%, which had included 29 million dollars of unfavorable discrete items or 21 cents per diluted share.

Speaker #2: In 2026, we project revenues for the engine business to be up 9 to 14%, up from our prior guide of up 7 to 12%, driven primarily by higher expectations for North America heavy and medium-duty trucks.

Speaker #2: All-in net earnings for the quarter were 932 million dollars, or 6 dollars 73 per diluted share, compared to 890 million or 6 dollars and 43 cents per diluted share, a year ago.

Speaker #2: We expect EBITDA to be in the range of 12.5 to 13.25%, compared to our prior guidance of 12.5 to 13.5. Component segment revenue was 2.9 billion dollars, an increase of 7% from a year ago, EBITDA was 13.2%, a decrease from 14.7% a year ago, as higher product coverage costs were partially offset by stronger North American truck volumes, higher China on and off highway volumes, favorable pricing.

Speaker #2: Our operating cash flow was $1.5 billion, a record for a second quarter, and compares favorably to $785 million a year ago, driven primarily by improved working capital.

Mark Smith: We expect EBITDA to be in the range of 12.5% to 13.25%, compared to our prior guidance of 12.5% to 13.5%. Components segment revenue was $2.9 billion, an increase of 7% from a year ago. EBITDA was 13.2%, a decrease from 14.7% a year ago, as higher product coverage costs were partially offset by stronger North American truck volumes, higher China on and off highway volumes, favorable pricing. For Components, we expect 2026 revenues to be up 8% to 13%, up from our prior outlook of a growth of 7.5% at the midpoint, due to stronger demand for trucks in North America, stronger demand in on and off highway markets in China. We expect EBITDA to be in the range of 13.5% to 14.25%, compared to our prior guide of 13.5% to 14.5%. In the Distribution segment, revenues increased 9% from a year ago to a record $3.3 billion.

Speaker #2: For components, we expect 2026 revenues to be up 8 to 13%, up from our prior outlook of growth of 7.5% at the midpoint due to stronger demand for trucks in North America and stronger demand in on and off highway markets in China.

Speaker #2: EBITDA was 12.5%, a decrease from 13.8% a year ago, higher were partially offset by stronger North American medium-duty truck volumes, China construction demand, and improved tariff recovery.

Speaker #2: We expect EBITDA to be in the range of 13.5 to 14.25%, compared to our prior guide of 13.5 to 14.5. In the distribution segment, revenues increased 9% from a year ago to a record 3.3 billion dollars, EBITDA decreased as a percent of sales to 13.6, compared to 14.6 a year ago, driven by the higher incentive compensation and freight expenses, which were partially offset by how higher power generation volumes.

Mark Smith: We expect EBITDA to be in the range of 13.5% to 14.25%, compared to our prior guide of 13.5% to 14.5%. In the Distribution segment, revenues increased 9% from a year ago to a record $3.3 billion. EBITDA decreased as a percent of sales to 13.6% compared to 14.6% a year ago, driven by the higher incentive compensation and freight expenses, which were partially offset by higher power generation volumes. We expect 2026 distribution revenues to be up 9% to 14%, consistent with our prior guide.

Speaker #2: In 2026, we project revenues for the Engine business to be up 9% to 14%, an increase from our prior guidance of up 7% to 12%, driven primarily by higher expectations for North America heavy- and medium-duty trucks.

Mark Smith: EBITDA decreased as a percent of sales to 13.6% compared to 14.6% a year ago, driven by the higher incentive compensation and freight expenses, which were partially offset by higher power generation volumes. We expect 2026 distribution revenues to be up 9% to 14%, consistent with our prior guide. We also expect EBITDA margins to be in the range of 13.5% to 14.25%, compared to our previous guidance of 14.25% at the midpoint. In the Power Systems segment, revenues were a record $2.3 billion, an increase of 19%, and EBITDA increased from 22.8% to 24.5% of sales, primarily driven by strong global power generation demand, especially in the US and China. For 2026, we expect Power Systems revenues to grow 14% to 19%, unchanged from three months ago.

Speaker #2: We expect EBITDA to be in the range of 12.5% to 13.25%, compared to our prior guidance of 12.5% to 13.5%. Component segment revenue was $2.9 billion, an increase of 7% from a year ago. EBITDA was 13.2%, a decrease from a year ago, as higher product coverage costs were partially offset by stronger North American truck volumes, higher China on- and off-highway volumes, and unfavorable pricing.

Speaker #2: We expect 2026 distribution revenues to be up 9 to 14%, consistent with our prior guide. We also expect EBITDA margins to be in the range of 13.5 to 14.25%, compared to our prior previous guidance of 14.25 at the midpoint.

Mark Smith: We also expect EBITDA margins to be in the range of 13.5% to 14.25%, compared to our previous guidance of 14.25% at the midpoint. In the Power Systems segment, revenues were a record $2.3 billion, an increase of 19%, and EBITDA increased from 22.8% to 24.5% of sales, primarily driven by strong global power generation demand, especially in the US and China. For 2026, we expect Power Systems revenues to grow 14% to 19%, unchanged from three months ago.

Speaker #2: In the power systems segment, revenues were a record 2.3 billion dollars, an increase of 19%, and EBITDA increased from 22.8 to 24.5% of sales, primarily driven by strong global power generation demand, especially in the US.

Speaker #2: For Components, we expect 2026 revenues to be up 8% to 13%, an increase from our prior outlook of growth of 7.5% at the midpoint, due to stronger demand for trucks in North America and stronger demand in on- and off-highway markets in China.

Mark Smith: We also expect EBITDA margins in the range of 25% to 25.75%, compared to our previous guide of 25.5% at the midpoint, reflecting continued strong performance across the business, as well as increased investments during the H2 of the year to support development of our new 130-liter natural gas generator platform and expand our position in the growing prime power market. Accelera revenues increased 38% to $145 million, driven by higher electrified powertrain and electrolyzer sales. EBITDA was a loss of $69 million, an improvement from a loss of $100 million in the prior year, reflecting targeted cost reduction actions previously implemented in this segment.

Speaker #2: Reflecting continued strong performance across the business, as well as increased investments during the second half of the year to support development of our new 130-liter natural gas generator platform and expand our position in the growing prime power market.

Speaker #2: Accelera revenues increased 38% to 145 million dollars, driven by a higher electrified powertrain and electrolyzer sales, EBITDA was a loss of 69 million dollars, an improvement from a loss of 100 million dollars in the prior year, reflecting targeted cost reductions previously implemented in this segment.

Speaker #2: In 2026, we now anticipate Accelera revenues to be in the range of 350 to 400 million dollars, an increase from our prior guide of 300 to 350, and we now expect net losses in the range of 260 to 290 million dollars, compared to our prior guide of a negative 270 to 300 million dollars.

Speaker #2: In the power systems segment, revenues were a record 2.3 billion dollars, an increase of 19%, and EBITDA increased from 22.8 to 24.5% of sales primarily driven by strong global power generation demand, especially in the US.

Mark Smith: In 2026, we now anticipate Accelera revenues to be in the range of $350 to $400 million, an increase from our prior guide of $300 to $350, and we now expect net losses in the range of $260 to $290 million, compared to our prior guide of -$270 to $300 million. In summary, we've raised our full-year outlook and now expect total company revenues to increase between 10% and 13%, with EBITDA in the range of 18% to 18.5%. Our effective tax rate is expected to be approximately 23% for the full year, excluding any discrete items. Capital investments will be in the range of $1.35 to $1.45 billion as we continue to make critical investments to support future growth.

Speaker #2: In China, the 2026 we expect power systems revenues to grow 14 to 19%, unchanged from three months ago, but we also expect EBITDA margins in the range of 25 to 25.75%, compared to our previous guide of 25.5% at the midpoint, reflecting continued strong performance across the business, as well as increased investments during the second half of the year to support development of our new 130-liter natural gas generator platform and expand our position in the growing prime power market.

Speaker #2: In summary, we've raised our full year outlook and now expect total company revenues to increase between 10 and 13%, with EBITDA in the range of 18 to 18.5%.

Speaker #2: Our effective tax rate is expected to be approximately 23% for the full year, excluding any discrete items. Capital investments will be in the range of 1.35 to 1.45 billion, as we continue to make critical investments to support future growth.

Mark Smith: Capital investments will be in the range of $1.35 to $1.45 billion as we continue to make critical investments to support future growth. In summary, we delivered a strong quarter supported by continued growth in demand for power generation equipment, improving North America truck markets, and growth in China in most end markets, especially data centers.

Speaker #2: In summary, we delivered a strong quarter, supported by continued growth in demand for power generation equipment, improving North America truck markets, and growth in China in most end markets, especially data centers.

Mark Smith: In summary, we delivered a strong quarter supported by continued growth in demand for power generation equipment, improving North America truck markets, and growth in China in most end markets, especially data centers. Thanks to the excellence and commitment of our employees in what remains a complex global economic environment, we enter the H2 of the year with positive momentum and focused on supporting our customers with their growth plans and further improving our already strong financial position. Our strong balance sheet provides the financial flexibility to invest in the growth opportunities ahead, of which you've heard a little more today, while continuing to allocate capital with discipline and return excess capital to shareholders. Thank you. Now let me turn it back over to Nick.

Speaker #2: Thanks to the excellence and commitment of our employees in what remains a complex global economic environment, we enter the second half of the year with positive momentum.

Mark Smith: Thanks to the excellence and commitment of our employees in what remains a complex global economic environment, we enter the H2 of the year with positive momentum and focused on supporting our customers with their growth plans and further improving our already strong financial position. Our strong balance sheet provides the financial flexibility to invest in the growth opportunities ahead, of which you've heard a little more today, while continuing to allocate capital with discipline and return excess capital to shareholders. Thank you. Now let me turn it back over to Nick.

Speaker #2: And focused on supporting our customers with their growth plans and further improving our already strong financial position. Our strong balance sheet provides a financial flexibility to invest in the growth opportunities ahead, of which you've heard a little more today, while continuing to allocate capital with discipline and return excess capital to shareholders.

Speaker #2: In 2026, we now anticipate Accelera revenues to be in the range of $350 to $400 million, an increase from our prior guide of $300 to $350 million, and we now expect net losses in the range of $260 to $290 million, compared to our prior guide of negative $270 to $300 million.

Speaker #2: Thank you. Now let me turn it back over to Nick.

Speaker #1: Thank you, Mark. Our consideration to others on the call, I would ask that you limit yourself to one question in a related follow-up. If you have an additional question, please rejoin the queue.

Nick Arens: Thank you, Mark. Out of consideration to others on the call, I would ask that you limit yourself to one question and a related follow-up. If you have an additional question, please rejoin the queue. Operator, we are ready for our first question.

Speaker #2: In summary, we've raised our full-year outlook and now expect total company revenues to increase between 10% and 13%, with EBITDA in the range of 18% to 18.5%.

Speaker #1: Operator, we are ready for our first question.

Speaker #2: Our effective tax rate is expected to be approximately 23% for the full year, excluding any discrete items. Capital investments will be in the range of $1.35 to $1.45 billion, as we continue to make critical investments to support future growth.

Speaker #3: Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our first question is from Jamie Cook with Truist Securities.

Operator: Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our first question is from Jamie Cook with Truist Securities.

Speaker #4: Hi, good morning. I guess two questions. One, just given the incremental clarity we have now on EPA 2027, how are you thinking about the setup for 2027?

Jamie Cook: Hi. Good morning. I guess two questions. One, just given the incremental clarity we have now on EPA 2027, how are you thinking about the setup for 2027? I know at the Analyst Day, you expected a down H1 for 2027. How you're thinking about that, and then I guess, Mark, if you look at your earnings in the H2 of the year, it implies earnings probably $16, $17 of earnings power in the H2 of the year. I'm trying to think, is that a good way to think about a base for 2027? My second question, just the distribution margins, I think you lowered quite a bit. If you could just talk around the change in margin guidance for distribution. Thank you.

Speaker #4: I know at the analyst day you expected a down first half for 2027. So how are you thinking about that? And then I guess, Mark, how if you look at your earnings in the back half of the year and implies earnings 8 probably 16, 17 bucks of earnings power in the back half of the year, I'm trying to think, is that a good way to think about a base you know what I mean?

Speaker #2: Thanks to the excellence and commitment of our employees, in what remains a complex global economic environment, we enter the second half of the year with positive momentum.

Speaker #4: For 2027. And then my second question, just the distribution margins, I think you lowered quite a bit at so if you could just talk around the change in margin guidance for distribution.

Speaker #4: Thank you.

Speaker #1: Thank you.

Speaker #4: Jamie, Justin, obviously we raised our guide for this half of the year and the outlook for the North America truck market. So we continue to expect strength in the second half of the year.

Speaker #2: Thank you. Now, let me turn it back over to Nick.

Nick Arens: Thank you.

Jennifer Rumsey: Jamie, we obviously raised our guide for the year and the outlook for the North American truck market. We continue to expect strength in H2 of the year. With the EPA draft rule and with the phase transition that we've announced, the key thing is the destination doesn't change. The growth opportunity that will exist for us in engines and components with those new platform launches remains the same, and we think the transition will be smoother. While we would expect some moderation in demand next year, and we won't give specific guidance, of course, today on what that is, it will not be as abrupt as we might have previously anticipated as we continue to offer the current product for part of next year or in the case of the B, for all of next year, and then ramp up the new product.

Speaker #1: Thank you, Mark. Out of consideration for others on the call, I would ask that you limit yourself to one question and a related follow-up.

Speaker #1: If you have an additional question, please rejoin the queue. Operator, we are ready for our first question.

Speaker #4: With the EPA draft rule and with the phase transition that we've announced, the key thing is the destination doesn't change. The growth opportunity that will exist for us and engines and components with this new platform launches remains the same, and we think the transition will be smoother.

Speaker #3: Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our first question is from Jamie Cook with Truist Securities.

Speaker #4: So while we would expect some moderation in demand next year and we won't give specific guidance, of course, today on what that is, it will not be as abrupt as we might have previously anticipated as we continue to offer the current product for part of next year in the case of the B for all the next year and then ramp up the new product.

Jennifer Rumsey: While we would expect some moderation in demand next year, and we won't give specific guidance, of course, today on what that is, it will not be as abrupt as we might have previously anticipated as we continue to offer the current product for part of next year or in the case of the B, for all of next year, and then ramp up the new product. It's going to smooth that overall transition and really, I think, make less variation of what year-to-year demand looks like, more driven just by the fundamental economics.

Speaker #4: Hi, good morning. I guess two questions. One, just given the incremental clarity we have now on EPA 2027, how are you thinking about the setup for 2027?

Speaker #4: So it's going to smooth that overall transition and really, I think, make less variation of what year to year demand looks like, more driven just by the fundamental economics.

Jennifer Rumsey: It's going to smooth that overall transition and really, I think, make less variation of what year-to-year demand looks like, more driven just by the fundamental economics.

Speaker #1: Yep. And then to your other questions, Jamie, yes, there's nothing non-routine in the second half of the year, so we're expecting strong EBITDA percent for the second half of the year, up from the first half of the year, up from a year ago, in both Q3 and Q4.

Mark Smith: Yep. To your other questions, Jamie. Yes, there's no one-timers or anything non-routine in H2 of the year. We're expecting strong EBITDA percent for H2 of the year, up from H1 of the year, up from a year ago in both Q3 and Q4. The top-up in outlook for incentive compensation, yes, created a little bit of noise in the Q2 results, but that's going to be lower going into H2. The underlying story is one of, yes, significant revenue growth and margin expansion on an underlying, and as you'll see, hopefully in a reported basis in H2 of the year. Distribution, there's really two things going on, or maybe one thing not going on and one thing going on, in that the mix of the business isn't really changing.

Speaker #4: And then my second question, just the distribution margins—I think you lowered them quite a bit. So if you could just talk about the change in margin guidance for distribution.

Speaker #4: Thank you.

Speaker #1: Thank you.

Speaker #4: Jamie, Austin, we obviously raised our guide for this half of the year and the outlook for the North America truck market. So, we continue to expect strength in the second half of the year.

Speaker #1: The top-up in outlook for incentive compensation, yes, created a little bit of noise in the second quarter results, but that's going to be lower going into the second half.

Speaker #1: But the underlying story is one of, yes, significant revenue growth and margin expansion. On an underlying and, as you'll see, hopefully in a reported basis in the second half of the year.

Speaker #4: With the EPA draft rule and with the phase transition that we've announced, the key thing is the destination doesn't change. The growth opportunity that will exist for us in engines and components with this new platform launches remains the same, and we think the transition will be smoother.

Speaker #1: And then distribution, there's really two things going on. And maybe one thing not going on and one thing going on in that the mix of the business isn't really changing.

Speaker #1: There's obviously a lot of momentum in their execution of the installation of a lot of these big power generation contracts. The parts business isn't growing at the same rate, probably that would be the thing that would need to see a significant step up in the margin percent, probably.

Speaker #4: So, while we would expect some moderation in demand next year, and we won't give specific guidance today on what that is, it will not be as abrupt as we might have previously anticipated. As we continue to offer the current product for part of next year—in the case of the B, for all of next year—and then ramp up the new product.

Mark Smith: There's obviously a lot of momentum in their execution of the installation of a lot of these big power generation contracts. The parts business isn't growing at the same rate. Probably that would be the thing that would need to see a significant step-up in the margin percent, probably. The other factor is, as we've increased our outlook for total company profitability, along with that goes the higher incentive compensation, which unfortunately with distribution disproportionately impacts them as they've got, it's more of a people business. That's just a natural consequence. As a starting point, I would say when we go into next year, we reset our plans at target. Our incentive plan is operating above target right now for the current year because of the record performance, and that gets reset going into next year.

Speaker #1: The other factor is, as we've increased our outlook for total company profitability, along with that goes the higher incentive compensation which, unfortunately, the distribution disproportionately impacts them as they've got it's more of a people business.

Mark Smith: The other factor is, as we've increased our outlook for total company profitability, along with that goes the higher incentive compensation, which unfortunately with distribution disproportionately impacts them as they've got, it's more of a people business. That's just a natural consequence. As a starting point, I would say when we go into next year, we reset our plans at target. Our incentive plan is operating above target right now for the current year because of the record performance, and that gets reset going into next year.

Speaker #4: So it's going to smooth that overall transition and really, I think, make less variation in what year-to-year demand looks like—more driven just by the fundamental economics.

Speaker #1: Yep. And then to your other questions, Jamie, yes, there's nothing there's no one time or anything non-routine in the second half of the year, so we're expecting strong EBITDA percent for the second half of the year, up from the first half of the year, up from a year ago, in both Q3 and Q4.

Speaker #1: So that's just a natural consequence. I would, as a starting point, I would say when we go into next year, we reset our plans at target, our incentive plan is operating above target right now for the current year because of the record performance.

Speaker #1: And that gets reset going into next year. So that would be one thing that will probably be a bit of a tailwind. What happens to demand too early to say, as Jensen our best guess would be less volatility than we might have imagined in the certainly in the first half of the year, North America on highway.

Mark Smith: That will be one thing that will probably be a bit of a tailwind. What happens to demand? Too early to say. As Jen said, our best guess would be less volatility than we might have imagined certainly in H1 in North America and highway. Unquestionably, we've got robust backup in power generation, primarily from standby diesel for data centers, and you can see that continues to grow. I'm not seeing any significant changes at this point in time, but that's a very early commentary on what we see going forward. I hope that helped. There's nothing significantly changing. The distribution business could get close to 10% earnings growth this year, and on an underlying basis, we see a lot of growth there and margin expansion going forwards.

Speaker #1: The top-up in outlook for incentive compensation created a little bit of noise in the second quarter results, but that's going to be lower going into the second half.

Speaker #1: But the underlying story is one of, yes, significant revenue growth and margin expansion—on an underlying basis and, as you'll see, hopefully on a reported basis in the second half of the year.

Speaker #1: And questionably, we've got robust backup in power generation primary from standby diesel for data centers. And you can hear that that continues to grow.

Speaker #1: And then distribution, there's really two things going on. And maybe one thing not going on and one thing going on in that the mix of the business isn't really changing.

Speaker #1: So not seeing any significant changes at this point in time, but that's a very early commentary on what we see going forward. So I hope that helped.

Speaker #1: There's obviously a lot of momentum in their execution of the installation of a lot of these big power generation contracts. The parts business isn't growing at the same rate—probably, that would be the thing that would need to see a significant step up in the margin percent, probably.

Speaker #1: There's nothing significantly changing. The distribution business, yeah, could get close to kind of 10% earnings growth this year. And on the underlying basis, we see a lot of growth there in margin expansion going forwards.

Speaker #1: The other factor is, as we've increased our outlook for total company profitability, along with that goes the higher incentive compensation, which unfortunately disproportionately impacts them, as they've got—it's more of a people business.

Speaker #3: Our next question is from Steve Volkeman with Jefferies.

Operator: Our next question is from Stephen Volkmann with Jefferies.

Speaker #5: Hi. Excuse me. Good morning. Mark, can I just take that one step further? What would roughly be the reset in the incentive comp, I guess, I don't know, in dollar terms, just so we can think about what that good guy might look like next year?

Stephen Volkmann: Excuse me. Good morning. Mark, can I just take that one step further? What would roughly be the reset in the incentive comp, I guess, I don't know, in dollar terms, just so we can think about what that good guide might look like next year?

Speaker #1: Well, next year, it could be in the order of it could be in the order of like 200 million dollars.

Mark Smith: Well, next year it could be in the order of like $200 million.

Speaker #1: And that gets reset going into next year. So that would be one thing that will probably be a bit of a tailwind. What happens to demand too early to say, as Jennifer our best guess would be less volatility than we might have imagined in the certainly in the first half of the year, North America on highway.

Speaker #5: Perfect. Okay. Thanks.

Speaker #1: And then I would just say just to try and bring clarity because obviously that's created a little bit of, I would say, distortions the wrong word, but we had to top it up the second quarter.

Stephen Volkmann: Perfect. Okay. Thanks.

Mark Smith: May I just say, just to try and bring clarity, because obviously that's created a little bit of, I would say distortion is the wrong word, but we had to top it up the Q2. For the H2, it'll be about $25 million a quarter lower in Q3 and Q4 than the Q2 expense.

Speaker #1: For the second half, it'll be about 25 million dollars a quarter lower in Q3 and Q4 than the Q2 expense.

Speaker #1: Unquestionably, we've got robust backup in power generation, primarily from standby diesel, for data centers. And you can hear that that continues to grow. So, not seeing any significant changes at this point in time, but that's a very early commentary on what we see going forward.

Speaker #5: Got it. Okay. Thanks. And then can I just ask on powergen? I'm interested that your target is up 15 to 25 percent because my interpretation is you're kind of capacity constrained there.

Stephen Volkmann: Got it. Okay, thanks. Can I just ask on power gen, I'm interested that your target is up 15% to 25%, because my interpretation is you're kind of capacity constrained there. Why such a big range for that target? What could really kind of move that from bottom to top of the range?

Speaker #1: So I hope that helped. There's nothing significantly changing. The distribution business, yeah, could get close to kind of 10% earnings growth this year. And on the underlying basis, we see a lot of growth there in margin expansion going forwards.

Speaker #5: Why such a big range for that target? What could really kind of move that from bottom to top of the range?

Speaker #4: Yeah. Thanks, Steve. So our guide obviously stayed the same this quarter to what we talked about last quarter. It's largely underpinned by increased capacity that investment that we made in the 95-liter in particular that we completed last year.

Jennifer Rumsey: Yeah. Thanks, Steve. Our guide obviously stayed the same this quarter to what we talked about last quarter. It's largely underpinned by increased capacity, that investment that we made in the 95-liter in particular that we completed last year, and growing demand in China, out of our businesses in China for our product in China and Southeast Asia. As I said in my remarks, because of the capacity constraints on the large gensets, we're seeing some customers taking some of the smaller gensets. That trend has basically stayed the same in the last three months as what we saw previously. There is still some range in that, but it really depends on that. I think the large gensets will be basically at capacity and then how much we see of some of the smaller product sale will drive that variation.

Speaker #3: Our next question is from Steve Volkeman with Jefferies.

Speaker #5: Hi, excuse me. Good morning. Mark, can I just take that one step further? What would roughly be the reset in the incentive comp—I guess, I don't know—in dollar terms, just so we can think about what that good guy might look like next year?

Speaker #4: And then growing demand in China out of our businesses in China for product in China and Southeast Asia. And as I said in my remarks, because of the capacity constraints on the large gensets, we're seeing some customers taking some of the smaller gensets.

Speaker #1: Well, next year, it could be in the order of it could be in the order of like 200 million dollars.

Speaker #4: But that trend is basically staying the same in the last three months as what we saw previously. So there is still some range in that, but it really depends on that.

Speaker #5: Perfect. Okay. Thanks.

Speaker #1: And then I would just say, just to try and bring clarity, because obviously that's created a little bit of—I would say 'distortion' is the wrong word, but we had to top it up in the second quarter.

Speaker #4: I think the large gensets will be basically at capacity and then how much we see of some of the smaller product sale will drive that variation.

Speaker #1: For the second half, it'll be about 25 million dollars a quarter lower in Q3 and Q4 than the Q2 expense.

Speaker #1: But it's fair to say it's unlikely to be 10% swing from here to there. I think the one thing that's been a positive surprise is really the rapid acceleration in China.

Mark Smith: It's fair to say it's unlikely to be a 10% swing from here to there. I think the one thing that's been a positive surprise is really the rapid acceleration in China. We were already expecting strong demand in North America, China's really picked up as well. Whatever extra we can squeeze out with our amazing supply chain team in Power Systems, probably we can sell it for this year and certainly into next year.

Speaker #5: Got it. Okay. Thanks. And then can I just ask on power gen? I'm interested that your target is up 15 to 25 percent because my interpretation is you're kind of capacity constrained there.

Speaker #1: We were already expecting strong demand in North America but China's really picked up as well. So whatever extra we can squeeze out with our amazing supply chain team and power systems, probably we can sell it for this year and certainly into next year.

Speaker #5: Why such a big range for that target? What could really kind of move that from bottom to top of the range?

Speaker #4: Yeah, thanks, Steve. So, our guide obviously stayed the same this quarter to what we talked about last quarter. It's largely underpinned by increased capacity, that investment that we made, and the 95-liter in particular that we completed last year.

Speaker #3: Our next question is from Jerry Revich with Wells Fargo.

Operator: Our next question is from Jerry Revich with Wells Fargo.

Speaker #6: Yes. Hi. Good morning, everyone. I'm wondering if we could just talk about given the performance ramp and ahead of plan this year in power systems, how are you thinking about how much the team can ramp up deliveries 27 versus 26?

Jerry Revich: Yes. Hi. Good morning, everyone. I'm wondering if we could just talk about, given the performance ramp ahead of plan this year in Power Systems, how are you thinking about how much the team can ramp up deliveries 2027 versus 2026? Can we sustain this team's type of growth rate as the supply base continues to ramp up? Any updated thoughts on the cadence would be helpful.

Speaker #4: And then, growing demand in China, out of our businesses in China for product in China and Southeast Asia. And as I said in my remarks, because of the capacity constraints on the large gensets, we're seeing some customers taking some of the smaller gensets.

Speaker #6: Can we sustain this team's type of growth rate as the supply base continues to ramp up? Any update of thoughts on the cadence would be helpful.

Speaker #4: But that trend is basically staying the same in the last three months as what we saw previously. So there is still some range in that, but it really depends on that.

Speaker #4: Yeah. At this point, the cadence we see is really the same as what Jenny talked about. And May analysts say where we announced, of course, the additional investment in capacity 20 gigawatt incremental capacity across basically all of our plants and our supply chain.

Jennifer Rumsey: Yeah. At this point, the cadence we see is really the same as what Jenny talked about in the May Analyst Day, where we announced, of course, the additional investment in capacity, 20 GW incremental capacity across basically all of our plants and our supply chain. We'll see some of that coming online next year. We'd expect some step-up then the bigger step-up happening in 2028, then continuing to phase in through 2030. Recall that that capacity is pretty flexible across size of engine, size of genset, application for engines between industrial markets and power gen markets, including the natural gas prime demand. Really we're starting to see, as you heard, we're starting to see some prime demand for the products that we have, while we work on developing the new 130-liter.

Speaker #4: I think the large gensets will be basically at capacity and then how much we see of some of the smaller product sale will drive that variation.

Speaker #1: But it's fair to say it's unlikely to be 10% swing from here to there. I think the one thing that's been a positive surprise is really the rapid acceleration in China.

Speaker #4: And we'll see some of that come in online next year. So we'd expect some step up. And then the bigger step up happening in '28.

Speaker #1: We were already expecting strong demand in North America but China's really picked up as well. So whatever extra we supply chain team and power systems, probably we can sell it for this year and certainly into next year.

Speaker #4: And then continuing to phase in through 2030 and then recall that that capacity is pretty flexible across size of engine, size of genset, application between for engines between industrial markets and powergen markets, including the natural gas prime demand.

Jennifer Rumsey: Recall that that capacity is pretty flexible across size of engine, size of genset, application for engines between industrial markets and power gen markets, including the natural gas prime demand. Really we're starting to see, as you heard, we're starting to see some prime demand for the products that we have, while we work on developing the new 130-liter. That's going to grow a little bit, but still the predominant revenue for power gen this decade is going to be diesel standby.

Speaker #3: Our next question is from Jerry Revich with Wells Fargo.

Speaker #4: But really, we're starting to see, as you heard, we're starting to see some prime demand for the products that we have. While we work on developing the new 130-liter, but that's going to grow a little bit, but still the predominant revenue for powergen this decade is going to be diesel standby.

Speaker #6: Yes. Hi. Good morning, everyone. I'm wondering if we could just talk about, given the performance ramp, ahead of plan this year in power systems, how are you thinking about how much the team can ramp up deliveries 27 versus 26?

Jennifer Rumsey: That's going to grow a little bit, but still the predominant revenue for power gen this decade is going to be diesel standby.

Speaker #6: Can we sustain this team's type of growth rate as the supply base continues to ramp up? Any update of thoughts on the cadence would be helpful.

Speaker #6: That's super. And then can I shift topics? In engines, the guidance implies 14% type margins in the fourth quarter. On prior engine transitions, you folks have executed pretty seamlessly from one product to the next.

Jerry Revich: That's super. Can I shift topics? In engines, the guidance applies 14% type margins in Q4. On prior engine transitions, you folks have executed pretty seamlessly from one product to the next. Can you just talk about expectations into 2027? How hard is the product transition that you folks are dealing with producing some new products, some older product? How should we be thinking about the impact on operations over the course of 2027?

Speaker #4: Yeah. At this point, the cadence we see is really the same as what Jenny talked about and many analysts say, where we announced, of course, the additional investment in capacity—20 gigawatt incremental capacity—across basically all of our plants and our supply chain.

Speaker #6: Can you just talk about expectations into '27, how hard is the product transition that you folks are dealing with producing some new product, some older product?

Speaker #6: How should we be thinking about the impact on operations over the course of '27?

Speaker #4: And we'll see some of that coming online next year. So we'd expect some step up. And then the bigger step up happening in '28.

Speaker #4: Yeah. I mean, we, of course, on our plants, we're used to producing different products but this ability to have a longer limited production transition is something that we've not had in the past.

Jennifer Rumsey: Of course in our plants, we're used to producing different products. This ability to have a longer limited production transition is something that we've not had in the past. With the flexibility in the draft rule, and we anticipate this will stay in place based on all of our conversations with the EPA, it really helps us and the industry ramp through that limited production phase between the old and the new product. We're going to continue to sell the current product next year, and anticipate pretty solid demand for that and then ramp up. Well, we've had the Forever Rising Tour out. We've been doing field tests. We've had customers seeing the new HELM platform launches.

Speaker #4: And then continuing to phase in through 2030. And then recall that that capacity is pretty flexible across the size of engine, size of genset, application between—for engines—between industrial markets and power gen.

Speaker #4: So with the flexibility and the draft rule and we anticipate this will stay in place based on all of our conversations with the EPA.

Speaker #4: It really helps us and the industry ramp through that limited production phase between the old and the new products. So we're going to continue to sell the current product next year.

Speaker #4: Markets including the natural gas prime demand. But really, we're starting to see, as you heard, we're starting to see some prime demand for the products that we have.

Speaker #4: And anticipate pretty solid demand for that. And then ramp up. And then while we've had the forever rising tour out, we've been doing field tests.

Speaker #4: While we work on developing the new 130-liter, but that's going to grow a little bit, but still the predominant revenue for power gen this decade is going to be diesel standby.

Jennifer Rumsey: Well, we've had the Forever Rising Tour out. We've been doing field tests. We've had customers seeing the new HELM platform launches. I spent time with customers last week. They're really excited about the opportunity to start to buy at the beginning of the year and build confidence and move in a more measured way between the old and the new product. I think it's going to be a positive for us, and it's going to let us really gain confidence and capability in that new product across our different OEMs and end customers.

Speaker #4: We've had customers seeing the new HELM platform launches. I spent time with customers last week and they're really excited about the opportunity to start to buy at the beginning of the year.

Jennifer Rumsey: I spent time with customers last week. They're really excited about the opportunity to start to buy at the beginning of the year and build confidence and move in a more measured way between the old and the new product. I think it's going to be a positive for us, and it's going to let us really gain confidence and capability in that new product across our different OEMs and end customers.

Speaker #4: And build confidence and move in a more measured way between the old and the new products. So I think it's going to be a positive for us and it's going to let us really gain confidence and capability in that new product across our different OEMs and end customers.

Speaker #6: That's super. And then, can I shift topics? In engines, the guidance implies 14% type margins in the fourth quarter. On prior engine transitions, you folks have executed pretty seamlessly from one product to the next.

Speaker #6: Can you just talk about expectations into '27—how hard is the product transition that you folks are dealing with, producing some new products and some older products?

Speaker #3: Our next question is from Stephen Fisher with UBS.

Operator: Our next question is from Steven Fisher with UBS.

Operator: Our next question is Steven Fisher with UBS.

Speaker #7: Thanks. Good morning. Just on the power side of things, the incremental margins seem to be better than the 25 to 30 percent expectations that you've talked about.

Speaker #6: How should we be thinking about the impact on operations over the course of '27?

Steven Fisher: Thanks. Good morning. Just on the power side of things, the incremental margins seem to be better than the 25% to 30% expectations that you've talked about. I'm just curious, what's surprising you there? It looks like in the H2 implied to be better than that as well. Any color there would be helpful.

Speaker #4: Yeah, I mean, we, of course, on our plants, we're used to producing different products, but this ability to have a longer, limited production transition is something that we've not had in the past.

Speaker #7: I'm just curious, kind of what's surprising you there? And it looks like in the second half implied to be better than that as well.

Speaker #7: Any color there would be helpful.

Speaker #4: So with the flexibility in the draft rule, and we anticipate this will stay in place based on all of our conversations with the EPA, it really helps us and the industry ramp through that limited production phase between the old and the new products.

Speaker #1: I think the main drive has probably been stronger demand in China which helps on the JV earnings side. But overall, not a big surprise.

Mark Smith: I think the main driver has probably been stronger demand in China, which helps on the JV earnings side. Overall, not a big surprise. It's a question of efficiency during the ramp-up and how well we work with the supply chain, the pricing set. I think generally things have been going well there. There is going to be a step-up in engineering. It's not extraordinary, but as we're bringing to market more new platforms, that will be a factor. Certainly, we expect a strong gross margin performance to continue.

Speaker #1: It's really just it's a question of efficiency during the ramp-up and how well we work with the supply chain, the pricing set. So I think generally things have been going well there.

Speaker #4: So we're going to continue to sell the current product next year. And anticipate pretty solid demand for that. And then ramp up. And then while we've had the forever rising tour out, we've been doing field tests.

Speaker #1: There is going to be a step up in engineering. It's not extraordinary, but as we'll launch we'll bring into market more new platforms that will be a factor that certainly we expect a strong gross margin performance to continue.

Speaker #4: We've had customers seeing the new Helm platform launches. I spent time with customers last week and they're really excited about the opportunity to start to buy at the beginning of the year.

Speaker #5: Okay. And then just as a follow-up to maybe one of the prior questions, in terms of this the engine transition in 2027, I'm curious, to what extent you've thought maybe about whether there's likely to be a pre-buy in 2027 as well?

Steven Fisher: Okay. Then, just as a follow-up to maybe one of the prior questions, in terms of the engine transition in 2027, I'm curious to what extent you've thought maybe about whether there's likely to be a pre-buy in 2027 as well, for those that might be a little more concerned about the technology, but also still some higher cost. Do you think the sort of the phase ramp-up will help alleviate some of the desire potentially for a pre-buy on the technology side? Or do you think we could still see a pre-buy in 2027 out of 2028?

Speaker #3: Our next question is from Steven Fisher with UBS.

Speaker #5: For those that might be a little more concerned about the technology, but also still some higher cost, do you think the sort of the phase ramp-up will help alleviate some of the desire potentially for a pre-buy on the technology side or do you think we could still see a pre-buy in '27 out of '28?

Speaker #5: Thanks. Good morning. Just on the power side of things, the incremental margins seem to be better than the 25 to 30 percent expectations that you've talked about.

Speaker #5: I'm just curious, what's surprising you there? And it looks like the second half is implied to be better than that as well.

Speaker #5: Any color there would be helpful.

Speaker #4: Yeah. I think it really enables it just an overall smoother transition. That the industry is coming off of cyclical low, the fundamentals are improving, I would describe it as cautious optimism.

Jennifer Rumsey: I think it really enables just an overall smoother transition. The industry's coming off of cyclical low. The fundamentals are improving. I would describe it as cautious optimism. The fleet is aging. We're starting to see customers, just the fundamental economics are allowing them to buy, which is supporting demand. Some pre-buy is coming in, and I think we would anticipate that would continue into next year. I would think of it as just generally smoother year-over-year, versus if we were to go back a year or two years ago, what we would have anticipated.

Speaker #1: I think the main driver has probably been stronger demand in China, which helps on the JV earnings side. But overall, not a big surprise.

Speaker #4: So the fleet is aging. We're starting to see customers just the fundamental economics are allowing them to buy, which is supporting demand. And some pre-buy is coming in.

Speaker #1: It's really just it's a question of efficiency during the ramp up and how well we work with the supply chain, the pricing set. So I think generally things have been going well there.

Speaker #1: There is going to be a step up in engineering. It's not extraordinary, but as we launch, we'll bring into the market more new platforms. That will be a factor, and certainly, we expect the strong gross margin performance to continue.

Speaker #4: And I think we would anticipate that would continue into next year. But I would think about as just generally smoother year over year versus if we were to go back a year or two years ago, what we would have anticipated.

Speaker #5: Okay. And then just as a follow-up to maybe one of the prior questions, in terms of the engine transition in 2027, I'm curious, to what extent you've thought maybe about whether there's likely to be a pre-buy in 2027 as well?

Speaker #5: Thank you.

Steven Fisher: Thank you.

Speaker #3: Our next question is from Angel Castillo with Morgan Stanley.

Operator: Our next question is from Angel Castillo with Morgan Stanley.

Speaker #8: Hi. Good morning. Thanks for taking my question. Just wanted to continue on the EPA '27 dynamic. You mentioned that overall the shape of the curve and the demand likely ends up being a little bit better for you.

Angel Castillo: Hi, good morning, and thanks for taking my question. Just wanted to continue on the EPA 2027 dynamic. You mentioned that overall, the shape of the curve and the demand likely ends up being a little bit better for you. Just curious if we could put a little bit more of a financial kind of details around that, just in terms of any implications on your pricing ability on the new engine as you roll that out or phase that in. Any implications on cost as we think about this new, more layered approach or slow ramp-up, what does that mean for margins versus what you had kind of anticipated before? Just lastly on that, any implications on market share? I don't know if others can use credits or any other dynamics you'd expect.

Speaker #8: But just curious if we could put a little bit more of a financial kind of details around that just in terms of any implications on your pricing ability on the new engine as you roll that out or phase that in, any implications on cost as we think about kind of this new more layered approach or slow ramp-up, what does that mean for margins versus what you had kind of anticipated before?

Speaker #5: For those that might be a little more concerned about the technology, but also still see some higher costs, do you think the phase ramp-up will help alleviate some of the desire potentially for a pre-buy on the technology side?

Speaker #5: Or do you think we could still see a pre-buy in '27 out of '28?

Speaker #8: And just lastly on that, any implications on market share? I don't know if others can use credits or any other dynamics you'd expect.

Speaker #4: Yeah, I think it really enables just an overall smoother transition. The industry is coming off a cyclical low, the fundamentals are improving, and I would describe it as cautious optimism.

Speaker #1: Well, I think on economics, we're still working through all of the pricing, but what we said at analyst day for the new products, but what we said at analyst day is the industry expects that the largest contributor to the increased value and price of the trucks is going to be the powertrain.

Mark Smith: Well, I think on economics, we're still working through all of the pricing. What we said at Analyst Day for the new products, what we said at Analyst Day is the industry expects that the largest contributor to the increased value and price of the trucks is going to be the powertrain. We still believe that to be the case. We expect when we're launching new products with new value, that we're appropriately compensated for that. Regarding current products, obviously going into next year, I'll be surprised if we didn't get a question on this already, there'll be NCPs or nonconformance penalties. Those we expect to pass on to the market. We don't expect a significant financial impact from those. Yeah, those are the things that I would say overall in terms of economics of what we know now.

Speaker #4: So, the fleet is aging. We're starting to see customers—the fundamental economics are allowing them to buy, which is supporting demand. And some pre-buy is coming in.

Speaker #1: So we still believe that to be the case. And we expect when we're launching new products with new value that we're appropriately compensated for that.

Speaker #1: Regarding current products, obviously going into next year, I'll be surprised I didn't get a question on this already, but there'll be NCPs or non-conforming penalties those we expect to pass on to the market.

Speaker #5: Thank you.

Speaker #3: Our next question is from Angel Castillo with Morgan Stanley.

Mark Smith: Those we expect to pass on to the market. We don't expect a significant financial impact from those. Yeah, those are the things that I would say overall in terms of economics of what we know now. I think the benefit of this staged or staggered transition is obviously that we get to trial those products longer. Yeah, should be better for the industry overall. One of the consequences, of course, of staggering is that our R&D costs will stay elevated for a little bit longer. Again, it won't be $hundreds of millions more than the current rate. We're already spending a bit more. Our product coverage costs for next year would be lower than we would have anticipated with the full launch on 1 January. Quite a few moving parts, but I've tried to cover them all.

Speaker #7: Hi, good morning. Thanks for taking my question. I just wanted to continue on the EPA '27 dynamic. You mentioned that, overall, the shape of the curve and the demand likely end up being a little bit better for you.

Speaker #1: So we don't expect a significant financial impact from those. So yeah, those are the things that I would say overall in terms of economics of what we know now.

Speaker #7: But just curious if we could put a little bit more of a financial kind of details around that just in terms of any implications on your pricing ability on the new engine as you roll that out or phase that in, any implications on cost as we think about kind of this new more layered approach or slow ramp up, what does that mean for margins versus what you had kind of anticipated before?

Speaker #1: But I think this the benefit of this staged or staggered transition is obviously that we get to we get to trial those products longer and yeah, should be better for the industry overall.

Mark Smith: I think the benefit of this staged or staggered transition is obviously that we get to trial those products longer. Yeah, should be better for the industry overall. One of the consequences, of course, of staggering is that our R&D costs will stay elevated for a little bit longer. Again, it won't be $hundreds of millions more than the current rate. We're already spending a bit more. Our product coverage costs for next year would be lower than we would have anticipated with the full launch on 1 January. Quite a few moving parts, but I've tried to cover them all.

Speaker #1: One of the consequences, of course, of staggering is that our R&D costs will stay elevated for a little bit longer. Again, it won't be hundreds of millions of dollars more than the current rate.

Speaker #7: And just lastly on that, any implications on market share? I don't know if others can use credits or any other dynamics you'd expect.

Speaker #1: We're already spending a bit more. But our product coverage costs for next year would be lower than we would have anticipated with the full launch on January 1.

Speaker #1: So quite a few moving parts, but I've tried to cover them all.

Speaker #8: No, I understand that. That's very helpful. And then just curious on the backup or diesel power backlog, just could you give us any color in terms of what you're seeing in the shape of your backlog, how much maybe it's growing sequentially or year over year in the quarter?

Speaker #1: So we still believe that to be the case. And we expect when we're launching new products with new value, that we're appropriately compensated for that.

Angel Castillo: No, I understood that. That's very helpful. Then just curious on the backup or diesel power backlog, could you give us any color in terms of what you're seeing in the shape of your backlog, how much maybe it's growing sequentially or year-over-year in the quarter, and any kind of color that you can provide on kind of the regional demand as well as just the underlying backup that you see there for that product?

Speaker #1: Regarding current products, obviously going into next year, I'll be surprised I didn't get a question on this already, but there'll be NCPs or non-conforming penalties.

Speaker #8: And any kind of color that you can provide on kind of the regional demand as well as just the underlying backup that you see there for that product?

Speaker #1: Those we expect to pass on to the market, so we don't expect a significant financial impact from those. So yeah, those are the things that I would say overall in terms of economics of what we know now.

Speaker #4: Yeah. I mean, really it continues to be a capacity constrained strong demand market. You heard the strength in US, China, Southeast Asia. It continues.

Jennifer Rumsey: Yeah, really, it continues to be a capacity-constrained, strong demand market. You heard the strength in US, China, Southeast Asia. It continues. I'd just say we had a summit recently with customers and leaders from across the Americas for power generation, the message from them really remains consistent, which is continue to expand capacity. Demand for backup power is ahead of industry supply availability and how much more can we deliver them. The backlog is very strong. We feel very confident in the capacity investments that we're in the midst of making and under pressure to go faster if we can.

Speaker #1: But I think the benefit of this staged or staggered transition is obviously that we get to trial those products longer.

Speaker #4: I'd just say we had a summit recently with customers and leaders from across the Americas for power generation. And the message from them really remains consistent, which is continued expand capacity, demand for backup power is ahead of industry supply availability.

Speaker #1: And yeah, should be better for the industry overall. One of the consequences, of course, of staggering is that our R&D costs will stay elevated for a little bit longer.

Speaker #1: Again, it won't be hundreds of millions of dollars more than the current rate. We're already spending a bit more, but our product coverage costs for next year would be lower than we would have anticipated with the full launch.

Speaker #4: And how much more can we deliver them? So backlog is very strong. We feel very confident in the capacity investments that we're in the midst of making.

Speaker #4: And under pressure to go faster if we can't.

Speaker #1: On January 1. So quite a few moving parts, but I've tried to cover them all.

Speaker #3: Our next question is from Kyle Menzies with City.

Operator: Our next question is from Kyle Menges with Citi.

Speaker #8: Thanks. I just wanted to follow up on that last question from Angel. I'm curious for the 95 liter, at this point, how far are you booking how far out are you booking orders and also when are your competitors said earlier today that lead times are extending for diesel gen sets?

Speaker #7: No, I understand that. That's very helpful. And then, just curious, on the backup or diesel power backlog—could you give us any color in terms of what you're seeing in the shape of your backlog?

Kyle Menges: Thanks. I just wanted to follow up on that last question from Angel. I'm curious for the 95 liter at this point, how far out are you booking orders? Also one of your competitors said earlier today that lead times are extending for diesel gensets, and I'm curious if you're seeing the same.

Speaker #7: How much maybe it's growing sequentially or year over year in the quarter? And any kind of color that you can provide on kind of the regional demand as well as just the underlying backdrop that you see there for that product?

Speaker #8: And I'm curious if you're seeing the same?

Speaker #1: Well, I think demand continues to grow. That's the now selling out into the second further out into the second half of 2020 overall as a general statement about demand.

Mark Smith: I think demand continues to grow. That's the thing. So we're now selling out further out into H2 2028 overall as a general statement about demand. We have seen absolutely no pausing or blinking in demand. You've heard about the announcements with one large customer, I would say the general demand trend is not flat lining, it's still growing. So, yeah, if you want a new one, it's going to be H2 2028.

Speaker #4: Yeah. I mean, really, it continues to be a capacity-constrained, strong-demand market. You heard the strength in the US, China, Southeast Asia—it continues. I'd just say we had a summit recently with customers and leaders from across the Americas for power generation.

Speaker #1: So we have seen absolutely no pausing or blinking in demand. You've heard about the announcements with one large customer, but I would say the general demand trend is not flatlining.

Speaker #1: It's still growing. And so yeah, if you want a new one, it's going to be the second half of 2028.

Speaker #4: And the message from them really remains consistent, which is continued expanded capacity demand for backup power is ahead of industry supply availability. And how much more can we deliver to them?

Speaker #8: That's helpful. And then just any real changes in pricing as you're signing new agreements or pretty consistent with what you what pricing you've been putting through and agreements so far?

Kyle Menges: That's helpful. Then just any real changes in pricing as you're signing new agreements or pretty consistent with what pricing you've been putting through in agreements so far?

Speaker #4: So backlog is very strong. We feel very confident in the capacity investments that we're in the midst of making, and under pressure to go faster if we can.

Speaker #1: I think what you heard from Jenny is a clear expectation that as we grow, that we'll be raising our margin performance over time. That comes from a combination of factors: effectively introducing production, being fairly paid for the technology we're providing, hopefully parts growth from the industrial applications, all of those will contribute.

Mark Smith: I think what you heard from Jenny is a clear expectation that as we grow, that we'll be raising our margin performance over time. That comes from a combination of factors effectively introducing production, being fairly paid for the technology we're providing, hopefully parts growth from the industrial applications. All of those will contribute. We clearly have ambitions to keep growing the margins. We've got really strong momentum from the Power Systems team. That's what I would say overall. Again, I just remind you that there are not many players in this segment who can provide not just the products, but the service, the installation on a global basis. Demand is high. Yeah.

Speaker #3: Our next question is from Kyle Menzies with Citi.

Speaker #7: Thanks. I just wanted to follow up on that last question from Angel. I'm curious for the '95 leader, at this point, how far are you booking how far out are you booking orders and also when are your competitors said earlier today that lead times are extending for diesel gen sets?

Speaker #1: So we clearly have ambition to keep growing the margins. We've got really strong momentum from the power systems team. That's what I would say overall.

Speaker #1: But again, I just remind you, there are not many players in the segment who can provide not just the products, but the service, the installation on a global basis.

Speaker #7: And I'm curious if you're seeing the same?

Speaker #1: Well, I think demand continues to grow. That's the thing. And so we're now selling out into the second further out into the second half of 2020 overall as a general statement about demand.

Speaker #1: So demand is high. Yeah.

Speaker #1: So we have seen absolutely no pausing or blinking in demand. You've heard about the announcements with one large customer, but I would say the general demand trend is not even it's not flatlining.

Speaker #3: Our next question is from David Rosso with Evercore ISI.

Operator: Our next question is from David Raso with Evercore ISI.

Speaker #8: Hi. Thank you. Two quick ones. For 2027, I'm just curious your thoughts on the North American truck market, the appetite for are you finding customers have more desire to buy the 200 milligram full penalty engine?

David Raso: Hi, thank you. Two quick ones. For 2027, I'm just curious your thoughts on the North American truck market. Are you finding customers have more desire to buy the 200 milligram full penalty engine, so no tech change, but they're paying the penalty? Or a lower milligram that's still non-compliant, but then you can use credits to offset it, so there's no price increase. I'm just trying to get a sense of the appetite of the customer for new tech, but at a lower price versus I'd rather just have the current tech and pay the penalty and not sweat the technology change. The second question, can you help us with power gen next year, the level of capacity versus this year, just so we have a sense of volume.

Speaker #1: It's still growing. And so yeah, if you want a new one, it's going to be the second half of 2028.

Speaker #8: So no tech change, but they're paying the penalty. Or a lower milligram that's still non-compliant, but then you can use credits to offset it so there's no price increase.

Speaker #7: That's helpful. And then just any real changes.

Speaker #8: I'm just trying to get a sense of the appetite of the customer for new tech but at a lower price. Versus I'd rather just have the current tech and pay the penalty and not sweat the technology change.

David Raso: I'm just trying to get a sense of the appetite of the customer for new tech, but at a lower price versus I'd rather just have the current tech and pay the penalty and not sweat the technology change. The second question, can you help us with power gen next year, the level of capacity versus this year, just so we have a sense of volume. I know mix is an important part of that question, just a little of the capacity you think you'll have next year versus this year for power gen gensets. Thank you.

Speaker #8: And the second question, can you help us with power gen next year, the level of capacity versus this year? Just so we have a sense of volume.

Speaker #8: I know mix is an important part of that question, but just a little of the capacity you think you'll have next year versus this year for power gen resets.

David Raso: I know mix is an important part of that question, just a little of the capacity you think you'll have next year versus this year for power gen gensets. Thank you.

Speaker #8: Thank you.

Speaker #4: So the one I'll start and then let Mark build on that. David, thanks for the question. And just a little bit of a caution to say we expect that NCPs in that regulatory flexibility will stay in place in the final rule.

Jennifer Rumsey: I'll start, and then let Mark Smith build on that. David Raso, thanks for the question. Just a little bit of a caution to say we expect that NCPs and that regulatory flexibility will stay in place in the final rule. We have a proposed rule, and some of the details of how that will work will move around. How you described what could happen in terms of product availability, credit offsets, all that may not exactly be correct. Fundamentally, though, what I would say is that customers are interested in both. They are very excited to be able to continue buying the current products that we are offering and extending into next year, and they want to start buying the new product and gain more experience with that.

Speaker #4: We have a proposed rule and some of the details of how that will work will move around. So how you described what could happen in terms of product availability credit offsets, all that may not exactly be correct.

Speaker #4: Fundamentally though, what I would say is that customers are interested in both. They're very excited to be able to continue buying the current products that we are offering and extending into next year.

Jennifer Rumsey: They are very excited to be able to continue buying the current products that we are offering and extending into next year, and they want to start buying the new product and gain more experience with that. We are working right now across our different OEMs on their plans and what will be available, and different truck models at what time. There will be multiple moving parts in how this plays out. Fundamentally, we are talking with OEMs about what they want from current product, new product, what the sell in of the market and the end customers that we talk to, I would anticipate initially will buy more of the current offering, but they want both. They want to start ramping into the new product as well.

Speaker #4: And they want to start buying the new product and gain more experience with that. And we're working right now across our different OEMs on their plans and what will be available in different truck models at what time.

Jennifer Rumsey: We are working right now across our different OEMs on their plans and what will be available, and different truck models at what time. There will be multiple moving parts in how this plays out. Fundamentally, we are talking with OEMs about what they want from current product, new product, what the sell in of the market and the end customers that we talk to, I would anticipate initially will buy more of the current offering, but they want both. They want to start ramping into the new product as well.

Speaker #4: So there will be multiple moving parts and how this plays out. But fundamentally, we are talking with OEMs about what they want from current product, new product, what the selling of the market, and the end customers that we talk to.

Speaker #4: I would anticipate initially we'll buy more of the current offering, but they want both. They want to start ramping into the new product as well.

Speaker #1: Essentially, I don't think most of the conversation on an individual base saying I want one of those or I want one of those, right?

Mark Smith: Essentially, I do not think most of the conversation on an individual base saying, I want one of those, or, I want one of those, right? Ultimately, the industry is moving towards the new products. It is on an extended timeframe and in a fashion that we have not seen before over recent cycles. It is somewhat unprecedented, certainly over the last 15 years, that for whatever the reasons, the regulations are being finalized so close to the actual date of implementation. I do not think it is a per engine calculation that is really going on. Ultimately, the entire industry, not just Cummins, needs to transition to the new product. It will be an interesting dynamic along the way.

Speaker #1: Ultimately, the industry is moving towards the new products. It's on an extended timeframe. And in a fashion that we haven't seen before over recent cycles.

Speaker #1: So it is somewhat unprecedented, certainly over the last 15 years, that for whatever the reasons, the regulations are being finalized so close to the actual date.

Speaker #1: Of implementation. But I don't think it's a per-engine calculation that's really going on. Ultimately, we all. The entire industry, not just Cummins, needs to transition to the new product.

Speaker #1: So it'll be an interesting dynamic along the way.

Speaker #8: On the power gen capacity question?

David Raso: On the power gen capacity question.

Speaker #1: I think we'll punt that one until later in the year. Otherwise, we're getting into too many levels of guidance right now. But yes, it'll be high.

Mark Smith: I think we'll punt that one until later in the year. Otherwise, we're getting into too many levels of guidance right now. Yes, it'll be high.

Speaker #3: Our next question is from Tim Thene with Raymond James.

Operator: Our next question is from Tim Thein with Raymond James.

Speaker #8: Oh, thank you. Good morning. Maybe I'll just pair these two together. So question one is just on the engine business. Curious if you can comment to the outlook for parts demand in North America.

Kyle Menges: Thank you. Good morning. Maybe I'll just pair these two together. Question one is just on the engine business. Curious if you can comment to the outlook for parts demand in North America, just again, the on-highway piece specifically. I think if I read it correctly, the guidance came up just marginally, but just curious if in general, the healthier freight markets and stronger customers, if you're seeing any pull-through in parts. The second part is just on the China data center market has gotten a lot of air time, and I'm just curious if you have

Tim Thein: Thank you. Good morning. Maybe I'll just pair these two together. Question one is just on the engine business. Curious if you can comment to the outlook for parts demand in North America, just again, the on-highway piece specifically. I think if I read it correctly, the guidance came up just marginally, but just curious if in general, the healthier freight markets and stronger customers, if you're seeing any pull-through in parts.

Speaker #8: Just again, the on-highway piece specifically. I think if I read it correctly, the guidance came up just marginally, but just curious if in general, the healthier freight markets and stronger customers if you're seeing any pull-through in parts?

Speaker #8: And then the second part is just on the China data center market has gotten a lot of airtime. And I'm just curious if you have just from a visibility standpoint, how that compares just you talked a lot about North America, but just you have a similar level of kind of visibility or not in China and obviously that implications for the Chongqing joint venture, which is going in importance.

Tim Thein: The second part is just on the China data center market has gotten a lot of air time, and I'm just curious if you have Just from a visibility standpoint, how that compares. You talked a lot about North America, but do you have a similar level of visibility or not in China and same risk? Obviously, that has implications for the Chongqing joint venture, which is growing in importance. Maybe just those two questions. Thank you.

Tim Thein: Just from a visibility standpoint, how that compares. You talked a lot about North America, but do you have a similar level of visibility or not in China and same risk? Obviously, that has implications for the Chongqing joint venture, which is growing in importance. Maybe just those two questions. Thank you.

Speaker #8: So maybe just those two questions. Thank you.

Speaker #4: Yeah. On the parts the market's up, as you said, we raised the bottom end of the guide a little bit. So we're seeing some strengthening of parts as the fleet has aged and economics are improving a little bit.

Jennifer Rumsey: Yeah. On the parts, the market's up. As you said, we raised the bottom end of the guide a little bit. We are seeing some strengthening of parts as the fleet has aged and economics are improving a little bit. It has not moved fundamentally from what we talked about a quarter ago, but better certainly this year than last year. Just as in North America, we have strategic customers in China and Southeast Asia, and we have conversations with them about multi-year plans and demand there. I would say the conversations are very similar. We go sit down and they say, More than the last time we met. Please, how quick can you do it? Those are pretty consistent in both of those customer bases.

Speaker #4: Has it moved fundamentally from what we talked about a quarter ago? But better certainly this year than last year. And just as an North America, we have strategic customers in China and Southeast Asia, and we have conversations with them about multi-year plans and demand there.

Speaker #4: So I would say the conversations are very similar. We go sit down and they say more than the last time we met, police, how quick can you do it?

Speaker #4: Those are pretty consistent in both of those customer bases.

Uh, thank you, good, good morning, maybe. I'll just, uh, just compare these 2 together. So, question, 1 is just on the engine business. Um, curious, if you can in comment to the outlook for parts demand in, in North America, just again, the on Highway, uh, piece specifically. Um, I think, I think if, uh, if I read it correctly that the guidance came up, just marginally. But just curious, if in general, the healthier Freight markets and stronger customers of your seen any, uh, pull through in parts,

Speaker #1: Cool large customers in each market than a broader market participation with others. Yeah.

Mark Smith: Core large customers in each market and a broader market participation with others.

And then, uh, the second part is just on on the China uh, Data Center Market has gotten a lot of of air time. And I'm just curious as to if you have just from a visibility standpoint. Um,

Speaker #3: Our next question is from Rob Wertheimer with Melius Research.

Operator: Our next question is from Rob Wertheimer with Melius Research.

Speaker #8: Oh, thanks. Hey Mark, you touched on this earlier on the NCPs and the EPA's 2027. But just to understand it right, if a competitor has credits, they can avoid passing the cost of that on.

Rob Wertheimer: Thanks. Hey, Mark, you touched on this earlier on the NCPs and the EPA 2027, just to understand it right, if a competitor has credits they can avoid passing the cost of that on, do you anticipate any difficulty in passing that through yourselves or any margin impact that might arise from that in next year?

How does that compare, uh, just if—if—you've talked a lot about North America, but do you have a similar level of visibility or not in China and, um,

Speaker #8: And do you anticipate any difficulty in passing that through yourselves or any margin impact that might arise from that in next year?

Obviously, the implications for the Chongqing joint venture, which, you know, is going in, are important. So maybe just those two questions. Thank you.

Speaker #4: Yeah. Well, so how the credits will work in the end, it remains to be seen. But it's not generally you can't just use credits to offset NCPs.

Jennifer Rumsey: Well, how the credits will work in the end, it remains to be seen, but generally you can't just use credits to offset NCPs. I'd just correct you on that, on our expectation there.

Yeah, on the on the parts uh the the markets up as you said we raised the bottom end of the guide a little bit. So we're seeing a, you know, some strengthening of of Parts is um you know the fleet is has aged and and economics are improving a little bit has

Speaker #4: I just kind of correct you on that on our expectation. There.

It, you know, moved fundamentally from what we talked about.

Speaker #8: That's not specific to Cummins.

Speaker #4: Yeah. And of course, we can't comment on what everybody plans to do in terms of NCPs and credit usage and all of that. But we don't expect that there's going to be a kind of a big use of credits to offset NCPs.

Mark Smith: That's not specific to Cummins.

Jennifer Rumsey: Yeah. Of course, we can't comment on what everybody plans to do in terms of NCPs and credit usage and all of that, but we don't expect that there's going to be a big use of credits to offset NCPs.

A quarter ago, but certainly better this year than last year, and just as in North America, you know, we have strategic customers in China and Southeast Asia, and we have conversations with them about multi-year.

Speaker #8: Perfect. Thank you for that.

Rob Wertheimer: Perfect. Thank you for that.

Speaker #3: Our next question is from Kristen Owen with Oppenheimer and Company.

Operator: Our next question is from Kristin Owen with Oppenheimer and Company.

Plans and demand there. So, I would say the conversations are very similar. We go sit down, and they say, "More than the last time we met. Please have quick. Can you do it?" Those are pretty consistent in both of those customer bases.

Speaker #7: Hi. Good morning. Thank you for the question. Two quick ones from me. First, I understand it's probably difficult to parse out underlying demand versus pre-buy given the changes.

Kristen Owen: Hi, good morning. Thank you for the question. Two quick ones from me. First, I understand it's probably difficult to parse out underlying demand versus pre-buy given the changes. I do want to try to pull at the threads for underlying demand because it does seem like the economics are improving on tightening supply, not necessarily freight increase in volume. I'm just wondering how you're thinking about underlying replacement demand outside of the EPA transition, and then I have a follow-up.

Call large customers in each market, rather than broader market participation with others.

Speaker #7: But I do want to try to pull at the threads for underlying demand because it does seem like the economics are improving on tightening supply, not necessarily freight increase in volume.

Our next question is from Rob Wimer with Melius research.

Speaker #7: So I'm just wondering how you're thinking about underlying replacement demand outside of the EPA transition. And then I have a follow-up.

Speaker #4: Yeah. A lot of what we see right now is that underlying demand and replacement improving. So there is some pre-buy happening certainly, but the fundamentals have improved and that's driving underlying demand up.

Jennifer Rumsey: Yeah, a lot of what we see right now is that underlying demand and replacement improving. There is some pre-buy happening, certainly, but the fundamentals have improved and that's driven underlying demand up. The uncertainty that existed really until last month around regulations and all of the details that were associated with that has caused people to be cautious around pre-buy as well. We are seeing some in H2, but I would say it's more driven by just market improvement.

I think he hey Mark you touched on this earlier on the mcps on the epa's uh 2027 and but just to understand it, right? If a competitor has credits, they can avoid passing the cost of that on. And do you anticipate any any, you know, any difficulty in passing that through yourselves or any margin impact that might arise from that and next year,

Speaker #4: And the uncertainty that exists really until last month around regulations and all of the details that were associated with that has caused people to be cautious around pre-buy as well.

Yeah. That well, so how the credits will work in the end. It remains to be seen but it's not generally. You can't just use credits to offset ncps. I just kind of correct you on that on our expect and our expectation.

Speaker #4: So we are seeing some in the second half, but I would say it's more driven by just market improvement.

There. Um, that's not specific to come. Yeah. And of course we're not we can't comment on what everybody plans to do in terms of ncps and credit usage and all of that. But we don't expect that there's going to be a kind of a big use of credits to offset ncps.

Speaker #7: Okay. I'm just trying to square that with the increase in the pre-buy expectation in your medium-duty guidance. So maybe I can follow up with that offline.

Perfect, thank you for that.

Kristen Owen: Okay. I'm just trying to square that with the increase in the pre-buy expectation in your medium duty guidance. Maybe I can follow up with you that offline. My second question is, since we've covered NCPs pretty well, wanted to ask about the warranty accruals. That was obviously favorable from a pricing standpoint for the buyer, but just how you're thinking about warranty accruals as we start to build this bridge in 2027, how that's going to impact your incremental margins with the more measured cadence of production.

Our next question is from Kristen Owen with Oppenheimer & Company.

Speaker #7: My second question is, since we've covered NCPs pretty well, I wanted to ask about the warranty accruals. That was obviously favorable from a pricing standpoint for the buyer, but just how you're thinking about warranty accruals as we start to build this bridge in 2027, how that's going to impact your incremental margins with the more measured cadence of production.

Speaker #1: Right. So typically when we launch a new platform of which we'll be launching several between 2027 and 2028 for those who come with a higher warranty accrual, and then we adjust that over time as we get actual field experience.

Mark Smith: Right. Typically when we launch a new platform, of which we'll be launching several between 2027 and 2028, those come with a higher warranty accrual, and then we adjust that over time as we get actual field experience. Our current warranty costs are running in the low 2% of sales range across the entire company, pretty much at historical lows, despite what I'd call historical complexity of the products. We'd expect that to go up as we get more of a mix of new products in North America. Over time, historically, those costs either have not played out quite as high as anticipated or we've just addressed any field issues as we've gone along. That's just a typical part of launching new products.

Hi, good morning. Thank you for the question. Uh, 2 2 quick ones from me first, um, I understand it's, it's probably difficult to parse out underlying Demand versus pre-b. Buy given the changes. Um, but I do want to try to pull out the, the threads, for underlying demand because it does seem like, um, the the economics are improving on tightening Supply. Not necessarily Freight, uh, increase in volume. So, I'm just wondering how you're thinking about underlying replacement demand outside of the EPA transition. And then I have a follow-up.

Speaker #1: Our current warranty costs are running in the low 2% of sales range across the entire company. Pretty much a historical low despite what are called historical complexity of the products.

Yeah, a lot of what we see right now is that underlying demand and replacement are improving. So, there is some pre-buy happening, certainly, but the fundamentals have improved and that's driven underlying demand up, and the uncertainty that existed...

Speaker #1: So we'd expect that to go up as we get more of a mix of new products in North America. And then over time, historically, those costs either have not played out quite as high as anticipated or we've just addressed any field issues as we've gone along.

You know, really until last month around regulations and and all of the details that were associated with that as as caused people to be cautious around. Um,

all prey as well. So, we are seeing some in the second half, but I would say it's

Speaker #1: That's just a typical part of launching new products. So I would say relative to what we might have thought six months ago, next year's warranty costs will be more like this year's for the first half of the year, maybe a slight tick up for the limited launches.

Mark Smith: I would say relative to what we might have thought six months ago, next year's warranty costs will be more like this year's for the H1, maybe a slight tick up for the limited launches, and then we'll move to a higher rate as we get more into the fuller launches in the Q4 and into 2028. If we're just focusing on that, of course, on the new products, we've got more value, more content, and there's also a scaling and efficiency factor to some extent on some of the components as we go through. By and large, the first nine months, if we just assume equal demand, are going to look more similar to how we're performing now. It'll start to change for a short period of time and then improve again over time. That would be the bill.

Speaker #1: And then we'll move to a higher rate as we get more into the fuller launches in fourth quarter and into 2028. We're just focusing on that.

Speaker #1: Of course, on the new products, we've got more value, more value, more content. And there's also a scaling and efficiency factor to some extent on some of the components as we go through.

Okay, I'm I'm just trying to square that with the increase in the pre-b. Buy expectation in your medium duty guidance. So maybe maybe I can follow up with that offline. Um my my second question is um since we've covered ncp's pretty well, I wanted to ask about the warranty approvals um that was obviously favorable from a pricing standpoint, for the buyer but just how you're thinking about warranty acral as we start to build this bridge in 2027. How that's going to impact. Uh, your incremental margins uh with the the more

Measured Cadence of production.

Speaker #1: But by and large, the first nine months are going to look if we just assume equal demand, they're going to look more similar to how we're performing now.

Right. So typically, when we launch a new platform, which will be launched in several instances between 2027 and 2028, those come with a higher...

Speaker #1: And then it'll start to change for a short period of time. And then improve again over time. That would be the goal.

Speaker #4: The extended limited production, though, will allow us to get on any issues that we see quickly and address those as volume starts to ramp.

Warranty accrual. And then we adjust that over time as we get actual field experience. Our current warranty costs are running, you know, in the low 2% of sales range across the entire company.

Jennifer Rumsey: The extended limited production, though, will allow us to get on any issues that we see quickly and address those as volume starts to ramp. Over the long term, it should provide a positive from a quality perspective.

Speaker #4: So over the long term, it should provide a positive from a quality perspective.

Speaker #3: Thank you. We have reached the end of our question and answer session. I would like to hand the floor back over to Nick Aarons for any closing comments.

Operator: Thank you. We have reached the end of our question and answer session. I would like to hand the floor back over to Nicholas Arens for any closing comments.

Pretty much at historical lows, despite what I've called historical complexity in the products. So, we'd expect that to go up as we get more of a mix of new products in North America. And then, over time, historically, those costs either have not played out quite in the time as anticipated, or we've just...

Speaker #1: Thank you. That concludes our teleconference for the day. Thank you all for participating in your contentious interest and comments. As always, investor relations team will be available for questions after the call.

Nick Arens: Thank you. That concludes our teleconference for the day. Thank you all for participating and your continued interest in Cummins. As always, the investor relations team will be available for questions after the call.

You know, we've addressed any field issues as we've gone along. That's just a typical part of launching new products.

so, I would say relative to

what we might have thought, 6 months ago, next year's warranty costs.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Will be more like this years for the first half of the year maybe a slight tick up for the limited launches and then we'll move to a higher rate as we get more into the Fuller launches.

Fourth quarter, and into 2028, we're just focusing on that. Of course, on the new products, we've got more value, more value, more content. Um, and there's also a scaling and efficiency factor, to some extent, on some of the components as we go through. But by and large, the first—

9 months are going to look if we just assume equal demand, they're going to look more similar to how we're performing now.

Um, and then it'll start to change for a short period of time, and then...

Improved over time, that would be the bill.

The extended limit of production that will allow us to, you know, get on any issues that we see quickly um and address those as, as a volume starts to ramp. So, over in the over the long term, it should provide a positive

From a quality perspective.

Thank you. We have reached the end of our question and answer session. I would like to hand the floor back over to Nick Arens for any closing comments.

Thank you. That concludes our teleconference for the day. Thank you all for participating and for your continued interest and comments. As always, the Investor Relations team will be available for questions after the call.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Operator: Greetings, welcome to the Q2 2026 Cummins Inc. earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nicholas Arens, Executive Director of Investor Relations. Please go ahead.

Operator: Greetings, welcome to the Q2 2026 Cummins Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Nicholas Arens, Executive Director of Investor Relations. Please go ahead.

Nicholas Arens: Thank you, Paul. Good morning, everyone, welcome to our teleconference today to discuss Cummins results for the Q2 2026. Participating with me today are Jennifer Rumsey, our Chair and Chief Executive Officer, and Mark Smith, our Chief Financial Officer. We will all be available to answer questions at the end of the teleconference. Before we start, please note that some of the information that you will hear or be given today will consist of forward-looking statements within the meaning of the Securities and Exchange Act of 1934. Such statements express our forecasts, expectations, hopes, beliefs, and intentions on strategies regarding the future. Our actual future results could differ materially from those projected in such forward-looking statements because of the several risks and uncertainties.

Nicholas Arens: More information regarding such risks and uncertainties is available in the forward-looking disclosure statement in the slide deck and our filings with the Securities and Exchange Commission, particularly the Risk Factors section of our most recently filed annual report on Form 10-K, and any subsequently filed quarterly reports on Form 10-Q. During this call, we will be discussing certain non-GAAP financial measures. We will refer you to our website for the reconciliation of those measures to GAAP financial measures. Our press release with a copy of the financial statements and a copy of today's webcast presentation are available on our website within the investor relations section at cummins.com. With that out of the way, I will turn you over to our Chair and CEO, Jennifer Rumsey, to kick us off.

Jennifer Rumsey: Thank you, Nick. Good morning. I'll start with a summary of our Q2 accomplishments and financial results, then discuss our sales and end market trends by region. I will finish with a discussion of our outlook for 2026. Mark will then walk you through additional details on our Q2 performance and our full year forecast. Before getting into the details of our performance, I want to highlight a few major events from the quarter. In May, we hosted our 2026 Analyst Day, where we raised our 2030 financial targets and reinforced our commitment to returning capital to shareholders. This reflects that our strategy is working. We are advancing our position in key markets and experiencing increasing demand for our products.

Jennifer Rumsey: In response to growing global investments in data centers, we also announced plans to further expand our global capacity and broaden our power generation portfolio with integrated power solutions and the development of 130-liter natural gas genset, extending our reach into the growing prime power market. Since Analyst Day, we have continued to build momentum in the data center market. We recently signed a multi-year agreement with a global hyperscaler, expanding a longstanding partnership and securing visibility into several gigawatts of future backup power genset demand. This agreement reinforces our confidence in our growth outlook and supports the capacity expansion already underway. In June, we announced an agreement with Third Day Energy to provide QSK60 and HSK78 natural gas generator sets and integrated microgrid technology for a behind-the-meter prime power solution supporting a high-performance computing data center in Texas.

Jennifer Rumsey: The project highlights our ability to deliver integrated power solutions, deepen customer partnerships, and expand our presence in the growing prime power market. Finally, the EPA released its much-awaited proposed rule last month that provides greater clarity on the implementation of the North America on-highway 2027 emissions regulations for our industry. Based on the proposed rule, we announced our intention to use the implementation flexibilities outlined by the EPA to support a measured transition to our new HELM engine platforms. This approach is designed to satisfy the proposed regulatory framework and support OEM customer production schedules while providing additional real-world operating experience to help build end-user confidence in our new engines. This balanced approach also helps maintain product availability, continue bringing new, innovative products to market, and support a successful industry transition.

Jennifer Rumsey: As a part of our phased transition, we plan to begin limited production of the model year 2027 X15 engine in January 2027, based on individual OEM launch plans, with production ramping progressively and full production expected to begin in Q4 of 2027. We also plan to begin limited production of the model year 2027 X10 in January 2027, with full production expected by Q3 of 2027 based on OEM launch plans. During the transition, the current X12 and L9 engines used in truck and transit bus applications are expected to remain available under EPA's proposed rule. Consistent with our previous announcement, our next generation B platform is expected to launch in January 2028, and the current B platform will be available for all of 2027.

Jennifer Rumsey: As we execute this phased transition, we will continue to work closely with our OEM partners, dealers, fleets, and other end customers to align product availability and launch timing. We will also continue to stay actively engaged with the EPA and monitor its rulemaking and implementation flexibilities to support a successful transition for our customers and the industry. Together, these actions reflect our commitment to deliver for our customers, execute with discipline, and invest in products and technologies that will support long-term profitable growth. Now I will turn to our overall company performance for Q2 of 2026 and cover some of our key markets. We delivered record Q2 sales of $9.5 billion, an increase of 9% compared to Q2 of 2025. Growth was driven primarily by higher global demand in power generation markets, particularly from data centers and international construction markets.

Jennifer Rumsey: EBITDA for the quarter was a record $1.7 billion, or 17.5% of sales, compared to $1.6 billion, or 18.4% of sales a year ago. The increase in EBITDA was primarily due to higher volumes, increased joint venture earnings, and positive pricing, partially offset by tariffs and higher variable compensation expenses associated with our projections for record full-year earnings. Our second quarter revenues in North America increased 8% compared to the second quarter of 2025. Industry production of heavy-duty trucks in the second quarter was 60,000 units, down 4% from 2025 levels, while our heavy-duty unit sales were 23,000, up 2% year over year. Industry production of medium-duty trucks was 32,000 units in the second quarter of 2026, an increase of 8% from 2025 levels, while our unit sales were 29,000, up 19% year over year.

Jennifer Rumsey: We shipped 33,000 engines to Stellantis for use in their Ram pickups in the second quarter of 2026, down 2% from a year ago. Revenues for North America power generation increased by 19%, driven primarily by continued strong data center demand and supported by the additional manufacturing capacity we brought online at the end of 2025 to meet that growing customer demand. Our international revenues increased 12% during the second quarter compared to a year ago. Second quarter revenues in China, including joint ventures, were $2.3 billion, an increase of 30% year over year, driven by accelerating data center demand, as well as improving on-highway and construction markets.

Jennifer Rumsey: Industry demand for medium and heavy-duty trucks in China was 378,000 units, an increase of 24% from last year, driven by strong export demand, particularly in Africa and Southeast Asia, as well as improving domestic replacement demand and increase in battery electric-powered trucks. Our sales in units, including joint ventures, were 53,000 units, an increase of 2%. Industry demand for excavators in China in the second quarter was 79,000 units, an increase of 34% from 2025 levels. We sold 15,000 units, up 35%, driven by export demand associated with mining investments in Africa and Indonesia. Results also benefited from OEM inventory stocking to mitigate potential logistics risks in the Middle East, as well as continued domestic demand supported by rural development projects. Sales of power generation equipment in China increased 88% in the second quarter due to accelerating data center demand.

Jennifer Rumsey: Second quarter revenues in India, including joint ventures, was $742 million, an increase of 6% from a year ago. Industry truck production increased 5% from 2025, driven by increased freight availability, infrastructure, and mining activity. Let me provide our outlook for 2026, including comments on several of our key markets. We have raised our full year outlook once again, as demand continues to build across several key markets. We now expect total company revenues to increase 10% to 13% in 2026, compared to our prior guidance of 8% to 11%. This improved outlook reflects higher demand in North America on-highway markets, continued strength in power generation driven by data center markets, and improved on- and off-highway demand in China.

Jennifer Rumsey: We are raising the midpoint of our 2026 North America heavy-duty truck forecast to a range of 240,000 to 250,000 units, up from our prior guidance of 230,000 to 250,000 units. This reflects strong recent order activity and improving fleet profitability, which drove better than expected Q2 production and improved visibility into demand in the H2 of the year. In the North America medium-duty truck market, we are increasing our forecast to 130,000 to 140,000 units in 2026, compared to our prior guidance of 125,000 to 135,000 units. This reflects stronger than expected demand in the H2 of the year, supported by improving OEM outlooks and a modestly higher pre-buy following the recent regulatory clarification. For both heavy and medium-duty trucks, we anticipate that industry production is largely set for the H2 of this year.

Jennifer Rumsey: Consistent with our prior guidance, our engine shipments for pickup trucks in North America are expected to be 125,000 to 140,000 units in 2026. In China, we now expect total revenue, including joint ventures, to increase approximately 15% in 2026, an improvement from our prior outlook of up 10%. The higher outlook reflects stronger than expected on- and off-highway demand, particularly during the Q2. While we expect normal seasonal moderation during the H2 of the year, we continue to expect full year demand to exceed our prior expectations. For China heavy- and medium-duty truck demand, we now expect a range of down 5% to up 5%, compared to our prior guidance of down 10% to flat. This reflects stronger than expected export demand, particularly in Africa and Southeast Asia. In India, consistent with our prior guidance, we expect total revenue, including joint ventures, to increase 2% in 2026.

Jennifer Rumsey: This includes our expectation for industry demand for trucks to be flat at the midpoint of our guidance, supported by tax rate reductions, improving underlying demands. For global construction, we now expect demand to range from flat to up 10%, an improvement from our prior outlook of down 10% to flat. In China construction, export demand is stronger than we previously anticipated, with relatively flat domestic demand. In North America, we expect demand to remain largely flat given ongoing tariff and interest rate uncertainty. We expect our major global high horsepower markets to remain strong in 2026. Consistent with our prior outlook, we continue to expect global power generation revenues to increase 15% to 25%. While customer demand remains exceptionally strong, particularly for data center applications, our growth in 2026 will continue to be constrained by capacity.

Jennifer Rumsey: Our outlook reflects the capacity we brought online in North America at the end of 2025, continued international growth, particularly in China and the broader Asia-Pacific region, and increased demand for lower output generator sets as customers seek solutions amid ongoing capacity constraints for larger configurations. The sustained strength in customer demand continues to support our long-term investments in expanding our power generation portfolio and global capacity, as we discussed in May. In mining, we now expect engine sales to range from down 5% to up 5% for the year, compared with our prior guidance of flat to up 10%. While fleet replacement activity remains supportive in several markets, elevated inventory levels in others are expected to moderate demand through the remainder of the year.

Jennifer Rumsey: For aftermarket, reflecting the slight adjustment in our prior guidance, we expect growth of 3% to 8% for 2026, supported by aging fleets and higher parts consumption. In summary, we delivered a strong Q2 and are raising our full year revenue growth outlook to 10% to 13% up, while increasing the midpoint of our EBITDA guidance to a range of 18% to 18.5%. Our outlook reflects our expectation for improving operating performance in H2, led by stronger North America on-highway markets and continued high demand in power generation. We enter H2 with positive momentum and greater regulatory clarity. We remain focused on executing our strategy, investing for long-term growth, and helping our customers succeed in a rapidly evolving market.

Mark Smith: Thank you, Jen. Good morning, everyone. Our Q2 financial performance and other important business developments built on the themes from our recent Analyst Day. We delivered record quarterly sales and EBITDA dollars and strong operating cash flow in Q2, extending our track record of raising performance cycle over cycle. We returned over half a billion dollars of cash to shareholders in the form of share repurchases and cash dividends. The Power Systems business was awarded new prime power business here in the US. We significantly expanded our opportunities for growth in data center backup power with one of our existing global hyperscaler customers, as Jen summarized. Having reflected on our strong performance in Q2 and the record demand for Cummins products globally, we've raised our full-year forecast from three months ago.

Mark Smith: In another sign of confidence, our board of directors approved a 10% increase in our quarterly cash dividend, the 17th straight year of dividend growth. Q2 revenues were $9.5 billion, up 9% from a year ago. Sales in North America increased 8%, while international revenues grew 12%, led by China. EBITDA was $1.7 billion, or 17.5%, compared to $1.6 billion or 18.4% a year ago. The increase in EBITDA dollars was primarily driven by higher global power generation volumes and stronger international construction demand. The net impact of tariffs was immaterial to EBITDA dollars in the quarter. Let's go into each line item with a little more detail. Gross margin for the quarter was $2.5 billion, or 26.1% of sales, up from $2.3 billion or 26.4% last year.

Mark Smith: The increase in dollars was primarily driven by higher volumes, an increase in joint venture earnings, and positive pricing, partially offset by tariffs and an increase in higher incentive compensation, which is related to our projections for record full-year financial performance this year. To avoid me repeating myself several times, I will simply note that the higher incentive compensation impacts cost of sales and operating expenses for all of our operating segments. The run rate for incentive compensation should be lower for H2 than we incurred in Q2 based on our current forecast. Selling, administrative, and research expenses were $1.3 billion, or 13.5% of sales, compared to $1.1 billion or 13.1% a year ago. The increase was driven primarily by higher development costs to support our upcoming on-highway platform launches in North America and new mining and natural gas power generation programs.

Mark Smith: Joint venture income of $154 million, increased $36 million from the prior year, primarily due to stronger performance in our China joint ventures, benefiting the Engine and Power Systems segments. Other income was $32 million, compared to $49 million from the prior year. Interest expense was $80 million, a decrease of $7 million from a year ago. The all-in effective tax rate in Q2 was 25.1%, which included $29 million of unfavorable discrete items, or $0.21 per diluted share. All-in net earnings for the quarter were $932 million, or $6.73 per diluted share, compared to $890 million or $6.43 per diluted share a year ago. Our operating cash flow was $1.5 billion, a record for a Q2. Compares favorably to $785 million a year ago, driven primarily by improved working capital.

Mark Smith: During the quarter, we returned $501 million to shareholders, consistent with our long-standing commitment to return approximately 50% of operating cash flow. This included $225 million of share repurchases and $276 million in cash dividends. I'll now comment on the segment performance and our guidance for the full year 2026. For the Engine segment, Q2 revenues were $3.1 billion, an increase of 6% from a year ago. EBITDA was 12.5%, a decrease from 13.8% a year ago, as higher research and development and freight costs were partially offset by stronger North American medium-duty truck volumes, China construction demand, and improved tariff recovery. In 2026, we project revenues for the Engine business to be up 9% to 14%, up from our prior guide of up 7% to 12%, driven primarily by higher expectations for North America heavy and medium-duty trucks.

Mark Smith: We expect EBITDA to be in the range of 12.5% to 13.25%, compared to our prior guidance of 12.5% to 13.5%. Components segment revenue was $2.9 billion, an increase of 7% from a year ago. EBITDA was 13.2%, a decrease from 14.7% a year ago, as higher product coverage costs were partially offset by stronger North American truck volumes and higher China on and off highway volumes, favorable pricing. For Components, we expect 2026 revenues to be up 8% to 13%, up from our prior outlook of a growth of 7.5% at the midpoint, due to stronger demand for trucks in North America, stronger demand in on and off highway markets in China. We expect EBITDA to be in the range of 13.5% to 14.25%, compared to our prior guide of 13.5% to 14.5%.

Mark Smith: In the Distribution segment, revenues increased 9% from a year ago to a record $3.3 billion. EBITDA decreased as a percent of sales to 13.6% compared to 14.6% a year ago, driven by the higher incentive compensation and freight expenses, which were partially offset by higher power generation volumes. We expect 2026 Distribution revenues to be up 9% to 14% consistent with our prior guide. We also expect EBITDA margins to be in the range of 13.5% to 14.25% compared to our previous guidance of 14.25% at the midpoint. In the Power Systems segment, revenues were a record $2.3 billion, an increase of 19%. EBITDA increased from 22.8% to 24.5% of sales, primarily driven by strong global power generation demand, especially in the US and China. For 2026, we expect Power Systems revenues to grow 14% to 19%, unchanged from three months ago.

Mark Smith: We also expect EBITDA margins in the range of 25% to 25.75% compared to our previous guide of 25.5% at the midpoint, reflecting continued strong performance across the business as well as increased investments during the H2 of the year to support development of our new 130-liter natural gas generator platform and expand our position in the growing prime power market. Accelera revenues increased 38% to $145 million driven by higher electrified powertrain and electrolyzer sales. EBITDA was a loss of $69 million, an improvement from a loss of $100 million in the prior year, reflecting targeted cost reduction actions previously implemented in this segment.

Mark Smith: In 2026, we now anticipate Accelera revenues to be in the range of $350 to $400 million, an increase from our prior guide of $300 to 350 million. We now expect net losses in the range of $260 to $290 million compared to our prior guide of -$270 to 300 million. In summary, we've raised our full-year outlook and now expect total company revenues to increase between 10% and 13% with EBITDA in the range of 18% to 18.5%. Our effective tax rate is expected to be approximately 23% for the full year, excluding any discrete items. Capital investments will be in the range of $1.35 to 1.45 billion as we continue to make critical investments to support future growth.

Nicholas Arens: Thank you, Mark. Out of consideration to others on the call, I would ask that you limit yourself to one question and a related follow-up. If you have an additional question, please rejoin the queue. Operator, we are ready for our first question.

Operator: Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Our first question is from Jamie Cook with Truist Securities.

Jamie Cook: Hi. Good morning. I guess two questions. One, just given the incremental clarity we have now on EPA 2027, how are you thinking about the setup for 2027? I know at the Analyst Day, you expected a down H1 for 2027. How are you thinking about that? I guess, Mark, if you look at your earnings in the H2 of the year, it implies earnings probably $16, $17 of earnings power in the H2 of the year. I'm trying to think, is that a good way to think about a base for 2027? My second question, just the Distribution margins, I think you lowered quite a bit. If you could just talk around the change in margin guidance for Distribution. Thank you.

Nicholas Arens: Thank you.

Mark Smith: Jamie. Obviously, we raised our guide for the year and the outlook for the North American truck market. We continue to expect strength in the H2 of the year. With the EPA draft rule and with the phase transition that we've announced, the key thing is the destination doesn't change. The growth opportunity that will exist for us in Engines and Components with those new platform launches remains the same, and we think the transition will be smoother. While we would expect some moderation in demand next year, and we won't give specific guidance, of course, today on what that is, it will not be as abrupt as we might have previously anticipated as we continue to offer the current product for part of next year or in the case of the B, for all of next year and then ramp up the new product.

Jennifer Rumsey: Jamie. Obviously, we raised our guide for the year and the outlook for the North American truck market. We continue to expect strength in the H2 of the year. With the EPA draft rule and with the phase transition that we've announced, the key thing is the destination doesn't change. The growth opportunity that will exist for us in Engines and Components with those new platform launches remains the same, and we think the transition will be smoother.

Jennifer Rumsey: While we would expect some moderation in demand next year, and we won't give specific guidance, of course, today on what that is, it will not be as abrupt as we might have previously anticipated as we continue to offer the current product for part of next year or in the case of the B, for all of next year and then ramp up the new product. It's going to smooth that overall transition and really, I think, make less variation of what year-to-year demand looks like, more driven just by the fundamental economics.

Mark Smith: It's going to smooth that overall transition and really, I think, make less variation of what year-to-year demand looks like, more driven just by the fundamental economics. To your other questions, Jamie. Yes, there's no one-timers or anything non-routine in the H2 of the year. We're expecting strong EBITDA percent for the H2 of the year, up from the H1 of the year, up from a year ago in both Q3 and Q4. The top-up in outlook for incentive compensation, yes, created a little bit of noise in the Q2 results, but that's going to be lower going into the H2. The underlying story is one of, yes, significant revenue growth and margin expansion on an underlying, and as you'll see, hopefully, in a reported basis in the H2 of the year.

Mark Smith: To your other questions, Jamie. Yes, there's no one-timers or anything non-routine in the H2 of the year. We're expecting strong EBITDA percent for the H2 of the year, up from the H1 of the year, up from a year ago in both Q3 and Q4. The top-up in outlook for incentive compensation, yes, created a little bit of noise in the Q2 results, but that's going to be lower going into the H2. The underlying story is one of, yes, significant revenue growth and margin expansion on an underlying, and as you'll see, hopefully, in a reported basis in the H2 of the year.

Mark Smith: Distribution, there's really two things going on, or maybe one thing not going on and one thing going on, in that the mix of the business isn't really changing. There's obviously a lot of momentum in their execution of the installation of a lot of these big power generation contracts. The parts business isn't growing at the same rate. Probably that would be the thing that would need to see a significant step up in the margin percent, probably. The other factor is, as we've increased our outlook for total company profitability, along with that goes the higher incentive compensation, which unfortunately with Distribution, disproportionately impacts them as they've got It's more of a people business. That's just a natural consequence. As a starting point, I would say when we go into next year, we reset our plans at target.

Mark Smith: Our incentive plan is operating above target right now for the current year because of the record performance, and that gets reset going into next year. That will be one thing that will probably be a bit of a tailwind. What happens to demand? Too early to say. As Jenny said, our best guess would be less volatility than we might have imagined certainly in the H1 of the year, North American Highway. Unquestionably, we've got robust backup in power generation, primarily from standby diesel for data centers, and you could feel that continues to grow. I'm not seeing any significant changes at this point in time, but that's a very early commentary on what we see going forward. I hope that helped. There's nothing significantly changing. The Distribution business, yeah, could get close to 10% earnings growth this year.

Mark Smith: I'm not seeing any significant changes at this point in time, but that's a very early commentary on what we see going forward. I hope that helped. There's nothing significantly changing. The Distribution business, yeah, could get close to 10% earnings growth this year. On the underlying basis, we see a lot of growth there and margin expansion going forwards.

Mark Smith: On the underlying basis, we see a lot of growth there and margin expansion going forwards.

Operator: Our next question is from Stephen Volkmann with Jefferies.

Stephen Volkmann: Hey. Excuse me. Good morning. Mark, can I just take that one step further? What would roughly be the reset in the incentive comp, I guess, I don't know, in dollar terms, just so we can think about what that good guide might look like next year?

Mark Smith: Well, next year it could be in the order of like $200 million.

Stephen Volkmann: Perfect. Okay, thanks.

Mark Smith: I would just say, just to try and bring clarity because obviously that's created a little bit of, I would say distortion is the wrong word, but we had to top it up Q2. For H2, you'll be about $25 million a quarter lower in Q3 and Q4 than the Q2 expense.

Stephen Volkmann: Got it. Okay, thanks. Can I just ask on power gen? I'm interested that your target is up 15% to 25%, because my interpretation is you're kind of capacity constrained there. Why such a big range for that target? What could really kind of move that from bottom to top of the range?

Jennifer Rumsey: Yeah. Thanks, Steve. Our guide obviously stayed the same this quarter to what we talked about last quarter. It's largely underpinned by increased capacity, the investment that we made in the 95-liter in particular that we completed last year. Growing demand in China out of our businesses in China for our product in China and Southeast Asia. As I said in my remarks, because of the capacity constraints on the large gensets, we're seeing some customers taking some of the smaller gensets. That trend is basically staying the same in the last three months as what we saw previously. There is still some range in that, but it really depends on that. I think the large gensets will be basically at capacity, and then how much we see of some of the smaller product sale will drive that variation.

Mark Smith: It's fair to say it's unlikely to be 10% swing from here to there. I think the one thing that's been a positive surprise is really the rapid acceleration in China. We were already expecting strong demand in North America, but China's really picked up as well. Whatever extra we can squeeze out with our amazing supply chain team in Power Systems, probably we can sell it for this year and certainly into next year.

Operator: Our next question is from Jerry Revich with Wells Fargo.

Jerry Revich: Yes, hi. Good morning, everyone. I'm wondering if we could just talk about, given the performance ramp ahead of plan this year in Power Systems, how are you thinking about how much the team can ramp up deliveries 2027 versus 2026? Can we sustain this teens type of growth rate as the supply base continues to ramp up? Any updated thoughts on the cadence would be helpful.

Jennifer Rumsey: Yeah. At this point, the cadence we see is really the same as what Jenny talked about in the May Analyst Day, where we announced, of course, the additional investment in capacity, 20 GW incremental capacity across basically all of our plants and our supply chain. We'll see some of that come in online next year, so we'd expect some step up and then the bigger step up happening in 2028. Then continuing to phase in through 2030, and then recall that that capacity is pretty flexible across size of engine, size of genset, application for engines between industrial markets and power gen markets, including the natural gas prime demand. Really, as you heard, we're starting to see some prime demand for the products that we have, while we work on developing the new 130-liter.

Jennifer Rumsey: That's going to grow a little bit, but still the predominant revenue for power gen this decade is going to be diesel standby.

Jerry Revich: That's super. To mention topics in engines, the guidance supplies 14%-type margins in the Q4. On prior engine transitions, you folks have executed pretty seamlessly from one product to the next. Can you just talk about expectations into 2027? How hard is the product transition that you folks are dealing with producing some new products, some older product? How should we be thinking about the impact on operations over the course of 2027?

Jennifer Rumsey: Of course, in our plants, we're used to producing different products. This ability to have a longer limited production transition is something that we've not had in the past. With the flexibility in the draft rule, and we anticipate this will stay in place based on all of our conversations with the EPA, it really helps us and the industry ramp through that limited production phase between the old and the new product. We're going to continue to sell the current product next year, and anticipate pretty solid demand for that and then ramp up. Well, we've had the Forever Rising Tour out. We've been doing field tests. We've had customers seeing the new HELM platform launches.

Jennifer Rumsey: I spent time with customers last week, and they're really excited about the opportunity to start to buy at the beginning of the year and build confidence and move in a more measured way between the old and the new product. I think it's going to be a positive for us, and it's going to let us really gain confidence and capability in that new product across our different OEMs and end customers.

Operator: Our next question is from Steven Fisher with UBS.

Steven Fisher: Thanks. Good morning. Just on the power side of things, the incremental margins seem to be better than the 25% to 30% expectations that you've talked about. I am just curious, what is surprising you there? It looks like in the H2, implied to be better than that as well. Any color there would be helpful.

Mark Smith: I think the main driver is probably been stronger demand in China, which helps on the JV earnings side. Overall, not a big surprise. It is a question of efficiency during the ramp-up and how well we work with the supply chain, the pricing set. I think generally things have been going well there. There is going to be a step-up in engineering. It is not extraordinary, but as we are bringing to market more new platforms, that will be a factor. Certainly, we expect a strong gross margin performance to continue.

Steven Fisher: Okay. Just as a follow-up to maybe one of the prior questions. In terms of the engine transition in 2027, I am curious to what extent you have thought maybe about whether there is likely to be a pre-buy in 2027 as well? For those that might be a little more concerned about the technology, but also still some higher cost. Do you think the phase ramp-up will help alleviate some of the desire potentially for a pre-buy on the technology side? Or do you think we could still see a pre-buy in 2027 out of 2028?

Jennifer Rumsey: I think it really enables just an overall smoother transition. The industry's coming off of cyclical low. The fundamentals are improving. I would describe it as cautious optimism. The fleet is aging. Some pre-buy is coming in, and I think we would anticipate that would continue into next year. I would think of it as just generally smoother year-over-year, versus if we were to go back a year or two years ago, what we would have anticipated.

Steven Fisher: Thank you.

Operator: Our next question is from Angel Castillo with Morgan Stanley.

Angel Castillo: Hi. Good morning, and thanks for taking my question. Just wanted to continue on the EPA 2027 dynamic. You mentioned that overall, the shape of the curve and the demand likely ends up being a little bit better for you. Just curious if we could put a little bit more of a financial kind of details around that, just in terms of any implications on your pricing ability on the new engine as you roll that out or phase that in. Any implications on cost as we think about this new, more layered approach or slow ramp-up? What does that mean for margins versus what you had kind of anticipated before? Just lastly on that, any implications on market share? I don't know if others can use credits or any other dynamics you'd expect.

Mark Smith: Well, I think on economics, we're still working through all of the pricing. What we said at Analyst Day for the new products, the industry expects that the largest contributor to the increased value and price of the trucks is going to be the powertrain, so we still believe that to be the case. We expect when we're launching new products with new value that we're appropriately compensated for that. Regarding current products, obviously, going into next year, I'll be surprised if we didn't get a question on this already, but there'll be NCPs or nonconformance penalties. Those we expect to pass on to the market, so we don't expect a significant financial impact from those. Yeah, those are the things that I would say overall in terms of economics of what we know now.

Angel Castillo: No, understood that. That's very helpful. Just curious on the backup or diesel power backlog. Could you give us any color in terms of what you're seeing in the shape of your backlog, how much maybe it's growing sequentially or year-over-year in the quarter, and any kind of color that you can provide on kind of the regional demand as well as just the underlying backup that you see there for that product?

Jennifer Rumsey: Yeah, really, it continues to be a capacity-constrained, strong demand market. You heard the strength in US, China, Southeast Asia continues. I'd just say we had a summit recently with customers and leaders from across the Americas for power generation. The message from them really remains consistent, which is continue to expand capacity, demand for backup power is ahead of industry supply availability and how much more can we deliver them. The backlog is very strong. We feel very confident in the capacity investments that we're in the midst of making and under pressure to go faster if we can.

Operator: Our next question is from Kyle Menges with Citi.

Kyle Menges: Thanks. I just wanted to follow up on that last question from Angel. I'm curious for the 95-liter at this point, how far out are you booking orders? Also one of your competitors said earlier today that lead times are extending for diesel gensets, and I'm curious if you're seeing the same.

Mark Smith: I think demand continues to grow. That's the thing. We're now selling out further out into the second half of 2028 overall as a general statement about demand. We have seen absolutely no pausing or blinking in demand. You've heard about the announcements with one large customer, I would say the general demand trend it's not flatlining, it's still growing. So yeah, if you want a new one, it's going to be the second half of 2028.

Kyle Menges: That's helpful. Just any real changes-

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