Deere Q2 Earnings Show Strong Revenue Growth as Construction Demand Offsets Weak Agriculture Market
Deere Q2 Earnings Show Strong Revenue Growth as Construction Demand Offsets Weak Agriculture Market
Deere & Company reported a stronger second quarter for fiscal 2026, supported by solid demand in construction equipment and small agriculture products, even as the large agriculture market remained under pressure. The company posted total net sales and revenue of $13.369 billion, up 5% year over year, while net income reached $1.773 billion, or $6.55 per diluted share.
Full-Year Profit Outlook Remains Steady
Despite mixed conditions across its core business segments, Deere kept its full-year net income forecast unchanged at $4.5 billion to $5 billion. The company also maintained its equipment operations cash flow outlook of $4.5 billion to $5.5 billion. This steady guidance suggests management remains confident in Deere’s ability to manage costs, protect margins, and balance weakness in farming equipment with stronger performance in other divisions.
Tariff Refunds Help Lift Margins
A major factor supporting Deere’s quarterly profitability was a $272 million tariff-related recovery. The refund helped reduce production costs and improved margins by nearly 2.5 percentage points during the quarter. However, the company still expects around $900 million in net tariff costs for the full year after refunds.
Deere said it has not added tariff surcharges for customers. Instead, the company is using mitigation strategies such as supplier changes, reshoring, tariff exemption requests, and compliance with USMCA trade rules. Management also noted that about 80% of John Deere’s U.S. complete goods sales are produced in U.S. facilities.
Segment Performance Shows a Split Market
Production and Precision Agriculture Declines
The Production and Precision Agriculture segment remained the weakest area. Net sales fell 14% year over year to $4.503 billion, mainly because of lower shipment volumes. Operating profit was $706 million, with an operating margin of 15.7%.
Small Ag and Turf Posts Strong Growth
Small Ag and Turf performed much better, with net sales rising 16% to $3.485 billion. The segment benefited from higher shipment volumes and favorable currency effects. Operating profit increased to $719 million, producing a strong 20.6% operating margin.
Construction and Forestry Leads the Quarter
Construction and Forestry was Deere’s strongest growth segment. Net sales jumped 29% to $3.79 billion, supported by healthy construction demand, higher shipments, infrastructure spending, rental activity, and data center investment. Operating profit reached $561 million, with a 14.8% operating margin.
Construction Demand Offsets Agriculture Weakness
Deere continues to expect large agriculture equipment sales in the U.S. and Canada to decline by 15% to 20%. Farmers are still dealing with high input costs and global market uncertainty. South America is also weaker than expected, with tractor and combine sales now projected to fall about 15%, partly because of pressure in Brazil.
On the other hand, Deere raised its outlook for Construction and Forestry. The company now expects full-year net sales in that segment to rise about 20%. Its U.S. and Canada construction order book has increased more than 60% since November and is at its highest level since April 2024.
Inventory Levels Improve
Deere also reported progress in managing equipment inventory. New North American high-horsepower tractor and combine inventories are down more than 50% from their mid-2024 peak. Used inventories have also improved, with used combine and tractor inventories down by the mid-teens from recent peaks.
Technology Investment Remains a Priority
The company continues to invest in precision agriculture and connected equipment. Deere highlighted newer tractor models, planting technologies, See & Spray capabilities, and JDLink Boost kits supported by satellite connectivity. Monthly active digital users have reached nearly 440,000, showing that digital tools are becoming a larger part of Deere’s long-term strategy.
Shareholder Returns Continue
During the quarter, Deere returned $635 million to shareholders through dividends and share repurchases. Management said the company remains focused on disciplined capital allocation while investing in products that help customers improve productivity and reduce input costs.
Conclusion
Overall, Deere’s second-quarter results show a company managing through a split business cycle. Large agriculture remains weak, but construction equipment, small agriculture products, tariff recoveries, inventory control, and technology investment helped support profitability. With full-year earnings guidance unchanged, Deere appears focused on protecting margins while preparing for better conditions when the agriculture market eventually improves.
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