Cummins Inc (CMI)

How it makes money

Two streams, with very different rhythms. The first is original equipment: Cummins sells engines and components to truck and machinery manufacturers, one unit at a time, at prices negotiated in multi-year supply programmes. The second is the installed base: once an engine is in the field it needs filters, injectors, turbochargers, remanufactured parts, overhauls and service contracts, and those are sold through the Distribution segment and through independent dealers for the fifteen or twenty years the engine works. Aftermarket parts and service carry higher and steadier margins than first fitment, and they keep earning while new truck orders are weak. A third, smaller stream is power generation equipment — standby and prime generator sets sold to data centres, hospitals, industrial sites and defence customers — which in 2025 was the growing part of the business.

Revenue by segment

Cummins' advantage rests on things that are hard to copy quickly rather than on size alone. Certifying an engine family under US, European and Chinese emissions rules takes years of development and testing, and the aftertreatment know-how that makes a diesel legal is the part truck makers are least willing to develop themselves. Once an engine is specified into a truck platform, changing supplier means re-engineering and re-certifying the vehicle. And the installed base feeds a service and parts network of more than 640 locations that competitors would need decades to build, which is why aftermarket revenue keeps flowing when new-truck demand stops. The limits are real: the customers are a handful of large manufacturers who can and do build their own engines, and a shift away from internal combustion would devalue much of the intellectual property — Cummins itself lists exactly that among its risks.

The core of the business follows the heavy-truck order cycle, which is one of the sharper cycles in industry: fleets buy when freight rates and utilisation are high and credit is cheap, and stop almost completely when they are not, so engine and component volumes can swing by a third from peak to trough. Construction and mining machinery add a second cycle on top. Two things soften the ride. Aftermarket parts and service depend on trucks already on the road and on miles driven, not on new orders, so they keep earning through the downturn. And power generation follows a different clock altogether — data centre construction, grid reliability and backup capacity — which is why in fiscal 2025 Distribution and Power Systems set records while Engine and Components sales fell on weak North American heavy- and medium-duty truck demand. Regulation adds an artificial cycle of its own: a new emissions deadline pulls purchases forward into the year before it and empties the year after.

Key risks

• The emissions settlements with EPA, CARB and the DOJ — Cummins discloses as a risk any adverse consequence of the agreements it entered with the US Environmental Protection Agency, the California Air Resources Board, the Environmental and Natural Resources Division of the DOJ and the California Attorney General's Office to resolve regulatory civil claims over its emissions certification and compliance process for certain engines used mainly in US pick-up trucks. The agreements became final in April 2024 and require additional mitigation projects; the company also flags adverse reputational impact and the legal actions that may follow.
• Emissions rules can tighten — or loosen — unpredictably — The company lists increased scrutiny from regulatory agencies and unpredictability in the adoption, implementation and enforcement of emission standards around the world, evolving climate legislation, and — pointing the other way — emissions deregulation. Both directions hurt: tighter rules raise development cost, while deregulation devalues the compliance technology Cummins has spent years building.
• Dependence on a few large truck manufacturers — Among its risk factors Cummins names large truck manufacturers and other original equipment customers discontinuing the outsourcing of their engine supply, experiencing financial distress, or changing control. Its own filing states that PACCAR alone accounted for 13 percent of consolidated net sales in 2025.
• Tariffs and trade disruption — The filing lists adverse consequences from changes in tariffs and other trade disruptions, and changes in international, national and regional trade laws, regulations and policies. Cummins builds and ships parts across borders — engines assembled in one country with components made in several others — so a tariff change alters landed cost on a large share of the product.
• The energy transition may leave the current product behind — Cummins names the development of new technologies that reduce demand for its current products and services, and the risk of not successfully developing new technologies and products to address the energy transition, alongside lower than expected acceptance of new or existing products. The 2025 write-off of the electrolyzer goodwill inside Accelera is the disclosed instance of the second half of that risk.
• Costs, supply and capacity — The company discloses raw material, transportation and labour price fluctuations and supply shortages, variability in material and commodity costs, and the difficulty of aligning capacity and production with demand. It also flags product recalls and product liability claims, and the results of joint ventures and other investees it does not directly control.

Top customers account for 13% of revenue

PACCAR — the maker of Kenworth, Peterbilt and DAF trucks — is Cummins' largest customer and accounted for 13 percent of consolidated net sales in fiscal 2025, down from 16 percent in each of 2024 and 2023. The filing states PACCAR was the only customer above 10 percent of net sales in 2025. Other named original-equipment customers include Stellantis, Daimler, Traton, Volkswagen Caminhões e Ônibus, Komatsu and SANY Heavy Industry, none of them disclosed individually. Concentration is therefore moderate at the invoice level, but heavier than it looks in substance: a handful of truck manufacturers decide whether a Cummins engine goes into their platform at all.