#Deere & Company Reports Strong Q1 Earnings
Deere & Company reported fiscal first-quarter 2026 results that exceeded analyst expectations across both revenue and earnings, driven by a meaningful recovery in construction and small agriculture equipment demand. Total net sales and revenues rose 13% year over year to $9.61 billion, well above consensus forecasts, while earnings per share of $2.42 beat estimates by nearly 20%. Despite the top-line strength, net income declined 25% from the prior-year quarter to $656 million, reflecting cost pressures from tariffs, warranty expenses, and an unfavorable mix in large agriculture. The quarter ended February 1, 2026.
#Financial Performance Breakdown
Performance diverged sharply by segment. Construction & Forestry was the standout, with net sales rising 34% to $2.67 billion and operating profit more than doubling — from $65 million to $137 million — on higher shipment volumes and production efficiencies. Small Agriculture & Turf also delivered strong results, with net sales up 24% to $2.17 billion and operating profit up 58% to $196 million, supported by higher volumes, favorable currency effects, and solid demand from dairy and livestock producers.
The Production & Precision Agriculture segment was the weak point. While net sales edged up 3% to $3.16 billion on currency translation benefits, operating profit collapsed 59% to $139 million, with the operating margin falling to just 4.4% from 11% a year earlier. Higher tariff costs, an unfavorable geographic sales mix weighted toward South America, and elevated warranty expenses were the primary culprits.
Tariffs represent a meaningful headwind across the business, with management projecting total tariff costs of approximately $1.2 billion for the full fiscal year. Despite lower net income, the overall equipment operations margin came in at 5.9%, ahead of internal forecasts, driven by shipment volumes that outpaced initial plans. Deere raised its full-year cash flow guidance from equipment operations to a range of $4.5 to $5.5 billion.
#Strategic and Operational Highlights
Management characterized 2026 as the anticipated bottom of the current agricultural cycle, citing improving order books across several product lines as evidence of stabilization. North American large agriculture early order program results came in better than expected, and large tractor order velocity has increased, prompting a modest upward revision to the large ag net sales forecast for the year. Used large tractor inventory levels have declined meaningfully, with late-model units down more than 40% from their peak in early 2025, which management views as a prerequisite for renewed replacement demand.
In construction, contractor confidence has strengthened alongside growing backlogs tied to U.S. infrastructure spending, data center construction, and rental fleet replenishment. Deere also announced the launch of fully proprietary 20-ton excavators, a strategic push into a segment representing roughly 40% of the North American construction market. The company completed the acquisition of Tenna, a fleet intelligence platform, to expand its digital and connectivity capabilities. The acquisition closed on February 18, 2026, and Tenna will continue to operate as an independent brand.
Precision agriculture adoption continues to accelerate, with management noting that 80% of new combine orders now include the company's highest-tier automation package.
#Management Commentary and Outlook
CEO John May described the quarter as reflecting the strength of a diversified portfolio spanning multiple markets and geographies, and expressed confidence that 2026 provides a strong foundation for accelerated growth as the cycle turns. CFO Josh Jepsen highlighted deliberate inventory management over the past year as positioning the company favorably heading into the recovery.
Full-year fiscal 2026 guidance calls for net income of $4.5 to $5.0 billion. By segment, Small Ag & Turf and Construction & Forestry are each expected to grow net sales approximately 15%, while Production & Precision Agriculture net sales are projected to decline 5–10%, with margins recovering sequentially as the geographic mix normalizes toward North America. Management also increased the segment's operating margin guidance for Small Ag & Turf to 13.5–15% and Construction & Forestry to 9–11%. The U.S. and Canada large agriculture industry is expected to contract 15–20% for the full year, though management sees signs that order trends are firming. South American markets are expected to be down roughly 5%.
#Investor Takeaway and Risk Framing
Deere's first-quarter results reflect a business navigating the tail end of a large agriculture downturn while benefiting from a genuine recovery in construction and smaller equipment markets. Revenue is growing, earnings beat expectations handily, and management is clearly more optimistic than a year ago. The key risks are concentrated in the Production & Precision Agriculture segment, where tariff costs and a weak large ag market are compressing margins significantly. Execution on the construction and small ag momentum, combined with a large ag recovery in future years, will determine the pace at which overall profitability recovers.