Greetings, and welcome to the Q3 2025 Cummins Inc. Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nick Arens, Executive Director of Investor Relations. Thank you, sir. You may begin.

Thank you, Maria. Good morning, everyone, and welcome to our teleconference today to discuss Cummins' results for the third quarter of 2025. 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 a number of 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 and section of the most recently filed annual report on Form 10-K and any subsequently filed quarterly reports on Form 10-Q. During the course of 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. 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.

Thank you, Nick. Good morning, everyone. I'll start with a summary of our third quarter accomplishments and financial results. Then I will discuss our sales and end market trends by region. Finally, I'll provide an update on how we are navigating the evolving trade and policy landscapes, along with our market outlook for the remainder of the year. Mark will then take you through more details of our third quarter financial performance. Before getting into the details of our results, I want to take a moment to highlight a few major accomplishments from the third quarter. In September, we announced a collaboration with Komatsu to develop hybrid powertrains for surface haulage heavy mining equipment. This joint development effort will leverage the breadth and scale of Komatsu's and Cummins' global capabilities to enable the acceleration of optimized hybrid solutions for mining. Retrofit hybrid solutions hold the potential to help mining customers accelerate their decarbonization journey today while lowering the cost of operations of their installed fleet assets. We are excited about this opportunity to bridge current operational needs with future low-carbon goals to support our customers' sustainability efforts. Additionally, our latest 15-liter engine delivered standout results during this quarter's Run on Less –- Messy Middle event hosted by the North America Council for Freight Efficiency. Three of the 13 participating fleets ran the new X15N natural gas engine through some of the most demanding duty cycles of the demonstration, showcasing its ability to deliver true heavy-duty performance while unlocking the cost and emissions benefits of natural gas. At the same event, our X15 diesel led in fuel economy and operational efficiency, reinforcing its position as a benchmark for dependable high-performance power. These results highlight the growing adoption of Cummins' technologies and the tangible value customers are experiencing from our advanced powertrain…

Thank you, Jen, and good morning, everyone. We delivered strong results in what can be best described as a tale of 2 economies, certainly here in the U.S. Key takeaways today are: number one, business trends in the third quarter played out as we communicated at a high level 3 months ago. Demand for our Power Systems and Distribution businesses remains very strong, driven in part by rising demand for backup power for data centers. U.S. truck production, on the other hand, slowed sharply with our shipments in heavy- and medium-duty truck engines down 27% from the second quarter, right in the middle of our uninspiring projection of a decline of between 25% and 30%. Our margins were strong with sales growth in Power Systems and Distribution converted into EBITDA margin expansion and cost containment efforts across the company helped mitigate the impact of declining truck volumes in the U.S. And thirdly, also as we projected, the negative impact of tariffs continued to grow in the third quarter. However, we managed the net hit to our profitability through price recovery and other actions, and the proportion of cost recovery in the third quarter increased sequentially. Fourth, our operating cash flow was strong at $1.3 billion in the quarter. Amongst those highlights, it's worth reinforcing that we're extending our track record of meaningfully improving our performance cycle over cycle. Now let's take a little closer look at our results. Our revenues were $8.3 billion, down 2% from a year ago. Sales in North America decreased 4%, while international revenues increased 2%. EBITDA was $1.2 billion or 14.3% of sales for the quarter compared to $1.4 billion or 16.4% of sales a year ago. Third quarter 2025 results included $240 million of noncash charges related to our electrolyzer business within the Accelera…

Thank you, Mark. [Operator Instructions] Operator, we are ready for our first question.

[Operator Instructions] Our first question comes from Jamie Cook with Truist Securities.

Congratulations on a nice quarter. I guess 2 questions. One, Mark, how you're thinking about Engine margins in the fourth quarter and the ability to cover tariff costs or how to think about margins would be my first question. I guess then just my second question. As we think about Power Systems, obviously, the margins were very strong in the quarter. Just trying to think through how we think about 2026, the ability to ramp production more? How you're thinking about price cost? And I guess, Mark, do we need to raise the margin targets in Power Systems?

High-quality questions to answer. Let's start with the Engine business, and then Jen can comment on Power Systems. Yes, I think there are a number of things that the Engine business is dealing with that provide great complexity, right? We've got product changeover. We're preparing, hopefully, to launch new platforms. We've got some additional extra costs. We saw some slowdown in parts in the third quarter, and we're having to maintain this higher engineering budget until we get through the product launches. Having said all that, they're doing a lot. The leadership team within the Engine business across the company doing a lot to manage their costs. Hopefully, we're getting towards the low point. So I think, yes, I wouldn't expect with what I know right now to see a dramatically different performance from the Engine business, albeit on lower volumes in the fourth quarter. Clearly, volume is a temporary downward pressure given short quarters and inflated ramp-up, which we're excited about on the Ram pickup, which will kind of ease a bit. But overall, I think, well, hopefully, we're moving towards the bottom in terms of the pressures on the Engine business and Components.

And Jamie, on the power gen, we've -- obviously, we've seen really strong performance from both Power Systems and Distribution business. In Power Systems, in particular, we've been on a couple of year journey to really fix some of the underlying performance of that business, look at rationalizing the products that we're offering, how do we leverage the footprint that we have, get more strategic on how we're pricing in the market. And we did that at the same time that the power generation demand has grown at a really high rate, and we've been able to invest modestly in capacity expansion, about $200 million, bringing in new products kind of exactly the right time. So that really has been firing on all cylinders, if you would, and delivering incremental margins that are touching on 50%. So what I would say is we are committed to continuing to invest for profitable growth in that business. We had record order intake in Q3. So we think that the demand remains strong, in particular for data centers and that we will continue to invest as it makes sense in capacity and products to profitably grow and improve business performance, but I would not expect it to stay at that trajectory of incremental margin improvement as we go into future years.

Our next question comes from Angel Castillo with Morgan Stanley.

Congrats on another strong quarter here. Jen, I was hoping you could just kind of expand on your last comments that you just made about capacity additions. I think at this point, you're well kind of ahead of your expectations at Investor Day on data center sales. And as you mentioned, you already have that doubling of kind of large diesel engines capacity underway. But just in light of kind of the stronger demand, can you maybe walk us through what work or kind of assessments you might be doing on the back end to understand whether there is a need or a desire to kind of do either additional capacity investments in large diesel engines or potentially and maybe more importantly, are you exploring any potential for expanding your lines on the natural gas engine to kind of increase to the larger engine sizes to perhaps pursue some of the kind of prime power opportunities that we're seeing out there for data centers as they look for other prime power kind of speed to power opportunities? So just kind of any comments on the kind of this longer-term backdrop given the strong demand we're seeing?

Yes. So first, I'd say our focus has really been on this capacity investment that we've talked about. We're reaching the end of that doubling in capacity on large engines, as you noted, and position has heavily been in the backup power for data centers with the products that we have that we're selling into the market today. I'm really pleased with the execution of that team. We've tracked kind of ahead of schedule on that capacity expansion. We're reaching the end as we come to the end of the year. And just to give you a sense, in 2024, for data center power generation, our total revenue for the company was $2.6 billion. About half of that was in Power Systems. About half of that was in DBU because one of the unique things that we have is engine, some of the key components and auxiliaries that we sell to that market plus the channel. So we're getting benefit in both PSU and DBU. For '25, we expect that revenue into the data center market is going to be up 30% to 35%. It's been ramping up Q4 last year. We had a nice bump up, continuing to ramp up this year. And so we'll be kind of at that full run rate on that product expansion for data centers. And then that leads to kind of the second part of your question is really focused now on what's next? Are there additional places where we want to do a capacity expansion of the products that we have because we think that, that demand in that market is going to remain strong? So we're actively looking at that. With the products that we have, engines for peak shaving, should we invest in prime power engines or more natural gas engines? So no decisions there. But certainly, those are things that we're looking at, and we'll continue to share as we make decisions on where we want to go next in the data center.

Yes. And then just on the component technologies, we're also selling to other customers as well, somewhat akin to the components business story. So yes, it's exciting to be talking about investment with visibility and the returns in that business.

That's very helpful. And then just for my follow-up, Mark, on the Section 232, could you help us quantify, I guess, how much the headwind is in 3Q and 4Q on kind of a gross basis? And any comments or kind of way to maybe put guardrails around the potential for getting a similar rebate on engines manufactured in the U.S. as we've seen, I think, the U.S. trucks manufacturers get? And what is kind of the financial impact of that as we think about potentially 2026 if getting such a rebate?

Tell you what, I've got exactly the same questions that you've got. And we've got -- we need to know a lot more details than we've currently got to be able to predict that. What I will say is we're in a -- we are a strong manufacturer of engines in our plants here in the U.S. So we're really well positioned to help our customers and navigate through. But honestly, all these modelings, I know it's important in some regards, but the actual details, there's 5 or 6 questions that we need a lot more details to be able to calculate it, let alone communicate it. So what I would say is we're in a strong position given our footprint, and we'll remain a strong partner to our customers through all of this. And you can generally tell from our tone that stability going forward would be really, really helpful. For what is outside of a broad economic recession or what I'd call a hard emissions change, this is the sharpest decline in truck orders that many of you who have been here a long time have witnessed. And it's not all down to tariffs, but they also don't help with that uncertainty. So look forward to more clarity, even more so the stability, but we're in a good position overall. And we're trying to work through all these collaboratively with customers and suppliers. It's been a huge demand on all participants.

Our next question comes from David Raso with Evercore.

Thinking about a delta between '25 and '26, the actions taken in Accelera sort of set up an interesting dynamic there. What percent of the losses right now are electrolyzers? How should we think about the actions taken sort of the decision around that business? How much that can improve the size of the losses from '25 to '26?

Yes. What I would say is all we've recorded in this quarter, the really noncash impairment charge is mostly goodwill write-down, which is disappointing, but necessarily given the weaker outlook. So I would say what we've done really doesn't so far, David, hasn't -- doesn't do much to change the trajectory. But as Jen pointed out, we obviously have been and continue to look very closely at further actions we can do to reduce the rate of losses. It's less than half of the total of the overall Accelera segment. But yes, watch for updates on that from us.

Okay. And actions that would help reduce that loss. I mean once you make that decision on the write-down, I would think there's harder decisions playing out behind the scenes on cost. Are those actions that could help '26 or is there a longer time frame when I think of the delta between '25 and '26?

There are different types of actions, but we are conscious if there's a lower demand environment, we're not -- nobody is comfortable sitting at the losses that we're at when the demand environments change. So we're looking at all that, and we'll be transparent when we've concluded that here, but we're working on it right now.

It's fair to say strategically, we're continuing to look at the Accelera portfolio in light of how markets are moving, slowdown that's happening and what technologies we think are most likely to win. And then investing in the places that we see the opportunity to position ourselves for the medium and long term and looking at how we reduce losses in other areas. At the end of last year, we did that in the fuel cell part of the business, and we're continuing to execute some of those changes. And now we're looking at electrolyzers, as Mark noted.

It's fair to describe the decline in revenue outlook as sharp and dramatic and merits further close review, which is ongoing right now.

Our next question comes from Rob Wertheimer with Melius Research.

Thanks for all the comments on direction. It's very helpful. On nat gas and data centers and prime power, I mean, Cummins obviously has very successful nat gas platforms in different engines. So I wonder if you could give us a mini teach-in on what that entails? Is it a hard engineering challenge to bring it to large engines? Is it you need a lot of operating hours? Maybe what goes into that decision? And then I wonder if you could just talk about any changes. I mean you guys were ahead of the data center boom or capitalizing on that. Anything shifting now? Any change in data center design? Is it all of them use -- back up the ratio? Just maybe what's evolved in the market over the last few months?

Yes. So as you said, I mean, Cummins has strength in engine, research and development and manufacturing capability. We understand natural gas. So the question is, we have a certain portfolio of natural gas products today and assessing what is -- if there's demand for natural gas for data centers, what's the right product? If we don't have it today -- our development is a multiyear development cycle, typically, but we have the capability to do that if we think that, that is going to be attractive growth opportunities. So that's how I would think about natural gas. In terms of the data center landscape, what you see is high reliability is absolutely critical. So the need to have backup power to ensure that high reliability is not going to go away. They don't run that often. Really, where the challenge is, is more on the prime power and can the grid support it and how do they solve the prime power challenge. And so that's where using a backup genset maybe for peak shaving or additional sources of prime power or what data centers are out exploring. And as I mentioned in my comments earlier, I think we have ability to do some peak shaving with products that we have today. We've started to invest in some stationary energy storage solutions that could be used in data center applications, and we're continuing to evaluate where else we think we're positioned to invest and get attractive returns.

Our next question comes from Kyle Menges with Citigroup.

I was hoping if you could just talk a little bit more about Accelera and actually just looking at the performance and -- I mean, it seems like you're actually still on track to hit the midpoint, if not a little bit above the full year guide within Accelera on revenues for this year. It sounds like e-mobility had some nice growth in the quarter as well. So it would be helpful just to hear about the growth you're seeing in new mobility versus electrolyzers and then also maybe at a high level, the differences in profitability that you're seeing right now between the e-mobility piece of Accelera and the electrolyzer piece.

Yes. I would say most of the actual sales in e-mobility are bus applications, a lot of it here in the U.S. and that's continuing, and we're in a great position there. There's lots of other explorations and discussions. There's been a big shakeout even in the e-mobility industry given, I would say, lower prospects for accelerated growth, even though we're growing the overall -- everybody's projections for growth has come down, and that's led to a shakeout certainly in a lot of the start-up, some of the less well-capitalized participants. So I think there's still a lot of discussion and future opportunity for Cummins in e-mobility. And I think that's been generally been a good story that as the volumes and we've released new iterations of products that we've moved from, yes, significant losses and negative gross margin to something a lot more stable and sustainable going forward. It's still somewhat muted, right, in the grand scheme of a $35 billion company, but we've seen clear progress there, and we're positive and staying invested there. On electrolyzers, we went back a couple of years, we had pretty ambitious targets for growth and we were tracking that trajectory every quarter. It was -- we were tracking years out where do we need to be, and we were on that curve for significant revenue growth for quite some time. And the reality is, yes, it's dried up faster than anything I have seen in my career for a variety of reasons, especially here in the U.S., but also some of the adoption in international markets. So whilst, yes, we probably guided a little cautiously going into the new year, not knowing exactly what would happen. So we're not way off on the revenue from the guidance that we no longer have, but the one that we originally gave. But yes, it's just internally, it's surprised even us to the downside. And so that's why. It might look to you like we're on track, but electrolyzer is way off. And it's not just for now, but then that leaves the orders as a big gestation period between taking an order, shipping a product, having it installed, recognizing the revenue. And so not only is that shorter orders now, that's leaving like a hole in the projections going forward for the next couple of years. So that's why we're acting now. So it's tough, very tough in ex e-mobility, but we're pleased with the progress, and I don't want that to be lost from the e-mobility team.

That's helpful, Mark. And then just a follow-up on clarifying some of your comments on the emission margins and maybe just thinking about some of the puts and takes into the fourth quarter on Engine margins as you start to neutralize tariffs even though volumes could still be down sequentially. I mean, I guess the question when you said Engine could be kind of similar to the third quarter, does that mean that you have confidence in doing roughly 10% EBITDA margin again in the fourth quarter? Or are we talking about similar decrementals in which case you could be talking about 8% EBITDA margins for Engine in the fourth quarter based on volume...

I'll just say it out here and this -- you can all -- I don't expect to have 8% margins in the fourth quarter in the Engine business, but some of the factors -- the volume is going down, not we expect it to. I'm unfortunately, confident, but we hope that's a bottoming. We also saw a slowdown in parts. We hope that doesn't continue. And then, yes, all the other things that we're doing on cost, productivity, managing through tariffs can all help mitigate. It's certainly not going to be dramatically better. We're dealing with more headwinds. I've tried to be clear about that. So hopefully, that helps. I would just say, there's always a bit of seasonality, fourth quarter going into the holiday period. Those usually get exaggerated when you're in a weak economic environment. But just now, we're working hard. The Engine business is working hard every day to get this balance right. And what you can see from our financial reports that we disclosed the engineering costs by segment, by quarter. You can see our engineering costs are up year-over-year because we're still in this prelaunch development, not yet final certain regulations. So that's got to continue, but that shouldn't be a step worse in the fourth quarter. So don't expect magic, but don't expect 8% EBITDA with what I know right now.

I'll just add a couple of points. I mean we've been working to flex down plants and so seeing that action coming through the full Q4 as well as the Engine business has seen more than its share of the net tariff impact that impacted them in Q3, but we get to more full recovery. In Q4, it will reduce.

Yes. I mean there's always some natural variation across some of the businesses. In general, as we've said, we expect Power Systems and Distribution to be strong. It's -- no quarters are ever identical to the prior one, even if it looks similar on the top line. Pressure is still there on Engine business and Components. We still got a tight control on costs and we're figuring out what else we can do on Accelera. That's the headline. And then as I mentioned, we've also done a lot to improve our credit metrics, which gives us flexibility for capital allocation going forward. So as much as troughs are tough, they also give you -- working through them effectively gives you that platform and that confidence to move forward when demand improves. Unfortunately, I wish I could be more bullish and say we're super confident. We feel like we're getting to the closer -- to the bottom of the trough on on-highway. We think the trends on power generation, data centers, which benefit Power Systems and Distribution are going to continue. So hopefully, we get this coming together of strong demand across the company at some point here in the not-too-distant future. It's a little elusive right now on trucks. But we feel, given how long it's been and how far it's been down, that is a question of time in a cyclical business. But it's not imminent that it's going to turn up.

Our next question comes from Tami Zakaria with JPMorgan.

Great quarter, and thanks for your time. Are you able to speak to the distribution or services opportunity you see long-term as you're selling these gensets and probably have a very sizable installed base right now? What is the typical expectancy of these? Is there a scenario where we would see the first wave of aftermarket services picking up for those units that you've sold over the last 12 to 24 months? So any way to comment on that or quantify that?

So Tami, for data centers, the distribution business gets revenue on the front end for a lot of the customers as they do the installation and some of the additional components and product around the engine and the genset in the data center. There's not a lot of aftermarket revenue in data center backup power because they don't run that often. So there's some service and support that we provide to those customers to ensure they stay up. It's not the same if you think about like a mining application or a heavy-duty truck application. That said, our installed base has been growing and those other applications that do drive more aftermarket content. So we believe aftermarket, in general, will be a tailwind for the Distribution business and especially as customers come back, there's a little bit of waiting on service that isn't necessary right now because of business financial conditions, but we think that we'll see some improvement in aftermarket as Mark had noted.

Understood. That's very helpful. And if NOx 2027 is not delayed after review, how are you thinking about the cadence of any product launches in 2026 tied to that?

Yes. Great. Well, we continue to maintain our focus on development of the new products that we're launching for '27 and feel good about how we're positioned with the new platforms and technology that we're bringing to our customers. It's important to understand, we've never had this level of uncertainty around regulation. So that's certainly been challenging and keeping our team focused on the launches ahead, starting to work with our supply base on different scenarios and what that could mean to try to ensure we can offer a product to our customers as we understand that decision. And really, we've been engaging closely with the EPA as they look at opportunities to try to take some cost out of that rule and also just emphasizing the need to get certainty as soon as possible. And I think everybody, all the OEMs in the industry are pushing on that certainty point. So we're prepared to launch, really hoping to give that certainty on direction in the not-too-distant future. And assuming that the '27 regulations largely stay in place as they are today, we'll be ready to launch our products into the market in '27.

Our next question comes from Steven Fisher with UBS.

Congrats on the power results. Just curious on the international data center opportunities relative to the U.S., how do you see those being different? And is there any difference in the momentum there? And how are the competitive dynamics differ internationally versus on the domestic side?

If you look at the data center market, I mean, we see strong and growing demand in U.S. and China. Those are the kind of the standouts. There's growth globally. You heard in some of my numbers on how the market is moving. We're seeing investment in data centers and other markets around the world. But the 2 biggest areas are really U.S. and China. And of course, everybody is trying to figure out how to get in and compete in that market. So we're well -- very well positioned today and really trying to focus on continuing to maintain a strong position with our products as others try to figure out how do they take advantage of those market opportunities.

Okay, and then...

Go ahead, Mark.

I was going to say, obviously, in China, you tend -- in most of our markets, you tend to see more presence of local competition or trying to get in than we do in the U.S. or in other markets.

That makes sense. And then on the Power Systems margins in general, obviously, still very strong, and you talked about the 50% incrementals before. I guess just noticing as the year has progressed, the segment's margins have kind of flattened out a little bit. I'm just kind of curious what's driving that? Are there other things outside of data centers that are restraining that? I know at the beginning of the year, we talked a lot about the aftermarket components in there. Maybe that was just fluctuating a little bit. Just curious how to think about sort of that flattening that we're seeing over the course of this year.

I would say the general -- so that's the great news. There is some natural variation between aftermarket, all goods segments. So some of that sometimes is at play a little bit. The good news, Steve -- back to somebody asking that should we raise the targets? I really like the way you think. I'm sure Jenny and the team might be dialing in. If not, we'll relay that to them later. But yes, really proud of the work that we've done there. And with rising demand, yes, there's some capacity investment. We're expecting earnings growth. Let's just put it out there. We're expecting earnings growth from here going into next year with what we know right now.

Our next question comes from Noah Kaye with Oppenheimer.

Jen, I think you framed it well and talked about the level of uncertainty right now as you prepare for next year's product launch vis-a-vis the regulations. But as you kind of get into year-end budgetary planning, is it fair to think of as a baseline that engineering and development spend can be a potential tailwind into next year? Or would you expect it to be a headwind if the base case of unchanged regulations goes forward?

In the base case of unchanged regulation, I would think of our research spend is pretty flat through next year when we launch the product, and then we'll have the ability to start decreasing that after that. And then I would think about just in terms of demand, that's where our -- as we're planning for next year, that's where the highest error bars are is what's going to happen in on-highway demand. As Mark noted, we think we're reaching the bottom. We think there's some upside. When does that happen given the capacity that's been taken out as we've responded to this big down cycle, how quickly will capacity be added back once demand starts to come up? So I'm thinking about some revenue increase at some point in the year, but R&D is staying pretty flat.

Yes. Accelera probably won't be growing, and there's always the question of what are we investing in the future, whether that's in Engines and Components or in Power Systems or future technologies. But yes, not a dramatic change for the next year. There's just natural inflation because a lot of those costs are people costs. There is some natural inflation that we're always counting against. So it will not be a significant tailwind, let's put it like that. Longer term, yes, but not tomorrow.

Yes.

Yes, yes, yes. And on that topic of investing, and I want to tie it back to the discussion around the prime power opportunity. 30% of data center sites could be using prime power in some form 5 years out from now. You've got fuel cell in the portfolio. You've got battery. You've got natural gas and diesel gen. How do you think about tying together some of those elements, including what might sit in Accelera today to go after expanded wallet share if prime power becomes more of a growth opportunity?

Yes. Well, our strategy really has been to maintain a portfolio of solutions likely across different customers and markets. There's not going to be one answer. I think our strong position in engines as power demand grows and as energy transition pushes out, positions us really well. We're really more focused, frankly, in both power generation and in mobile applications on the battery opportunities where we think there's more opportunity versus fuel cell. We -- as you know, we've slowed down some of the investment and work in the fuel cell side. And there'll be more to say if we have a clear investment that we think is going to be attractive on the prime side. But today, we're really focused on continuing to execute on some of the investments that we've made to expand capacity in standby and being disciplined in how we think about additional investments into that market.

Yes, I think the great thing with what we've done right now, it's relatively modest investments for a lot of growth with quite high predictability of returns. So we're definitely enjoying that in our financial results. Should do more going forward.

Our next question comes from Scott Group with Wolfe Research.

This is Cole on for Scott. Maybe just to expand on Engine margins, it sounds like the net tariff impact peaked in 3Q as you recover more price and ramp down facilities in 4Q. But as you look ahead to 2026, a 3.75% rebate is not immaterial. How much could this positively impact margins in 1Q or throughout 2026, all else equal?

I just can't -- I simply can't answer that. I wouldn't be thinking about tariffs as margin improvement things. It's been a big cost headwind that we've been trying to recover and work with all that we can to mitigate the cost. I think -- I understand why you're asking it, but we are not framing tariffs as a margin opportunity in any way, shape or form. It's been a big hindrance to our industry. And hopefully, we get stability and relief.

Okay. Fair enough.

You're right. Going into Q4, we are -- it is true, we're catching up more with the recovery of the tariffs. I'd correct myself, but anything incremental, that's not the way we're thinking about it. We're hoping there's a platform for greater demand for the end user customers.

Yes, just to reiterate Mark's point, the way to think about it is if we get stability in tariffs and customers start ordering again, that will help our margins because we'll be utilizing our plants more, but by itself as a margin improvement. We're just trying to cover the cost basically.

Yes. And we don't know enough to know all these -- the nuances of any recently announced things, rebates or other things. There's just a lot more detail. Even the emissions regulations, it's great to get the headline. There's a gazillion things that you need to know between that as to how that actually works financially, practically and other things. So we'd love to give you more clarity, we just can't.

Yes, all makes sense. And maybe just on the competitive dynamic, there's like a lot of moving pieces with certain OEMs now either in a better or worse competitive position due to these new Section 232 tariffs. How do you expect this to impact your share position across the Engine business moving forward?

We are in a strong position to support all of our customers with our U.S. base, and we've got -- the great news is we've got great penetration across multiple brands and OEMs and our -- generally, the trend has been for our customer demand for Cummins products has been rising in heavy- and medium-duty truck over the last few years. So we feel like we're really well positioned, but it's obviously been very complex for all involved and continues to be so.

Our final question comes from Chad Dillard with Bernstein.

So just given the market demand for standby power, I think you guys talked about record level of orders this past quarter. Does Cummins need to expand capacity beyond what you've already announced? And then I was hoping you could comment on, I guess, the role of standby power as more prime power moves behind the meter.

Yes. So from a capacity perspective, certainly, we're looking at in addition to evaluating our -- if we do anything on the prime power side, which we've talked a lot about this morning. We are evaluating are there places that we can continue to invest in capacity because we do see such strong demand and whether it's orders we took last quarter, it's the conversations we are having with some of our customers around the world, we think that, that demand is going to continue. And so if there's places that we think we can invest and take capacity up, we will be evaluating that, certainly. And we still think that in the coming years, this demand for prime power is going to continue. While I do think that there tends to be a hype cycle around technology, fundamentally, the need to store more data in the cloud, whether it's AI or other driven is a trend that's going to continue to grow.

And then second question, just on tariffs. So can you quantify the gross tariff impact in 2025? And then what's the split between IEPA versus 232? And if we do get IEPA rollback, I mean, should we consider this more like a pass-through?

We have not provided the guidance on the gross amounts generally, but the net position has been negative for the company, and we're in the tens of millions of dollars of negative impact each quarter so far. That's what I can tell you. And what happens, I'm just not going to speculate. We just don't know enough for what happens. But we -- as we said, as clear as I possibly can, we've been battling to offset costs on the industry. It's not a margin -- it's a margin dilutor even if we recover it, right?

There's a lot of moving parts between IEPA and 232 tariffs and uncertainty around that. So really, we want to understand the details on that before we provide any color on what that looks like. The great news is we make our engines and our gensets for the U.S. here in the U.S., and the team has done an outstanding job of navigating a lot of change and challenge and working to recover the cost of those tariffs. So really proud of what they've done given the environment that we've been navigating this year.

All right. Appreciate it, everybody. Thanks for joining us.

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